Blog of A Plodding Visionary
Business
Socialism and Poverty Alleviation, Part 6 (American fascism?)
010 months ago
The past few posts have focused almost exclusively on socialism’s handling of justice and compassion. Now I hope to turn the tables a bit and address some other concerns. One major one is the area of economic oppression. Another will be the impact systems have on our worldviews, and even our own spiritual lives.
I hope the previous posts have made it clear that command systems that forcibly take from one to give to another are unjust and oppressive, wherein oppression is taking by force what someone else has fully earned. This is generally done by the powerful to the less powerful. Sometimes it’s simply taking by force, by believing that you know better than they do who ought to have what. But oppression is also when someone in control of another violates the principle of just weights and measures, such as by giving someone a bad deal because they have little choice but to accept it. While even the wealthy can be victims of oppression under a powerful government, the poor are most vulnerable. Part of being poor, as per When Helping Hurts, is the feeling of being caught in a web, so any attempt to exercise freedom or improve just results in getting stuck somewhere else.
We can even see examples of this here in Omaha, if you consider the plethora of check cashing services, pawn shops, and so on, that take advantage of people with bad or no credit, no bank accounts, or immediate pressing needs that cause people to take an emergency bad deal because they see no way out. Or, say, Tobacco and Phones 4 Less, which you can find on many major corners in Omaha, and which has a predominantly poor clientele, where one can get a relatively expensive pack of cigarettes, maybe some liquor, and a more or less disposable cell phone with a high cost per minute but with no credit check, which is a prerequisite for some of the better value postpaid plans. Now I’m not saying such places should be forcibly shut down or anything, but keep these examples in mind as ways where even within free systems people can be taken advantage of. Yet then again, bad credit does mean a higher risk of repayment, so there is also a legitimate business and financial reason for the higher rates and prices. There’s a fine line. In When Helping Hurts, they refer to examples like these as well as things such as predatory lending by loan sharks, which is not justifiable, and especially in other countries such as China, continuation of sweat shop factories where workers who essentially have nowhere else to go are paid a far-below-market wage, but – if given a choice, which isn’t always the case – the workers might reason that accepting that wage is still better than nothing.
With this in mind, as well as the examples we hear about all the time of multilevel corporations that have become famous for mass layoffs that don’t make economic sense, or greed at the top resulting in the company being plundered so its executive can retire early, people often decide that capitalism is a failure and socialism, then, is the answer. But I believe that what often poses as the capitalistic free market system really isn’t. Remember the list of the ten steps to socialism? America, which is at least said to be a capitalistic, free market country, already has adopted many if not all of them in at least some form. We have various “czars” and commissions that really regulate pretty much every aspect of life. We have an educational system that often cares more about teaching children how they ought to think as cogs in the system than teaching them valuable knowledge. We have huge businesses that can corner the markets and fix prices and wages as they see fit, with little regard to public demand. As it is now, freedom is becoming narrower.
I’m becoming convinced that the direction we are going here is not, in its current state, a battle between socialism and free market economics, but rather a much more narrow battle – a battle between socialism and fascism. Fascism, remember, is a form of totalitarianism – top-down, heavy handed authority rule – like socialism. The only difference is instead of government ownership of everything, it permits private ownership under heavy regulation. Not free market private ownership as government is very much involved, but almost like the government and business are two heads of the same creature (maybe add in organized labor as a third head), that sometimes appear to war with each other but down deep are connected and very much in control. Now, for almost a century, despite being very similar in terms of heavy-handedness, authority, and soaking up power like a sponge soaks up water, socialists and fascists have passionately hated each other based on differences in who should hold absolute power… who should be “God”. Which is funny because it’s basically an intramural battle or a family feud – at the center are the same totalitarian ideas. Socialism pretends to help the poor, by really just impoverishing everyone. Fascism doesn’t make a pretense of helping the poor – but still works to destroy the individual and family in favor of power. It uses corporatism – big business interests – believing basically that the only purpose of a corporation is to provide increasing value to the shareholders. Everything else is sacrificed to that one end. The media usually calls that free market capitalism in order to make socialism look good, but it is not so.
Coming up: What real free-market capitalism might look like.
Coming Soon
011 months ago
I just finished teaching a 3 week class in church on economic systems, focusing specifically on why socialism won’t work and why it has no place in a Christian worldview.
