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Moderated Economy (an Economic Issue)


Two important features of a Moderated Economic system are described by its name. In one case, our community leaders and governments would moderate (watch over) our economic activity to safeguard and to promote the financial wellbeing and accumulation of wealth by their citizens and businesses. In the other case, we would create a moderate (fair and reasonable) economy where economic activity stays within some practical limits and does not become excessive or extreme.

A basic goal of any economic system would be to use resources in the most productive and profitable manner possible in order to build wealth. Beyond this, a Moderated Economy would focus on some additional goals. One of these goals would be to produce locally as many of the goods and services that are needed as possible, or at least some minimum amount of each of them. This would help to ensure that people will be able to get their basic necessities no matter what happens to the world economy. Another pair of goals would be to ensure that everyone can get a job to earn a living, and that our labor resources are producing wealth and not being wasted.

In general, a Moderated Economy would extend a Market Economy’s focus on the economic self interests of the individual to include the economic self interests of the community, the state, and the nation. As we saw earlier, our actions can create, redistribute or destroy wealth. We want to focus not only on helping individuals to become wealthier, but also on helping our communities, states and nation to become wealthier.

In addition, a Moderated Economy would replace the direct control of a Command Economy with more of an economic framework approach. Instead of our governments directly owning businesses or telling specific people or businesses what to do, our governments would create economic frameworks for our local, state and national economies. These frameworks would allow our citizens and businesses to operate within a safe and secure environment from which they and our communities, states and nation could prosper and build wealth.

It is very important to note that in order for a Moderated Economic System to work, some significant changes will need to be made in the way our governments work. In general, some of the same principles that will need to go into a Moderated Economic System will need to go into our Political System. Specifically, there would need to be more oversight of the governments and safeguards put in place to protect the rights of all citizens. I already talked a little about this in the section on Political Issues. I will refer to these governments as Moderated Governments in order to make it clear that I am not talking about entrusting our current governments with control of our Moderated Economy.


With the help of our Moderated Governments, the first thing we would need to do is to determine the types and amounts of the basic goods and services that are needed by the people in our local communities and in the local regions. Then, we would need to determine whether or not these were already being provided by local sources or through trade with dependable partners. For any that are not, we would need to determine why not and formulate ideas as to how to fix the problem. In most cases, this would mean having our Moderated Governments provide the right incentives or disincentives to encourage local individuals and businesses to do what is necessary to provide what we need.

Of course, in order for a community to become wealthier, it must do more than just meet the basic needs of its citizens. It must innovate, and produce or provide things that are in demand in other places. In a Moderated Economy, the idea is to balance the production of necessities and luxuries. Concentrate too much on necessities and you do not accumulate much wealth. Concentrate too much on luxuries and you become vulnerable to economic down turns.

Another important component of a Moderated Economy is the reduction in the cost of living. This mainly comes about by making it cheaper, easier, and preferable to use our resources productively. One example that I will talk more about later is the automobile. Cars are expensive to own and operate, especially considering that they are parked and not in use most of the time. For most people, there is no good alternative to owning a car. What we need to do is to reduce the need for regular travel by car and to provide cheaper and more convenient alternatives. This alone could reduce many people’s cost of living by more than 20 percent and allow them to do other things with the time they would have wasted driving and maintaining a car.

In the following subsections, I will give a brief description of the different roles that would be played by each level of our Moderated Governments, and by individuals and businesses. Since the players (individuals and businesses) cannot start playing the game (economic activity) until they know what the rules of the game (laws, incentives and disincentives) will be, we will start by looking at the roles of our Moderated Governments. I will also give an example of how the Moderated Economy would work within an important industry. Then, in upcoming sections, I will go into more detail about the need for this new economic system and how other parts of it would work.

National Government

At the national level, the main objective of our Moderated Government would be to level the economic playing field in two economic arenas. In both arenas, our national government’s goals would be very similar, but there would be a sizable difference in the role it could play in meeting those goals. One role would be to represent and to protect our interests on the international scene, and the other would be to moderate our domestic economic activities to help state governments to do their job.

