International Competitiveness
Capital goes where it is treated well. As much as planners would like to think otherwise, capital can't be forced to stay where it is not welcome.
Capital seeks 2 things: nice returns and a predictable legal environment. Many second- and third-world nations have tremendous natural resources and human capital. But, those countries effectively have forced their citizens to take a vow of poverty, by chasing away capital. They don't attract capital, because they unduly restrict profits (typically through high taxes) and/or they lack stability.
By contrast, the United States has maintained a good balance of allowing nice returns and creating a legally predictable environment. (The more predictable the legal environment, the lower the returns have to be attract capital). As a result, the United States has enjoyed an amazing inflow of financial and human capital.
The Administration has chased capital away from the automotive industry. "Non-governmental capital" I should say. And, not just away from GM and Chrysler; I can't see investors plowing lots of money into companies that will compete against the federal purse and against the people who regulate the entire industry.
If it does not take a wiser approach toward the flow of capital, the Administration could chase capital away from the entire nation. It cannot be overstated how important it is to our national prosperity (education, roads, law enforcement, national defense, welfare programs, individual opportunity, etc. etc.) that the rest of the world continue to push its money our way. Remember: half of every dollar Government currently spends was loaned to it.
Before we even get to "the rest of the world," this article describes how American-based companies (whose management and employees vote 90% Democrat, I would guess) are threatening to move resources out of the United States, if current tax proposals move forward. A quick response might be that the Government won't allow it. But, remember, as much as planners would like to think otherwise, capital can't be forced to stay where it is not welcome.
Capital seeks 2 things: nice returns and a predictable legal environment. Many second- and third-world nations have tremendous natural resources and human capital. But, those countries effectively have forced their citizens to take a vow of poverty, by chasing away capital. They don't attract capital, because they unduly restrict profits (typically through high taxes) and/or they lack stability.
By contrast, the United States has maintained a good balance of allowing nice returns and creating a legally predictable environment. (The more predictable the legal environment, the lower the returns have to be attract capital). As a result, the United States has enjoyed an amazing inflow of financial and human capital.
The Administration has chased capital away from the automotive industry. "Non-governmental capital" I should say. And, not just away from GM and Chrysler; I can't see investors plowing lots of money into companies that will compete against the federal purse and against the people who regulate the entire industry.
If it does not take a wiser approach toward the flow of capital, the Administration could chase capital away from the entire nation. It cannot be overstated how important it is to our national prosperity (education, roads, law enforcement, national defense, welfare programs, individual opportunity, etc. etc.) that the rest of the world continue to push its money our way. Remember: half of every dollar Government currently spends was loaned to it.
Before we even get to "the rest of the world," this article describes how American-based companies (whose management and employees vote 90% Democrat, I would guess) are threatening to move resources out of the United States, if current tax proposals move forward. A quick response might be that the Government won't allow it. But, remember, as much as planners would like to think otherwise, capital can't be forced to stay where it is not welcome.
posted by steve u. at 6/04/2009
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2 Comments:
Anon 1 is obviously under the mistaken belief that the web address and name steveu are insufficient to drive massive amounts of traffic. Oh, the foolishness!
Steve – great post. However, I think you are missing the real problem because you seem to make two incorrect assumptions:
The First assumption you seem to make is that the left is trying to bring “non-governmental capital” into the system (i.e. preserve the capitalist system we have had in place). This is not the case. “Non-Government controlled capital to the far left is the source of most societal ills in our country and thus should be put in check (controlled) by society (read government). Let me give you an example of what I mean. Dr. Anthony Samad recently wrote in the L.A. Progressive that the big difference between the two sides in US politics is that the Right believes in “individual responsibility” whereas the Left believes in “societal responsibility”. From his perspective the individual view invites greed and corruption. He goes on to say: “Capitalists think money solves everything, when it is actually the cause of many social and economic societal ills — particularly as it relates to the distribution and redistribution of income and wealth. Capitalism is based on maximizing wealth without limit, and has few safeguards as it relates to greed and class conflict (deflation of egalitarianism).” You can read the whole thing here.
The second assumption you make is that the Left views “the rule of law” the same as the Right. One need only look at the current nominee to the Supreme Court to see that this is not the case. Never mind her assertions in favor of racial exceptionalism (wise Latina remark), she is more direct in stating the view of the left when she wrote: “The public expects the law to be static and predictable. The law, however, is uncertain and responds to changing circumstances.” “Returning Majesty to the Law and Politics: A Modern Approach” (30 Suffolk U.L. Rev. 35 (1996)).
Thus, to those on the far left, the role of society (government) is to limit and or control capitol in order to solve perceived injustices / inequalities. It goes without saying that the law must be very pliable in order to exact this control.
Thus, the very scary reality is that the current administration’s attack on capital is intentional and should not be unexpected all thing considered.
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