WASHINGTON — As we begin a new year, we look for guideposts to help governments and business improve economic performance. In a world of global competition, the platform provided to firms and individuals is crucial to growth and prosperity. From observations comparing countries that do well with those that are falling behind, here are some suggestions:
Government has few, if any, limits in coming up with new revenue-raising schemes. Such government creativity can be dangerous, become unfair and nontransparent, and go on to shape the outlook of citizens.
Let me provide one example. The state of New Hampshire recently introduced a “view factor” in its property-tax assessments. This view tax assigns a specific value to the ability to see the surrounding sights from one’s property, and taxes the resulting benefit.
In talking with audiences in a variety of countries about this new tax, there was a key difference in reactions. Some audiences were outraged about the tax, stated that the property value was already incorporated in the purchase price, and suggested that there be complaints, lawsuits or voter rebellions. Questioning the foundation and rationale of government regulations in this way seems to help the competitive platform.
On the other side, some audiences seemed more concerned with the possibility of receiving special deals under the tax: “My grandfather is blind, could he get an exemption?” “I wear glasses and can’t enjoy views, could I get a reduction?” “We are only home at night, would that provide a discount?”
The latter approach reflects conditions where the basic battle has already been conceded. The argument focuses only on narrow self-interest — not helpful for a solid platform encouraging competition.
It helps to have a reluctant perspective toward taxation. The belief that any income belongs to the individual who then parts with some of it in support of government is an important constraint on government expenditures.
All too often taxation is seen as a principal government expectation with very limited regard for the person that generated the money in the first place. Such lack of concern becomes highly visible during budget discussions: Increases in expenditures are routinely seen as fixed, and any deficit is remedied through higher taxes rather than by cutting budgets.
In those rare times when a budget surplus is encountered, the tendency is to find new ways to spend money rather than return it to its proprietors. Yet, there is a remarkable lack of examples where governments have taxed their country to prosperity.
Ambition is another dimension that differs sharply and helps shape competitiveness. Of concern is not ambition per se, but the key direction of its outlook. In many countries, for example, there are regional differentials in development and economic outlook. Such inequities stir concerns and questions — which can take two entirely different directions. Letters to newspaper editors are a good indicator. They tend to describe similar situations, such as: “My former colleague has been hired by a multinational corporation and now earns four times as much as I do, even though we grew up together and have a very similar background.”
It is in the concluding request and question where the writers differ. While one may ask what he or she can do to get such a good job as well, another inquires how he can bring this coworker “back to us so that we are all equal again.”
The forward-driving ambition tends to work much better since it supports others and provides for more initiative and enthusiasm.
Then there is the indicator provided by conversation. When and how we talk with each other influences our perspective and horizons. Particularly when we meet new people, there is the conversational small talk that communicates little in terms of specifics, but in its cumulative thrust is reflective of society and its attitudes. Two key differences tend to emerge.
Once one gets beyond talk about the weather, key conversations in some regions will center on poor government decisions, concerns about the future of the economy, worries about factory closures, and possible future downturns in one’s personal fortune. Elsewhere, one tends to find discussions focusing on new plans, ventures and opportunities that might emerge. Often the conclusion even encourages followup to explore mutual interests.
The upbeat conversations appear to reflect a more productive, innovative and networking society — all of which tend to be a sign of greater competitiveness.
There are other differentiators as well. The above are only some key indicators that are easy to check and seem to distinguish well among countries with different competitive platforms and reflect future economic performance. These indicators are also the ones we can influence directly and personally with our attitudes and outlooks.
So let me wish everybody: limited government creativity in raising revenue, reluctance toward budget increases, positive ambition that is supportive of others, and many forward-looking, encouraging conversations. Have a happy and prosperous New Year!