On the international scene, the focus would be on trade and foreign investment. With a Moderated Economy, all our trade agreements would be replaced with a single agreement that could be summed up by the application of two major principles. First, imported goods and services would need to meet the same standards of quality and production as our domestically produced goods and services. Second, any foreign investment in the United States by any given foreign individual or business would be limited by the same limits that their government imposed on American investment in their country.

In the first case, we do not want to give foreign made goods an advantage just because they can be produced without incurring the same expenses involved in meeting the safety, environmental and labor laws that we impose on producers in the United States. In addition, we want to ensure that all the goods and services that we buy and use were created in accordance with the values that we want to support. Therefore, we simply state that all goods sold in the United States must meet our standards of production and our quality of workmanship. To enforce this, imported goods would need to come with proof that they were produced in accordance with our laws or an appropriate fine would be imposed on the importer.

In the second case, we do not want people from some foreign country buying up American businesses or assets unless we have the same right to do so in their country. For instance, if a country does not allow American individuals or businesses to own a controlling interest in their businesses or does not allow us to buy their land, then they should not be allowed to own a controlling interest in any of our businesses or to buy American land. Similarly, if a country nationalizes American businesses, then we should have the same right to nationalize their businesses in the United States or to be appropriately compensated in some other way for our losses.

On the domestic side, the national government wants to enact appropriate national laws to provide equal protection to all our citizens and businesses, and to ensure that our resources are not wasted or misused and that our environment is not polluted or damaged. Our national government must ensure that we are all playing by the same rules and that the citizens and businesses of all states and territories are treated fairly and equally.

Our national government would also set our national economic goals and create the framework needed to meet those goals. For instance, our goals might include such things as being energy independent, producing a certain percentage of various goods and services domestically, having a favorable balance of trade, and creating national wealth. Appropriate incentives and disincentives would be used to encourage individuals, businesses and states to take part in doing what is needed to build an economic environment that would meet the goals of the national economic framework.

State Governments

At the state level, our Moderated Governments would play roles that would be somewhat intermediate between those of our national government and our local governments. A state’s size, population and geography may influence how much its roles look more like those of our national government or its local governments.

In general, a state government’s two main economic roles would center on managing trade with other states, and to help and to monitor their local governments to ensure that they are doing their jobs with respect to their economic prosperity, and protecting their citizens, resources and environments.

With respect to trade, the state governments would want to ensure that goods and services imported to their state meet the same standards as those produced locally. Of course, they would be much more limited in what they could do than our national government. Nevertheless, they would not want to give imported goods an advantage over locally produced goods, just because another state’s laws were more lenient.

Within their state, the state government wants to ensure that each county, city, town, or community treats its citizens and businesses fairly and equally. In addition, the state government wants to ensure that the local governments are doing what is needed to safeguard its prosperity and the prosperity of its citizens and the state. To that end, the state government would also set some economic goals and create its own framework for meeting those goals.

Local Governments

Unlike our national government and the state governments, the role of our local Moderated Governments would be more directly focused on their communities, their citizens, and their local businesses. It would be the job of the local government to protect, to promote, to improve, and to regulate the economic activities of, between, and with its citizens, its businesses, its resources, and its environment. In a Moderated Economy, the local governments would truly have the biggest and toughest jobs with respect to creating a secure and prosperous economy.

A local government would need to ensure that all its citizens can earn a living by encouraging and providing the right educational opportunities, and by encouraging a balanced mix of businesses. It would provide a favorable economic environment for a good mix of businesses to operate within the local area by making it easy to meet all legal and regulatory requirements, and by protecting their businesses from unfair competition from businesses in other locations. It would monitor its resources to ensure that they are not being misused or wasted, and that there will be enough for all its citizens. It would monitor its environment to keep it clean and safe for all its citizens and its wildlife.

A local government would also need to determine what resources were available and help guide their citizens and businesses to use them in the most efficient and productive manner possible. It’s in the interest of the local citizens to protect their resources so that there will be enough for everyone now and in the future. How they handle any given resource would depend on whether it is renewable or not, whether it must be imported or can be exported, and on what its value is to the community’s citizens and people elsewhere.

