It's easy and logical to blame stock market turbulence on the S&P downgrade of America's credit rating. However, it may pay to look at other, less apparent factors to see why America's economy is struggling and what needs to be changed to get back on track.
What prompted me to write this column was a recent article discussing opposition to a utility's plan to make its power grid more reliable, through increased use of "smart grid" technology. The gravamen of this opposition is that while the plan makes technical sense, and is needed by the community, it would lead to the utility making "too much money" (as though anyone can determine what that means), despite its agreement to limit consumer rate increases to 2.5% per year. A subhead aptly summarizes the positions: "State Leaders, Consumer Advocates Say Proposed Changes to Prevent Outages Would Be Too Lucrative for Two Utilities." A "consumer advocate" elaborates:
"We think the pilot project has gone well and it shows a smart grid can have real value," said David Kolata, executive director of the Citizens Utility Board, a group that represents consumers at the utility commission. But he said his group still opposes the utility bill because "there's a Trojan horse aspect to it" since it tantalizes with the promise of greater grid reliability but then throws in other provisions that give utilities too much money.
As a person who has experienced more than six days of power outages this summer as a result of interruption of service from this utility and, more importantly, a very concerned economic observer, I see a definite connection between this mentality and our economic problems. In the first place, reliable infrastructure is essential to economic growth. We seem to feel this is true when we pursue nation-building efforts in Southwest Asia, but it is equally true here as well. I can personally attest to the economic disruption caused by the outages in the Chicago area, and I'm sure that readers can do likewise with respect to other areas of the country.
More fundamentally, this situation reflects the existence of an increasingly virulent anti-business mentality on the part of so much of our elites and political leadership. Castigating a company for making too much money is an inherently naïve mentality which undermines the sort of risk taking which is necessary for economic and job growth in a capitalistic system. Why should someone take risks unless they also have the potential for large returns? Even worse is castigating them for pursuing a plan which is so clearly in the public interest. How are we going to solve the many serious problems which we face without a meaningful profit motive? The irrational jealousy toward business reflected in complaints about money it will make from enhancing infrastructure reliability send the wrong message to our entrepreneurs.
In a different context we see the same behavior manifesting itself in Washington where classic 'shoot the messenger' behavior is being exhibited by our president and Treasury Secretary as they almost hysterically berate S&P in the wake of their downgrade. The clear message being sent is that these officials dislike and distrust business in the first instance and dislike it even more when it dares to tell the truth about economic policy.
It is terrible for our economy -- any economy -- when elites and leadership turn against the fundamental moral and economic tenets on which the economy is based. Such action can only lead to self-fulfilling pessimism.
Whatever the ideological orientation of readers may be, it is imperative that they realize the threat to our society which is presented by the spectacles discussed in this column and speak out about it. Everyone loses when our leadership undermines our economic incentives.