Communist China, 1995, The Dawn of Capitalism
Economics / Economic Theory Nov 19, 2009 - 07:47 AMBy: Steve_Selengut
The Hong Kong based guide talked about the free enterprise zones, building projects, golf courses, and roads with a chest full of pride and visible excitement. Capitalism was everywhere along the tour route, and judging from the advertisements on billboards and posters, the world was coming to China!
But although the government was embracing "for-profit" business for the first time, the train-ride out of the country evidenced the abject poverty of what would become a willing and able workforce. Another communist built wall was falling; another socialist society was moving closer to "The Force".
Today, in the very birthplace of capitalism, an entrenched, arrogant, and incompetent congress equates greedy executives with the demise of capitalism while the economic force field it demeans catapults third world nations onto the leader board of global economic growth potential. Capitalism dead? Hardly.
As congressional fat cats lament the corruption of governments throughout the world, they line their pockets with favors from powerful lobbyists on Wall Street, within drug companies and insurers, and seek the bed of every conceivable public and private special interest group, ad nauseum.
Isn't "lobbying" a euphemism for "corrupting"? Isn't our government as corrupt as any of those that we so pompously criticize? Aren't all business taxes passed on to consumers?
The failure of the grandiose Health Care Reform movement, or its transformation into a "we'll just let the taxpayers continue to bite the bullet for spiraling costs" welfare program is a glaring example. Our eloquent President has changed his tag line from delivery system cost containment to "what the heck, we'll just change the definition of insurance and move on".
They just don't get it --- do you? Chinese and Indian economies are glowing because their businesses are growing. Emerging markets emerge through capitalism. Why? Because their governments nurture the job providors.
Here, we cut our entrepreneurs off at the knees and expect them to be globally competitive. We tax and abuse our creative best, allow power mongers to control the reins of government, and encourage our citizenry to ask: "what can my country do for me?" Career politicians who can't remember their last private paycheck are voting American capitalism comatose.
Just as surely as major corporations breed corruption and greed in the executive suite, they also provide jobs, health insurance, and pension benefits to millions. Blaming capitalism is an easy non-answer to many questions--- isn't it clear that greed is a result and not a cause?
If it's shareholder protection we want, lets empower regulatory bodies to insure it. Require shareholder advocates on boards of publicly traded companies, for example. Yes Madam Speaker, 401(k) investors and taxpayers are shareholders too, and they bleed directly and indirectly when congress kills companies.
What taxpayers want from their government is preventative action instead of post-disaster bailouts and blame deflection rhetoric.
There's no mystery why sub-prime mortgages were allowed to run wild, or any doubt that derivative creators were encouraged to slither around the regulators with their too-complicated-to-understand-so-just-trust-me time bombs. Yet the financial product creativity factory continues to flourish.
Similarly, the financial "Weekend at Bernie's" debacle was a regulatory blunder, a mirror image of Social Security funding, but definitely not evidence of problems with capitalism.
If we want to cut health care costs, nearly 90% of my survey respondents listed tort reform as an essential ingredient in any package--- clearly not a topic that a lawyer-laden legislature would have an interest in considering. Talk about entrenched lobbyists!
Fear of frivolous legal action (and absurd jury awards) boosts costs for all businesses, all professionals, and all consumers. We need laws that prevent abuse of the system and which demand that people take responsibility for their own bad decisions and clumsy errors.
We need fresh new independent politicians who want to make things better for people, not for Republicans or Democrats, liberals or conservatives. You can't get meaningful change from career politicians who pander for votes with every decision opportunity.
Class warfare politics is America's shame. The majority of Americans want the opportunity to succeed at something, to become rich and famous, even. We don't want free; we want affordable. We want to be in control of our own destinies. We want jobs, world-class education, and healthcare that doesn't have to look over its shoulder for ambulance chasers.
Instead of the popular congressional "we can't cut business income taxes, because that will benefit the rich", let's try "we have to use tax policy to encourage businesses to increase in the full-time, permanent employee, population, because that will benefit America.
For every 1% an employer increases permanent staff, it gets a 5% Federal, State, and Local income tax credit. For every year a more than 20% staff increase is maintained, all other taxes, levies, fees, charges, and miscellaneous assessments are decreased by 10%.
Audit the calculations and have strict penalties for those who become too creative; fine attorneys and accountants double who help businesses circumvent the spirit of the law. Keep the tax benefits out of CEO mansions.
Within a few years, the new, no-party, independent congress will be no-business-taxes-ever proponents and will be able to move on to a Flat-Fair personal income tax combination and a national pension plan that replaces the Social Security Ponzi scheme.
The cost of hiring and providing for new employees has made it a decision of last resort for most of us--- the nostrils are just not wide enough. If we want more jobs, we need to encourage employers to hire additional workers.
Jobs, Permanent Jobs, Millions Of 'Em--- Make it so.
By Steve Selengut
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Professional Portfolio Management since 1979
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"
Disclaimer : Anything presented here is simply the opinion of Steve Selengut and should not be construed as anything else. One of the fascinating things about investing is that there are so many differing approaches, theories, and strategies. We encourage you to do your homework.
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