Monday, December 8, 2014

"Lost Faith" or Bad Cooking?

Disillusionment and blame are what politicians serve up

A recent column by Larry Summers points at distrust in business and government as the source of slow economic recovery and crumbling infrastructure. Mr. Summers ends:
More important than any specific remedy, there is a reason beyond the media and the public’s own economic problems that there is so much disillusionment with so many institutions. They do not seem to perform as well as they once did. We see it every day. Fixing escalators and building bridges may seem like small stuff at a time of economic crisis and geopolitical instability. But it is time we recognize the importance of what may seem small to what is ultimately important — the faith of citizens in their collective future.
So why might have we lost faith? Perhaps because politicians have told us over and over that we should distrust these institutions. One major party tells us not to trust Big Government and that we should starve it of the financial resources that might make it a successful provider of public services. The other major party tells us not to trust Big Business and that we must constrain its ability to grow and provide private employment.

Look – I'm not about to tell you that Big Government or Big Business are without flaws. As companies get big they develop top-heavy bureaucracies and become unresponsive behemoths that beg for government bailouts when things go south. Governments, too, develop top-heavy bureaucracies that serve nothing but their own existence to the detriment of public services and public debt. A business sometimes goes bankrupt; government goes further into debt.

Escalators and bridges in disrepair result not from a loss in trust but from a lack of capital. When public and private budgets get crunched, capital expenditures suffer so employees don't. We don't like to see employees laid off in a slow economy and employers – public and private – don't like laying employees off. This is a natural human reaction. Instead, we make do with the resources available – at the expense of productivity – whether it's cannibalizing one escalator to make another work or installing a net under a crumbling bridge so passersby don't get plunked on the head.

These human traits – compassion, ingenuity, tenacity – are positive and don't represent "lost faith" but rather hope that that things will get better. I've witnessed a group of Marines tear apart several computers to cobble together one computer that works. While ingenious and tenacious, it is far better to give them the financial resources they need to purchase a new computer and put their collective talents to more productive use.

The key policy takeaway is that we not starve the government beast or chain the business monster. Right-sized government must focus on citizen services, not self service that builds the bureaucracy or personal political stature. Likewise good business must focus on good consumer and B2B products and services in a competitive environment that doesn't pick winners or protect losers.

I tend to be an optimist and believe that we can shape the future if we don't fall prey to the pessimists. Politicians will be politicians and will always look to bury each other. Our job – as citizens and voters – is to ensure they don't bury our self-belief and posterity as well.