The Equanimist

Working Hypothesis (re So-Far Failed Attempt at Greater-US Market/Foreign Middle-Classification)

Posted in Economics, Economy, Public Policy, Socioeconomy by equanimist on September 25, 2010
When money represents discrete fractions of actualized human potential adjusted for an instantaneous estimation of future productivity increase, to account for net outflow of money as the US trade deficit ballooned in a continual expansion of the US-dollar denominated market, more US dollars were necessary to fuel the “greater-US” market without either disrupting the US socioeconomy or experiencing dramatic domestic deflation.

Money supply then would have to grow at the rate of productive population within the greater-US market (i.e., the domestic and foreign USD-denominated markets) adjusted for (an extremely near-term estimate of) productivity gains made by same (so to maintain full employment absent deflation).

Logically, attempts to ever-expand the greater-US market would require some still-greater money supply. [Indeed, for as long as the US pursues a policy of “creating middle classes” money supply expansion should outstrip labor population growth multiplied by the estimation of instantaneous productivity growth within the greater-US market by some instantaneous estimation of the rate of current expansion.]

The Federal Reserve would furnish money sufficient to the task. But, it wouldn’t get used to the purpose.

Fig. 1, Closed blue triangles and closed green squares represent M2 and M1, respectively. Closed red circles and open blue triangles represent the bottom 90% of US earners and the top 1% of US earners, respectively. Data sources: M1 & M2, Federal Reserve (link); wage data, Piketty and Saez, TabFig2008.xls (link). M1 & M2 are plotted in billions; incomes are plotted in hundreds of 2008 US dollars for the sake of scale. (Click on graph to see full-sized image, which will open in another tab.)

Because US workers were already highly paid relative to poor foreign workers, we would not expect US middle-class incomes to grow much as a result of greater-US market expansion (unless the creation/expansion of a greater-US market were to enhance productivity gains). And, as is clear in Fig. 1, US workers’ incomes remained relatively flat over the time period. But, if money were being used to purpose (i.e., to promote development of foreign middle classes) then we would not expect to see a rise in top-tier US incomes. But, we do.

From approximately 1982, the top 1% of US earners saw increases that roughly corresponded to the increase in M2.

Perhaps, in attempting to expand the greater-US market in rapid fashion while erecting no backstop against domestic disruption, we wanted something that we shouldn’t have expected:

In order to keep the US market competitive, poor foreign wages-per-capita would have had to rapidly approach US middle-class wages minus cost of transport (i.e., grow at a rate unsupported by the foreign-labor-pool-to-foreign-labor-demand ratio). Otherwise, poor foreigners would always out-compete US counterparts on a purely-cost basis.

Absent extraordinary wage increases in poor-labor countries (and in the face of anemic foreign demand for their own goods and services—the result of low wages relative to the cost of the goods that they produce), the US (and parts of Europe) would have to consume the excess supply or give up creating foreign middle classes. Of course, as much as was prudent, US-made goods and services could be replaced with foreign-made. US jobs would be slashed en masse at every opportunity. Fear of the prospect of unrest would (generally) make that temporary. Still, the average unemployment rate in the US has crept ever higher in the post-war era.

Fig. 2, US Unemployment Rate by Year, from Jan 1948 thru Aug 2010. Data source: Bureau of Labor Statistics (link). Black line is a linear regression calculated by Microsoft Excel. (Click on graph for full-sized image.)

Needing domestic jobs but unwilling to pay foreign workers enough to buy the goods that they’d produced; or charge US consumers less for goods and services than the market would bear (i.e., produce domestic goods at a loss and foreign goods at a profit); or lavish cash (so-called “profits”) on the US population, US stewards had to find some way to effect purchase of the surplus goods produced.

In the absence of real money to purchase excess goods, credit could be furnished US people.

Fig. 3, Consumer Credit Expansion. Open red diamonds represent yearly consumer credit. Closed blue triangles and open black circles represent M2 and M1, respectively. Closed green squares represent M1 + consumer credit. All numbers in billions. Data source: Federal Reserve (link). (Click on graph for full-sized image.)

 
That is, it seems that money might have been loaned, instead of given, to “average” US people in order to purchase the surplus goods—or money was siphoned off at every opportunity instead of perpetually circulated (depending upon your perspective). [It seems difficult to imagine how smart people expected this to work.]
 
As of now, credit associated with “excess” production/consumption (which became a way of life) must still be repaid but bottom 90% incomes have not risen to meet the burden.
 
More pointedly, it seems the world economy is dependent upon vanishing credit to purchase surplus goods despite plenty of fiat money for the purpose because top-tier earners have irrationally siphoned needed currency off the greater-US market.
 
Absent meaningful change, the greater-US market will fail. Non-western middle classes will not develop. Global stability will continue to elude. And, even the fate of the US market is uncertain.

Invest in US

Posted in Economics, Economy, Political Economy, Politics, Public Policy, Socioeconomy by equanimist on August 16, 2010

I

Where do stewards who hoard currency (incentivization to put people to productive work) think that average people are going to get money?

Where do average people get money? Can they print it?

How does flow and use of money (economic engine) work? Can socioeconomy (presently) function without some kind of currency actively cycling through it?

The single most pressing issue facing the US remains a lack of US jobs—as opposed to unemployment, which concept is clouded by unemployment insurance: jobless aren’t exactly unemployed for so long as they receive money from the government to pay bills but in a sort of limbo between employment and unemployment.

While fundamental causes of hoarded currency may include utter lack of perception/understanding of socioeconomic principles (including civic responsibility and patriotism as same apply to the wider world) combined with inability among people vying for acceptance (and conditioned to think one way or another) to “put two and two together and get four” on their own when they are being told it is ten, the proximal cause of unemployment is hoarded (misused) currency. This can and must be quickly addressed.

II

Currency (so-called “paper money” measured in dollars and cents) is not commodity but tool. That US people were able to produce with credit (pseudo-currency) more than they could afford with circulating (real) currency is testament to the fact that there is not enough real currency circulating through the economy.

The US did not furnish too many jobs. US people did not live beyond their means, but credit to supplement available incentivization provides evidence of irrational distribution of paper money, which is disproportionately concentrated in the hands of a few who do not use it.

Lack of current in currency can be the result of a confluence of factors including too-high pay packages at the top combined with too-low investment by top earners and businesses, too-low taxes on top earners and wealthy businesses, too-low wages at the bottom, and too-high prices for goods and services (in this case, the direct result of pull from the top as evidenced by increasingly unequal wages).

That the modern steward class would sooner allow US infrastructure to decay than make currency available is testament to a radical change in attitude of US stewardship that took place over several decades.

III

Why does it bother currency-hoarders that US masses buy the very iPods and PS3s and HD TVs that keep them entertained (and otherwise oblivious to a changing power structure)? Surely it must bother them because they are not doling out the money with which to make future purchases, or, they are but they are not including enough to meet other expenses.

Why does it bother them that average US people are well educated in order to be more productive, better-quality servants? Surely it must bother them because they and their representatives have cut and continue to cut education spending. Isn’t high pay supposed to attract the best and the brightest? Aren’t small class sizes supposed to lead to better-educated students? Hasn’t the US system suffered by most metrics?