Of course, human labor is one of the most important resources, if not the most important resource, that any community has, and a local government would need to ensure that it is not wasted. The main idea is to keep people working on productive tasks that will increase the wealth of both the individual and the community. If we keep everyone doing productive work, then we will also give everyone the opportunity to earn a living, which would provide numerous benefits both to the individual and to the community. I will talk more about this in the upcoming subsections on Labor and Jobs.

It is in the best interest of everyone to have our environment protected, but a given individual may put a higher priority on growing their own wealth, than doing their part to protect our environment. Since protecting the health and wellbeing of its citizens is important for any community, a local government must take on the responsibility of protecting the local environment and making sure its citizens and visitors do the same. By protecting the environment and reducing pollution we will allow more people to stay healthy and productive, and help to keep down the community’s health care costs.

Individuals and Businesses

For the most part, a local economy would be driven by the consumer, as it would be in a Mixed Economy that is heavily weighted towards a Market Economy. This is pretty much what we have today except for the roles played by the various levels of government.

In a Moderated Economy, the idea is for each level of government to provide a framework to guide our economy down a profitable and secure economic path, and to buffer our economy from internal and external attacks. Within this framework, the economy would still mostly be a Market Economy where individuals and businesses could pursue their entrepreneurial spirit, take risks and innovate. Their only real limitations would be the incentives and disincentives imposed to discourage them from doing things that might otherwise have profited them, but would have reduced the wealth of the community.


Let’s now take a look at how a Moderated Economy might handle a specific example. A good choice would be to look at the clothing industry, since much of the manufacturing of our clothing has been outsourced to other countries. With a Moderated Economy, much of that work would come back to the United States, which would provide us with jobs and tax revenue.

At the national level, we have enacted a number of business laws dealing with such things as quality, labor, and pollution control that must be followed by manufactures in the United States. We cannot directly enforce these laws in other countries, but we can control how and when we import any goods that were manufactured elsewhere in what would have been in violation of our laws if they had been manufactured here.

The first step is to require that all goods sold in the United States show proof as to where and when they were manufactured. If the goods were made here in the United States, then the manufacturers would have needed to comply with our laws and the goods could be sold without any problem. If the goods were made in another country, then they may not have been manufactured in a way that was in compliance with our laws. If that is the case, then we would impose an appropriate noncompliance fee on each item sold.

It would be up to the importers to get and to provide the proof as to which of our laws were complied with when the imported foreign goods were made. If all of our appropriate laws were complied with, then we would not impose any restrictions on those goods being sold here. On the other hand, if some or all of our legal requirements were not met, then an appropriate noncompliance fee would need to be paid for each item sold here or those goods would not be allowed to be sold here in the United States.

For U.S. manufacturers, this could help to make our clothing more competitive, because noncompliant foreign made clothing would cost more. Either the foreign clothing manufactures would need to incur the added expense of meeting our various business requirements such as quality controls, safety standards, labor practices, and pollution controls, or each piece of clothing that was sold here would be subject to the appropriate noncompliance fees. Once the price of foreign clothing reflected more of the costs that are imposed on U.S. clothing manufacturers, then it would become more profitable and attractive for business to manufacture clothing here in the United States.

Of course, labor and some other costs may still be less in these other countries, but local manufactures would not have to spend as much on transportation. In addition, lead times would be much shorter for stores buying from local clothing manufactures. If a store was running low on something, they could get restocked a lot quicker from a local clothing manufacturer than most foreign ones. Stores could also offer more custom clothing, where a customer might be able to order and to get some specific style or color in their size in only a few days instead of weeks or months.

Another aspect of the Moderated Economic system is its focus on creating more sustainable local economies. We want some percentage of necessities such as food, clothing and home furnishings make here where they would create local jobs and pay taxes to the local government. In this case, the national, state and local governments could provide incentives to build or to maintain local manufacturing. Of course, these incentives would be limited to what would help create wealth for the community, state, and nation, and would not be given if they just helped make the businesses’ owners wealthier.

