Barro’s Welfare Error

Via Ted Nesi comes a Bloomberg column by Josh Barro.  It’s one of those commentaries in which it isn’t quite clear whether the author is offering pure political advice or expressing his opinion, so I’ll assume the latter.  In that context, here are Barro’s thoughts on the balance of the economy and government:

If you concede that the purpose of a business is to provide well-paying jobs and solid benefits, then you cannot defend private equity. Private equity defenders must stand up for the idea that firms do not have a social obligation to retain and pay their employees; their function is to produce products and profits and getting them to do so more efficiently is good for consumers and for the economy as a whole.
… [Therefore, it’s a] straightforward neoliberal proposition: The government should provide a robust safety net so that employers can be left free to hire, fire, open and close at will. A dynamic private sector is important, but it needs a substantial welfare state to support the people who fall through its cracks.

Barro’s is an interesting argument, but its greatest asset is how clearly it brings into focus something that people across the country are beginning to sense, especially on the right:  The model of big finance and big business operating to supply wealth, with a robust welfare state picking up the pieces shed in the name of efficiency, is an excellent example of the ways in which the  money-shuffling sector is distorting the country’s economy and government deleteriously in its own favor.
Barro introduces an error with his most fundamental premise that there is such a thing as one single “purpose of a business.”  The purpose of a business is whatever the people involved in it want it to be.  If they value profit above all else, they’ll follow Barro’s reasoning; if they value a sense of community, they’ll operate differently.
Indeed, the infinite variety of priorities is a large part of what makes people go into one industry or another — or one line of work or another.
Continue reading on the Ocean State Current

0 0 votes
Article Rating
Notify of
1 Comment
Newest Most Voted
Inline Feedbacks
View all comments
11 years ago

The liberal Barro thinks like a liberal. The business exists for the workers to do as they please. Let’s see what happens at GM. They are already losing money hand over fist. Another bailout financed by the money grubbing private sector perhaps? Why don’t we all just play house together and pretend like the imaginary is real. Greece 2012 right around the corner.

Show your support for Anchor Rising with a 25-cent-per-day subscription.