The Pandemic Recession Is Showing America’s Economic Problems
The “pandemic recession” has shown us that the U.S. has two economies.
The first one is made up of college educated, knowledge-based employers and employees. They work with ideas, facts, figures and spread sheets. These businesses and their employees need only an internet connection to continue unabated. Their incomes, for the most part, have not diminished.
Our second economy is based on having to be physically present in a business. These are the people that are restaurant servers and cooks, retail clerks in stores, airline personnel, and hotel workers whose businesses have been closed. Many of the tradespeople that service these types of establishments have been affected. They are the ones with diminished earning capacity.
An Outmoded Model
Yet what has been the government’s response? A totally inadequate one based on an economic model that no longer is relevant. If the country continues down this wrong path, even much of the first U.S. economy will fall like that of the second.
Our government’s programs are mired in an old economic model that has not been true since the 1960s. Even President-Elect Biden’s supposed expanded social programs are based on those antiquated employer-based models. From unemployment insurance to health care to family and sick leave, the government is foisting current and expanded benefits onto the private sector through mandates.
More than half the population will not be covered by employer-based programs since they work for themselves or in small businesses. There is also a fundamental inequality built into that system with haves and have nots. It also saddles business with higher labor costs as compared with their competitors in the rest of the world.
Countries that blur the lines between public and private ownership (such as China) internally operate their economies as extensions of government. China, no matter its claim to a market-based structure, only does so when in the world economy. Most other nations are much more attuned to a capitalistic market economy both domestically and internationally.
On the other hand, the United States is proceeding down the path of crony capitalism. It rewards favored companies and industries using elaborate tax avoidance laws and government subsidies. Monopolies are ignored and barriers are erected to new companies entering the market. This approach, like that followed by nations such as Russia, is ultimately bad for individuals and businesses.
Our system subsidizes corporations and not people. In any capitalistic and market economic system, businesses are meant to die. More and more, the U.S. government refuses to allow this to occur with large corporations. They cite “the too big to fail” theory while allowing businesses to obtain such a status through subsidy and pro-monopolistic government actions.
Businesses are supposed to be the ones without government support and lifelines rather than individuals. If we as a nation adequately support our citizens with healthcare, day care, elder care, and currently rental and mortgage assistance, the economy would immediately flourish. Yet, even now, we refuse to see the logic in this approach that most other capitalist nations follow.
For example, if we supported individuals rather than businesses, the current moratoriums on rent and mortgage evictions would be unnecessary. These types of moratoriums are placing our commercial real estate and bank industries on the brink of an economic meltdown. By giving individuals the resources to pay their rent and mortgages, the tenants and homeowners would stay in their homes. It would also allow the housing industries to be paid and make their payments to businesses in the greater economy. At the same time, by allowing courts to issue eviction and foreclosure orders, there would once again be equilibrium brought into the system.
What Should America Do?
Almost every advanced nation makes sure that individuals are protected while allowing businesses to compete unfettered in the markets. The United States continues to lose ground in being a true capitalistic economy on the world stage. How often have we all heard of people staying in a job because of a loss of healthcare or their retirement benefits? How many new businesses are not opening because the would-be entrepreneur is afraid that his family will go without benefits?
At the same time, by saddling business with unfunded social mandates such as healthcare, American businesses are encumbered with costs their world competitors are not. Our government grows more and more bloated and inefficient and yet provides truly little for the citizens who pay taxes. It is true that taxes would go up, but the benefit far outweighs the projected increase. Our deficits are exploding to fund bureaucracies without providing any benefit to our citizens. This is unsustainable.
America can no longer continue with the outmoded system of crony capitalism for business and Darwinism for individuals. It is time that the U.S. adopts the best practices of other advanced nations. It needs to provide all the social service benefits I outlined and remove the coddled treatment of big businesses.
By doing so, businesses will be free to concentrate on providing their customers goods and services that add to our GNP. Now much of their time is devoted to securing employee benefits which is unproductive to their core mission. This is not what a capitalistic and free market should be doing. Free our businesses and put the burden on government as most other OECD nations do.