When I have time I will be putting some of that material here on my blog. First, though, I want to promote a blog by a fellow PCA member who teaches economics and exposes the fallacies of liberal anti-thinker Paul Krugman. http://krugman-in-wonderland.blogspot.com/ If you’re not familiar with Krugman, you can consider yourself fortunate, but those of us who receive emails or see tweets promoting the “wisdom of Krugman” will appreciate this resource.
More to come soon.
Defense of Private Property
0Submission to the local newspaper:
There are many today who say the conservative agenda is all about greed. I would like to take this opportunity to try and explain why this is a misconception.
The left has become fond of using terminology such as “tax cuts for the rich” or “giveaways to the wealthy” which in essence implies that future tax revenues are already public property. This language then in turn paints those who argue for tax cuts as being defenders of the wealthy, and for those who are not themselves wealthy, being manipulated by those who are. But it is not greed but rather private property rights and freedoms that are being fought for.
If what you privately earn is already considered to be public property, so that allowing you to keep more of it is called a “giveaway”, then a logical, albeit extreme, extension of the argument is that government already possesses the rights and thus could actually stake a claim to 100% of your earnings if it so chose. Furthermore, the very idea that government “allows” you to keep what is yours is also contrary to conservative philosophy. Conservatives are not, in general, truly advocating the vice of greedy hoarding but rather a delineation and defense of rights. Specifically, that there truly is such a thing as private ownership, and that it must be defended from a government that is also not immune to the vice of greed.
In this light one could say that the “greed” argument wielded by the left is the classic case of the pot calling the kettle black.
Reason to Work
0In my last post, I laid out a theory on the actual wage value of work. In this next installment, however, I want to build on that by focusing on the topic of economic value not being the only purpose of a business.
First, ironically, economic value is the purpose of a business. As stated in the last post, if a business is not (a) profitable and (b) does not meet its owner’s intentions and goals, it is not going to be successful.
Yet for many, economic value is not the purpose of a business. And this is of far greater importance in the grand scheme of things. When we approach this topic from the belief that everyone is a worker for the Kingdom of God, no matter what the job title is, then the primary goal must be outside the realm of one’s own self. Decisions have greater impact — the business owner who is using his resources and talents for the glory of God must also be thinking, “How does this decision bring glory to God and build his Kingdom?” Sometimes the right answer in this case — different for each person — will actually seem to be contrary to “common business sense”.
But also, work is not just a cover — a secondary role in which someone fulfills another mission, as a spy might do — for being able to evangelize. No, it in itself is a means of glorifying God and shaping culture, as producers, creators, and even mentors. Does the work serve someone else? Does the product meet someone else’s need? Does the service provided enable someone else to do their work better?
It’s also not the owner alone who has such responsibilities within the Kingdom. The worker, even the lowest-ranked worker in the organization, has a responsibility to ensure he is performing the value of his wage — as I alluded to in my previous post. If he isn’t generating value, or if the job isn’t allowing him to fulfill his God-given calling, he ought to quit. It sounds harsh, but it’s the truth. Anything else is robbing the business — as well as himself and God.
A Simple Economics Lesson
0What you won’t get in an Economics 101 class due to political correctness and regulation…
Let’s say I’m a sole proprietor (true) making $80,000/yr. (ha! not true). Also, let’s say that the demand for my products and/or services is such that I am working most of my waking hours in order to keep up with demand, but even so the demand is such that I can’t accept all work orders.
In that hypothetical situation, it would seem the logical next step would be to hire an employee. Doing so would mean more available hours, and thus, a shared workload for increased productivity. Obvious, right?
Not so fast. At $80,000 income, a portion of that then has to go to the employee’s salary, plus benefits, and whatever else goes with the position. Let’s say this employee makes, including benefits, about $35,000/yr.
So then we have some possible economic outcomes for me, as the for-profit business owner.
1. In the event the productivity didn’t increase, for whatever reason, due to increased time spent on my part with training, reviews, and management tasks that I didn’t previously have to do, and the business still only was making $80,000/yr., all of a sudden my share of it would have fallen from $80,000 to $45,000. D’oh!
2. Let’s say productivity did increase and receipts are now $100,000. The problem is that I’m still not coming out ahead as my net profit is just $65,000 – not counting any bonuses or raises requested due to the increased profitability. From an economic standpoint, even though the business as a whole improved, I actually still did not make a wise choice because, as the owner, I am receiving less return by the hiring. The ONLY way this could be justifiable is if I were to view the business as having done something charitable and essentially making a donation, as it is a net loss in profit.
