Europe attacks these behavioral inefficiencies with regulations ranging from zoning laws to legislation on monopolistic use of shelf space. Currently, there is a wealth of economic research and analysis being tossed around in academic debate that blames these regulations for stunting Europe's productivity gap with the US and their high unemployment rates. These debates amount to little more than boast sessions on which economist choose the most intriguing sector to investigate or lecturing on the "how's" and the "why's" of lagging productivity. The reason I dare to so easily dismiss the work by renowned U.S. economists and thinkers is that they all fail to realize that the EU and local governments are acting as their constituents are asking them to act. Their decisions are not made in some utopian economic bubble where efficiency reigns, but rather in a real-time political sphere with the concerns of their constituents to worry about.
The US is "blessed" with constituents that are increasingly conservative, illustrated by the Republican controlled federal government. The conservative US population seeks to deregulate and get government out of their life and their pockets. This shift and the increasing expenses of spreading democracy to the Middle East and Central Asia are leading to even more conservative government spending. It is likely that this trend in muted spending is to continue until the end of this decade; that, however, will be more certain after the Congressional elections next year.
On closer examination of the US populous, however, it is clear that they are not fully 'Republican' (2), in that they are not entirely pro-business. This is no surprise considering the impression given by idiotic accounting maneuvers of some of our "best and brightest" executives. Politically and morally, the American people seem to be in favor of increased regulations on US businesses as a result of the abuses of power and status by the managerial class.
I believe through this simple evaluation of the US political environment, there
are two more compelling reasons for US businesses to explore value creation
by investing in social ventures. There is a large planned move of cash and resources
out of government funded social services that coincides with a deteriorating
perception of business and its role in society. The intersection of these two
forces should provide further motivation for re-evaluating the policies governing
how value is defined and how it can be created using alternative projects such
as social ventures. The primary reason must remain the simple economic argument
that an unfulfilled demand exists for many social services and supplying that
demand creates value for the supplier. I believe that the big question of why
investors invest in a company that is planning to take on projects that are
most likely not positive NPV and risky in a way that no adequate measure of
this risk exists is answered somewhat by this model.
Write to Aankit
Patel at firstname.lastname@example.org
(1) For fear of falling into the noise of the academic debate between Euro-sclerosis and US "cowboy capitalism", I will use the terms social capitalism and pure capitalism to describe the two extremes represented by Europe and the US.
(2) Loosely defined as
smaller government and pro-business for the sake of this report.
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