The Governor’s Budget vs. the Free Market

jeffersonquote This post was previously published in the April 21, 2017 edition of the Rochester Business Journal

In the tug of war between the welfare state and free market capitalism, New York’s recently passed budget represents a setback for the free market. Wrapped around the promise of free college tuition for the middle class, the budget adds a new entitlement to an already overtaxed economy. Programs like free tuition, family leave and minimum wage increases all add to the cost of doing business in New York, a state that has relied on Wall Street employment to bolster job growth and tax revenue as the upstate economy flounders.

The governor seems to be unaware of the connection between his policies and a consistently lagging job market. Is it any wonder that his “New York Open for Business” campaign is largely considered to be a joke in business circles?

Yet, at some level, we free marketeers have only ourselves to blame.

As job growth in our economy has moved downstream to small businesses, business owners and CEO’s have pursued a more libertarian philosophy than the large corporations that drove the economy in the past century. It’s understandable that those who have put all their energies into building a successful business and, perhaps, have put all their assets – their homes, their children’s college fund – on the line in that pursuit would promote a culture of rugged individualism.

However, the ideal of rugged individualism hasn’t been at the center of American society since the industrial revolution forced people off their farms and into factories in the late 19th Century. During that gilded age, large industrial corporations and their founders, like George Eastman, were communitarian in their relationship with local governments, educational institutions and their employees.

Driven by the lasting effects of that culture or perhaps by a stronger ethical foundation, corporate leadership after WWII was guided by a more enlightened view. Corporate leaders were also leaders of their communities and wealth was more broadly shared.

The libertarian strain that underpins today’s entrepreneurial culture often fails to take community and employee welfare into account. It’s every man and woman for himself or herself. As wealth becomes more concentrated at the top, is it any wonder that the middle class demands more from government?

When I ask business owners about their company culture, the most frequent response is “family” – “our company culture is like a family”. If you are a business owner or senior executive, ask yourself if you really treat your employees like family. Do you visit them when they are hospitalized? Do you go to the funeral when someone close to them dies? Do you worry about their children’s college education?

You would do those things if they were part of your family, wouldn’t you?

The governor’s free tuition program will likely be an unguided missile. Students often do a poor job picking a course of study that makes them attractive to the job market. The national student loan crisis is the product of those poor choices. New York’s program will likely have the same results — graduates whose skills don’t match the market.

aspenAt the same time, one of the most common complaints of business owners is the absence of qualified individuals in the workforce. Perhaps business leaders should work with local educational institutions to develop the programs that will provide them with a workforce ready for work the day they graduate. The Aspen Institute and others have outlined a “playbook” to guide communities toward successful outcomes.

The governor has co-opted other programs from the national progressive agenda. Beginning in 2018, New York’s Paid Family Leave Act will provide replacement income and guarantee a returning employee continuing employment. And, New York’s minimum wage law is the most progressive (or perhaps aggressive) such law in the nation.

If libertarians were more communitarian, perhaps the voting population would not feel the need to support such intrusive legislation. Do we really need to government to tell us how and when to provide extended time off for our employees? Do you do that for those whose contribution you value? Do you extend them the opportunity to return to work when their circumstances allow?

Addressing the needs of our local communities is best done locally. The good news is that the power to do so is in our hands.