3. The employee who makes $35,000/yr. directly contributes to the business’s bottom line in that annual receipts are $115,000/yr. This is where it begins to make some economic sense as my return remains the same but one job was truly created. This is essentially the break-even point.
4. The productivity of the employee who makes $35,000/yr. has brought in $45,000 additional in profits. The business’ receipts are now $125,000/yr. Thus, the hiring was of clear economic advantage, and by all means, he’s even earned himself a raise or bonus!
This illustrates why I believe government-pushed job-creating efforts, as well as business regulations, are unsustainable and will lead to further economic collapses. It seems that today the focus is all about “employment”, regardless of the actual value an employee brings to a business. A lot of capital is wasted by bureaucratic and middle-management/hierarchical positions. Unless one of those positions is actually, at minimum, bringing in to the organization the value of the corresponding salary at that position, then the position is overvalued, and is unnecessary waste. Or at the low end, the people who actually do the work (and are the ones at the center of the “job creation” talk), does each and every one actually bring to the organization his salary (or more) in added value? Hopefully, yes, but I wouldn’t bet on it. Fact is, when you have someone putting in 8 hours a day, just filling a chair at a desk and maybe doing some assigned tasks, and ultimately looking to one day cash in with a nice retirement package, there’s almost no way the actual added value of that employee’s work is actually covering his or her own salary. So my economic theory, as the rule of thumb for getting on track for recovery, is as follows: “An employee’s wage must be directly correlated to the value s/he brings to the organization.”
The business owner has full responsibility to treat employees well, treat them fairly, pay them their due, and not rob them of their due human dignity. This cannot be underscored enough, as it is one of the things lacking today in many business environments. The employee has full responsibility to ensure that his or her productivity is equaling the value of his or her wage in net gain for the organization. The owner should find the balance between excessive profit (a common temptation) and net loss (rare, noble, but ultimately not responsible) in order to be able to duly reap the fruits of his labor and the reward of his successful venture. The employee must give his all and understand his worth to the organization he has become a part of, rather than seeing it as the ticket to riches or retirement. Without this two-way responsibility, job creation efforts will fail. Today, from the government’s perspective, the mandate often looks like this: ”Create ten jobs, and then you’ll be eligible for a temporary tax reduction.” This is unsustainable because (a) the temporary tax “relief” is not going to truly pay for those ten jobs, (b) the ‘strings attached’ do not really help either the worker or owner, and (c) it is ultimately a form of a welfare program because the new employees, more likely than not, are direct beneficiaries of the tax credit but do not help the actual bottom line of the business. The business has essentially become a regulated “services provider”.
So in summary, this unofficial economics 101 blog post is intended to communicate the following (as relating to for-profit organizations – this does not apply to non-profits):
1. The purpose of any for-profit business is to reward its owners. Simply put, that is the reason for any new invention, any entrepreneurial enterprise, retail store, manufacturing process, or even advance in medicine.
2. Responsibility is important. All involved in a business must act in a way that is responsible to others affected. The owner of a business must respect his employees, and the employees must understand their role of helping the organization succeed.
3. With that in mind, however, a charitable act is a more probable reason (and a noble one at that) that a business would add additional jobs when those jobs are not forecast to actually positively impact the bottom line.
4. The value of a job (the salary + benefits) is its net impact on the organization as a whole.
5. Outside-managed, or regulated, efforts which force businesses will have a detrimental effect on the business, and then ultimately on the economy at large, by taking away the freedom of business owners and ultimately forcing them to accept cuts or implement organizational cuts.
6. Top-down job creation acts which mandate simple creation of jobs, not necessarily needed or quality jobs, will cause more hurt than benefit.
(Finally — I didn’t include non-profits because their fundamental purpose is much different. While a for-profit business is ultimately for its owners, a non-profit exists for a lateral purpose — not for the good of its owners, but of its neighbors. Thus, staff salaries in a non-profit are not based on value brought in, but value to one another, and value to the community in general.) For-profit companies cannot be made to operate like a non-profit (though it is very commendable when they do, if that is the owner’s prerogative), and non-profit organizations ought not act like for-profit.
Equality and fairness are a two-way street, and the rights of the owner must not be trampled on in favor of the lowest-tier employee… and vice versa. Workers must not be underpaid (see Jer. 22:13 and Mal. 3:5) but at the same time it must be understood that businesses exist for the purposes of the owner(s), as otherwise these businesses would not exist, and job creation efforts that do not respect this are prone to causing numerous unintended, hurtful consequences which will affect everyone from the top of the company to the bottom.
