Does government have a role in the 21st century?

By Chrystia Freeland
May 31, 2012

The big economic question in much of the world today is usually framed as the fight between advocates of austerity and advocates of growth. But another way to view the debate is as a contest between those who think that 21st-century government can be effective and those who don’t.

Indeed, some of America’s most outspoken capitalists have begun to fight the “Buffett Rule,” which would set a minimum tax level for millionaires, and other calls to raise taxes for those at the very top, with the argument that money is best left in the bank accounts of the superrich because they are more effective at using it than the state is.

“I’m a job creator. I’m one of the guys who can help us out. I’m a Silicon Valley guy who can invent and create,” T.J. Rodgers, chief executive of Cypress Semiconductor, told me. “If you tax me more, I will either give less to charity or I will fund venture companies less, or I will sell the stock in my own company or other companies I own, like Intel and Google. I will do one of those three things to return the money to the government.”

If that were to happen, Rodgers told me, the economy would be hurt, because he is better at investing money than government bureaucrats are.

“The money will go into cash for clunkers or another program. And somehow we’re supposed to believe that taking money from the investments, my investments, out of Silicon Valley, where they have been very, very good for the economy, and putting them into cash for clunkers, or the new scheme, whatever it is, is somehow going to make America’s economy better,” he said. “It’s just wrong. It’s going to hurt the people that they’re pandering to. It’s going to hurt the very people that think if we vote for this, then we’ll get more money. What will happen is the economy that they depend on will be less robust and they’ll be in worse shape.” “Cash for clunkers” is a term for a U.S. government program in 2009 that provided rebates to those who traded in older, fuel-guzzling cars for more efficient models.

Edward Conard, a former partner at Bain Capital, the buyout firm once led by Mitt Romney, the Republican presidential candidate, makes the same point in Unintended Consequences, a book published this month. Conard, like Rodgers, argues that society overall benefits when the rich are taxed lightly because the rich – by virtue of their wealth – have shown they are the best investors of capital.

As Conard writes: “For every dollar earned by a successful innovator or lucky risk taker, society captures forty cents of investment. Were society to pay the incremental dollar of income to a middle-class consumer, he would charge society ninety to ninety-nine cents of consumption for every penny of investment – a steep price. It’s cheaper for society to allocate income to the rich.”

There’s a lot to unpack in this line of reasoning. For one thing, it is hard to escape the obvious self-interest – it is certainly convenient to believe that low taxes for oneself not only are a personal boon but also serve the collective good. The debate is also ideological. The right has long been campaigning to reduce the power of the state and to increase the power of the individual.

But there is also a special resonance to arguments about the relative efficacy of the private sector over the state when you hear them in the 21st-century United States from a West Coast technology entrepreneur. After all, whatever your political allegiances, it is hard to disagree that in recent decades, when it comes to transforming the world, the Valley has outdone the Beltway.

One reason for that gap may be that while our private and business lives have been transformed by the technology revolution, government largely has not. To understand what hasn’t happened – and the possibilities the future might hold – I spoke to another entrepreneur at the cutting edge of the global technology revolution: Nandan Nilekani, the co-founder of an Indian outsourcing behemoth, Infosys.

Nilekani has gone on to another pioneering job, working inside the notoriously slow-moving Indian government to create a unique digital identity for each citizen. That second career has given him a different perspective on the state: He agrees with Rodgers and Conard that it needs to be reinvented, but he also argues that it is absolutely essential, not least as a foundation for private-sector entrepreneurship.

“Just as technologies are disrupting industries – retail or publishing or whatever – technologies can also disrupt the way you do government,” Nilekani told me. “The thing is that we don’t yet know how to do it well.”

“If you have grown up using a tablet or a smartphone, with nice user interfaces, and one click, you get everything, you get maps everywhere, you’re used to a certain level of responsiveness and efficiency,” Nilekani explained. Government is often not very good at delivering either, he said, which can make us more frustrated as citizens than we are as consumers.

One response to that gap is that of Rodgers and Conard, namely to give up on the state. Nilekani advocates something different. What we need to do, he argues, is reinvent government, just as the technology revolution has forced most businesses to reinvent themselves.

Nilekani thinks this transformation of the state is one of the world’s most urgent challenges because he believes that without a powerful and effective government, private entrepreneurship is impossible.

