KINDER'S COMMENTARY: BUSINESS IS SETTING THE REAL AGENDA

The world's financial markets have become the watchdogs over domestic economic, political, social and legal policies. They are the judge and jury. Instead of governments dictating to markets, international markets oversee governmental policies. International investors require confidence in the continued existence of transparent societies, with sound fiscal and monetary policies, and providing a dependable framework of political and legal stability. Countries will not stay ahead in the competitive race for international capital unless confidence and stability prevail. -- William C. Freund, chief economist emeritus of the New York Stock Exchange, on the watchdog role financial markets increasingly are playing, writing in the Durell Journal of Money and Banking, Summer 1995.

Freund is emphasizing one of the most salient facts of our time: That the power of governments -- governments anywhere, at any level -- to command or even to influence the decisions individual business people make is rapidly diminishing in today's interdependent world economy. This is all to the good, as this powerful trend is moving power and decisionmaking away from politicians and unelected government bureaucrats and toward individuals cooperating freely and voluntarily in an increasingly competitive marketplace.

The point can be illustrated through a brutal example of government action at its very worst: The invasion of one nation by another. In August 1990, when Saddam Hussein sent a couple of hundred thousand armored troops across the Iraqi border in an unprovoked invasion of Kuwait, it was a classic scene of war. On orders from Saddam, Iraqi troops brutally plundered their tiny, defenseless neighbor, seizing pretty much anything of significant worth and hauling it back to Baghdad in the manner of marauding armies through the ages. Their plunder included priceless works of art, expensive rugs, china, porcelain, silver, gold, precious gems and other valuables.

This time, however, there was a crucial difference. Increasingly, in today's information economy, wealth can't be measured by the traditional, material measures. Even as the Iraqi troops raped and plundered, wealthy Kuwaitis in London, Paris, New York and Los Angeles were quietly transferring wealth out of accounts in their homeland and into markets in nations where that wealth could, instantly, enjoy safety and security. With a few computer keystrokes, these savvy investors could and did transfer staggering sums representing untold wealth. In these transfers, neither weather nor distance nor international boundaries meant anything at all. Until the arrival of the troops of Desert Storm, Saddam's troops could haul off everything that wasn't nailed down and some things that were, but with all his might he was largely powerless to halt this quiet, computerized wealth transfer in the new information economy.

A corollary to Freund's point expressed above is another important fact of our time: Business is increasingly portable in today's competitive marketplace. People and businesses will respond to the artificial barriers to commerce that governments place in their path. When the liberals who've so long held sway in Massachusetts raised personal income taxes too high during the 1970s, a funny thing happened: Many of their most productive people moved across the state line to live in New Hampshire, a more frugal state with no personal income tax. When business taxes were raised still further, business leaders began moving their companies across the state line. The point was made: Business is portable.

This is true not just for taxes, but for all the panoply of government-made decisions directly affecting business: Workers compensation, excessive regulation, the quality of a state's or a city's educational system. Get too out of line on any decision that impacts business, and you will eventually push decisionmakers to relocate. At his request, I recently had dinner with the chief executive officer of one of Missouri's large companies, headquartered in one of our state's large cities. With great regret, he told me that harassment of his company by a department of Gov. Mel Carnahan's administration had continued so long and so unfairly that he had begun considering moving his 1,500 employees across the state line to a more hospitable environment.

If that ever happens, of course, there will be hell to pay. It's an important cautionary note for me, and for anyone else in government. Sped by rapid innovations in international markets that will continue no matter who is in power, the era of large, intrusive and omnipotent government is coming rapidly to an end as power shifts to individuals and to markets.

~Peter Kinder is the associate publisher of the Southeast Missourian and a state senator from Cape Girardeau.