For instance, even with all the advantages created by requiring foreign made cloths sold here to meet our legal standards, there is still the possibility that some local manufactures may find it hard to compete. If there were no or not enough clothing being manufactured in the area, the government could provide some incentives to help local clothing manufacturers. If the desired percentage of clothing was being manufactured locally, then our Moderated Governments would simply monitor the health of the industry to ensure that it stayed competitive.

Inflation and Recession

Our economy can be derailed by high inflation or a recession. Inflation happens when business and/or consumer demand outstrips supply and causes prices to rise. This can happen when there are problems with supply production or distribution, or simply when people start consuming a lot more. A recession can occur when consumers and/or businesses significantly cut back on their spending and start laying off workers. This can happen when people become too pessimistic about their future.

In some cases, we can also have stagflation where we have both inflation and a recession at the same time. This can happen when businesses pull back, but consumers continue spending. For instance, if there is a shortage of some good like food, water or energy that people cannot easily do without, demand will remain high, prices will rise. If the good is something like oil, then the shortage will not only raise prices of things like gas, but all goods that are produced and even reduce the supply of other goods when the shortage forces businesses to cut back on production.

It has usually been left up to our national government to deal with these issues. In particular, it has mostly been left to the Federal Reserve, which tries to handle these issues via changes in their target interest rates. When inflation is too high, the Federal Reserve will raise rates to reduce borrowing and spending in order to lower demand, which would in turn lower prices. When we are in a recession, the Federal Reserve will lower interest rates to spur borrowing and spending in order to boost economic growth, which would lead to hiring and increased business and consumer spending.

However, there are many problems with using interest rates to deal with inflation and recession. First off, changes in interest rates take time to kick in and it is too easy to overshoot the mark. Raising rates too much could lead to recession, and lowering rates too much could lead to inflation. Raising interest rates also leads to higher business and consumer borrowing costs, which can increase production costs and causes higher prices. When inflation is due to a shortage of one or more goods, raising interest rates can also make it harder for businesses to invest in the needed improvements to reduce the shortages. Lowering interest rates also reduces income from things like savings and money market accounts, which can reduce consumer buying power.

When businesses and consumers cannot count of stable interest rates, they cannot easily plan their borrowing and spending. If people think that interest rates may rise, then they may want to borrow before the increase. However, if interest rates go up, then the economy may slow and make it a bad idea to borrow. If people think that interest rates may go down, then they may want to hold off borrowing. However, a business may then not be ready to take advantage of economic growth and consumers may face higher prices

As we can see, there are a lot of problems with trying to fix inflation or a recession by changing interest rates. The side effects can often be worse than the cure. The better solution would be to try to prevent inflations and recessions before they occur.

Part of the answer is in setting and keeping interest rates within a narrow range that can keep economic activity at an appropriate level. If businesses and consumers do not need to worry about possible big changes in interest rates, then they can more easily plan their borrowing and spending. Interest rates would need to be low enough to allow businesses and consumers to borrow at a reasonably low enough cost, but high enough so that lenders can make a good return on their money. This should really be driven by supply and demand. If there is a lot of money that could be lent, then interest rates would go down a bit, but if there is less money that could be lent, then interest rates would go up a bit.

The rest of the answer comes from having a moderated economy. Our various governments should monitor the supply and demand for goods, services, resources, employment, etc. and then provide that information to businesses, consumers and workers. If people have this information, then they can plan their borrowing, spending, and education in order to make the best economic decisions to help themselves and everyone else.

For instance, if businesses know there is going to be a shortage of a certain product, then they could decide to produce more of that product. If there is going to be a shortage of demand, then they could decide to produce less. If consumers know there is going to be a shortage or surplus of a product, then they can adjust their buying accordingly. If students or workers know there is going to be a surplus or deficit of certain types of workers, then they can plan their education so that can have the skills to work at jobs that will be in demand. In addition, schools could also better plan what classes they need to teach.

The bottom line is that if we and our moderated governments can keep the economy on an even keel, then we can reduce or even eliminate the problems of inflation and recession, and we can live better lives. I will talk more about what we can do in the upcoming sections.

Next Section

Economic Growth - Controlling our Economic Growth so that it makes our lives better.

Last Updated:
Saturday, October 01, 2022
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