Capitalism Is Our Economic Cure

Rick Hamada
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Wednesday - June 16, 2010

Rebound, recovery, revitalization - these words are used to describe our economic condition. Fragile, tenuous, suspect - I humbly submit these words as more appropriate to describe our economic condition.

I don’t want to “talk down” any positive economic news, nor do I want to engage in fatalistic pessimism. But I would like to consider verifiable data in developing an opinion about our economic reality. Yes, there are positive stories in the news cycle. But troubling situations still remain, leading me to believe we have only seen the first wave of our deep recession.

I would recommend using history as a relevant perspective. The New American Foundation reminds us that in the years of our most recent recessions - 1973, 1981, 1990 and 2001 - our total civilian employment for those years was up 7 percent, 8 percent, 4 percent and 3 percent, respectively. We have realized 1 percent growth since the depths of unemployment two years ago. That’s in comparison, on average, of 1 percent vs. 5.5 percent.


 

There have been concerns across many sectors regarding the viability of the euro. If this currency collapses or continues to devalue dramatically, the strengthening of the dollar could lead to a big hit on American exports to euro-based countries. Our shaky trade balance could be rocked even more with certain manufacturing or service sectors feeling more pain.

Retail sales have seen a slight uptick, but not to the level found when there truly was a rebound from a moribund economy. Over the past three quarters, there has been a 1.7 percent increase in sales where economists cite a 3.5 percent increase is more in line with a sustainable rebound. That’s an approximate 50 percent differential.

There are other indicators contributing to a troubling conclusion. Housing prices (Hawaii notwithstanding) falling, personal savings diminishing, corporate profits vis-a-vis wages still down and the anemic private sector growth spurred on by the stimulus spending (ending far below expectations) do not bode well for a vibrant financial recovery.

Consumer confidence, coupled with an increase in spending, is one way to revive our flagging economy. However, in times of financial difficulty or uncertainty, the government’s knee-jerk reaction is to increase taxes and fees to facilitate “revenue enhancement.”

This policy is counterintuitive to a practical and historically successful strategy of reducing taxes. When government seizes more and more of your cash, it’s not dissimilar to taking precious blood from the arm of a patient undergoing a transfusion. It weakens instead of empowers.


What is the reality of our economic future?

Unfortunately, it is inextricably connected to our political future, more now than in years past. It will take an abrupt turnaround of our current policies leading to debt creation. In fact, we will need to execute an immediate course of action to cap government spending, implement tax reductions and facilitate increased economic activity.

The revenue generated from a vibrant capitalistic society is the cure for what ails us.

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