Why does it bother these hoarders that average people can afford their own homes? Surely, average people must live some place.

Past US stewards (i.e., our progenitors) might have been thrilled by the extraordinary accomplishments that we made as a society. Yet, their children revolted against the socioeconomy that made these possible. The “greatest generation”, spoiled (perhaps) by two terrible wars, bred a generation (the current steward class) that is preponderantly fearful, callous and avaricious beyond reason. These compulsive people are committed to a “zero-sum-game”, “tough-love” vision of life incompatible with civil society because it undermines systems that civilize.

Modern US stewards take indiscriminately from people whom they see as adversaries (i.e., everybody else) in order to hoard, while they would undermine with an army of lawyers and lobbyists the institutions that make possible US socioeconomy and gamble that US middle class will accept the change passively.

Worse, modern US stewards fail to understand the risk—that we are what we are—not what we would wish to be. If US stewards act like Mexican, Indian or Chinese (or pre-war US) stewards then, all else being equal, they’ll recreate Mexico, India or China (or pre-war America). Consider, for example, Mexico is so fantastic that its citizens streamed across the US-Mexican border at great personal risk to be illegal immigrants and all that that entails.

There is nothing in the last few hundred years of western history that suggests that average western people will suffer degradation indefinitely while their stewards enjoy ever-increasing wealth. The result of wealth consolidation and deficient current then, instead of safety, is likely to be ruin (preceded only by volatility and risk).

IV

Consolidated wealth must be wound down to a sustainable level and invested at home.

It is no longer enough to stimulate US demand. US people must spend more on US goods and services or jobs won’t come back. To that end, average US people need more real money to spend and strong incentives to spend it domestically. Further, it will not be enough to furnish more credit for the purpose: this crisis is predicated upon credit in place of currency.

The Credit Gamble [which seems something like, “If we (a minority of stewards) make credit available and show what it can do then the broader steward class (the same that has been consolidating money) will be forced to pay when the rent comes due because average people will be unable to do so”], this gamble did not pay off.

Modern US “stewards” do not tend to see themselves as such but see themselves as adversaries of average people and popular government: aristocrats. These aristocrats see only how fat their wallets get, and, thinking that they are successful just as long at they make more money to hoard, they continue to siphon the lifeblood (fiat currency) off our socioeconomic system.

Doubling down would be foolish.

V

To suggest or, worse, believe that people who have and businesses that have consolidated wealth will spend (in an “uncertain environment”) more than they make (that is, that they will suddenly spend down their savings to reinvigorate the US economy) because their taxes are lowered is absurd and would not be worthy of consideration except that it is suggested by those who view success in terms of hoarded currency and their surrogates.

If the US did not attract business sufficient to employ US people and jobs were vanishing for that reason then tax cuts could be used to attract business and restore jobs. But business attraction is not now relevant to US job creation.

There are plenty of businesses headquartered and/or doing business in the US. Despite tax cuts, it will remain cheaper to produce goods and services in China and India and Mexico. Believing the bottom line the single most important function of business, US businesses will continue to outsource absent some incentive to produce goods and services in the US. The “savings” that outsourcing yields will continue to go to a small few who have steadily awarded themselves higher pay and severance packages at the expense of “working” people absent some force acting against them. And, jobs will not come back as the result of tax cuts.

Instead, taxes should be raised substantially on top earners. Further, tax law should be modified to tax extraordinary wealth that is not invested in projects that put people to work. Using this money to create US jobs will begin to make up the slack in currency circulation without devaluing the dollar.

Obviously, it is difficult for elected US officials, increasingly pageant winners and right-hand men—not stewards per se, to distribute money to the middle class, which will spend it wisely (just so long as they spend it domestically). But, the US government must also pressure wealthy businesses to expand domestically and pay more in wages (in a deflationary environment) and simultaneously take money from same wealthy businesses (i.e., stewards who own/manage same) to distribute to US middle class.

[One might argue that businesspeople borrowed from future growth to buoy their own incomes: by beggaring their countryman and leaving same laden with debt, while packing away the higher yield of outsourcing—not putting it to use abroad to create foreign middle classes or distributing it at home to sustain their own way of life but always “leaving it to others” to do these things, these businesspeople ensured that the US would lose jobs, spend down its capital, accumulate debt and ultimately collapse like a house of cards when the cheap money stopped flowing.]

VI

High taxes, however, are not sufficient solution.

The wake of a staggering Chinese trade surplus and Buy Chinese incentives (borrowed, perhaps, from decades-long success of “Buy American” programs) provide another opportunity to institute an Invest in US program. Unfortunately, it will be a harder sell than it was a few years ago when inferior products seemed a plague, but it should look the same:

1.) All containers entering US ports should be thoroughly inspected. Inspection costs should be paid by the importers themselves—not US middle class.

It must be within a country’s purview to verify that contents of shipping containers are as listed and meet well-defined standards; and, if one genuinely wants to stop crimes including everything from trafficking in guns and human slaves to terrorism, it is a wise policy.

Moreover, it would remove an artificially low barrier to outsourcing and perforce make same more expensive absent tariffs. Special relationships with countries whose standards, wages and security mirror our own should be recreated.

2.) Illegal immigration should be stanched. While not as big a population as that of China or India (or China and India combined) the illegal population represents a substantial group that will work for extremely low wages and, as such, negatively impact wage growth.

While the US is and should remain a melting pot, a society is not likely to absorb a group twenty-times its size and maintain the status quo.

Let us be quite clear, while there are US policies that have done disservice, the sum total US policies have done great service to US people and foreign people all over the world.

Adding, in too rapid fashion, too many people of any nationality, religion or ethnicity that do not support core US principles threatens the US socioeconomy because it is likely to tip the balance away from core positions.

3.) Insourcing should be dramatically curtailed. Our institutions have not expanded to include more than 6 billion people vying for positions. In order to rebuild US capital, US positions must be substantially limited to US citizens.

The US cannot employ, educate, feed and etc. the whole world. The US can employ, educate and feed some foreign people and lead by example.

4.) Taxes should be raised on corporations and wealthy; and, in the meantime, money should be printed to replace credit and invested in projects with long term benefit, esp. infrastructure, education, defense and clean-energy technologies.

It should go without saying: Infrastructure makes every daily pursuit possible. Safe neighborhoods, reliable power lines, running water, driveable roads, sound bridges and so on and so forth are indispensable to civil society and high productivity. Of course, to the extent that these suffer civil society and productivity must also suffer.

But, civil society and productivity also suffer when children are poorly socialized and educated. Successive generations must be taught the core principles, techniques and skills—the wisdom upon which success is predicated or be all but guaranteed a darker tomorrow.

History makes clear that the world is navigating treacherous waters. And, the US is in a weakened state. Cuts in defense spending could not be timed more inappropriately than now. While new bombers and manned aircraft might be put on hold, the US would be foolish to divert money from myriad technologies as diverse as unmanned aerial vehicles and energy production that will ensure US hegemony.

The US cannot stand up for freedom and democracy and lie prostrate at the feet of foreign despots. Clean, cheap energy technologies sufficient to US demand will ensure our independence, while creating hundreds of thousands of jobs and products to export. Stewards should hasten such technological advances while putting people back to work.

