Center for progressive economics

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CPE Articles, Essays and Position Papers


— Page 3 of 10

The Third Flaw:

Lack of Long-Term Planning

There is the obsession with immediate – short-term – maximization of profits – “The Quick Buck.” Private capital and management are constantly expecting relatively quick and high rates of return. Government capital is more long-term and not profit oriented, so it works more for the benefit of society, including business. We see this clearly in the investments in infrastructure, education, research and other necessary projects. Government regulations and tax policies should always encourage more long range planning in the private sector.

An excellent example of encouraging long-term planning in the private sector is tax policy on dividends. They should be taxed at the same rate to individuals as wages are, with a small exclusion for lower income earners. However, they should be deductible to the corporations, the same as interest on their debt. This would encourage more equity capital and dividend payouts instead of accumulation. Thus, having the tremendous effect of trying to maintain the dividend resulting in better long-range policies than short-term profits for current stock trading. Generally a business will make substantially more money over time because it survives longer with appropriate long range plans and operations.

Pollution is another notable example. Does it pay to maximize short-term profits by disregarding appropriate pollution controls resulting in costly clean ups, fines and possible extinction, not to mention killing your customers or making them sick so they have to spend more on healthcare instead of your companies goods and services? No, it does not. Pollution controls greatly enhance the long-term benefits not only to humans but also to all businesses – especially the sectors they regulate.

Remember – the total of long-term profits should always be greater than the sum of all short-term profits added together! Long-term planning yielding long-term profits for both business and the community are the most sustainable economic model over time.