Strong business leadership needed

The editorial at http://www.detroitnews.com/article/20131031/OPINION01/310310008/When-government-fails-business-fills-void?odyssey=mod|newswell|text|FRONTPAGE|s titled “When government fails, business fills void” highlights an important consideration often lost in the noise of information.  In order to highlight private industry’s role in society and the economy, the recent Business Leaders for Michigan CEO summit intentionally left out political leaders.  This was not business leaders thumbing their collective noses at politicians.  Rather, it is acknowledgement of the role governments and business leaders should play.

The founders of the United States, and prior to them, of the States envisioned government with a limited role in the daily lives of its citizens.  Governing is necessary for basic needs or general welfare.  Government should create the foundation upon which society and the economy rests.  Public utilities, roads and public safety fall within the jurisdiction of the government.  Laws necessary for the proper execution of contracts and protection of private property fall within the jurisdiction of the government.  Any restriction beyond such placed on private industry or the economy as a whole will be corrected by Adam Smith’s invisible hand.  The overall health and development of a society and the economy, therefore, falls to business leaders.

Why is this the case?  Governments do not generate revenue by delivering products or services.  Governments do not take raw material, add value, and sell at a profit.  Revenue for a government comes from a limited number of sources: taxes, fees and bond issuance.  Bond issuance, though, must be repaid from another source of revenue.  Therefore, governments run on taxes and fees.  Taxes and fees remove money from society and the economy that may be employed by citizens or private industry in other, more beneficial ways.  As such, revenue should be limited to meet the costs of the basic functions noted above to the maximum extent possible.

For the reader thinking to themselves, private industry lacks ethics and morals and we cannot leave society and the economy in the hands of individuals whose sole purpose is to generate income for their owners.  To some extent, you are correct.  There is a social responsibility requisite with being a business or community leader, which sometimes they do not live up to when making their decisions.  Carney, Rockefeller and Ford were great men, who did wonderful things without which the United States would not be the dominate economy it is today.  All, however, lost focus of the social contract at times.  This too is where Government can step in to enforce the social contract.  Beyond that, governments have a social contract with all of their citizens.  To some extent, governments must generate revenue to care for citizens that are in need.

The line between basic necessities and enforcing or fulfilling social contracts is difficult to draw.  Much like the checks and balances built into the Constitution, private industry and community leaders need to offset government involvement and control.  As the above editorial eludes, business leaders cannot abdicate their role to a government whose general opinion can change with each election.  Michigan and Detroit will not grow as a society and economy without strong business leadership.