“I think innovation is something best done effectively in the private sector,” he told me. “But it’s the role of governments to create public goods which are platforms for innovation. If you look at the U.S., the Internet was a government defense program on which today you have this huge innovation ecosystem. GPS is another example.” That system “was designed for military applications. But today it’s used for maps or car navigating systems or whatever. So the ideal is to create these global public goods or these national public goods that are platforms. And then make them open so that people can innovate.”

That’s an important paradigm shift. Instead of arguing over whether to shrink the state or expand it, or whether money is better spent by the private sector or by the state, maybe we should be focusing more on reinventing the state for the 21st century.

32 comments

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Conard & Rodgers, what hubris, as if all investments are good ones. LOL!!! Not to mention a complete lack of understanding of why government exist in the first place. Yes, government can be inefficient and wasteful, but so are most businesses. Also, a good government is one that is supposed to serve and protect its people, as opposed to a corporation whose main (only) concern is to make a profit for it’s owners. Lastly, these 1 percenters should never forget the role of chance or timing had in their good fortune. It rarely just hard work and intelligence that gets you everything that you have in life.

Posted by Boxster550 | Report as abusive

The problem is every manager in government gets paid more money for managing more employees, has to spend more money every year to increase its budget (otherwise their budget shrinks) and do not actually produce anything. Managers want to show how pro-active they are to get promoted and so create “new and improved” systems that really only contribute to new layers of bureaucracy. Government is the definition of inefficiency and no amount of smart phones or tablets will change that. Noone will voluntarily shrink the size of their department give up un-needed money in their budget. The huge lumbering mass that is the Federal Government sucks in resources like a black hole and its mass slows accordingly. If the government was able to actually do anything there is no question what-so-ever that a private enterprise could have done it faster, more efficiently and for far less cost. But hey, let’s just hire more tech people, more people to manage them, create a new department to oversee them and buy umpteen hundreds of millions of dollars of equipment and then we’ll do a study to see what other new division needs to be created to work with them.

Posted by Bme72 | Report as abusive

Rodgers and Conard want us to believe in Trickle Down economics. Yeah, that’s worked over the past three decades.

You guys want to pay less taxes, then keep your dirty paws out of government via lobbies and campaign contributions. You’ll see government get smaller in a hurry.

Rodgers, you don’t want to give to charity, fine with me,it’s a tax write-off so the wealthy can feel good about themselves.

Start to reduce the size of government by reducing the Defense budget, but increase the budget for the SEC and EPA. Because otherwise, I don’t have any defense against guys like Rodgers and Conard.

Posted by Andvari | Report as abusive

Since innovation produces more potentially dangerous things, we will in the future require more regulation (government).
Examples: aircraft, cars (traffic laws and highways), radiation, electricity (electrical code), use of wireless communication, drugs that can help or kill if misused.

Also our type financial system when left to itself or bad government has collapsed many times for 500 year.

Posted by SamuelReich | Report as abusive

I wish Mr. Nilekani would have elaborated more on how we could reinvent government. He says that innovation is best handled by the private sector, then gives 2 examples of innovation that came from government. So the private sector does it best, but occasionally the government comes up with some worthwhile innovations of their own. I agree. Okay. What’s the point? I still don’t get the connection between GPS and a more innovative government.

The wealthy make the argument that they should pay less in taxes, but history doesn’t support that argument. Americans have come up with amazing innovations during times when taxes on the rich were very steep, and the country thrived. The truth is, these “job creators” just aren’t creating the jobs, not here in the US. I’d say, raise their taxes and give them tax breaks when they DO hire people.

They aren’t putting their money back into the economy where it’s desperately needed. The government WILL put it back into the economy. Far too much of today’s “innovation” is focused on creating new ways of increasing wealth without inventing or producing any new products.

Rodgers misleadingly names the cash for clunkers program as an example of where his tax dollars would be going. That’s silly. His tax dollars are needed for America’s education. That’s where innovation comes from. Without an educated population we won’t get the kind of innovation the US is known for. Taxes are near historical lows, our government is drowning in debt, our education and infrastructure are in dire need of being upgraded, and unemployment is high. So much for his argument on lowering his taxes. His disproven theory is killing this nation.

His tax dollars are also needed for our military, our infrastructure, research, law enforcement, and healthcare, to name a few areas where taxes are spent. Cash for clunkers. Give me a break. Face it, there are a lot of greedy rich people who could care less about our country and are only interested in increasing their wealth by any means necessary. They use our country for all of its advantages, but don’t want to give back anything in return. That is not what America practiced during times when we thrived best.

