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 efficient, productive and profitable manner possible 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 number of each of them. This would help to ensure that we will be able to get our necessities no matter what happens to the world economy. Another pair of goals would be to ensure that we can all 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 individuals or businesses what to do, our governments would create economic frameworks for our local, state and national economies. These frameworks would allow individuals 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 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 be needed 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 of us. I already talked a little about this in the section on Political Issues. I will refer to these governments as Moderated Governments 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 us in our local communities and in the local regions. Then, we would need to determine whether these were already being provided by local sources or through trade with dependable and reliable trading partners or not. For any that are not, we would need to determine why not and formulate ideas as to how to fix the problems.
There could be numerous reasons why goods or services are not being adequately produced locally or by dependable and reliable trading partners. In many cases it may be a lack of some basic resource. In other cases, it may be that undependable or unreliable trading partners may be undercutting others with cheap labor, are not adhering to common pollution or safety standards, or doing things to control the market of some good or service.
If we have a lack of some resource, then we must find a way to get that resource. If we are lacking the needed skilled workers, then we need to beef up education and training. If we are lacking energy, then we need to build up renewable energy capture and storage capacity. If we are lacking raw materials, then we need to find new sources and to recycle more.
If local producers and suppliers are being undercut by undependable or unreliable trading partners, then we need to do what we can to counter them. This may include imposing noncompliance fees based on what unfair practices they are using. I will talk more about these fees in an upcoming subsection below.
In some cases, there may be a lack of infrastructure or expertise in producing or providing some good or service. In those cases, our Moderated Governments may need to provide some support to help businesses to ramp up to produce or to provide the needed goods or services. In some cases, that would mean providing some temporary incentives or disincentives to encourage local individuals and businesses to do what is necessary to provide what we need.
Of course, 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 downturns.
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. However, this also means reducing and eliminating waste in whatever form it takes.
One example that I will talk more about later is the automobile. Cars are expensive to own and to operate, especially considering that they are parked and not in use most of the time. For most of us, 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 of our costs of living by more than 20 percent and allow us to do other things with the time we 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 the rules of the game (laws, incentives and disincentives), 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.
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, otherwise an appropriate fine would be imposed on the importer.
In the second case, we do not want individuals and businesses 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, providing for our national security, and creating national wealth. Appropriate incentives and disincentives may be needed 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.
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, and 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.
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.
Given the vast differences between small towns and big cities, there may be vast differences between what each local government needs to do and can do. For smaller communities, the county or state government may need to take on more responsibility. For big cities, they may be able to handle everything themselves.
A local government, with the appropriate help from the state and national governments, 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 others 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 everyone 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 sections on Labor and Jobs.
It is in the best interest of all of us 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 of us to stay healthy and productive and help to keep down our community’s health care costs.
For the most part, a local economy would be driven by the consumer, as it would be in a Mixed Economy that is weighted heavily 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.
Of course, individuals and businesses must respect all laws and regulations that are in place to protect us and our environment. Therefore, they must comply with all needed audits and inspections. When needed, incentives and disincentives may need to be imposed to discourage them from doing things that might otherwise have benefited them but would have unduly harmed or reduced the wealth of our community.
One of the most important roles our Federal Government would play in our Moderated Economy would be to ensure that we have a level playing field for goods manufactured here or elsewhere. We have many business laws dealing with such things as quality, labor, and pollution control that must be followed for manufacturing done here in the United States.
However, we cannot directly enforce our business laws in other countries. This means that many of the goods that we import may have been manufactured in ways that would have been in violation of our laws if they had been manufactured here. Since many foreign-produced goods do not need to incur the added expense of complying with our business laws, they can undercut our locally produced goods. Although we cannot directly control how goods are produced elsewhere, we can control how and when we import these goods, which can help to influence how foreign goods are produced.
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 complied with our laws. If that is the case, then we would impose any appropriate noncompliance fee on each item imported.
The next step would be to determine which of our appropriate business laws that a foreign manufacturer had or had not complied with. If all our appropriate business laws were complied with, then we would not impose any noncompliance fees on those imported goods being sold here. On the other hand, if all or some of our business laws were not met, then an appropriate noncompliance fee would be computed and would need to be paid by the importer for each imported item or those goods would not be allowed to be imported and sold here in the United States.
The federal government would keep track of which laws were complied with for various imported foreign goods. An importer could check on the compliance status of any foreign manufacturer before importing their goods. If the government had an up-to-date report, then the import would just need to pay any noncompliance fee for what had been found to be in noncompliance. This would raise the cost of these noncompliant goods, which could then reduce sales of these goods here and could make locally produced goods more competitive.
If the government did not have an up-to-date compliance report for a foreign manufacturer, the importer would need to pay the full noncompliance fee for the goods or would need to request an up-to-date report. The importer and/or the foreign manufacturer would need to pay for the needed inspections and report. The foreign manufacturer could also make the needed changes to become more compliant with our business laws and in turn reduce the noncompliance fees imposed on their goods.
