Hawaii’s World

By A.A. Smyser

Tuesday, June 10, 1997

Profit motive drives
thriving economies

WE have in our community a disabling distrust in the profit motive. I'll come back to why it's "disabling."

It showed in the opposition of our teacher and principal unions to a school privatization test with the No. 1 reason that the operators intended to make a profit.

It shows in our hog-tying of business with some of the most burdensome, costly, time-delaying regulations in America.

It shows in our greater trust in labor unions than in business. It shows in our having labor on both sides of the table in many management situations. School principals are unionized. Labor has been able to work through the governor and Legislature to slow urgently needed government payroll reductions to a crawl.

Our 1997 Legislature thumbed-down privatization. We match our distrust of profit with a simple lack of business sense -- as when the City Council mandated low-flush toilets in hotels over a three-year period. This is costing hotels up to $1,000 a bathroom when re-tiling and repainting costs are factored in. Yet the improvement in water savings is not that urgent. The savings are reduced when two flushes are needed instead of one. Far better we should have confined the mandate to new construction and major renovations.

Where profit is accepted as honorable economies prosper. Leading the world in economic freedom by a Heritage Foundation/ Wall Street Journal calculation are, in order, Hong Kong, Singapore, Bahrain, New Zealand, Switzerland, U.S., United Kingdom and Taiwan. We are leaders, too, in helping raise worldwide standards of living, not just ours.

The economic basket cases of the world are from the old Soviet bloc. There government instead of the ability to make a profit in a free market was deemed the best allocator of goods and services.

China is making tremendous strides economically by encouraging free enterprise even though it disdains democracy. Japan has lost its lustre as a prosperity model. The truth coming out is that its managed economy could carry it only so far.

Investors are seen as heartless (and frequently are) but luring them is the key to more jobs and prosperity worldwide. Their hand is restrained by competition. Another needed restraint is prudent government regulation. Hawaii, however, is so overregulated today that the only active big investors we have now are bottom-fishing for fire sale prices. They, bless them, keep hotels going that otherwise would have shut down.

Massachusetts, Michigan, New York and New Jersey have in common that they are strong labor states, heavily Democratic and were in significant economic decline. They also had high tax rates and fiscal crises worse than ours. They all have cut taxes and increased jobs.

We in Hawaii must drastically reduce the inefficiency and cost of our public sector before we can regain economic momentum, job growth and living standard improvement. Most public employees are great people. The over-bureaucratized, over-unionized structure they work in is awful.

NO one can promise that no one will be hurt as we fix things. Those who are should be helped. But fears of personal loss are exaggerated. The record is clear that the long run results can be immensely beneficial.

My Exhibit A is New Zealand, which I visited in March. Before 1984 it was a totally socialized country headed for economic disaster. Now it is freer than we are. It has streamlined its external and internal economies in ways mind-boggling to us. Yet successive three-year national elections since 1984 have shown no desire to turn back the clock. I suggested in my column May 8 that a delegation of our government, labor and political leaders fly down to be briefed on it. I repeat the suggestion today.

A.A. Smyser is the contributing editor
and former editor of the the Star-Bulletin
His column runs Tuesday and Thursday.

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