VII

The positions outlined here are in keeping with a long US history of independence, freedom and equality under a strong central government.

Make no mistake, while it is indeed possible that the US has changed so that we will welcome socialism or peaceably abide poverty and starvation it seems unlikely.

Fundamental change no more exotic or painful than restoration of flow of currency can change the tide. If we hope to avoid the real dangers on our present course, we will make the change.

There is no magic place where money doesn’t flow but people prosper.

A Short Note on the Primary Superiority of Fiat Currency-based Socioeconomics to Commodity-based Socioeconomics

Posted in *HIGHLIGHTS, Economics, Economy, Philosophy, Socioeconomy by equanimist on June 10, 2010

Work is not used to put people to money (so long as “excess” of any product can be created) but money is used to put people to work.

Fiat currency is not a commodity but a tool. That it can be used as currency of actualized human potential is its primary virtue. Otherwise, we might as well use something like gold, which may tend to approximate (but is no) ideal fixed-quantity commodity.

As has been demonstrated time and again, there is an extremely acquisitive and (very nearly) equally thrifty minority who will part with what they’ve got “over their dead bodies”.

Still, there is a human potential greater than the relatively small portion of currency that this de facto steward class makes available to effect productivity and, otherwise, peace and prosperity.

Fiat currency takes control of this natural tyranny putting people to work (and, otherwise, keeping others from it). The work people do (and, otherwise, the work that they don’t do) makes our lives better.

Fiat currency representing the work that has been done and approximating, at any given instant, that which can be done by same population with improved technology in future accomplishes in this way what commodities cannot: stabilization as the result of primarily peaceful transitions—a modulation (i.e., minimization) in amplitude of cyclical socioeconomic transitions between peace and war, if you will.

Commodity-based socioeconomics, on the other hand, must include physical reclamation of actual assets for redistribution or debt (forgiven cyclically) in place of fiat currency! That entails a lot of dead bodies, as has been demonstrated.

Part III.C. Regarding US Unemployment

1. ‘The proof is in the pudding’

Relatively-high, steady unemployment is not compatible with civil society when a relatively acquisitive, motivated people confront social programs that only reinforce hardship and success.

Now, it appears that there are more US Americans who would work than there are US jobs to do. This is not the case. The US people need challenging, satisfying work now more than ever because they are “on edge” and strapped for cash. Moreover, innovation will be product of a lot of hard work.

Notwithstanding that recent “boom” times were characterized by relatively high US unemployment (see Fig. 1 below for data on the US Unemployment Rate since 1948) there must be work for the unemployed to do.

2.

Human-capacity utilization is being slashed instead. It would appear that the steward class does not see high employment as a responsibility of US stewardship. US pundits wonder aloud, who’s at fault for high unemployment?

Many so-called conservatives cry, “People refuse to work! Fat, lazy, beer-drinking, out-of workers – socialists living on the fat of the land are the problem. It’s un-American.”

The left is flabbergasted. “Now, now… It’s the corporate fat cats,” they tell the middle class, as if they had taken vows of poverty. “It’s CEOs and corporate lobbyists, who laze about smoke-filled rooms, while you build America.”

3. ‘Finger-pointing’ (AKA, Proximal cause)

Of course, an individual must be incentivized and make a choice to work. Individuals do not incentivize themselves. Who is responsible to incentivize workers? Are they doing that or not?

Data on US income inequality clearly show diverging pay scales of small-and-shrinking proportion at the bottom and large-and-growing proportion at the top. That is, it looks like the topmost tier is and has been consolidating wealth and removing some portion of monetary incentives for decades.

Further, relatively “high-paying” (middle-class) jobs are disappearing to foreign nations where they can be done more cheaply. In place of such jobs, so-called “McJobs” have appeared. Many find such work neither satisfying nor worthwhile.

But, now, all jobs are coming under the axe as stewards and managers ‘restructure’ to ‘maximize efficiencies and profits’.

These data strongly suggest that US workers are and have been losing battles for middle-class wages and satisfying jobs. Individuals within the steward class that makes policy and those under them, who manage finance and companies, and those under them, who manage divisions, and so forth must be accountable because stewards create jobs, set pay scales, hire and fire.

However, in that stewards want to live a little bit better than they have at any instant (e.g., now) are they not just like their compatriots? They’re just a little better at getting what they want.

4. ‘The meat of the matter’ (AKA, Distal cause)

What an individual feels and believes and can accomplish for itself has steadily gained importance in the western world, esp. the US. Now, it appears that the individual matters more than societal concerns, of which we admit fewer and fewer over time. The result is a new west where, much like the old west, it’s every man for himself. A middle-class democracy cannot exist indefinitely in such a state.

Some examples stand out from the pack. Bernard Madoff and Allen Stanford clearly take first and second place, respectively. Others fade into the woodwork. If, for example, we assume that Ben Bernanke had compelling evidence to suggest that the Merrill deal must go through and pressed Ken Lewis to make the deal, does it matter if Mr. Bernanke did what he believed was best for the country in pressing Mr. Lewis to complete the deal? It must! Can Mr. Bernanke have violated US law if he did what a preponderance of evidence suggested was best for the country despite the fact that a relatively small group of risk takers suffered a financial setback, or, he might have violated the terms of an imperfect law? Which is more important, an individual or the country? The country or the law?

The good of a country does not change over time. Our understanding of it does, and so, our laws change to better approximate the national interest because a country’s laws exist first and foremost to effect the national interest! As such, absent foreseeable, avoidable and/or greater wrong, it hardly seems an act can violate law if it is reasonable, appears the best of alternatives and is intended to effect national prosperity.

Yet, secular, self-centered individuals now want and believe that they can do whatever they like within the law without repercussion (because “it’s a free country”, virtually everything not specifically addressed by current law). The law is become sacrosanct. The law is become an offensive weapon.

This may be par for the course among third-world ruling classes, but, it cannot work within the context of a middle-class democracy precisely because it obviates the possibility of a middle class: When one societal group is so inclined, capable of outmaneuvering another group and consistently allowed to take advantage of same, the long term result must be oppression or eradication of the weaker group, here, the US middle class.

Approaching an extreme in the US, when a plurality of individuals threatens civil society, self-centered and selfish individuals give only cursory thought to others – rarely more than is absolutely necessary – and, generally, persuade themselves of the rightness and goodness of their own interests: freewill, as a philosophy, does not allow the possibility of responsibility for actions that do not violate the law but only actions that violate the law. Believing thus absolves law-abiding individuals of guilt and, in so doing, sets in motion a positive and pleasurable feedback loop. Moreover (in free countries like the US) coupled, extreme visions of freewill and individuality effectually subvert the justice system: laws addressing specific actions cannot possibly foresee infinitely-diverse bad actions, and, because we do not admit an enforceable “spirit of the law”, bad actors are free to act unless there’s a law that prevents them from doing so.

When bad actors act in the self-interests described, while they fight to keep the law off their bad actions and achieve success as a result, they attract and make converts of others.

The result is a socioeconomy so corrupt that is does not see itself as corrupt. Corruption is become business as usual. And, rising unemployment over time (as illustrated below) is just a symptom.

