In his blog post, which was republished in the Huffington Post, UC Berkeley Public Policy scholar Robert Reich outlines the issues facing Wisconsin and the United States. In a nutshell, he argues that tax breaks to the rich and corporate entities have contributed to the already-severe impact of the recession to cause extremely tight budgets.
The standard argument for tax breaks is that allowing a more attractive environment for corporations will encourage them to continue to invest in the local economy and reside within the tax base. The logic is that by reinvesting, they will grow, and with additional growth comes additional revenues, and that even at a lower percentage, this will result in higher tax revenues in the future.
Let's pick that apart.
In times of crisis, we need short term cash-flow-oriented solutions at a community level in order to keep individual families functioning. Waste management, water systems, children enrolled in schools, and emergency services are all funded at a community level. Giving tax breaks is obviously in opposition to that goal of keeping the community functioning.The reasoning for giving tax breaks is to spawn future community revenues.
But in order to grow and to innovate, any company needs healthy employees who can think, have knowledge, are creative, understand processes, and have relationships built upon trust. Those components (health, skills, knowledge, creativity, processes, relationships, and trust) are intangible assets. So the best way to improve future revenues is the increase the intangible asset base that evenutally can produce financially productive assets.
And where are those components built? Health is built at the community level; it's based on food, clean water, sleep, access to medical care, and a supportive environment (emotionally and physically). While some skill and knowledge is built within companies, a lot is built in the formal educational system and more is built informally through interactions with one's peers during shared activities. Creativity is to some degree innate, but also developed in the same way knowledge is: through both formal education and informal community context, as detailed in depth in the seminal work of Richard Florida. Relationships and trust are reinforced through casual extra-work activities after (some) have been nucleated in a work context. And while processes are developed inside companies, companies also often look to the best practices of other organizations for process refinements (often enabled by faculty at educational institutions). Another overlooked intangible asset is that of the spiritual -- love, connection, vulnerability, passion, mission -- which provides the deep engagement human beings need to feel satisfied with their lives overall. Spirituality is rarely cultivated in a professional context.
Building intangible assets is crucial to the future success of the private sector. Since in large part they're built and reinforced within non-work communities, healthy communities are therefore also crucial to the future success of the private sector. When we dismantle the ability for the community to renew itself and rely on a relatively few wealthy individuals and private firms to fund the development of all these critical intangible assets, we vastly increase the risk that these assets will not be built, and in fact the financial competitive power of the United States will be tremendously weakened in the future.
No institution is perfect. Governments aren't, unions aren't, and corporations aren't. Individuals aren't perfect either. It is understanding the role of each in the overall economic landscape and optimizing for the production of intangible assets and their conversion to tangible assets that we will, as a society, rebuild a resilient global economy.
