Consumer and business interests shouldn’t be mutually exclusive

For decades, thinkers and analysts across the political spectrum have sparred when it comes to economic policy and the government’s role in within it.

Many believe the government should protect consumer interests before business interests, whereas others believe the opposite. This leaves many people to question what the methodology in economics is. Whose interests are more important?

The truth is, the interests of both parties are highly important. Consumer spending and business investments are the two biggest boosters of the economy. It’s important that both the interests of consumers and business are protected. If the government fails to protect one or the other, gross domestic product stagnates.

The good news is that the protection of both consumers and businesses isn’t mutually exclusive.

A protection of consumer interests, in turn, protects business interests. If consumers have money to spend, they spend it on products, services and goods that various businesses provide.

Consumer spending will help thrust the economy forward and allow the GDP to grow. Increased profits within businesses from consumer spending also allow businesses to invest in themselves more, resulting in an overall economic growth.

This begs the question of what steps the government should take to protect consumer interests. There are a few different things the government can do to increase consumer spending, and, in turn, to boost business investment.

The key idea would be to put more money in the pockets of workers, since they make up the most consumers in the United States and tend to spend a larger share of their income than wealthier Americans. Different methods to give workers this money would involve actions such as implementing a higher minimum wage, earned income tax credit, social welfare policy and lower taxes on workers and forming stronger unions.

These steps were successful in the past. Former President Franklin D. Roosevelt helped propel the United States out of the Great Depression by implementing the New Deal, a series of programs that called for extensive government spending. The same result occurred when former President Barack Obama, in his first year in office, passed a stimulus package aimed at boosting the economy out of the Great Recession of 2007. It flushed billions of dollars into the working and unemployed classes.

A common misconception is that these “handouts” to the working class come at the detriment of the wealthy. It is true that these measures, especially lower taxes on workers, are, in large part, financed by those at the top.

However, that doesn’t mean that these measures come at the detriment to those at the top of the pyramid. Rather, the result is a significant boost in economic growth, which allows those at the top to earn even more.

But these policies only affect changes in the long term. When it comes to economics, rarely is short-term change caused by the government. In most cases, presidents who tout low monthly unemployment rates under their tenure as their own work only deceive the electorate, as do critics who pretend that high unemployment rates are the fault of the president.

The short-term effect on the economy, such as monthly unemployment rates, is regulated and affected by the Federal Reserve. When it comes to that realm of economics, there isn’t much government involvement.

In fact, the monthly unemployment report, gathered by the Bureau of Labor Statistics, is mostly the result of regulation from the Fed — not actions performed by the president or by members of Congress. The only action the government takes here is the appointment of officials to the Fed.

Therefore, when it comes to the government’s role in the economy, the only thing it should be doing is protecting the interests of consumers. As the consumers’ interests are protected, those of the businesses are as well. And if both of those interests are mutually protected, GDP begins to rise.

However, in terms of the short run, there isn’t much the government can do. In that case, it’s up to our entrusted governors of the Federal Reserve.

Gabriel Koppel

Public Affairs ‘22

November 19, 2018

About Author

Gabriel Koppel

Leave a Reply

Your email address will not be published. Required fields are marked *