02 February 2009
By Pam Tucker
Folks, we are in a mess. We are perhaps on the leading edge of the sharpest economic decline of our lifetime. Moving forward, economists, politicians and leaders will hopefully study the factors that contributed to our current situation in order to learn how to better stabilize economic growth without hindering the progress brought about by entrepreneurs and idea innovators. Clearly, the loose money policy utilized after 9-11 to prevent a recession had the effect of lowering interest rates and expanding credit to a level that was not sustainable. Economic growth was based on extended borrowing and high risk mortgages. The system finally collapsed when shocks in commodity and energy prices coupled with widespread mortgage defaults triggered a negative domino effect throughout the economy. This, however, is only part of the story.
Over 60 years ago, Joseph Schumpeter described how creative destruction occurs whenever new, better technology replaced poorer technology. A classic example of this is how the horse drawn carriage industry collapsed with the widespread adoption of motor vehicles. Thousands of craftsmen whose lives had been built on perfecting the carriage found themselves with skills that were no longer relevant in the automotive age. Although this transition was painful, it was certainly a necessary transition.
Today, these kinds of dislocations are occurring simultaneously in several sectors throughout the global economy. Not only because of rapid technological innovation, but also because of natural resource scarcity which is leading to dramatic fluctuations in commodity prices and to the expanding social awareness of the human effects on our environment which is increasingly affecting consumer demand in ways not fully described by neo-classic economics.
In a global age, we are competing with entrepreneurs and societies in all parts of the world to find better solutions to the rapidly evolving world around us. Whichever individuals and companies find the best solutions will enjoy higher levels of wealth. Whichever communities adapt to the changing conditions will enjoy a better quality of life.
We, here in New Hampshire, are well positioned to adapt to these social and economic changes. Our tax burden is low and government regulation is minimal. New Hampshire allows its citizens to enjoy a higher level of economic freedom than most other states; and the United States, in general, allows for a greater level of economic freedom than other countries. This enables us to reap greater rewards for our creativity and hard work. It also creates a flexible economic environment that allows businesses and individuals to more rapidly adjust to changing global, social, economic and environmental conditions.
As we struggle with our state’s fiscal crisis, we must remember and protect this advantage we enjoy here in New Hampshire. Raising taxes and fees and increasing regulation will only hinder our citizens’ and businesses’ ability to flexibly adapt to these changes.
Our state government must deal with any budget shortfall by reigning in spending. Certainly, this must be dealt with in an efficient manner that preserves those services that are most essential to the people of New Hampshire. Education, rule of law, and infrastructure are absolutely necessary to our long term success. By cutting spending rather than raising taxes we can preserve our state’s economic flexibility and system of rewarding hard work and innovative ideas.
Beyond preserving our competitive edge here in New Hampshire, elected officials ought to exercise their leadership abilities in ways that enhance economic growth. Far too often, politicians get the idea that the main conduit by which they can facilitate a better society is by writing more laws. However, there is much more we can do. As individuals with the networking ability to get elected in the first place, each of us has some ability to identify those entrepreneurs and businesses that are focusing their energies on new products and services that will succeed in the new economy. If we use our positions of leadership to promote the exchange of business and technological ideas, we can facilitate the adoption of new practices as well as the roll out of new products and services spurring economic growth. In short, we can help our communities to transition from older, outdated technologies to new, better technologies.
I am not in any way suggesting that the government should steer the free market, but that, we, as individuals with networking and marketing abilities can spread the word about entrepreneurs and businesses that are utilizing new technologies and developing better products in order to speed up the process of economic transition. We must also use our positions to assist people as they update their skills and transition to jobs relevant in the new economy.
Without question, this kind of networking already exists here in New Hampshire. Neighbors talk with neighbors, businesses advertise of their own will, and numerous professional organizations serve as networking centers where ideas are shared and explored. However, the 424 of us in the New Hampshire legislature have the potential to become a part of this process and enhance the efficiency by which new ideas are spread and implemented.
I believe that by utilizing our skills and social position, we Representatives can positively enhance economic growth and improve the quality of life for the citizens of New Hampshire.
This certainly does not address the problems of extended credit or fluctuating energy and commodity prices. These problems are better addressed at the national level. However here in New Hampshire, we do have the opportunity and ability to encourage new ideas and to network entrepreneurs in our communities together. We can smooth the technological transition along and assist those individuals and businesses who have the courage to take economic risks in these challenging times. In doing so, New Hampshire citizens and businesses will be better positioned for future economic success and our communities will enjoy a better quality of life.