Production NOT consumption

Discussion in 'Economics' started by ShoeshineBoy, Feb 16, 2008.

  1. What this guy says makes a heck of a lot of sense: it's production NOT consumption that drives an economy. Agree? Disagree? I've always said that it is technology and creativity that puts America at the top. Am I out of my mind?

    Well, if I'm not crazy, then the "economic stimulus package" is going about everything exactly bass ackwards:

    http://www.forbes.com/opinions/2008...n-oped-cx_ybr_0214yaron.html?feed=rss_tickers

    Finally, he argues that to increase production you don't need MORE government, you need LESS. So why does everyone in our country want MORE government?

    I think he does a great job of listing just a few ways that we straightjacket our businesses:

    "For example: If a fast-growing software company needs to quickly import a dozen eager and talented Indian programmers, it can't, thanks to our immigration laws. If a company needs to fire a group of incompetent employees to make its workforce more productive, it risks a million-dollar lawsuit. If a developer seeks to offer low-cost housing in the vast, unused tracts of land in expensive California districts, too bad--that would go against environmentalist "open space" laws.

    If a health insurance company tries to win more customers with deductibles, coverage and limits that will make insurance far more affordable, the idea is sunk; states dictate the terms of health insurance contracts. If a group of venture capitalists want to invest in new nuclear power, to supply cheap energy to a new market, it cannot--environmental regulations have prevented any new plants for decades, despite the technology's stellar safety record.

    If the board of a struggling public company wants to hire a top-flight CEO to turn its company around, its job is much harder (and more expensive) thanks to the CEO-repelling climate created by Sarbanes-Oxley, whose vague laws and new criminal penalties make managing a firm much riskier. Even the simple project of building a larger facility to house a growing business can easily be held up for six months, while the owner must glad-hand zoning and permit bureaucrats."
     
  2. production drives it; consumption grows it...
     
  3. The stimulus package may be successful for its intangible benefits like temporarily boosting consumer confidence, not because of the actual money they are handing out.
     
  4. So you're saying this is a chicken and the egg sort of thing?
     
  5. You can have a production economy or a market economy. We are a market economy. The only products that we really produce, are what can be produced with a paper and pencil.

    I agree with the article though, too many restrictions in place.
     
  6. agmccall

    agmccall

    "Build it and they will come"

    So....if all the large automakers decided to not build cars anymore and instead produce buggy whips, then the production without the consumption would give us a booming economy?
     
  7. Concur with that. And that is likely by design. Services are much cleaner than production and valuations can be pretty much whatever you say they are.

    And that will work - until it doesn't.
     
  8. its easy to say "lets get rid of all these onerous regulations and let businesses flourish!"

    But weren't many of these regulations put in place as knee-jerk reactions to some type of corporate misdeeds? If there hadn't been Enron, Worldcom, would we now have Sarbanes-Oxley? If not for gross polluters, strip-miners, etc., would we have an EPA?

    Without powerful, successful corporations, of course, we wouldn't be able to provide employment to the masses. Wasn't it, however, abuses by these same corporations that spawned the labor unions that have since brought our auto industry to its knees?

    I was watching Kudlow a few weeks ago railing for elimation of corporate income taxes to bring in more capital and investment to the U.S. Sounds great, but how much of that would trickle down to the masses. How much would simply line the pockets of wealthy investors and elite management?

    The U.S. could adopt the China model, as they have begun to adopt capitalism, and go back to sweatshop labor, soot-clogged air, and polluted water, and secure our competitive advantage for a few more years. Sounds great!
     
  9. Not sure what you mean by this: we produce a lot of technology (and sell it) still at this point. Many of our exporters are doing very well.

    Oh! I just got it: you're saying, I think, that we're a service based economy. I agree with that to a point if that's what you're saying...
     
  10. Too much production without adequate consumption leads to economic bubbles and economic crisis.
     
    #10     Feb 16, 2008