Friday, October 06, 2006

How to Grow

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.

6 comments:

Wade said...

When the Union Pacific Railroad was laying track through the west in the 1860's or 1870's many a town sprung up along the route. These towns were largely unregulated and their economies thrived. Of course these economies consisted manly of the sales of booze, sex and gambling because that was the market. Sounds like Las Vegas. The question I have is will unregulated economic growth in the City of Racine result in the type of city in which I want to live. If it will not how to I malipulate the economy, through the government, forming concerned citizens groups, moving to Windpoint and starting a blog. I don't know?

Denis Navratil said...

I don't know what kind of town Racine would be if there were no laws, like in the frontier west. And this is not what I am advocating. I am suggesting that we move in that direction rather than in the direction of more government intrusion. Nobody is, or should be, guaranteed a city that they would like to live in. But it is easier to cash out of a thriving city than it is a poor one. I guess it comes down to this. Would you prefer to live in a city where people are mostly free to engage in lawful economic activity, or one where the government grabs more and more of the power and money? I will take the former

Denis Navratil said...

Oh I almost forgot. I didn't mean to ignore your comment/question concerning blogs, citizen gropus and Wind Point, I just couldn't figure out what the heck you were saying or asking. Please clarify if you would.

Wade said...

I did not say there were no laws, one could still not murder, steal, or rape, ect. There was not much regulation and the result was not what I would call the ideal town. I don't know the history of every western town, some probably become nice places to live through regulation. Some changed due to the infusion clegy and women. Some changed on their own due to the market. I agree Racine needs lower taxes. I would agree with you that Racine needs less regulation, but in what areas. I think we can be discriminating in what we regulate. Racine may need less regulation, but I don't think it is in the areas of the pawn and payday loan business, nor in the area of whom gets to sell alcohol in the city.
You seem to want to apply a hands off ecomonic theory to Racine as if there are no external forces ( state and federal Gov't) beyond our control.

If I want to live in a community free of, say, pawn shops, what do
I do if one trys to open for business. Move out of the community. Form a citizen group to organize a boycott. Start a community newsletter informing the people of the dangers pawning your goods for money.
I am not a morning person so I hope this is coherrent. I am up too early, I have to go volunteer at my kids school for fall clean up day. See Denis, if people would just work together instead of depending on the government to do things, we would all be better off.

Wade said...

I am making an assumtion that people in a community should, or have a right to, try to mold that community into a place they would want to live.

Denis Navratil said...

A few points come to mind Wade. First, I am aware that there are state and federal levels of government, which greatly limit the options left available to local governments. And this is a huge problem if you ask me. The more power taken by the state and federal or, God forbid, international governments, the less power is left to local governments, and less still for individuals.

You seem to be advocating a largely unchecked power for the local majority when you support the prohibition of pawn shops, payday loans etc... The problem that I have with a majoritarian only approach to governing is that it fails to protect individuals or minorities (I don't mean racial minorities).

I believe that the reason the US is a great country is because our constitution limits the power of government, thereby empowering the individual. And I worry about the nearly constant efforts to take freedoms from individuals for a so-called greater good.