“[M]any of the ideas which now pass for brilliant innovations and advances are in fact mere revival of ancient errors….”
— Henry Hazlitt (1894-1993)
TO “modernize” the CNMI’s business processes means creating a system that will 1) “streamline the permitting, procurement, and contract management processes”; and 2) make it easier for entrepreneurs and investors to do business in the Northern Marianas. The goal is to have what Hong Kong was known for (before the Big Brothers of Beijing took over): “red tape so thin a one-page form can launch a company.”
But there is also a more urgent need to “modernize” the way many policy-makers and/or elected officials think about the economy. Let me explain.
Since the inauguration of the Commonwealth government in 1978, many NMI leaders have been trying to find ways to grow the local economy — not for the sake of “growth.” No. The primary objective then and now is to generate enough revenue to pay for programs and/or services that a vast majority of voters demand from their government: good-paying jobs, medical referrals, scholarships, pension checks, dependable and affordable utilities, paved roads, homestead villages, public safety, a clean environment, among many other (expensive) goodies.
Then and now so many well-meaning, sincere, intelligent, educated politicians have been elected to office and have tried (and are trying) their darndest best to help improve the lives of the “ordinary folks,” a.k.a. “The People.” But so many politicians — everywhere and throughout human history — have little or no interest in learning basic economics, the knowledge of which can and will help them craft policies that do not end up harming the very same people they are supposed to benefit.
Politics tells us what must be done. Economics shows us what can be done.
However, the main “problem” with economics is that many of its principles are counterintuitive — they “violate” common sense. In a famous 1987 editorial, for example, the New York Times (not a typo) declared: “The Right Minimum Wage: $0.00.”
How can that be? we ask. If wages are “low” then government should increase them. If prices are “high” then government should reduce them. It’s “common sense” we say; it’s plain to see!
And this is the same kind of thinking that underlies the following phrases: “trade deficit,” “money circulating in the local economy,” “exports good, imports bad,” “self-sufficiency,” “people before profit,” “price control,” “price gouging,” “fair tax rate,” “living wage.”
Economics — to quote one of its best teachers, Henry Hazlitt — “consists in looking not merely at the immediate but at the longer effects of any act of policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”
Hence, economists who oppose a government-mandated wage hike are not against higher wages for workers. They are opposed to it because they don’t believe it works and, worse, that its unintended consequences are bad for the workers. Moreover, there are other and better ways to help improve the workers’ welfare.
In politics, however, this is how a minimum-wage hike proposal is, more or less, promoted: “Only greedy businesspersons and those in their pockets are opposed to a rate hike which will give workers better pay and a better life.”
Economics is mostly about arithmetic. Politics usually involves theatrics. (And the script has been the same throughout known human history: “I care! I really do! I will serve you! I know what I’m doing! I will listen to you! I am beholden only to you, The People!”)
In the case of a government-mandated wage hike — especially one that is imposed amid a deteriorating economy — the actual and usual result is a reduction in work-hours; a reduction or scrapping of benefits; job losses; or business closures. (And when businesses shut down because they cannot afford the latest government-imposed additional costs, the politician’s usual reaction is, “Good; if they can’t afford to pay fair wages and/or fair tax rates then they have no business doing business.” Which, of course, begs the following questions: fair to whom? And wasn’t the wage or tax hike supposed to benefit “The People”? So the workers whose salaries were reduced or who lost their jobs are not considered “People”?”)
Politics, ultimately, is about acquiring power and exercising it to remain in power. So to win votes, many politicians would go out of their way to “share the wealth” — of other people who are not “The People,” i.e., the vast majority of voters.
Our planet needs more economically literate elected officials. But that means we also need more economically literate voters.
I’m not crossing my fingers.
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