Thursday, January 29, 2009

Academics are supposed to be the impractical ones, why are business leaders being the self-defeating idiots?

Republicans want tax cuts, tax cuts, tax cuts (but not ones to poor people) as the solution for everything.

Here's why that's particularly stupid (recession edition): the problem is NOT that companies don't have enough money to build factories with. It's not like people are going to the mall and saying "I'm so frustrated, I just can't find enough things to buy. Won't somebody please give industry more cash so they can invent more products".

The problem is that consumers are looking at all the stuff on sale, and shrugging it all off because they can't *afford* any of it right now. Give more money to the inventors, and they're not going to risk it on R&D for big new products, not in this economy. Give it to banks, and they will sit on it, because they figure anyone they lend it to will just lose it anyway. Give it to rich people, and maybe they'll invest some of it (i.e., give it to banks and inventors, who will duly sit on it), or they'll stick it under THEIR mattress themselves.

What we need to do is to spend money building railroads, laying grass in parks, paying young people to be rangers for the summer... something, anything, to get cash into the pockets of ordinary Americans (particularly poor ones, who are pretty much guaranteed to go out and spend it post haste) so that they can go out and be consumers again. If American business leaders could remove their heads from their own behinds for just a minute they would see that lack of consumers is a far bigger problem than lack of investors right now, and they would get solidly behind heavy-spending stimulus bills, rather than trying to block them like they are.

Normally, business faces a collective active problem over wages - it is in their interest to pay their own employees as little as possible, while hoping that everyone else pays their employees generously, so that those employees have the money to buy the company's goods and services. But that constraint isn't even here now - if the money comes from the governments, why are the corporations so opposed? Answer: toxic ideology and stunning myopia.

The self-image of choice for business people is traditionally of a square shouldered, granite jawed colossus standing astride the flows of commerce, in a sharp suit. Okay, but lets add to that picture a Mr. Magoo squint, and two inch thick glasses. Now imagine he's just dropped the glasses. That's about right.

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Update: Krugman says something similar, but in more technical terms.

1 comment:

steve said...

"If American business leaders could remove their heads from their own behinds for just a minute they would see..."

Nope! In fact, isn't the news full of reports of companies laying off employees by the thousands to preserve revenues in a time of blah blah blah? I mean, these are businesses that are hurting, OK, but they're not in danger of actual collapse. So laying off workers when the odds are that said workers aren't going to find a job again in a hurry seems really nasty, right? But it's happening...