Tuesday, November 16, 2010

Treating business as the enemy
costs jobs and economic growth

Commentary by James H. Shott

As President of the West Virginia Chamber of Commerce, Steve Roberts is the leader of the organization that is most concerned with businesses in the state, and he understands what so many of our leaders do not: that business is the driver of economies at all levels. He knows what is impeding business development in a state that has the reputation of being unfriendly to business.

Speaking to a meeting of the Rotary Clubs and the Chambers of Commerce of Bluefield and Princeton, West Virginia, Mr. Roberts presented a litany of negative data underscoring the state’s problems in the areas of health, education and the economy, some of which are directly linked to the state’s business environment.

In education he said that West Virginia ranks 50th for residents with college degrees. That might be because most West Virginians either don’t go to college, or don’t complete a degree program. Or, it might be due to the fact that most of those with a college education left the state because they were unable to find meaningful work due to the state’s business environment.

Where the economy is concerned, the link is much clearer. The state is 47th in the United States for per capita income and 49th for per capita GDP. It ranks 2nd for the percent of its population receiving Food Stamps, 4th for the percentage of children living in poverty, and 2nd for projected population loss through 2020. Other states that have better business climates have more jobs available for their citizens and more jobs that pay well, and outperform the Mountain State.

Mr. Roberts believes being unfriendly to business has cost West Virginia a staggering 80,000 manufacturing jobs since 1979 when approximately 130,000 West Virginians were employed in manufacturing operations. Those jobs didn’t go to Asia, and didn’t leave because of NAFTA he said, they were lost to neighboring states that were and are more business-friendly. And he noted that neighboring Kentucky had gained about 80,000 manufacturing jobs during that same period.

While neighboring states managed to grow their manufacturing base West Virginia increased workers compensation costs, increased the risks employers face from lawsuits, and increased taxes. “We simply said to the people who made the biggest investments and hired people at the best wage levels, ‘we’re not shaping our policies to make you welcome here,’” he said.

According to Mr. Roberts the state’s problems lie primarily in three areas: Taxes, the electoral system, and the legal system.

He said the state inordinately taxes employers with the fourth highest corporate tax per capita and the second highest insurance premium tax in the US.

West Virginia’s electoral system is one of only a handful that allows straight-ticket voting, and only Michigan has a higher percentage of straight-ticket voting. It is one of only seven states whose entire judiciary is chosen in partisan political elections.

West Virginia’s legal system has earned the reputation of not providing everyone a fair trial at all times. Mr. Roberts pointed out that West Virginia is the only state that doesn’t have automatic right of appeal for punitive damages awards, has the lowest threshold for bringing deliberate intent lawsuits against employers, is the only state that allows medical monitoring payments to claimants with no proof of injury, and is one of only four states that has not seriously limited some combination of punitive damages, joint and several liability, and collateral source rules. He noted that in 2007 three of the seven largest jury verdicts in the world were rendered in West Virginia.

He said, however, that changes are under way. The workers compensation system, long a deterrent to business, has been privatized, lowering costs by 40-percent, and the business franchise tax is headed for gradual elimination. Recent news reflects that the state is producing jobs faster than the US as a whole, but it has a long way to go to become attractive to business.

In many ways, West Virginia is a microcosm of what is wrong with the United States.

For the first 140 or so years of its existence the United States was a bastion of personal freedom, protecting the opportunity for its citizens to do pretty much what they wanted to do, an essentially free-market economic system that enabled America to develop into a globe-leading force that produced new and better products and systems that were the envy of the free world.

Over the last century encroachment by government into private sector activity has punished business through high taxation and excess regulation, and dampened the creation of wealth that made the US the most prosperous nation in the world.

Don Watkins and Yaron Brook, writing on Forbes.com, inform us that the “economic system fully geared to the life of producers is complete, unregulated, laissez-faire capitalism – a total separation of state and economics, where the government protects each individual's inalienable rights, including his rights to property and to freedom of contract and trade, and otherwise ‘gets the hell out of the way.’ That's what it means to be pro-business.”

And getting government out of the way is how the US will grow its way out of the recession and restore prosperity.

Cross-posted from Observations

1 comment:

  1. He said, however, that changes are under way. The workers compensation system, long a deterrent to business, has been privatized, lowering costs by 40-percent, and the business franchise tax is headed for gradual elimination. Recent news reflects that the state is producing jobs faster than the US as a whole, but it has a long way to go to become attractive to business.

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