Fig. 1, Unemployment Rate 1948 Jan – 2009 Aug, based on unemployment rate data by month over a period 1948 Jan thru 2009 Aug obtained from the Bureau of Labor Statistics. Red line is linear regression calculated by Microsoft Excel. Upper (green) and lower (yellow) brackets highlight amplitude of swings.

The unemployment rate has clearly trended up over this time period (from approx. 5% to approx. 6.3% – a rise of approx. 25% in the portion of the population that is unemployed at any instant). More disturbing, however, is the change in unemployment-cycle amplitude in the postwar period, illustrated by the brackets. The highs and lows seem to be diverging. But, finally, the troughs are getting higher. During “boom” times US unemployment is staying higher.

5. The positive feedback loop in action

I can make more money if I pay less. I want to make more money because I want and believe that I deserve more. Nobody is stopping me from employing fewer people. And, I can employ them at a lower rate.

Since I don’t believe that I have any responsibility to employ people, and, I have no responsibility to my fellow countrymen, I will find ways to increase productivity with fewer workers and pay them less.

…I have done so, and, I have kept more money. I live a slightly more lavish lifestyle and have consolidated more wealth. But, I know I can live a more lavish lifestyle and consolidate more wealth if I can further increase worker productivity while keeping money in my pocket. Moreover, I can pay even less if I outsource relatively “high-paying”, middle-class jobs to “business-friendly” nations.

I will invest in technologies that eliminate the worker and outsource middle-class jobs to lower-class countries where I will pay middle-class workers according to lower-class rates.

…Success!

Other people see what I am doing. They are impressed. And, they do it, too.

The unemployment rate ticks ever up. Some hypothesize that the natural unemployment rate might not be even 5% but something higher. And, so forth and so on.

Of course, the principles that underlie this logic extend beyond employment to all facets of human endeavor.

6. A curious justification: human rights

While the justification described may be sufficient to have set the loop in motion, still, present justification for actions that negatively impact the domestic socioeconomy jibe nicely with “progressive-”liberal ideology. Specifically, so-called “bleeding hearts” would put an end to injustice in the world. Irrespective merit-of-the argument, the argument supports substantial US investment in foreign countries: it takes a lot of money to elevate a poor population from poverty into the middle class.

Will to furnish that money never existed in the US steward class. (The same people have used profits of outsourcing and insourcing to pay themselves more.) Yet, the plan was clearly lucrative over the short term.

Jobs were moved overseas, and, money that would have lined US-middle-class pockets went with them. This would have been fine and could have been sufficient to raise many poor foreigners out of poverty if it had been temporary. But, wages of poor foreign workers did not rapidly approach US-middle-class wages, and, adequate foreign demand would not develop. (It seems plausible that many foreign populations are generally less acquisitive than the US population and will, as such, tolerate a low standard of living that US people will not. Further, foreign workers who might pressure foreign stewards routinely migrate to the US leaving a vanishingly motivated people behind. Thus, foreign stewards might easily fail to see the benefit of higher domestic standards of living.)

While outsourcing and insourcing effectively grew the US workforce out of all proportion to the number of available US jobs and the same globalization replaced US workers with cheaper foreign workers, US-middle-class income continued to decline. Moreover, the goods that the US middle class consumed and the services with which it was furnished originated overseas with greater frequency. This further diminished US capacity for demand.

When the US middle class could no longer afford the effort to spread US-middle-class democracy in a hostile world, US stewards doubled down. In order to pay for the plan in the face of diverging pay scales, rising US unemployment and relatively weak foreign demand, the bankrupt US middle class was furnished credit that US consumers were eager to use. But, now the plan must work because there was never any hope that US-middle-class people could repay the staggering debt they would accrue if foreign wages did not rise to US-middle-class levels, and, outsourced jobs never “returned” home. Further, the US steward class was ill-prepared to cover its losses and never intended to do so.

We now know it was a bad bet. The US middle-class could not prop up poor foreigners whose steward classes would not adapt to the demands of progressive-liberal US ambitions. The US middle class was gambled into servitude.

But, the US people didn’t “come to America” to be poor, indentured servants. Just the opposite. “No taxation without representation!” they cry. “Live free or die!” The US has always attracted relatively acquisitive and extremely motivated people who are looking for a “better” life, revolutionaries. Moreover, many tens or hundreds of millions of US Americans have already lived some version of the “American dream”. Taken together, these facts strongly suggest that the US middle class, without anyplace to go, will revolt.

It must be time to retrench.

7. Solution to the example, unemployment (AKA, “It’s past time to get tough”)

The US steward class must cover its losses and, then, institute the changes that must be made in order to regain standing in the world and maintain a vibrant civil society:

(1) (a) Raise minimum wage for all those emancipated and/or adult US individuals to some “relatively-high”, middle-class level (based not on a USD amount but some fraction of the upper wage); and (b) guarantee unemployment benefits (at some significantly lower, “poverty” rate) to every citizen whose household income is below the minimum-wage figure per capita.

(2) Guarantee health coverage to every US American.

(3) (a) Stop trade with countries that refuse to adopt similar policies; (b) severely limit immigration from same; and (c) prevent domestic entities and other entities based in trading-partner countries from outsourcing services to and developing products in non-trading-partner countries.

8. How it works

The unemployed cannot pay their own unemployment benefits, let alone medical bills. And, under this plan, there is significant benefit to work. Still, the plan is ineffectual if US business entities can get visas for cheap labor and employ cheap labor abroad. So, the law must be reformed to stanch the flood of cheap foreign labor.

Thus, under this plan, US employers are effectively compelled to employ every emancipated or adult US citizen and end the deadly trend to mass poverty that results when the steward class does not rightly estimate its relationship to a civil, acquisitive and motivated middle class. At the same time, the unemployed have strong incentive to work to stay out of poverty.

Which is better for the employer: an employee who does nothing and gets paid, or an employee who adds to net income?

Domestic employers will bend over backward attempting to make money off of those whom they have to pay (i.e., US Americans) and the number of US jobs will expand out of proportion to the number of US workers. Otherwise, US companies might (1) move to the third world, where they need not pay or (2) regress (i.e., forfeit high quality of life). In the event that more than a very few choose (1) they’ll have either to change the third world, or, as in (2) they won’t live well because demand for their goods will be much lower and, as a result, their incomes will drop substantially while they will face a hostile population in relatively wild lands. That is, there isn’t enough room at the top tier of the third world to absorb a mass exodus of top-tier first-worlders, and, it seems unlikely that the steward class would choose to recreate the third world at home.

For the same reason that companies will not relocate en masse, the US people will find it better to enjoy the comforts that a little work brings. It appeals to virtually everybody to work for “something better” because it’s human nature (as will be explored in some later part).

In any case, the US will retain advantages that it has always had: diverse, creative, motivated US people working within the framework of the US constitution and (now centuries-old) institutions. While restored domestic-demand capacity will grow the socioeconomy, the kind of work that US people have done historically will breed continued innovation and further progress.

That this plan is good for every US American and the citizens of all US trading partners is self-apparent. But, further, it is good for citizens of our non-trading partners because it provides the strongest incentive to make progress on issues that plague these countries (e.g., income inequality and human rights). They will have no choice but to commit to change or squander US investment. Now that these countries have experienced growth and higher living standards associated with US-middle-class investment, it should be hard to go back to the old ways.

