Political incentives and a free society

Politicians deeply embedded with government and liberal press editors’ support “incentives” to lure favored businesses to North Carolina. Two troubling excuses for this inexcusable intrusion into business decisions are: 1) “We need the jobs.” 2) “We have to offer incentives to attract businesses to our location because surrounding states offer them.

The noun “incentive” means something that induces action. By definition it could be punishment or reward. Our politicians offer public (other people’s money) rewards in the form of cash, tax reductions and rebates to companies they select to locate and operate in return for promises of jobs (and tax revenue). Frankly, I don’t buy the “jobs” ploy. This is more about increasing tax revenue to expand government projects. But there are other negative consequences.

In effect, incentives result in other businesses and taxpayers being punished because they must pick up the tax burden that’s reduced on those who luckily win this political game of chance.

In the case of the first excuse for these lures, it is not a function of government to provide jobs. Of course, statists—having for decades infiltrated our political and social institutions—have incrementally pushed to expand the scope of government. Thus, most people today accept statism, antithetical to our original concept of limited government. The late economist Milton Friedman believed that modern (twentieth-century) liberals favor “policies of state intervention and paternalism”—ideas that classic liberals fought against.

Surprisingly, people who claim to oppose neo-liberal ideology often support interventionist government. Dr. Friedman observes that initially people of “good will” wielding power may not be corrupted by that power. Yet, inevitably, expanded government becomes corrupt. He said that the drive to “extend the scope of government” is a “great tragedy,” in his 1962 book “Capitalism and Freedom.”

Friedman wrote, “…the scope of government must be limited. Its major function must be to protect our freedom both from the enemies out-side our gates and from our fellow citizens and to: preserve law and order, enforce private contracts and foster competitive markets. Government interference distorts markets; confusing business decision-makers and hiding the real costs of goods and services.

In the second excuse-case cited above, why do we need to compete with other states? Each state is unique: differing in geography, culture, history, natural resources and government. Business people will decide which is best for their interests—an economic principle that results in benefits for many other people. Government provided “incentives” interfere with normal market functions.

If government officials think they must bribe business people to operate in their jurisdiction, it seems to me they in essence believe that their area has nothing else to offer. In many cases that may be true, but one would think they’d have enough pride not to want to admit it.

Concerning North Carolina, we are on track to create a more attractive economic environment with a majority government of people who understand how to create business-friendly conditions. They have begun to reduce taxes and excessive regulations; improve our highway system and reform education.

Dr. Friedman said that beyond even-handed enforcement of laws on enterprises and labor unions, the most important and effective step to a competitive market would be tax reform. He believes the corporate tax should be abolished. With that legislative action all businesses would benefit and be attracted to locate in this State.

If our politicians and the supporting political class would spend more time reducing taxes rather than reshuffling them we would all be better off. Our citizens would keep more of their money to spend the way they choose, and business people would have the best incentive to operate in North Carolina.


About R. E. Smith Jr.

Mr. Smith writes essays and commentary on politics, American history, environment, higher education and culture. He's been published in print media and at blog sites for about 25 years. Smith's formal education includes B.S. and M.S. degrees from the State University of New York and Syracuse University. He has earned a 21-credit hour Certificate in Professional Writing from the University of North Carolina-Wilmington. Training/work experience: NYS Ranger School; U. S. Army, Corp of Engineers; soil scientist and forester with USDA; Assoc. Professor at SUNY; real estate agent; small business owner.
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