Posted by flashrooster | Report as abusive

This morning’s jobs report proves what I stated last night in the post you’re apparently refusing to post. Rodgers claims that the rich need lower taxes to create jobs. They’ve had tax rates near historical lows for nearly a decade now and the jobs aren’t coming. So his theory is incorrect. They’re sitting on that money or investing it overseas. We need that money circulating in our economy. The government can do that, and through much better, more efficient programs than Cash for Clunkers. That’s just a red herring. There’s education, infrastructure, defense, healthcare, research, law enforcement, and agencies that protect our food and water supplies, our air, that protect us from diseases, that protect our investment platforms, and on and on. Education is the real mechanism for creating innovation and we just keep cutting education funding.

Sure wish you’d post my post from last night in which I put forth my entire argument.

Posted by flashrooster | Report as abusive

What is needed is not to “reinvent” government, but to balance its operation. The rich—and the rest of us—are beneficiaries of the public education system, the highway system, environmental protections (such as we have), safety regulation of medicines, food, airlines (and more), courts system, police, and the many other valuable conditions our government provides which none of us as individuals could provide. Now, many of those who have accumulated a lot of wealth by their use of this broad menu of public goods want to pretend they are self-made men and women—they did it all themselves and owe nobody anything.

It is outrageous to think, as one interviewee said, that the rich should be allowed to keep and invest their money (rather than paying in taxes), since they obviously invest well. The speaker appears to claim that the menu of public benefits is automatically maintained by whatever investment one makes. Nevermind that the intended beneficiary of an investment is typically the investor.

What I am saying is that when a tire is going flat, repair it; it doesn’t call for reinventing the wheel.

Posted by bcrawf | Report as abusive

One Only: Total Tax Freedom

The natural drive and honor of civilized people are to be self-sufficient for themselves and their dependents. Economic freedom is fundamental for achieving self-sufficiency and prosperity.

The obscure political power taxing people destroys economic freedom and divides communities; because it is always abused by minority self-interests and breeds conflicts, protests and revolutions.

Tax is any economic value surrendered to political force. Tax abuse includes: quick riches for power abusers; favors for family and friends; useless services; illegal tax for protected and untaxed corruption; discriminatory tax collections; selective voter handouts to retain power; oppressive and costly laws; huge living costs enforced with profits and tax of state directed and uncompetitive business.

Tax abuse and all kinds of taxes make it impossible for anyone to calculate what total tax is; or to collect all taxes and ensure that tax abusers and everyone pay their fair tax share. The unknown total tax on the masses must be far more than what they earn. That forces people into excessive debt even for basic living costs and increases poverty.

Self-interest driven tax abuse is unstoppable. So stop its source, the obscure political power taxing people. Total tax freedom is the one and only solution. Then everybody knows tax is exactly nil.

With their hard earned money totally tax free, all people can afford competitive goods and services, insurance cover for possible loss and savings for old age. And they may freely contribute for community needs and minimal competent public duties. That leaves no reason to tax people, except for abuse.

In contrast to destructive tax abuse, global and local free enterprise excels in providing all possible human needs: productive jobs, affordable goods and services, infrastructure, new technologies and products, capital markets, etc. Many start as small business, the worldwide champion job creator.

Empower people with economic and total tax freedom to create winning nations. It cures tax abuse (100%), unemployment and poverty. Civilized people unite to end outdated tax slavery. Do not vote otherwise!

Posted by WGO | Report as abusive

Regarding US Government investment, remember that Google was originally an National Science Foundation research project.

Posted by Machev | Report as abusive

Government does have a role. Or at least it should. That role is to represent the citizens, of which many are consumers and workers. Unfortunately, they have lost their way. Currently they represent big business in the private sector. This is not good. There should be a natural tension between government and the private sector. An amiable, healthy, yet natural tension. Otherwise we all but owned by the private sector. The intent of the the forefathers is that we, the people, are the government. “We The People of the United States of America…” and all that jazz.

Posted by SeaWa | Report as abusive

Hi Chrystia,

A very interesting subject indeed.

Allow me to reflect thereon however. I shall try to put my comments in bullets.

- The business leaders you quoted defend only their partial & parochial interests through empty sayings that has no viable economic analysis grounds.

- Almost nobody today is for centralization or severe governmental interventions in the different economic spheres, still govs need to check & control businesses, enable & empower consumers & customers, bring up laws and regulations that works for all. Balancing tests are certainly needed, yet efficiency and facilitation should be the main pillars for building up legal frameworks that again works for all.