A sliver of a slice of US American and foreign stewards will understand that it means an end to tyranny and, because they cannot see how that benefits them (either because they actually cannot understand or because it flies in the face of the supreme belief that their interests are more important than their nations’) the plan will not suffice to persuade them that the next phase in the evolution of civil society will afford a higher quality of life for all.

They will fight it tooth and nail – not because it’s a bad plan (bad for the US and US-trading partners) but because it is a good plan that is good for the US, US-trading partners and the world; and, to their way of thinking (which equates personal benefit with personal wealth) that’s bad for them.

REPOST: Part I. "It’s Just Business"

While I continue to conceive this ongoing untitled series (among other things) I think this — a week during which banks (e.g., Goldman Sachs and JPMorgan Chase) reported extraordinary profits while ordinary citizens, who footed the bill, are jobless and homeless — this is a perfect time to repost Part I. “It’s Just Business”.


How does a businessperson* (often a salesperson in this capacity) “make” money? In the simplest sense, s/he buys or finances or otherwise brings goods and services (that somebody/-ies designed/engineered/whathaveyou and produced or otherwise will either provide or facilitate – sometimes his or her own goods or services) to market where s/he peddles them to the consumer. To the extent that s/he profits off this ingenuity and productivity or other work s/he makes more or less money.

Of course, design/engineering/whathaveyou/production &c. cost money, and, materials have inherent cost. For the sake of argument, assume that the total cost of the product is its worth irrespective remuneration owed a businessperson (or businesspeople) in his or her (or their) managing/marketing/sales capacity. In a freemarket, to the extent that a businessperson can keep total production or service costs down, convince a consumer to pay a higher price above a product’s worth and to buy more of same s/he makes more money. That is, businesspeople (often paid bonuses/commissions/whathaveyou) are incentivized to devise techniques to sell products and services at increasingly high profit margins above their worth and to do so en masse whenever possible.

By nature, this system cannot make anybody rich if everybody does it so the rules are such that it is very difficult (generally impossible for most people) to pull off. (If, for example, few can understand codified techniques and fewer still can afford the training and fewer still will be able to do both and fewer still will be able to apply the training skillfully, we’ve already narrowed down the population of potential businesspeople a great deal; and, in this way, everybody cannot do it). Nor can it work if people are given to know that the worth of the products that some businessperson is peddling is less than the price that they are being asked to pay.

‘Transparency’ is, thus, the enemy of the businessperson, who is incentivized to misrepresent actual product worth and obfuscate his or her own share in the profits (and that of his or her employer where applicable). If s/he can swindle one percent (or two or even five percent) on a million cheap units at one (or two or even a dozen) times a year then swindling becomes so extremely advantageous that s/he lives like a god.

Language becomes a weapon! Jargon, jargon as far as the eye can see. “First-in, last-out” (sometimes, FILO) accounting, for example, what’s that? Imagine that you have a hundred identical widgets. The first one that you bought only cost you five dollars and the last one that you bought cost you one hundred dollars. Further, for the sake of simplicity, suppose that the cost of each successive widget is always (over some finite period) more than the last. You sell a widget. FILO allows you to claim that though you’ve got a hundred identical widgets in your stock that range in cost from five dollars to one hundred dollars, you kept the cheap widget and sold the most expensive one for a relatively small profit or even a loss. What a concept!

What’s a company’s profit margin? How many widgets at what profit margin does a company sell in a given period? How much does it make? What does it own? What does it owe? What’s it worth? What are you really getting when you buy a share of stock in some company? Financial widgets, shares of stock, for example, take the cake as far as widgets go.

A quick look at the “Financials” section of a stock listing from a free website like Google reveals a list of “Total Revenue”, “Gross Profit”, “Operating Income”, and “Net Income”; the “Balance Sheet” section lists “Total Current Assets”, “Total Assets”, “Total Current Liabilities”, “Total Liabilities”, and “Total Equity”; the “Cash Flow” section lists “Net Income/Starting Line”, “Cash from Operating Activities”, “Cash from Investing Activities”, “Cash from Financing Activities”, and “Net Change in Cash”. Have you got any idea what that means? Probably. But do you really know – to a certainty? Do you, for example, know how they account? Know how they report? Even the P/E varies from site to site.

Delving into a business report reveals a seemingly limitless array of terms each denoting a specific concept and probably connoting another (that even educated businesspeople and financial experts cannot be expected to fully understand) strung together in a sort of word soup. Delving into the fine print on a so-called “financial product” is somewhat less revealing. Are the terms useful? When people who know what they mean talk to each other and interact, sure; to everybody else, they’re worse than useless – not merely incomprehensible but misleading when incorrect meanings are inferred from context clues – misunderstandings that few people have energy, time, intellectual capacity and resources to clear up.

Jargon makes it impossible for most people to understand what a widget is actually worth. And, it is generally impossible to uncover what a businessperson is actually “making”. This is by design – even when the intent of the information provider may be to provide good intel. A small few will have a pretty good idea. But why wouldn’t they play it close to the vest? They’re out to make money – especially if they’ve put the time and energy into understanding it all. And, everybody can’t make money because, all else being equal, if everybody made money then there’d be smaller shares for the few, and, they could not live like gods.

Businesspeople know that they thrive at the expense of the many – that somebody actually starves so that they might live in greater luxury. And, that’s why they give meaningless, obtuse and arcane answers to even simple questions: they wield deceit to their advantage at others’ expense. Even otherwise respectable men and women who drive innovation and get it to the marketplace, get rich organizing a salesforce (or otherwise act as such) in order to swindle more money out of consumers’ pockets than “their” goods and services are worth and to persuade “willing” investors to capitalize them.

But, when a businessperson can control the laborforce, too, profit climbs even higher. So, the same logic undergirds many hiring processes and pay packages. The savvy businessman or -woman attempts to hire people at some price below their worth, and so forth, in order to maximize his or her own profits. They despise the unions for this reason.

Academic institutions (businesses themselves, just ask the head coach of a good college football team) furnish a particularly elegant and relatively uniform example with which the author is intimately familiar. Colleges and universities generally offer new hires just a little less than somebody who has already worked at same for some short time, like a year. H.R. people either tell the candidate that they will make some salary toward the bottom of a range because they’re new (inexperienced in some way or an unproven commodity) or they leave it to the candidate to infer. Then, when the time arrives for a raise, it turns out that the institutions give only cost-of-living increases. In other words, new hires don’t make less because they’re ‘junior’ but because they haven’t yet received cost-of-living increases. That is, by their logic and practice, a new hire should get what the oldest hire at the same tier is being paid because the old hire is not getting a cent for performance or experience – just cost-of-living.

Savvy businesspeople get it at both ends: charging exorbitant fees (see the escalating cost of tuition for example) and ‘keeping costs down’. This is the freemarket. “It’s just business.”

Is it too much to expect that businesspeople should understand why a civilized society must curtail their prowess? We don’t let physically superior people run rough shod over their weaker cousins. We don’t let large men, for example, beat smaller women or take from them what they want. We make them conform to the requirements of a civil society. (But we let shrewd crafty people give weaker people the business.) We must curtail even the aptitude of all people who would run rough shod over our civil society and we know this.

