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Wednesday, December 5, 2012

Political Leaders: Treat Your Citizens Like Customers -- or Go Broke

Here are four anecdotes with a similar message. They should seriously alarm city, state, and country leaders everywhere:

  • A CEO of a multibillion dollar California company, and lifelong resident of the Golden State, told me at a dinner that he was moving his business from California to the Rocky Mountains. He wanted to be a “customer” of the state of Colorado, not the state of California anymore. His needs as a customer overrode his love of the Southern California lifestyle.
  • I just read this week that between 2010 and 2011, England’s total number of taxpayers with an annual income of over 1 million pounds suddenly went from 16,000 to 6,000. That’s right -- in one year. The British press is going nuts because a certain percentage of those 10,000 taxpayers flat-out left the country. It means that their own personal finances, and possibly small-business ownership, are more precious to them than their national loyalty or patriotism.
  • A young American CEO here in Washington informed me that he had just moved the headquarters and business operations of his building supply company to St. Thomas. He said he could no longer survive the taxes and regulations as a “customer” of the United States, so his business became a customer of St. Thomas.
  • Another friend told me last week that he was keeping his home in Washington, but bought a new primary residence in Florida because it favored his tax and business interests to migrate there. 
There’s an obvious pattern here. Many individuals, and businesses of all sizes -- especially those in technology -- can be headquartered anywhere. And wealthy people can pretty much live wherever they want. These businesses and individuals will migrate to cities, states, and countries where they can be most productive and enjoy tax rates and regulations that help them become highly profitable with few limits to growth.

Gallup’s World Poll asks this question across 160 countries: “Ideally, if you had the opportunity, would you like to move permanently to another country, or would you prefer to continue living in this country?” A less scientific way of wording this would be: Do you want to get the hell out of Dodge? One striking result: 28% of adults in the United Kingdom told Gallup they would like to leave the country permanently. This compares with 11% of Americans who say they would like to leave the United States permanently if they could.

I raise this issue now, because as the U.S. president and Congress work on a wide variety of new rules and regulations for this country, they should consider the people who live and work in America as customers rather than simply taking them for granted as trapped citizens. U.S. small businesses in particular are increasingly pessimistic about their future here in the United States. Basically, they’re not satisfied customers. Many American businesses can move out of the United States just as surely as they can move out of California or Detroit.

Note to mayors, governors, prime ministers, and presidents worldwide: You could learn a thing or two from some once-great U.S. companies, like the big auto makers, who went broke and needed a federal bailout to survive because they took their customers for granted. It’s time to start treating your citizens like customers. Find out what they want and start engaging them, not to mention appreciating them, rather than acting like they have nowhere to go. They have plenty of places to go -- and you’ll go broke without them.


Dr. Gene Nelson said...
December 6, 2012 at 3:27 AM  

If one is an economic elite, like Jim Clifton likely is, they want to maintain the privilege of being able to migrate anywhere they want to. The middle class does not have this capability. Today, the most common way for a person to be an economic elite is to be in the owner class where they capture a large part of the value added by the middle class who work for them.

The economic elites apparently want to continue to reap the benefits of living in nations like the U.S., where the citizens tend to be well-educated - but NOT have to pay their fair share for educating those citizens that they obtain their riches from.

The economic elites exploit the infrastructure such as natural resources and roads and a criminal justice system that protects their assets - yet they do not want to pay for the benefits that they use. The elites have the unique capability to pay for lobbyists that manipulate the government to provide special tax benefits that only apply to the economic elites.

This set of behaviors reminds me of the fictional Gordon Gekko in the 1987 movie, "Wall Street." Gordon’s motto was, "Greed is good." Eventually, greed tends to get the better of the economic elites. Examples such as the French Revolution come to mind. In my view, it would be far wiser to enact policies to strengthen the middle class so they have the discretionary time and economic resources to continue to be actively involved in the process of governing.

Anonymous said...
December 6, 2012 at 2:55 PM  

What Dr. Nelson is missing is that the tax costs of doing business in the USA have risen to the level they are no longer taking a portion of profits, but eroding capital creation. Any business owner I know, including me invests a large portion of profits back into the business, not into "elete living.

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