- State-finance is a major role and tool for gov. Taxation, allocation & spending policies do differ but clearly with the bailouts, pardonning clauses, tax exemptions, agreements to compromise debts etc., the only absolute winner are the businesses.

- Do not you ever believe those empty words on private sector creating jobs bla bla bla, simply becuase they are incorrect. Businesses, particularly mega ones, cut down jobs, increase layoffs, reduce production costs, & with which quality, play out budgets, while impose alleviating prices etc. While acknowledging the anti-trust, & Sarbanes Oxly’s, laws and all, this is the not shocking reality in the business world. I will let you imagine the consequences we are all living.

In Brief, & as I referred to earleir, the keywords to reinventing the governmnet role are enabling and empowerment of the citizens and the individuals and with which a new era of prosperity can emerge. The legalists and the legislators, only those who can, are able to make this happen. Sorry for the typos!

Posted by Alaa-Elemary | Report as abusive

(Written as my comment to a Freeland column on Reuters.)
B.C., June 1, 2102

What is needed is not to “reinvent” government, but to balance its operation. The rich—and the rest of us—are beneficiaries of the public education system, the highway system, environmental protections (such as we have), safety regulation of medicines, food, airlines (and more), courts system, police, and the many other valuable conditions our government provides which none of us as individuals could provide. Now, many of those who have accumulated a lot of wealth by their use of this broad menu of public goods want to pretend they are self-made men and women—they did it all themselves and owe nobody anything.

It is outrageous to think, as one interviewee said, that the rich should be allowed to keep and invest their money (rather than paying in taxes), since they obviously invest well. The speaker appears to claim that the menu of public benefits is automatically maintained by whatever investment one makes. Nevermind that the intended beneficiary of an investment is typically the investor.

What I am saying is that when a tire is going flat, repair it; it doesn’t call for reinventing the wheel.

Posted by bcrawf | Report as abusive

I agree, simply stated, our effort and/or energy is un-necessarily channelled to fix a symptom than the real cause!

Posted by archanand | Report as abusive

Ms Freeland,

If you ever have the chance to interview the excellent Mr Rodgers again, please ask him where he believes he would be without the federal investments in his hometown, the universities he attended, and the industry he made his living in.

It should be amusing to hear him splutter on about the self-made man at any rate

Posted by charharhar | Report as abusive

Silicon valley would be nothing without all the government money that is poured into that area and all the government trained employees running around there. If anything, Silicon valley is under-taxed for all the taxpayer support that lead to those companies being viable in the first place. In addition, many of the goods are manufactured by quasi state run organizations.

Posted by M.C.McBride | Report as abusive

In order to determine what the role of government should be, one must first answer the question, “What is government?” In some cases, private parties can organize economically efficient solutions, because it is relatively easy for the parties affected by the problem and its possible solutions to identify each other and negotiate. In other cases, however, that is not the case. When a large number of people are affected by a problem and its possible solutions, it may be costly for the affected parties to identify each other and negotiate. This is viewed economically as a type of transaction cost. One way of looking at government (and certainly government when it is working efficiently) is that it is the process of addressing problems in such high transaction cost situations. In some cases, people may object to government because it is trying to address low transaction cost problems, where government may not be efficient. We have to recognize, however, the possibility that there are also cases where people may be benefiting by imposing costs on others in an inefficient manner, that this is more likely to happen in a high transaction cost situation, and that such people may resist processes to address such inefficiencies (defined as “government,” above) because they want to continue to impose costs on others.

Posted by Bob9999 | Report as abusive

As long as there are laws there are governments.

The real question is, who’s going to make the laws? No one is going to follow the laws of a corporation without the backing of governments to enforce them. If the corporations try to do that job, their lives become much more expensive and difficult. And corporations might even make war on each other. A world of big corporations with enormous power would be very like the Middleages where nobles were stronger than the kings.

Governments have historically had a role in fostering the development of ideas. They have to create the especially big projects no individual wealthy person could hope to undertake. Leonardo DaVince was employed by the kind of France to develop state-of- the-art military equipment. Louis XIV established academies that affected all aspects of the nation’s life because no wealthy individual or Lord had the range. The Medicis were so strong they were able to marry themselves into many of the largest empires of the time and make themselves even wealthier and more powerful. They morphed into dynasts and I am sure history repeats itself when everyone is looking elsewhere. The quality of life may have actually dropped over all during the period of the absolutists. For one thing – the practice of bathing regularly was easier in the Middleages than it was in the Renaissance and later. The lords got larger and everyone else got smaller. They encouraged the growth of cities and gobbled up all the available lands they could. The practice of tenant farming became more extensive.