For some time businesspeople have either shrugged or otherwise kept our laws off their bodies by convincing people that capitalism is equal to democracy, that patriotism is equal to rabid individualism. But, we know that capitalism and democracy are not part in parcel. And, patriotism is antithetical to rabid individualism. Patriotism is knowing and doing (and, to some extent, feeling) what’s best for your country, your state, your community, your home – because “charity begins at home;” n’est-ce pas?

So, what is the businessperson worth? What’s s/he earned? Now may be one of those rare opportunities when you get to ask and be heard to answer. Let me suggest that we start by asking what we’re worth – what are you worth? – because what you pay him or her will bear directly on the value of what you earn.

Would you pay a businessperson a million dollar salary/”pay package”/whathaveyou – how’s about ten million dollars – or a hundred million dollars – when you make twenty-five or fifty or a hundred thousand? If s/he had to come to you for it, would you authorize it? The answer is probably, “No.”

Even when we assume “freewill” – when we say, “Biology, Chemistry and Physics are crap” – when we say stupid things like “anybody can achieve the American dream” (while we know full-well that many just don’t have the intellectual wherewithal to succeed) – even when we allow all “men” are “created” equal to mean that everybody is just as capable as everybody else, how much remuneration does a salesperson, a marketer, a swindler deserve? What should we incentivize? Do we want the ‘best and the brightest’ people to go into business?

It’s not just business. It never was.


______________________________________________________


*Definitions

Business (n.): (1) “widgets for money;” an exchange of widgets (final products) and other services accompanied by terms and conditions that adequately (if incomprehensibly) describe same (such as they are) for money (an abstract representation of work – buffer between work and remuneration) (as in, We do business on four continents); (2) organization of the production or provision of same widgets and services (as in, She manages a small business, and, He generates a lot of business for the company); (3) organization of the production or provision of same widgets or services for the purpose of (1, above) (as in, That’s no way to run a business); (4) the hierarchy within which widgets and services are made or otherwise provided and sold (as in, That’s the business); (5) a beating (as in, I gave him the business.)


Businessperson (n.): (1) somebody who does, generates or conducts (runs) exchanges of widgets and other services accompanied by terms and conditions that adequately describe same for money; (2) a facilitator of same (e.g., a regulator or policy maker); (3) a gangster (as in, I’m a businessman).

Part III.A. Mutual Exclusivity

A. Mutual Exclusivity


Like “everything”, belief in freewill – the singular ability (generally attributed to “higher” animals and their familiars) to think, decide and act irrespective some inexorable extra-personal causative agent or agents (i.e., responsibly) – belief in freewill is over-determined.

It just seems right; does it not? I think, decide, act and can “observe” myself as I do so. Intuited, as it were, observations of freewill originate within me. Why question it?

Further, the concept of “personal responsibility” (i.e., the concept that I am master of my body and, therefore, uniquely accountable for its actions) is deeply ingrained and, generally, “works”. Application of the concept of freewill to life’s problems can and frequently does produce desired results.

Yet, the concept is integral to western justice systems, which are (almost universally and in toto) justified by freewill, or, “personal responsibility”. The “justice system” is supposed to “hold” individuals “responsible” and “punish” them for their bad actions. (Not so “capitalism”, a justice system, itself, which does not seek to “hold” individuals “responsible” and “reward” them for their good actions but as aforementioned in Part I.) Henceforward, it would seem, to extirpate the concept could turn justice on its head.

Moreover, it is often argued that, personal responsibility is the one best rational justification for productivity. And, this may be closest to home for many “successful” people [who (as it happens) either are or are not endowed by their creator with certain gifts] both social stratification and capitalism are virtually predicated upon freewill, without which (it seems) the socioeconomy could be imperiled.

Besides, when we assume determined will, many of us reach distasteful conclusions. Do we disavow determined will on that basis?

Some will understand “determinism” to mean that it doesn’t matter what a body does. This is patently absurd. Still, when we assume determined will the individual is reduced to a sentience, which can be neither more nor less blame- (or praise-) worthy than another – making the human experience just that.

Paradoxically, it is only when we assume determined will that we have control over the universe: I must be causative to be cause.

Personal and extra-personal control are mutually exclusive possibilities (as with black and white, up and down, left and right, ability and disability.) If we accept the former we disavow the latter and the converse.

Part II. Worth

“You say it is the good cause that hallows even war. I say unto you: It is the good war that hallows any cause.” – Nietzsche

Here, I would like (desperately) to write something else; that a man or woman is worth some moral equivalent in dollars; or, at least, that human dignity is valuable and productivity still more so. Peace costs. Loyalty costs. High living standards cost.

But this is not the place to argue that everybody is created equal – for better or worse – equally incapable of self-control; that freewill is an unsupportable postulate accepted by ignorants and promoted by spin doctors; that “you” are not the “you” you think yourself to be.

I will write these things – elsewhere – in some other ‘Part’.

The trouble is that these arguments against unmitigated avarice and megalomania break down when opponents deny reason (when no rational moral argument can stand up, and, we are debased). (Religious doctrine accomplished what reason seems inadequate to do. The fear of God served a purpose after all!)

When push comes to shove, a person is worth what s/he can and will take and defend. And, nothing can be taken that is not sacrificed (except in death).

Capitalism has so debased us. It is a “survival of the fittest” – a constant contest, which does not generally mean a triumph of the “best” but, specifically, some fruitful advantage (whether it be defined as child-bearing or wealth-consolidation – or betterment, but let us save that discussion for some other place).

In a freemarket, I am worth what I can and will take [from you] by force (intellectual or, now more rarely, physical) and am then willing and able to protect. [It’s extraordinarily counterproductive! How much work, for example, is just contest? And how much productivity is sapped by same? And how do our lives suffer as a result?]

We (people) are not (intrinsically) adversaries at a zero-sum game, but Capitalism makes us so. Ergo, it behooves me to be confident; to deny you; and to take some prize. I should think myself better and belittle you; I should value my assets and disparage yours; demand everything and leave nothing; have everything because having is triumph, and, triumph is controlling influence, and, controlling influence rules – not the best – but triumph.

To wit, capital is squandered.

When credit (not synonymous with but equivalent to effective triumph) is controlling influence – credit is everything! So, we contest for credit. “Good” and “bad” notwithstanding, when opposing forces meet, a slim “edge” wins, and, the “loser” is overcome – effectively negated in a binary capitalist system. But, how else can it be when triumph is everything (and everything else, perforce, is nothing)?

Worse, however, opposing forces are susceptible to “other” forces. Some of these other forces will favor one or another of two dueling bodies; some will come at odd angles. – An arch is “strong” not because it fights itself but because it supports itself and so distributes forces so as to maintain the integrity of its shape.

Society that fights at itself is inherently vulnerable. Locked in mortal combat, one with another, US citizens make themselves prey – needlessly, because US resources are suited to the task of cooperation.

