Are the capitalists striking for Mitt Romney?

With another three months of mediocre employment reports before the election, accusations about Bain Capital’s outsourcing strategies may be joined by a more radical concern: Is American big business sitting on $trillions in cash reserves in order to (a) embarrass Barack Obama and (b) get better investment terms from a Mitt Romney presidency?

Is this notion too conspiratorial, too European to surface in smart circles in the US, the most unruly mixed economy in the world?

Probably.

If the commanding figures in American business acted effectively—in concert—to advance their vast economic interests, they would have quickly stopped last year’s game of chicken over the US debt ceiling; they would have vigorously backed Democrat and Republican moderates—and scorned extremists—on entitlements and pro-growth tax reform. They wouldn’t be financing $billion-plus campaigns for Romney and Obama, as well as the campaigns of dozens of extremists who promise to keep Washington paralyzed.

Furthermore, in a majority of American states where business is declining to announce new plants and new jobs, they’re harming not just unfeeling Barack Obama’s chances of re-election, they harming fervent pro-business Republican incumbents as well.   

Animus toward Obama and $trillions in corporate cash reserves in today’s recovering economy, however, are making people wonder. Moira Herbst in The Guardian is suggesting that it be taxed away and spent productively by government.

Click on: www.guardian.co.uk/commentisfree/2012/aug/02/us-jobs-corporate-cash-hoarders?INTCMP=SRCH

Groupthink, if not candle-lite conspiracies, contributed mightily to the global financial catastrophe of 2007, and friends of business today place tremendous emphasis on the importance on business morale.

Keynes elevated the economic significance of the emotions of entrepreneurs in his expression “animal spirits” and, on balance, saw a bias toward action. If there’s money out there, they’d take extraordinary risks to get a profitable share of it.

This perspective argues in favor of public deficit spending when money out there is scarce (as it was in 2008). As well, however, it assumes that government can soon return to a more neutral stance because private “spirits” will soon return to finance future growth and innovation.

Free market economists can’t counter the idea that capitalists would “hoard” for partisan reasons or would sit on productive resources when profitable opportunities are available. If money had a political agenda, it couldn’t be efficient and, anyway, it would be cahoots with an oligarchy.

With these assumptions, economists can make rules, design quantitative models, and predict future overall economic growth. When the growth doesn’t show up, government’s can be questioned for spending too little. The argument revolves strictly around economic management. The mental state and motives of the economic players are supposed to be reasonably fixed, and supportive of economic growth.

Let’s play with a less reliable analogy:

To a bird-watcher and a farmer, capitalists seem to act like clouds of birds over fields of grain. “The climate of opinion” in the cloud forms and reforms in an instant; no one bird is in charge, no one descents. No central intelligence is at play. Still, we know they will tire and get hungry; they’ll land, but we can’t say where.

The resting state of our capitalists’ “animal spirits” needn’t be constant. The bias for growth and risk-taking that charged the vibrant early years of Keynes’s life may not be as robust in the Atlantic economies of today. Indeed, Keynes’s generation of policy-makers might feel more sure of themselves now in Asia’s growth centers.

Putting in power in Washington an alternative ideology that believes America can still grow as aggressively as it did when it was young, without positive support and incentives from Washington, would be quite an experiment and, therefore, is not likely what business leaders actually have in mind.

Conceivably, fear and partisanship in big business are depressing economic recovery and may contribute to the election of a Republican president. However, that doesn’t constitute a conspiracy or a harbinger of what will happen next.

Moods change; in six months, the same glass half full may look irresistible, whoever is president.

Austerity politics and business confidence

The economic recovery has lavishly rewarded those already at the top and made it much more difficult for tens of millions of other voters to realize the American dream. Observations like that get into politics and turn business leaders off.

Yet, the business community’s favorite, if not exclusive political voice, the Republican Party presently sees political advantage in polarizing America’s mass democracy. They portray the Democrats—the oldest political party in the union—as European social democrats and would happily privatize social insurance rather than ever raise a tax. With global capitalism starting to look more and more like an idea designed for China’s future, not America’s, business planners complain about political uncertainty and wait for the restoration of “business confidence.”

It’s not good enough that governments—local, state, and national—are entering a long, fraught period of austerity. They want assurances that scrambling politicians won’t talk themselves into doing anything to disrupt their world view. Without that assurance, many will sit on their hands and talk about grand expansion plans suspended in save files. Kevin Carmichael in The Globe and Mail captured these sentiments under the headline “Tax uncertainty handcuffs U.S. firms.”

“I could hire another 15 or 20 people, but I’m scared to death to do it because I’m afraid some tax change will come through,” said Clint Greenleaf, chief executive officer of Greenleaf Book Group LLC, a publisher based in Austin, Tex.

“It stifles growth,” Mr. Greenleaf said of Washington’s inability to come up with a coherent approach to taxes. “I’m not going to leverage the future of my 50 employees on the hope that the government won’t hurt me in the future.”

Click on: www.theglobeandmail.com/report-on-business/international-news/us/tax-uncertainty-handcuffs-us-firms/article2116566/

Is that what’s left of the legendary animal spirit of American entrepreneurship?

Did the 20th-century offer business a sure thing? Did American business then not notice that real socialists actually won elections in the United States, that both Roosevelts and, occasionally, a majority of Americans actually believed that elected governments, not business should drive economic reform?

Today, a majority of Americans say America is on the “wrong track.” Not long ago, a majority of Americans worried that American business was on the wrong track. And there was a time when the best and brightest sought public service—not MBAs.

The climate for business generally has never been better than it is now. In Canada, one political party stood for lower corporate taxes across the board and won a majority this spring. Developed and emerging economies all tackled the recession with measures to restore the private sector. Every Washington bipartisan commission that has addressed the US structural deficit has called for more intelligent growth incentives for business and for lower corporate tax rates.

Unless Mr. Greenleaf is worried about a particularly egregious tax loophole his business relies on or, in fact, has no strong commercial reason to hire more people right now, he should welcome, not worry about tax reform in Washington.

Waiting for things to calm down in Washington is naïve. Politics don’t slow down in difficult times. It could, as likely, get more radical and not limit itself to trimming entitlements and cutting bureaucracy.

How revenues are raised is as open to change as how revenues are spent. Unless mainstream business finds ways, with government, to restore shared prosperity, government, with others, will ultimately try other people’s ideas.