The aerospace industry couldn’t have been started at all without huge government funding. The airlines still need subsidies, I believe. The commuter trains always need them. The roads need constant subsidies. If roads were privatized I’ll bet they would become crushingly expensive and would hurt the manufacturers. The car companies would not want to pay for their maintenance without being able to make a profit. Immediately they will shift the cost from labor to the big shots. The corporations never believe the big shots are paid enough and never think the workers are paid too little. It takes ten years to paint a suspension bridge and when they are finished they have to start t again. Big business doesn’t like the costly dog work. And I’ll bet they wouldn’t want the expensive landmarks like the Brooklyn Bridge or Golden Gate Bridge but would try to replace them with easier maintenance substitutes.

Even the very lucrative computer and the internet wants government support.

Private business can’t tax and they are now trying to create a hybrid where private insurance companies are forcing itself onto people so they don’t have to call it a tax.

Even libertarians concede the need for national defense expenditures.

And people exaggerate the innovations of big corporations. When I was in HS 40 plus years, I remember a movie about the competitions GM used to have for young car designers. The winning design was beautiful and very slick and only the deLorian came close to what that kid had designed. deLoarian looking vehicles started to appear a while later. But that kid had created the icon almost 30 years sooner. The car companies changed minor details to their standard models over the decade to create the illusion of innovation and make the old models look out of date but didn’t do very much to revolutionize the vehicle. They would even encourage cheaper construction for quicker replacement. And they can actually crush competition and innovation until it suits their own business plans.

The car manufacturers built the cars but the states and federal government had to construct the roads. The local governments had to crate land use laws designed to allow for parking and related uses. That incestuous relationship, the partnership, the potential scam, whatever you call it, is the big question.

The real question would be, is there any room for voters now? It’s feeling very USSR like now, but the candidates spend a lot more money for campaigns than the Russians ever had to. It’s a way to make a living for those who specialize in politics I suppose? The Chinese don’t allow for the massive costs of elections either. And I really don’t think they are expecting to dismantle central governments anytime soon.

Posted by paintcan | Report as abusive

Customers with cash drive Business, they are the measure as to hire more or less.
Ask yourself a few questions. What in the United States do we have that the World needs? OIL, Drill, Pump, Ship, Sell,
Those are all JOBS, with real Payroll, and Profit,and Taxes
Each Job site creates additional Jobs, Money sent home creates additional jobs, they all pay Taxes. The same with Natural Gas.
The Government wants to subsidize business ventures, if they were a good business they would not need subsidies,
are like a permanent transfusion. This is throwing good money after bad, It was always a bad idea, but because
politicians never will admit they were wrong, they continue paying, because it costs them nothing it’s all taxpayers money.
Government makes RED TAPE, and RED INK !!!!

Posted by VincentLawrence | Report as abusive

While “the government” does redistribute wealth (let’s be candid) that is not its primary purpose — nor is that what primary vexes self-described wealth creators.

What they object to is government’s role in leveling the playing field and trying to ensure that the unpowerful don’t get trampled in the parade of laissez-faire capitalism.

They want to choke government because government regulates according to criteria whose primary goal isn’t to increase profits, but to act in the best interests of all citizens. Sometimes this means no drilling, minimum wage laws, protection of collective bargaining rights.

They don’t want less government. They just want government to be aligned with their interests. And they will pay a high price for that — not in taxes but in campaign and Super PAC contributions.

Posted by johncabell | Report as abusive

Hang on a minute, isn’t the whole point of taxation to help money reach parts of society that private capital do not reach?

The idea that an unbridled free market will lead to a fair and sustainable society has been completely debunked.

Skills in the technology sector certainly have role to play in delivering government services and initiatives, but that is completely different to deciding their aims.

Posted by DanielWebbOrg | Report as abusive

If a tech company were to propose and run a 21st Century government:

1. They might propose a bicameral legislature where one chamber was accountable to the customers and the other to the investors. Similar to today’s House of Representatives, the “customer” chamber would represent all citizens – one person, one vote, unless you do something to forfeit the privilege. More of a modern-era House of Lords than today’s Senate, the upper chamber would be accountable to those who actually fund the government – each vote is weighted by the amount of tax paid. Taxes would be clearly delimited from fees for service, much as business operating revenue is distinct from capital transactions.