This, however, is the reality. We have come down to agree that you are only worth what you can wrest from somebody else. Why? Because we are not a country – not a community – but three hundred million individuals loosely associated into real physical and ideological fractions. The enemy is your own spouse – or maybe not your spouse but the opposite “sex”; your neighbor – or maybe not your neighbor but somebody down the street – in the next state – half way across the continent – on the other side of the world. We’re “male” and “female” and “transgendered” – “straight”, “homosexual” and “bisexual” – “pants-wearers” and “pansies” and “housewives” (oh, my!) – “socialists”, “liberals”, “moderates”, “conservatives”, “fascists”, whathaveyou – “Christians”, “Muslims”, “Jewish”, and etcetera – “African Americans”, “Mexican Americans”, “Italian Americans”, “Europeans” and so forth – “Pennsylvanians” and “New Jerseyans”, for example – “Philadelphians”, “Princetonians”, “Trentonians” – “Smiths”, “Jonses”, and “Rodriguezes” – “fathers” and “mothers” – “sons” and “daughters” – “black sheep” and “good children”.

What are you worth but what you can wrest from another? Nothing.

The “American Dream” has gone up in a puff of Capitalism – not socialism, or republicanism or democracy, but capitalism.

REWRITE: This is a private drive. No trespassing. (Update 3)

Posted in Economy, Political Economy, Public Policy, Socioeconomy by equanimist on April 7, 2009

Originally published here, at the Equanimist, 17 Sept 2008. Rewritten and reposted in response to continued deterioration of the US labor market (another 600+k jobs lost in March) and other recent news, including (but in no way limited to) this debacle covered by the Christian Science Monitor related to ‘contaminated’ Chinese drywall.

Developed economies will be made solvent or reposition on the broad socioeconomic continuum. History makes the latter almost unthinkable.

Continued bailouts will only put “recovery” off. Systemic injury must be sustained. Loss ought, therefore, be distributed among financially responsible parties to stop “bleeding” the real economy.

Here, I would like to refer you back to a paper buried in a link within my first post below (December 2007) and to elaborate on certain of its conclusions.

Illiquidity (resulting in catastrophic losses) in the financial markets is only symptomatic. Typically, people don’t pay their debts when they don’t have money with which to do so. More than bad banking practices, four decades of increasing income inequality and overdependence upon the US lie behind the extraordinary decline in the value of such products as mortgage backed securities and collateralized debt obligations. US citizens have gone broke making rich despotic foreigners and domestic stewards (who fail utterly to recognize themselves as such) capitalizing on low foreign socioeconomic status.

If developed democracies are to “recover” then bad actors (viz., Chinese, Indian, Mexican, middle-eastern and Russian stewards, who have over-relied upon developed democracies to care for their large populations) must take responsibility for their own people or now learn to play by the rules (i.e., take bold and immediate steps to raise their domestic living standards).

In the meantime, developed democracies’ middle classes must be furnished real money with which to make real “domestic” purchases – more money in countries like the US, where the middle class has been trampled under foot by a flood of cheap labor far in excess of that inherent in legal immigration, and less in countries, esp. certain European countries, where the adverse effects of income inequality are largely corrected by social programs.

Is it time for closer ties between special, aligned democracies such as Australia, Canada, Europe, Japan and the US?

Through new cooperation and closer ties forged between same – beyond cooperative financial regulation to include “special” trading status through cooperative regulation of products and industries and similarly high commitment to national security – we might band together and so defend ourselves from the scourge of high income inequality and low living standards that once seemed a thing of the past. We will not lift “them” up (bad actors) who will not act for themselves.

Outsourcing to and insourcing from bad actors (e.g., China, India, Mexico, the middle-east and Russia) must be dissuaded. Though there may be myriad ways to do so, ensuring the reliability of shipments and adherence to strict migration policies seem the most reasonable methods. Broadly, check every “foreign” container and the actual contents thereof to ascertain with certainty whether or not those contents conform with strict regulations, which (as evidenced by ongoing troubles) is not done “abroad”; shore up porous borders; and describe means by which to repatriate as many illegal aliens as practicable.

This plan neither bars “foreign” investment in developed democracies nor unfairly taxes anybody in order to socialize profits (something extremely distasteful in the mouths of the US “right”) but provides an adequate framework within the spirit of our shared traditions to protect developed democracy from detractors. Simultaneously, this should create strong incentives to produce goods “domestically” (e.g. within the developed democratic world) – ergo, increase the number of “domestic” jobs out of all proportion to the worker pool – a step that should then increase wages and restore socioeconomic status from the bottom up. Moreover, this might provide strong incentive to “foreign” stewards to act in ways that will bring them closer to us so that they might participate in our economy and enjoy our high standards of living.

It would be nice if we could save everyone – but the global will does not seem to exist. Responsible “foreign” parties refuse to take an interest in their own well-being. No minority “domestic” group of nations will effect higher living standards by force. This race to the bottom helps no one. Let us lead by example.

Prelude to Part II in mixed metaphor, "On Natural Rights" (Update 1)

Posted in *HIGHLIGHTS, Economy, Philosophy, Poetry, Public Policy, Socioeconomy, Untitled Work Number I by equanimist on March 21, 2009
The natural world!
O, to be better by fine margins!
How will we know who is best?
We will fight. Winner, take all.


Drop what you are doing for the competition. The first place finisher will get a gold medal ($953/oz.); second place, a silver medal ($13.73/oz.); third place, bronze (something greater than zero/oz.). Never mind how impossibly small the difference between first and third might be.

Everybody else is worthless. Finito, Benito!

It is the natural prerogative of winners to dispense with losers. But, winners cannot expect to lord it over losers when they are better by fine margins.

Sayeth the businessman, son of steel workers, “This country – to which I owe everything – this, my country that raised me and made possible the extraordinary life that I lead, having taken everything, I will burn her tits. I will raze her to the ground under me! To whom do I owe my allegiance? I owe nothing! I earned this right. And, I will take my business elsewhere.”

And, they band together to defeat winners.

An endless cycle of winners and losers.

O, to exist in the natural state!

Let us not accomplish anything at all. Why should we when we can ravage the cupboard?

We will wear our balls hanging out and the women folk gather fruits and nuts; and, we will hunt within our domains.

Part I. "It’s Just Business" (Update 1)

How does a businessperson* (often a salesperson in this capacity) “make” money? In the simplest sense, s/he buys or finances or otherwise brings goods and services (that somebody/-ies designed/engineered/whathaveyou and produced or otherwise will either provide or facilitate – sometimes his or her own goods or services) to market where s/he peddles them to the consumer. To the extent that s/he profits off this ingenuity and productivity or other work s/he makes more or less money.

Of course, design/engineering/whathaveyou/production &c. cost money, and, materials have inherent cost. For the sake of argument, assume that the total cost of the product is its worth irrespective remuneration owed a businessperson (or businesspeople) in his or her (or their) managing/marketing/sales capacity. In a freemarket, to the extent that a businessperson can keep total production or service costs down, convince a consumer to pay a higher price above a product’s worth, and buy more of same s/he makes more money. That is, businesspeople (often paid bonuses/commissions/whathaveyou) are incentivized to devise techniques to sell products and services at increasingly high profit margins above their worth and to do so en masse whenever possible.

By nature, this system cannot make anybody rich if everybody does it so the rules are such that it is very difficult (generally impossible for most people) to pull off. (If, for example, few can understand codified techniques and fewer still can afford the training and fewer still will be able to do both and fewer still will be able to apply the training skillfully, we’ve already narrowed down the population of potential businesspeople a great deal; and, in this way, everybody cannot do it). Nor can it work if people are given to know that the worth of the products that some businessperson is peddling is less than the price that they are being asked to pay.

