Myths Liberals Embrace Hampers Economic Growth – Part 1

Article first published as Two Business Myths Liberals Embrace That Hampers Economic Growth on Technorati.

So much has the liberal media tainted businesses, people clamor for government intrusion in the economy. However, more government involvement will produce the opposite of the public’s desires. People want a growing economy that creates good-paying jobs with benefits to support their families. Period. Redistributing wealth does not create a growing prosperous economy.

Socialism is dead. Governments do not create jobs; businesses do. Therefore, why is there continuing anti business sentiments? I admit greedy CEO’s have been awful poster children for businesses. Nevertheless, in time, shareholders will remove them. Sadly, I do not know how we get effective governments.
We must dispel two popular myths to unleash business’ potential to help generate a robust economy. First, outsourcing is always bad. Second, increased government involvement in the economy is good.

Myth #1: Outsourcing Bad – Insourcing Good

Myths Busted Do We Believe?
Myths Busted Do We Believe?

Myths Busted Do We Believe?President Obama and his band of liberals do not seem to understand business. Do they believe business leaders decide their organizations’ future flippantly? Do they think creating tax incentives on the fly is enough to return businesses to America? “Let’s lower this tax, tweak that one, adjust another so we create more jobs. Then voilà; jobs, jobs, jobs!” I don’t think so, Mr. President.

A well-run business would have prepared a strategy that led to outsourcing. It would have developed that strategy after careful diagnosis of its situation: people, markets, products, competitiveness, finances, strengths, weaknesses, opportunities, threats. Besides, it would have followed that with a set of principles and policies to produce a coherent outsourcing plan.

Reversing that decision entails the same rigorous analysis. No doubt, liberals believe business leaders outsource and “insource” on a whim the way governments spend tax dollars.

During my years as a CFO, I reminded my colleagues that we would not do any project just because tax incentives made it profitable. Tax incentives can be helpful, but the project must be sound fundamentally without that incentive. The tax break must be extra, otherwise the project depends on government’s favor.

Penalizing businesses that outsource is dumb, just as enticing businesses to return. Why did the company outsource? Holistically, what’s the effect on the business’ activities? These are merely two relevant questions. Surely, a business might outsource segments of its activities to provide a base to expand at home. Then again, there might be a structural competitive advantage in outsourcing.

Government must help the needy in society. Even so, it must let the market decide business winners and losers. It must work with other countries to level the competitive playing field, so one country does not benefit from an artificial structural competitive advantage relative to another. That’s what is needed. There must be more cooperation internationally to achieve this goal.

We operate in a global market. The American economy needs the world to sell its products. What happens if each country adopted a similar nationalistic policy? What would Apple, Microsoft, Caterpillar, Walmart’s managements say about a future without access to global markets? Would their businesses thrive as they do today?

Liberals should try to understand reasons for outsourcing. American workers are highly trained and skilled – they are not the problem. However, some unions forget that America must compete with the world. Look at what happened in the automobile industry. It collapsed primarily because over a long period, weak managements agreed to horrendous demands from unions. Meanwhile, the nonunion auto transplants flourished in America.

Liberals who believe President Obama was right to rescue GM and Chrysler might be surprized at the negative medium term outcome. Time will tell; still, I believe the president was wrong. He should have allowed those companies to fold and let others pick up the pieces so they could start over with a new labor relations’ culture, among other things. This would have led to a short-term, manageable unemployment issue.

I do not think the current unions will allow GM and Chrysler much latitude to build sustainable profitable businesses. If these companies generate adequate profits consistently, unions will clamor for a return to the bad old days.

Thankfully, Republicans nullified the silly attempt to pass the insourcing tax incentive legislation.

See Myth number two in part two.

(c) 2012, Michel A. Bell

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Michel A. Bell

Michel A. Bell is a former senior business executive, author of five books, speaker, and adjunct professor of business administration at Briercrest College and Seminary. Michel graduated from Massachuetts Institute of Technology with a masters of science in management. He is founder and president of Managing God's Money, a private mission devoted to teaching biblical stewardship of time, talent, money and other resources. Visit Managing God's Money

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