I enjoyed catching up with several old friends and meeting new ones at meetings across the country this winter and discussing the need to focus on all aspects of the farm operation to assure a profit this year. We are moving into a year in which outside market influences are more volatile with each passing day. We are seeing more factory layoffs and everyday concerns for businesspeople and the general public. This, in turn, is going to start another round of housing defaults.
As if this wasn't bad enough, the economic correction is hitting all our trade partners, as well. Great Britain's banking system is in deep trouble. Europe does business with many countries that are experiencing a steep rise in unemployment. Even China's explosive economy is starting to slow down from the past year's 9% growth rate. Projections peg a growth rate this year of 6.4% or less in China, which signals big problems are around the corner because of the mass of people packing up and moving from rural to urban areas.
Because of the speed of the global contraction, many countries are quickly putting together financial stimulus packages to help stabilize and encourage their respective economies. As a result, the potential level of debt that's going to be assumed by governments around the world this year is staggering!
The big question. Does government involvement in creating jobs help or just delay the eventual decline that must occur when an economic system becomes overheated, as we saw from 2006 through 2008? As I've been saying at many of my meetings, it will help arrest the decline in the economy and even produce a quick bounce, but will it have any long-term legs?
My concern continues to grow that current policy objectives are focused on taking away from one sector of the economy and giving to another. What incentive does this give for the individual businessperson to take a risk? I would argue that most take a risk only with the objective of making profit. The greater the uncertainty, as we are experiencing now, the greater the profit has to be. It's not the objective of businesspeople to create jobs for jobs' sake.
I know this sounds cruel, but businesses exist for the sake of the stockholder, not for the worker. I think this assumption is going to be attacked both domestically and internationally throughout the coming years because the political base is weighted to the worker, rather than the job creator (the businessperson). If the current administration's stated objective is to increase taxes for those who make money, why take the risk of making money?
Also as a result of the current financial meltdown, I believe we're going to see an increase in the amount of regulation and red tape that businesses have to deal with when hiring and maintaining employees.
In the end, the economic engine that drives our economy, the small businessperson, is going to simply decide to coast and hold onto what he or she has, rather than take any risks. This attitude must be the true focus of the new administration if they really want a growing economy that is viable enough to last long term.
We have to give consumers the confidence that the future is going to be better than the past and that he or she will be able to secure a job that will provide for his or her family. You're not going to get this lasting stability with the government creating short-term jobs. I truly believe that only the private sector can do that, based on the long-term economic need.
So let's unshackle the sleeping giant in our economy. We should reduce all capital gains, sharply cut business taxes and make it extremely easy and financially appealing to work with government agencies to get money and implement programs.
The end objective that I believe our new administration should adopt is quite simple: Make small-business owners' profits so obscenely large that they have to hire more people to get the work accomplished. The more people they hire, the more money they make. If this situation existed, we would eventually hear complaints that there are not enough qualified personnel to fill the jobs and we need to open up immigration!
Written by Bob Utterback