‘Transparency’ is, thus, the enemy of the businessperson, who is incentivized to misrepresent actual product worth and obfuscate his or her own share in the profits (and that of his or her employer where applicable). If s/he can swindle one percent (or two or even five percent) on a million cheap units at one (or two or even a dozen) times a year then swindling becomes so extremely advantageous that s/he lives like a god.

Language becomes a weapon! Jargon, jargon as far as the eye can see. “First-in, last-out” (sometimes, FILO) accounting, for example, what’s that? Imagine that you have a hundred identical widgets. The first one that you bought only cost you five dollars and the last one that you bought cost you one hundred dollars. Further, for the sake of simplicity, suppose that the cost of each successive widget is always (over some finite period) more than the last. You sell a widget. FILO allows you to claim that though you’ve got a hundred identical widgets in your stock that range in cost from five dollars to one hundred dollars, you kept the cheap widget and sold the most expensive one for a relatively small profit or even a loss. What a concept!

What’s a company’s profit margin? How many widgets at what profit margin does a company sell in a given period? How much does it make? What does it own? What does it owe? What’s it worth? What are you really getting when you buy a share of stock in some company? Financial widgets, shares of stock, for example, take the cake as far as widgets go.

A quick look at the “Financials” section of a stock listing from a free website like Google reveals a list of “Total Revenue”, “Gross Profit”, “Operating Income”, and “Net Income”; the “Balance Sheet” section lists “Total Current Assets”, “Total Assets”, “Total Current Liabilities”, “Total Liabilities”, and “Total Equity”; the “Cash Flow” section lists “Net Income/Starting Line”, “Cash from Operating Activities”, “Cash from Investing Activities”, “Cash from Financing Activities”, and “Net Change in Cash”. Have you got any idea what that means? Probably. But do you really know – to a certainty? Do you, for example, know how they account? Know how they report? Even the P/E varies from site to site.

Delving into a business report reveals a seemingly limitless array of terms each denoting a specific concept and probably connoting another (that even educated businesspeople and financial experts cannot be expected to fully understand) strung together in a sort of word soup. Delving into the fine print on a so-called “financial product” is somewhat less revealing. Are the terms useful? When people who know what they mean talk to each other and interact, sure; to everybody else, they’re worse than useless – not merely incomprehensible but misleading when incorrect meanings are inferred from context clues – misunderstandings that few people have energy, time, intellectual capacity and resources to clear up.

Jargon makes it impossible for most people to understand what a widget is actually worth. And, it is generally impossible to uncover what a businessperson is actually “making”. This is by design – even when the intent of the information provider may be to provide good intel. A small few will have a pretty good idea. But why wouldn’t they play it close to the vest? They’re out to make money – especially if they’ve put the time and energy into understanding it all. And, everybody can’t make money because, all else being equal, if everybody made money then there’d be smaller shares for the few, and, they could not live like gods.

Businesspeople know that they thrive at the expense of the many – that somebody actually starves so that they might live in greater luxury. And, that’s why they give meaningless, obtuse and arcane answers to even simple questions: they wield deceit to their advantage at others’ expense. Even otherwise respectable men and women who drive innovation and get it to the marketplace, get rich organizing a salesforce (or otherwise act as such) in order to swindle more money out of consumers’ pockets than “their” goods and services are worth and to persuade “willing” investors to capitalize them.

But, when a businessperson can control the laborforce, too, profit climbs even higher. So, the same logic undergirds many hiring processes and pay packages. The savvy businessman or -woman attempts to hire people at some price below their worth, and so forth, in order to maximize his or her own profits. They despise the unions for this reason.

Academic institutions (businesses themselves, just ask the head coach of a good college football team) furnish a particularly elegant and relatively uniform example with which the author is intimately familiar. Colleges and universities generally offer new hires just a little less than somebody who has already worked at same for some short time, like a year. H.R. people either tell the candidate that they will make some salary toward the bottom of a range because they’re new (inexperienced in some way or an unproven commodity) or they leave it to the candidate to infer. Then, when the time arrives for a raise, it turns out that the institutions give only cost-of-living increases. In other words, new hires don’t make less because they’re ‘junior’ but because they haven’t yet received cost-of-living increases. That is, by their logic and practice, a new hire should get what the oldest hire at the same tier is being paid because the old hire is not getting a cent for performance or experience – just cost-of-living.

Savvy businesspeople get it at both ends: charging exorbitant fees (see the escalating cost of tuition for example) and ‘keeping costs down’. This is the freemarket. “It’s just business.”

Is it too much to expect that businesspeople should understand why a civilized society must curtail their prowess? We don’t let physically superior people run rough shod over their weaker cousins. We don’t let large men, for example, beat smaller women or take from them what they want. We make them conform to the requirements of a civil society. (But we let shrewd crafty people give weaker people the business.) We must curtail even the aptitude of all people who would run rough shod over our civil society and we know this.

For some time businesspeople have either shrugged or otherwise kept our laws off their bodies by convincing people that capitalism is equal to democracy, that patriotism is equal to rabid individualism. But, we know that capitalism and democracy are not part in parcel. And, patriotism is antithetical to rabid individualism. Patriotism is knowing and doing (and, to some extent, feeling) what’s best for your country, your state, your community, your home – because “charity begins at home;” n’est-ce pas?

So, what is the businessperson worth? What’s s/he earned? Now may be one of those rare opportunities when you get to ask and be heard to answer. Let me suggest that we start by asking what we’re worth – what are you worth? – because what you pay him or her will bear directly on the value of what you earn.

Would you pay a businessperson a million dollar salary/”pay package”/whathaveyou – how’s about ten million dollars – or a hundred million dollars – when your make twenty-five or fifty or a hundred thousand? If s/he had to come to you for it, would you authorize it? The answer is probably, “No.”

Even when we assume “freewill” – when we say, “Biology, Chemistry and Physics are crap” – when we say stupid things like “anybody can achieve the American dream” (while we know full-well that many just don’t have the intellectual wherewithal to succeed) – even when we allow that all “men” are “created” equal to mean that everybody is just as capable as everybody else, how much remuneration does a salesperson, a marketer, a swindler deserve? What should we incentivize? Do we want the ‘best and the brightest’ people to go into business?

It’s not just business. It never was.


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*Definitions

Business (n.): (1) “widgets for money;” an exchange of widgets (final products) and other services accompanied by terms and conditions that adequately (if incomprehensibly) describe same (such as they are) for money (an abstract representation of work – buffer between work and remuneration) (as in, We do business on four continents); (2) organization of the production or provision of same widgets and services (as in, She manages a small business, and, He generates a lot of business for the company); (3) organization of the production or provision of same widgets or services for the purpose of (1, above) (as in, That’s no way to run a business); (4) the hierarchy within which widgets and services are made or otherwise provided and sold (as in, That’s the business); (5) a beating (as in, I gave him the business.)


Businessperson (n.): (1) somebody who does, generates or conducts (runs) exchanges of widgets and other services accompanied by terms and conditions that adequately describe same for money; (2) a facilitator of same (e.g., a regulator or policy maker); (3) a gangster (as in, I’m a businessman).

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