Sunday, December 07, 2008

Is the Government the Best Doctor for the Economy?

While I think there are some things that the government can do to assist the economy and companies through legislation, I am very much in support of a free market system. It is aggravating that financial companies, insurance companies, and now the auto industry have made business decisions which have led them to the brink of collapse and then ask for the US taxpayers to bail them out. These same companies charge high prices to the very taxpayers they are receiving a rescue package from.

By dilly dallying around and not significantly improving car quality compared to foreign cars, the big three have allowed foreign car makers to overtake them through better a better quality product. Consumers can not be expected to "buy American" if American made cars do not offer the same quality level. It is a matter of survival of the fittest. Yes, there are some good quality American made cars but in several cases the comparable foreign cars are simply better.

While I sincerely hope the American car companies can improve in quality and in their business practices, it is not right for the taxpayers to provide a rescue to them for a crisis they have brought much on themselves.

An area I do agree with the government on is the request for management changes if assistance is to be provided. A leader must take responsibility for where his or her organization is at and the current dire straits of the companies are largely the responsibility of the executives in charge.

If a parent always bails out a child whenever they get in a tough spot, it does not encourage the child to take responsibility for his or her actions. Similarly, I think that companies should be allowed to go through some tough times to encourage them to make wiser and more responsible business decisions. I sympathize with the individual employees who work for these companies that may suffer. My hope is that companies will turn things around, become competitive and prosper in the future.

One way the government can help is by working with countries that have trade embargoes and tariffs in place. By pursuing fairer market practices internationally, the worldwide economy will benefit.

From a government involvement perspective, I understand the desire to stimulate the economy but at times, it is better to let things run their course. If we compare the economy to the human body being sick, government interaction is like pumping drugs into the body to make it well again. Can it work? Sure.

At the same time, the government is not always the best doctor and does not always prescribe the right medicine. When these cash infusions, funded based on budget deficits and increasing debt loads, are pumped into the market, sometimes they help and sometimes they don't. There are also the ever present lobbyists pushing agendas and skimming precious dollars off the top that are intended to help the economy not line the pockets of lobbyists. The best medicine is a dose of thoughtful planning followed by a regimen of good business practices.

I believe the economy has the ability to heal itself if the government will stay out of the way and allow things to settle down. America's economy and business community is resilient and will bounce back in time.

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