2. The legislature would introduce the concept of product management, who would maintain a “government roadmap” that was clearly communicated to the citizens. Every proposed program, department, or law would have sponsors, who would be accountable to both chambers. If a lower-chamber sponsor wants to propose another federal department, agency or program, or introduce frivolous legislation such as a Bloomberg-esque limit on soda cup sizes, let them. Let them prepare a business case, demonstrating the benefit to society and the cost, direct and indirect. In the upper chamber, they can present it in a “Dragon’s Den” environment, with the proposals producing the highest benefits in relation to cost receiving approval and the others being voted down. If approved, the upper chamber would be tasked with monitoring the performance of the program against the business case, with the authority to restructure or eliminate any agency or program if it no longer produces benefits sufficient to justify its cost, either by not delivering the promised benefits or introducing additional direct or indirect costs (see “TSA” and “drug interdiction”). Actual delivery of services would be outsourced if the skills required are outside of the core competency of the government agency running the program.

3. The government would be subject to all of its own rules, and would publish independently-audited financial statements every quarter.

Posted by CrankyWxGirl | Report as abusive

A democracy is not a business, Justice is not the same as profit, And Freedom is not defined by money.

What a bunch of shallow-thinking and right wing Republicon propoganda pretending to be serious analysis.

Ms. Freeland is nothing more than a shill and an apologist for the swindling of the American people by a sociopathic minority.

She, very obviously, does not believe in democracy. She, like the people who pay her, are dangerous people in our polity and need to exposed as the extreme proto-fascists that they are, and their voices marginalized.

Very poor thinking, and very dangerous propaganda.

Posted by pkg18 | Report as abusive

The arrogant always assume they can run the world and their country better, especially if they disagree with the political philosophy adopted. However, I would be very loathe to see the depths of poverty created by people such as Conard. The welfare state would cease to exist yet Conrad would welcome that, the poverty and inequality of the USA would be the worst the world has seen since the feudal times. He obviously sees no worth in the world of the nation state that he does not control, yet a little reading of history would show the gains made by the modern world. Gains that would be lost if arrogant people such as he had their way.
Nileani seems to be a far more intelligent person, and his views would benefit humanity far more than the retrograde views of people like Conard.

Posted by mbrmark | Report as abusive

Agree with Edward Conard somewhat. At least he’s making his money work.

I wonder about other rich people who haven’t a clue what to do with there wealth (they may have inherited), who either sit on it or buy lavish properties or holiday around the world. Perhaps those who invest there money in there country should pay less tax while those who do not pay more.

Especially agree with the point that governments do not know how to allocate money, they seem more interested in spending other peoples money.

Posted by snikmij10 | Report as abusive

The title of this article left out the one true and correct choice…”Get out of the way.”

Posted by Bitwise | Report as abusive

Freeland really shows her anti-democratic bias in this piece.

She, like for most of her sociopathic, Republicon brethren, believes that rule by the wealthy few is the best possible of all models. It’s a vision of the government as a business – free of choice, free of voice and free of freedom.

Everything and everybody in lock step working toward the common goal of profit for the shareholder.

This is the proto-fascist vision of the Republicon. It is an evil vision. It is anti-democratic and needs to be pushed to the margins of our social discourse where it belongs.

I’ll leave Ms. Freeland with this question: Why not leave our democracy and move to country that better suits her proto-fascist ideology – say China or Singapore? Why stay here and destroy our delicate democracy?

Posted by pkg18 | Report as abusive

Nilekani nails it at the end of the article. Brilliant insight. So many ueber capitalists like to forget the fact that govt is what creates a stable economic system with strong property rights, and legal recourse when things go awry. Although I assume its implied, Conrad sure doesn’t sound like he’s giving govt it’s due in creating an environment where he and others can get really, really rich.

Moreover, while *some* of it trickles down, capital moves by large scale investors such as those described above don’t always hit the target, either. If these investors are investing in high tech companies that pay good wages, but only pay good wages to 150 people, or if the investor opens a new, large, low priced retail outlet, but all the jobs pay $10/hr and offer no benefits, that’s not necessarily the boon they’d like us to think it is.

