This Country's Economic Ails - Lack of Respect for People's Self Interest

I am taking a break from my series on Free Banking to write a word or two for the benefit of a friend who is, in his own words, "liberal and proud of it." We are hoping to get together here soon and have a friendly discussion of politics and this up coming discussion has caused me to think about what some of my basic premises are with respect to our current ongoing economic funk. I think I can boil it down to one or two premises.

One I think is real fundemental. The government, the left, should accept and not begrudge the fact that people generally act in their own economic self interest. Now this is not to disparage altruism. That is a separate issue. What I am talking about is that economically speaking, people generally act in their own self interest. If the government is ever to be a positive force in our economy, it must accept and embrace that basic fact and learn to work with it for the best interests of this country.

That's why I get real nervous when I see large crowds of people with signs saying "Stop the Greed!" I am like: "Really? That's like telling people to not have a sex drive."

It is a fact that if a corporation finds it more to its advantage to have products manufactured overseas rather than in this country, it will do so. What we should be doing is asking ourselves what we can do to make it more to a company's interest to make things here. We should also accept the fact that there will always be somethings that are made overseas.

There was a time in this country when we made, or were capable of making, just about everything. The Japanese attacked Pearl Harbor because we stopped selling them oil. Think about that. From a dead stop, we produced a functioning deployable atomic bomb in about three or four years (depending on where you figure we really got serioous with that project.) Moral considerations aside, that was a huge technicalogical achievement.

My personal history is testament to the vitality that was once was ours. I wound up in Quebec in my late childhood and early adulthood as a result of the fact that the U.S. had exportable talents. And, at least in those times, the Federal Government knew how to encourage that sort of thing. I don't know what the tax law is now, but then you could earn up to $125,000, I think it was, tax free. Government apparently figured that it benefited the United States to have its citizens working in other countries earning money that would wind up back in the United States.

Instead today with corporations, we tax their profits at something like 35% and then we castigate them for trying to avoid those taxes by moving their operations overseas. They are just acting in their own self interest. What would you do in their place?

The other thing, and this is almost the subject of a separate blog post, is the whole issue of moral hazards. Every moral hazards has a cost and right now our economy is strained to the breaking point of a whole slew of moral hazards.

The Wall Street protests are in fact protesting some of these morals hazards, though they probably have no idea that most of them are the result of one government action or another.

Take the example of executive pay, specifically the issue of bonuses for bank executives. How is it that the executives of banks that required a baili out are still receiving large bonuses? The problem is that the banks were bailed out in the first place. If the banks has gone out of business and if the exectives of those failed banks were say selling apples on a street cornere, we wouldn't be complaining about executive bonuses. Why did we bail out the banks anyway? Ultimately, that relates back to Federal Deposit Insurance as I outlined in my previous post.

Bottom line is we should not be bailing out buisnesses.