Topic For August 2003
Can we identify 20 Government Policies that will encourage job-led economic
growth ?
Background
Before the Great Depression of the 1930s, the notion that government ought
to be responsible for creating jobs would have seemed absurd. Today,
however, we commonly hear aspiring politicians declare that their
number-one economic objective would be to increase employment.
The intellectual justification for gearing government budgetary and
monetary policies toward fine-tuning the economy (and, in particular,
toward generating more employment) was provided by John Maynard Keynes'
book, 'The General Theory of Employment Interest and Money'.
Since the book's publication in 1936, the dominant view of economic
policymakers has been that a competitive marketplace will fail to generate
adequate employment opportunities. This view underlies the advocacy of
government programs to "create jobs."
Government's role in the economy was laid out 10 years ago in a wonderful
essay by the late economist Karl Brunner, "The Poverty of Nations." A
person in an economy can use resources in only one of four basic endeavors:
He can,
1. produce,
2. trade,
3. influence the political process to redirect greater resources to his
advantage, or
4. protect himself against the wealth-redistributing efforts of others.
In the first two uses production and trade the total welfare generated by
the economy increases. In the language of economists, these activities
represent a positive-sum (win-win) gain.
However, the latter two efforts redirecting the flow of resources and
protecting against the wealth-redistributing efforts of others are
zero-sum, or even negative-sum, games. They add no value, waste time and
effort, and thus generate a lower standard of living for people as
resources are directed away from production and trade. Government
institutions laws, rules, regulations, and the judicial system influence
private decisions to allocate resources among these uses.
The influence of government as a wealth-redistributing body is well known
in both eastern and western economies. As we have had ample opportunity to
observe, government wealth redistribution by way of explicit or implicit
taxation necessarily lowers the incentive to create and accumulate wealth,
thereby lowering the potential productive power of the economic system.
But governments also promote production and trade, because they are
assignors and protectors of property rights, and provide for the
enforcement of private contracts. These are wealth-enhancing activities
that help the productive capacity of an economy to blossom. Thus,
governments have two necessarily contradictory and coexisting modes: "the
protective mode" and "the redistributive mode."
:
Can you suggest what ought to be the Government policies that will
encourage job-led economic growth?
Please suggest 10 proposed policies for "the protective mode" function, and
10 policies for "the redistributive mode."
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