As a capitalist, I agree with the proposition that people who put money into an enterprise such as Walmart or Microsoft deserve to reap the profits that they earn, even if I don't personally like the effects of those enterprises. But it seems that America has been paying short shrift to the means by which we've created and sustained an economic environment where such enterprises could succeed. I.e., we're killing the goose that lays the golden eggs. As a prime example of this inattention, I present to you the Republican frenzy to downsize government.
That's right: "Big" government, American-style, is good for business and good for the economy. Its downsizing would make things worse, not better, for big business.
Take Walmart (please!). In Part I, I briefly touched the ways that mass automobile ownership has benefited our economy. Let's start with a closer look at cars, and highways in particular, and how Walmart benefits from them.
Decades ago, the state and federal governments of the United States decided that roads should be built and maintained as public goods for public use. They undoubtedly were influenced by the automobile and oil companies, but that's beside the point here. The point is that virtually all large manufacturers, distributors, and retailers have gained economic benefits from this investment. Without a highway system connecting major cities, and trunk roads connecting points within metro areas, the manufacture and sale of most products would be far more difficult and far more expensive. Manufacturers would have a harder time obtaining raw inventory, as well as getting their finished goods to market. And large stores are supported by drawing customers from relatively far away. Without cars, and good roads to drive them on, they'd draw far fewer customers. Without the highway system that we have today, no one outside of Arkansas would ever have heard of Sam Walton.
As I discussed in Part I, it's mostly the middle class who use these roads, and it's mostly the middle class who buy these goods. Without a middle class, there might be no roads at all. But, let's suppose instead that business interests prevailed upon the government to create highways and roads, strictly for the sake of commerce. Since road maintenance is expensive, it seems likely that highways would be allowed to fall into greater disrepair than we tolerate today. Trucks would have to be built to withstand more bumps and potholes on the highway. The rich might still have automobiles available to purchase -- maybe even road-hardened Mercedes or Rolls -- but where would they fill up? Where would they drive to?
The government can't drive the economy on its own. What it can do is enable the middle class to drive the economy. Let's now consider some of the other ways it does this, above and beyond infrastructure. (I make no claim that government does the best possible job in any of these roles, but I do argue that these roles are indispensable to a well-functioning economy.)
Universal public education, just for starters, has contributed much towards creating the large middle class that we have in the United States today. On the whole, skilled laborers produce more valuable goods than unskilled laborers, and are paid more as a result.
A healthy economy also depends on healthy workers and consumers. While some people would like our government to do more in this area, consider the ways in which it already contributes to healthcare: Funding basic research; helping to ensure that pharmaceuticals are safe and effective; helping to ensure that medical professionals have the skills to perform the services that they're required to perform; and of course, by providing medical insurance to the neediest and the elderly. We could also include water and sanitation services in this category; by and large the infrastructure has been created through government investment, and it contributes immeasurably to public health.
Consumers are much more likely to spend when they have confidence in the goods that they're purchasing. By setting and enforcing safety standards for various kinds of products (food, automobiles), and by ensuring that any blatantly unsafe product is taken off the market (toys, electronic appliances), government helps assure consumers that the items on the store shelves are safe to buy. (The cause-and-effect is sometimes a bit indirect, but it's there nonetheless. A spinach recall due to e. coli contamination may occasionally deter shoppers from buying an unaffected bag of spinach. But consider the effect if food contaminated with e. coli were never removed from the market in a systematic way: Eventually, consumers would lose faith in the American food system.)
Confidence is important for finance and business, too. From Wall Street to Walmart, buyers want to be assured that they're not being sold a pig in a poke; sellers want to be sure of getting paid according to their sales agreements with their buyers. Government plays a major (though, of late, undersized) role in keeping fraud out of the securities and business markets.
Security from internal and external threats is also essential to well-functioning markets: When security is threatened, investors are much more reluctant to invest, and buyers are much more reluctant to buy. (This isn't an argument for or against any particular security policy; that would be far beyond the scope of this piece.) From this it follows that the wealth of a society is enhanced by well-functioning police and military forces under the authority of a democratic civilian government.
Even environmental protection is essential to a healthy economy. By mitigating the impact of pollutants on workers and consumers; by reducing the uncertainties for buyers of homes and real estate; and by keeping important ecosystems intact, environmental protection helps to create and preserve wealth.
So if "big" American government is beneficial, then who should pay for it? Isn't it true that high tax rates discourage economic growth? If that were the case, the United States wouldn't have seen such a powerful economic boom during the 1950s, when the marginal income tax rate reached 90%. By the same token, we should have seen less growth in the 1990s than in the nearly decade-long recession of the 2000s.
It should now be apparent that a healthy and appropriate tax system must be heavily progressive. It's not just that the rich can better afford to pay more in taxes. And it's not even that the rich are the ones who have benefited most from the economy that we, the people, have created. It's because preserving the middle class preserves the rich too.
By calling for smaller government and lower taxes, the rich aren't just threatening those below them. They're committing economic suicide. Perhaps as the economy globalizes, they'll be less dependent on the wealth of any one nation, even the world's richest. But if they succeed in their campaign for smaller government and greater "freedom" in this country, and as they globalize that effort, they may find that the only freedom they gain is the freedom to go bankrupt. And bankruptcy, of course, is another government program.