Some time ago, R.I. lawmakers were debating whether to stand behind the loan guarantees it gave to 38 Studios and others. It was as if it were silly to think that lenders actually expect to get repaid. Now there is heated debate on how and why the guarantees were made in the first place. (“R.I. lawmakers seek answers on 38 Studios,” The Sun, Aug. 12.)
As bad as the economic conditions are in Rhode Island and the rest of the country, we are in much better shape than a lot of “developed” countries such as Greece and Spain. The fact is, the Euro countries with the worst unemployment and government debt are mostly the countries that have the strictest laws protecting workers and redistributing income. A decade or so ago, Germany relaxed its labor laws and reduced government spending. The result was a lot of pain for a lot of people, but they have done rather well since. So now they are expected to help bail out some other Euro countries that have “protected” labor to huge levels of unemployment. Britain is in relatively good shape because of what that nasty old Margaret Thatcher did.
We are in relatively good condition because unions have lost the ability to “tax” consumers, and rich and greedy capitalists have dumped huge amounts of money into high-risk, innovative ventures like Google, Facebook and even video games. While the dot com bubble of a few years ago made a lot of people lose a lot of money, the long-term effect has been good for everyone, and I mean EVERYONE. The much maligned income inequality is because the shift from making things to information technology has dramatically increased the demand for and the price of high-level service jobs. While below-median incomes have increased some, incomes above the median have increased more, leading to the income inequality that we see.
Jobs are not created by starting businesses that go head-to-head with existing successful businesses. If that would work, existing businesses would just expand. Jobs are created by people who take huge risks on innovative ideas for possible huge rewards. That is something governments, state or federal, cannot do well and should not try to do. Rather than trying to promote specific investments, Congress should repeal the Dodd-Frank Act and all its yet unwritten regulations so that investors would stop sitting on their cash and take risks with it. Also, governments should recognize taxing the rich doesn’t reduce their spending or diminish their lifestyles very much. It mostly reduces the amount they are willing to risk on investments, both good and bad.