Stimulating Economy Is No Simple Task
Even in a small country like Jamaica, managing the economy is complicated and risky. I remember Robert Lightbourne, who was the Minister of Trade and Industry in the 1960s, proclaiming that governments interfere with established economic patterns “at their peril.” In an economy like America’s that peril is multiplied more than a hundred times.
Some intervention by governments is unavoidable, of course. And some can be beneficial. I applaud the Jamaican government’s recent announcement that it would consider making “micro” loans available to give small entrepreneurs a leg up, for example.
Jamaica is a land of small entrepreneurs. While I was growing up, it seemed everybody had “a line,” a business on the side that supplemented their income from their day job (if they had one). And many people operated little businesses that kept the wolf from their doors – from the coconut vendor in his donkey cart to the higgler lady selling fried fish by the side of the road.
I remember being greatly impressed by the ingenuity some of these people displayed. The men who sold oranges from push carts, for example, had invented a little machine that peeled an orange as they turned a handle.
I bet things are much the same today.
It is so much more fun to do something on your own than to work at a job. The vast majority of jobs are dreary and debilitating. You spend hour after hour doing something that somebody else thinks you should do. In your own business, you are motivated by the desire to validate your own bright ideas.
With a population exceeding 300 million, America might seem too big for micro businesses to survive. Yet in its early days America was the land of opportunity for people who didn’t have a lot of money but who had big ideas. Even today most of America’s jobs are created by small businesses.
It’s flashy for the Federal Reserve to cut interest rates by three-quarters a percent. And it will certainly stimulate more borrowing. But you can be sure it will also spur inflation.
It may be a popular political move to send out billions of dollars in tax rebate checks, but to many American taxpayers, a few hundred dollars won’t make much difference. After they buy that new video game or the latest cell phone wonder they will still have to find money for next month’s mortgage – and for the months after that.
Massive federal spending on the infrastructure – repairing crumbling roads and bridges, replacing obsolete dams and erecting imposing government buildings – would undoubtedly pour money into the communities where these projects are undertaken. But at what cost? The United States already is in debt up to its ears, largely because of a ruinous war in Iraq and a huge trade deficit.
Reckless spending has consequences. Sooner or later, the piper must be paid.
Perhaps the mighty U. S. should follow Jamaica’s lead and stimulate the economy at the grassroots level by encouraging people with “bright ideas” to give their dreams a chance. One beneficial result might be a reversal of the trend toward consolidation, a trend which has driven up prices – even for such staples as milk.
To do this, tax laws and business regulations would have to be restructured. The federal government, state legislatures and even local governments have burdened small businesses with so much red tape that it’s a wonder anyone tries to do anything. You need a staff of accountants just to comply with all the rules and regulations that exist today.
The tax structure seems to favor investors who buy shares in large corporations instead of providing encouragement for individuals to start their own businesses. In my view, this promotes the kind of consolidation that places the reins of the global economy in the hands of a relatively small number of corporate barons.
Bearing in mind that governments interfere with established economic patterns “at their peril,” I would suggest that federal and state lawmakers take the following steps to stimulate the economy:
- Get us out of Iraq as soon as practicable and stop pouring billions into that bottomless pit.
- Re-examine the deployment of troops around the world to see what commitments are really necessary.
- Restructure federal agencies to provide low-cost credit for struggling homeowners.
- Restructure bankruptcy laws to give homeowners the kind of relief provided to companies.
- Take legal action against the predatory lenders who created the mortgage mess, seeking fines to be used to get homeowners back on their feet.
- Restructure tax laws and regulations to give small businesses more wiggle room.
- Make low-interest (even forgivable) loans available to individuals who come up with “bright ideas.”
- Re-examine our trade agreements to create a level playing field for America.
These would probably provide some long-term relief. Most of the proposals I am hearing seem designed to give a short-term boost to the economy – at the risk of long-term disaster.