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REVIVE AN ECONOMY… THE ANSWER LIES WITH THE PRIVATE SECTOR

Written by: Bill Gschwind

Article Overview: The best road to economic recovery strengthens and grows private business. The private sector, guided by the discipline of the market system, will always be the most efficient way to create the right number of productive jobs providing the products and services the economy demands.

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REVIVE AN ECONOMY… THE ANSWER LIES WITH THE PRIVATE SECTOR

The best road to economic recovery strengthens and grows private business. The private sector, guided by the discipline of the market system, will always be the most efficient way to create the right number of productive jobs providing the products and services the economy demands.

There is a great debate taking place over the airwaves and around the water coolers in Minnesota about how best to create jobs and stimulate the economy. The $700 billion federal stimulus package is having little effect on job creation. Unemployment continues to increase and the economy continues to struggle.

So, can the government revitalize the economy by creating more public sector employment? Or will the private sector be the economic engine that turns this recession around?

When the government hires a person to dig a hole, and then hires another person to fill it in, two jobs have been created. While two public-sector employees are happy, the economic problem is that the money to pay them is taken out of the private economy through taxes and fees.

According to the Minnesota Department of Employment and Economic Development, Minnesota's largest employer is the state of Minnesota with over 75,000 employees. The average weekly salary of these state workers is $1,044 compared to the $885 average weekly salary of private sector employees. The state pays for these jobs with tax money the private sector would have reinvested to grow jobs and develop new products.

Unlike the public sector, the private sector creates jobs that provide products and services people want to buy. The success of the private sector is its ability to adapt and react quickly to current situations.

Unlike the government, when a private business no longer provides what customers want at a price they're willing to pay, it fails. The bankruptcy of General Motors is a good example. The government's bailout of GM failed miserably - costing taxpayers $50 billion. Some businesses will lose, while other businesses will win - in good times and bad. Economists found strong cleansing effects in the marketplace during the last two U.S. recessions, 1990 and 2001. This constructive destruction process has contributed to productivity growth in the United States that is higher than the rest of the world.

Had Obama supported a 6-month income tax holiday for individuals and businesses instead of the failed stimulus package, billions of dollars would have been left in the private economy, spent or invested by millions of individual taxpayers, and the recession would have been less severe. As it is, the fed is holding an auction this week to sell $200 billion of treasury bills. That is money that is not available to the private market for investment and drives interest rates higher on funds that are borrowed by individuals and businesses.

Economic growth occurs when confident business owners invest and expand, creating jobs. Those employees buy goods and services and the economy grows. Government subsidies to help the unemployed and the under-employed are short-lived and do not create the kinds of jobs that drive an economy. They may be a short-term feel-good fix, but like crack, just keep the junkie dependant on the dealer.

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Home > Small-Business-Consulting > Bill Gschwind > REVIVE AN ECONOMY THE ANSWER LIES WITH THE PRIVATE SECTOR
Article Tags: bailout, department of employment, department of employment and economic development, economic engine, economic problem, economic recovery, general motors, great debate, job creation, minnesota department of employment and economic development, private business, private economy, private sector employees, public sector employees, public sector employment, recession, state of minnesota, stimulus package, tax money, water coolers
Referred by: http://www.processspecialist.com/

About the Author: Bill Gschwind
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Bill Gschwind, JD, MBA has over 25 years experience in successful business management and sales. For the past 16 years, he has owned franchised and independent retail and business service organizations. Mr. Gschwind is a business attorney with an MBA in Business Management which makes him uniquely qualified to advise owner-operators on all matters relevant to operating a successful business. Contact him for questions or assistance in your organization with human resource development, leadership, and business planning services.
http://www.inPursuitConsulting.com


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