Robert A. Levine 7-29-15
Though America is seen by the world as the fount of capitalism, ideologues on both the right and the left are hurting U.S. businesses in their attempts to compete globally. Constraints on companies’ profits, sales, and development are occurring because politicians in legislative bodies and government agencies on the federal, state, and local levels are making policy decisions about how firms should be run and what actions are necessary to provide support.
The problems originating from the right come from their rigid adherence to primitive free market concepts as they would exist in an ideal world. Conservatives are unwilling to accept or understand the fact that other governments, including America’s major competitors, subsidize their industries, either directly, or indirectly through currency manipulation. In China, land may be provided to companies to build factories and low-cost loans are given by government-run banks for construction. Then, once the goods are being manufactured, the government or government-run banks may guarantee loans to other countries to purchase the output of the factories.
This system of guaranteed loans to buy various products from the nations making the loans has been an accepted way of doing business for decades. It has been an integral and automatic part of United States companies selling their products to other countries, with the Export-Import Bank (a government agency) guaranteeing the loans. The loans have been profitable for the government and Congress has renewed the Bank without much debate until this year, when right-wing conservatives labeled it “corporate welfare” and vowed to block it. In spite of conservative opposition, it did pass the Senate and now goes to the House for approval. Though a majority of Representatives support the renewal, the question is whether the conservative leadership of the House will allow it to come to the floor for a vote. If it does not pass, both large and small U.S. companies will be competing at a distinct disadvantage compared to other nations.
In addition to the Export-Import Bank, the government should be increasing rather than cutting funds for basic research as other competing nations are doing. Conservative ideologues do not see this as a role for government and want private industry to replace government spending in this area. However, industry is interested in the bottom line and does not want to support long-term research that may or may not have a return. They are more likely to give money to projects that will generate an immediate bang for the bucks invested. Government basic research projects have been crucial in the development of the Internet, drone technology, global positioning systems, numerous drugs to fight cancer and infections, and so forth, so they have been quite worthwhile for society.
Conservatives’ primary goal is to reduce the size of government and taxes on high-income individuals and corporations. But in order to somewhat level the playing field and for American industries to be able to compete in the cutthroat global trading system, government support of various kinds is required, including the Export-Import Bank and investment in basic research.
Left-wing ideologues want to distort the free-market in wages and employment by raising the minimum wage by government decree. This may be necessary to provide a living wage for laborers, restaurant and hospitality workers, and to slightly diminish income inequality, but is it a role that government should assume? Currently, only some states and municipalities have passed increases in the minimum wage, with Congress unwilling to take a stand on this issue. (However, President Obama did issue an executive order raising the minimum wage for federal contract workers to $10.10 per hour, which many would not consider a living wage.)
Democrats generally feel a raise in the minimum wage to at least $15 hourly is necessary and would not have significant economic ramifications, such as job losses, or making American products less affordable abroad. Republicans disagree and believe mandating wage increases would cause a jump in unemployment and American good less competitive. Because some cities and states have already boosted the minimum wage, its effect on employment will be able to be measured in the next few years.
The size of the government and the role it should play in the economy depends on whether you look at these issues through right-wing or left-wing lenses. In a global economy, with governments supporting industry in most countries, the United States must do whatever is necessary to compete, whether or not free market axioms are followed. Pragmatism should trump ideology.