Lately I have been engaged in discussions about local economic development. I have disagreed with some of the actions of the city council, especially their attempts to limit or prevent certain legal businesses from operating in Racine. The argument in favor of government regulation/restrictions goes something like this. If we prevent or discourage businesses that we don't like, such as pawn shops or payday loan stores, we will clean up our image, and new businesses will be drawn to Racine.
I think that our local politicians would do well to read two articles in todays Wall Street Journal. The first was written by Nobel prize winning economist Milton Friedman, who wrote about Hong Kong's remarkable economic success. After World War II, Hong Kong's financial affairs were run by a man named John Cowperwaite, who "was so famously laissez-faire that he refused to collect economic statistics for fear this would only give governmentofficials an excuse for more meddling." The results of this hands off approach are stunning. Hong Kong, initially dirt poor, now has a per capita income equal to that of Britian, even though Britian has enjoyed remarkable growth as well.
The second article, entitled "Tax Tidal Wave" tells a story you are not likely to hear in most newspapers. "Tax collections have increased by $521 billion in the last two fiscal years, the largest two year revenue increase- even after adjusting for inflation- in American history." Note that this revenue increase is happening AFTER a reduction in tax rates.
The lesson here for any politicians actually interested in achieving economic growth is that all they can do to help is to create an environment conducive to growth. And the Hong Kong success and our own success in the US suggests strongly, if not irrefutably, that the way to do this is to stop meddling in the private affairs of citizens. Decrease taxes and decrease regulations, and sit back and enjoy an economic miracle right here in Racine.