These compliance reports should also be made available to whoever wanted to know what goods were noncompliant with our business laws. We could then see what noncompliance fees we would pay for these goods and even allow us to decide not to buy these goods because they were produced in a noncompliant manner.
Although imposing these noncompliance fees for goods imported here would help to level our economic playing field with foreign manufacturers, it does not help level the playing field for everyone. What we need is for all nations to impose noncompliance fees. This could encourage all nations to update their business laws to require higher quality, labor and pollution standards. If all nations had equally high standards, then we would level the economic playing field and eliminate the need for these noncompliance fees.
Let’s now 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.
The first step would be to determine why so much of our clothing was being manufactured overseas. If there were issues here, then we would try to fix them and then monitor things to ensure those issues stayed fixed, and that no new issues arose.
Then we would need to look at the foreign clothing manufacturers to see what they were doing. For instance, foreign clothing manufactures may be able to produce their goods without complying with our business requirements, such as quality controls, safety standards, labor practices, and pollution controls. If these foreign clothing manufactures did not incur the expenses associated with complying with our laws, then their clothing would be less expensive. Therefore, we would want to impose the appropriate noncompliance fees for this foreign-made clothing.
Either the foreign clothing manufactures would need to incur the added expense of meeting our various business requirements, or each piece of clothing that was imported would be subject to the appropriate noncompliance fees. Since the noncompliant foreign made clothing would cost more, this would make U.S. manufactured clothing more competitive. 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 businesses 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 manufacturers. 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 to be made here where they would create local jobs and pay taxes to the local government, and to provide a buffer in case there are supply issues. That is, if there are issues getting the supply of goods from other places, we want our local businesses to have the needed capacity to pick up the slack and to prevent shortages.
For instance, even with all the advantages created by requiring foreign-made clothes to be sold here to meet our legal standards, there is still the possibility that some local manufacturers may find it hard to compete. If there were no clothing or not enough clothing being manufactured in the area, the government could provide some temporary incentives to help local clothing manufacturers get started. 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.
Our current economy is vulnerable to being derailed by high inflation or a recession. Inflation happens when prices of goods and services rise. This usually happens when business and/or consumer demand outstrips supply. Supplies may be low due to problems with production or distribution, or when we start consuming a lot more than producers had anticipated. A recession can occur when consumers and/or businesses significantly cut back on their spending and start laying off workers. This can happen when we become too pessimistic about our future and cut back to save for what might be hard times.
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 demand persists. For instance, if there is a shortage of some commodity like food, water or energy that we cannot easily do without, then demand will remain high, and prices will rise. If the commodity is something like oil, then the shortage will not only raise the prices of things like gas, but all products that are produced and even reduce the supply of other products 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 specific, 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 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 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 or a 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 a 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 lead to higher prices.
When inflation is due to a shortage of one or more commodities, raising interest rates can also make it harder for businesses to invest in the improvements needed to reduce the shortages. Lowering interest rates also reduces income from things like savings and money market accounts, which can reduce consumer buying power.
In addition, when businesses and consumers cannot count on stable interest rates, they cannot easily plan their borrowing and spending. If we think that interest rates may rise, then we 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 we think that interest rates may go down, then we 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.
Then, even if we get everything right in the United States, we are still at the mercy of the global economy. What we do here does not have much of an effect on what is going on in the rest of the world. If prices continue going up in other countries, then the cost of importing those goods will continue to go up and to keep our inflation high. If the rest of the world is in recession, then we will not sell as many of our goods overseas, and we could remain in a recession.
As we can see, there are a lot of problems with trying to fix inflation or a recession by just changing interest rates. If the changes are not done right, then the side effects can often be worse than the cure. The better solution would be to try to prevent inflation or a recession before it occurs.
Part of the answer is in setting and keeping interest rates relatively stable. Interest rates would need to stay low enough to allow businesses and consumers to borrow at a reasonably low enough cost, but high enough so that lenders and savers can make a good return on their money. 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.
Of course, interest rates should still be driven by supply and demand, but within a narrow range that can keep economic activity at an appropriate level. If there is a lot of money that could be lent, then interest rates could go down a bit, but if there is less money that could be lent, then interest rates could 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 we have this information, then we can plan our borrowing, investment, spending, education, etc. to make the best economic decisions to help ourselves 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 or to import more of that product as needed. If there is going to be less demand, then they could decide to produce or to import 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 work together, then we can keep our economy on an even keel by keeping supply high enough to meet demand. If we can do that, then businesses can provide what consumers want at reasonable prices, which would allow us to live better lives and to keep consumer confidence high. This in turn will eliminate the problems of inflation and recession. I will talk more about what we can do in the upcoming sections.
Economic Growth -
Controlling our Economic Growth so that it makes our lives better.
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