It is inevitable that we’re going to climb out of this dep/rec/whatever-ession a more unequal society than when we fell into it, but blanket statements by people like Rodgers and Conrad need some context and tempering.

There is a point where the govt literally taking your money and giving it to your neighbor b/c he ‘needs’ it more than you is actually beneficial to you, as well.

Posted by Adam_S | Report as abusive

Agree with Nilekani’s view that we need to help reinvent the governments to make the livelihood of the people better by, for example, his idea of creating global public goods that will benefit the citizens.
On taxes, I think I see it like tips. How much tip am I prepared to give? I personally would think somewhere around 10-15% is what I am prepared to pay. And this should apply to the rich or the not so rich as long as they are above the poverty line.

Posted by saechiu | Report as abusive

T.J. Rodgers and his kind have absolutely no idea how economies work. A dollar spent (let’s just say “given”) to the poor will be spent in its entirety. That means 100 cents on the dollar immediately goes back into the economy as someone else’s INCOME. That’s right, spending = income. A dollar given to a rich folk, however, might be saved or invested, and the investment part might take years to materialize. In any event just a 10% saving rate means his group only returns 90 cents on the dollar back into the economy. One reason the bank bailouts didn’t work so well is that much of the money was put aside, and this is the very reason why trickle-down economics isn’t nearly as effective as Keynesian economics in stimulating an economy. As Krugman has pointed out, a government program to get citizens to arm themselves against space aliens would have been more effective than the top-down stimulation we had. An economy is an eco-system, and as such all participants play a role. Rich investors are like bears, and poor folk are like salmon. Both parties are part of an eco-system, but the bears are in worse shape without salmon than salmon are without bears.

Posted by possibilianP | Report as abusive

What has always thrown me about these arguements that taxes “remove money from the economy” is that they are patently false. This has been one of the few articles that I’ve read that posits a more nuanced position…the question of whether or not it can be invested better is a much easier way to sell traditionally conservative notions of personal investment vis a vis government spending. It also isn’t as if the money doled out via entitlements or other programs is burnt when it is spent, it makes its way out into the economy.

However, it seems that it isn’t a true apple to apple comparison to see if growth occurs more for public spending vs. private investment…no one person has the same responsibilities or clout as a government.

Government is able to fulfill those roles that no one entity is neither large nor risk-averse enough to contemplate. From the examples in the article (the internt from a DARPA project and the spillover of GPS into the civilian market) to the benefits of space exploration, you have to take the good with the percieved bad.

Posted by postfattism | Report as abusive

There is an inherent flaw in both suggested models. Ultimately, if we are to work towards a system whereby we integrate the IT systems available into the decision making mechanisms once occupied by government then we are governed by those in control of the large IT firms. One cannot escape the prose of Orwell in this regard. Politicians are elected, albeit, by and large from priviledged background, wherby education is non-discretely adhered to by the letter and delivers financial reward to those who successfully get to the top of their political careers. For the rest of us however, we are left frustrated, at the whim of successful capitalists. This is not a humanistic approach that most human beings would wish to belong to. There is an inherent battle for survival, built into our genetics, that primes us for competition, though, surely, in the paradigm of existentialism, we should be looking to co-exist with one another and work interdependently to forward each and every individuals goals. I cannot see how this would not include further advancements in the voting system, to include statutory weekly voting rights for all above the age of 16. We could do this in a similar fashion to teletext, online even, where all questions are pre-checked for full independence from loaded language. Needless to say that those who have exhausted much of their own lives chasing a high level political career, would scoff at this assertion, however, it is indeed quite a presumption to make, to suggest that an ‘inner circle’ of minds is anymore proficient at making the ‘right’ decision on a weekly basis, then ALL citizens over the age of 16. If we are indeed to make the transition to a more equitable position, then we should look to implement the technology sooner, rather than later. My only fear is that this will require watchdogs of watchdogs, in order to ensure the process is not open to abuse by those sat with the biggest bank balances or those individuals so set in their ways to ever allow for this to happen.

Posted by ProfitProphet | Report as abusive

If the argument of the super rich were true wages would not have decreased 7% since 1992. If this were true the “capital sector” would be creating hundreds of thousands of job a month given that their taxes have been so low historically for the last 12 years. Services to the general public that are provided by a general cost sharing through taxation are being cut while corporations and “unearned” income is treated unfairly preferentially. Voodoo Economics has not worked and we have 30 years of history to support this.

Posted by DunaDad | Report as abusive