Today’s blog takes inspiration from the writings of Robert Reich. Reich is Professor of Public Policy at the University of California – Berkeley and a former Secretary of Labor in the Clinton administration.
There are many myths surrounding Western economies but three are bigger than all the others. These myths provide much of the narrative for political debate and, other than the contrast between politicians who’s views are faith-based and those who aren’t, arguably represent the most prominent point of difference between the left and right. The three great myths are:
The rich and big business drive job creation
The right believes this and its platform of tax breaks and financial incentives for the rich and large corporations is driven by this. Reich believes, and I agree, that most job creation comes from the middle classes – from the millions of entrepreneurs who create and run small to medium sized businesses. According to Forbes Magazine, 90% of US businesses have fewer than 20 employees and 65% of job growth, since 1995, has come from small business. Yet, they get a fraction of the attention and support, from government, that Fortune 500 companies get. The picture is no different in Europe, Japan or Australia.
We must choose between the free market and government
Nowhere in the debate between major political parties of the West, is there a bigger argument than this. The right wants government to get out of the way so that the market can get on with its natural behaviour. Reich thinks this is nonsensical – his view is that the free market doesn’t actually exist. He asserts that government creates market structure, rules to prevent ‘Lord of the Flies’ behaviour, remedies for predatory activity and protection against mega organisations becoming so large and powerful that they, in essence, become alternative governments driven by economic greed. Without this ‘adult supervision’ there would be no mechanism for IP protection, predatory activity of all kinds would be rampant and fraudulent activity would go unchecked.
The biggest issue is the size of government
In New Zealand, government has three year electoral cycles. When the National Party (right of centre) wins an election, government department re-structures dominate the first year (massive job cuts) and the engagement of consultants and contractors – to make up for the lost employees while continuing the illusion of ‘small government’ – dominate the second year. In the third year, no one does anything substantial for fear of damaging the chances of election. If the Labour Party (left of centre) wins the next election, they fire the consultants and contractors and hire back everyone kicked out in the re-structure – plus a few more for good luck. There is no clearer iteration of the left – right debate between big and small government than this. Reich says that we shouldn’t worry about the size of government – we should worry about who government is representing. If they support middle class driven job growth, sustainable prosperity will result and no one will complain about the size of government. If they support the rich and big business, the middle and lower classes will see no benefit from the reduced size of government.
Robert Reich has been called, by Time Magazine, one of the ten most effective cabinet secretaries of the last century. He’s one of the smartest men and most astute thinkers on earth. Nowhere is his unfailing logic more compelling than in the area of the economy. Governments, whoever and wherever they are, need to listen to Robert Reich.
david chaulk 