Capitalism, Shmapitalism

Taxation

2010-02-18T06:40:00.002-06:00

I know no one reads this blog, but I wasn't sure where else to write these thoughts. It's in my head and I guess I need to put it in words to sort out the thoughts properly.

So my opinion about fiscal conservatives is that they are supposed to believe in lower tax rates and less spending by the government. BUT (and this doesn't seem to be a very popular belief in the Republican or ESPECIALLY the Democrat parties) another belief I've heard many times and have tended to believe is this: If you lower tax rates, tax revenues will go up.

On the face of it that sounds silly and impossible, but I'm going to go through examples of why I think this could actually be true. But I don't know for sure. Does anyone?

But first, I was thinking about government spending. As the population of the US has grown (explosively), government spending has followed. Obviously more management has become necessary. And I could be wrong here (this is all just a rough theory) but it seems that spending per citizen keeps going up. Let's think about how other companies work. As a company grows, they buy more and sell more. Same with the government; they provide more goods and services and therefore must buy more. As a company grows, it becomes more efficient. True, more people doing more jobs means there can be more waste (time, etc), but the growth in efficiency outpaces that waste, otherwise a small company could make more money than a large company and no company would ever grow to be large. So theoretically, for every person a company hires, their profits go up. Part of that is because the more they sell, the more they need to buy. The more they need to buy, the cheaper they can buy things. Buying in bulk is cheaper. Quantity discounts rule in every sector of the marketplace. Even mine. If I could buy an entire shipping container full of coffee (250 bags = 38,000 pounds), I would get a substantial discount. Getting insurance for their people is cheaper in mass. Everything is cheaper the more you buy. So a larger company is able to operate, generally, more efficiently than a small one. In other words, they can do more with less (per). The government should work the same way. The larger the population becomes, the more buying power we have and the less it should cost each of us to operate efficiently. Since they're not a profit-oriented business, that would just mean they could reduce their income to match the reduction in expenditures, thus they would need less tax money from each of us to operate. Obviously that can't be an infinite model unless the fraction by which there is a percentage decrease lessens as the population grows. Which means it's possible there is virtually a rock-bottom price per citizen that is able to be achieved.

That's one theory.

Now, back to taxation. Here's how I think tax revenues could go up if tax rates went down. People generally spend all their money. If you let them keep more of the money they earn, they'll probably have incentive to work slightly harder (more return per hour= at the end of the day when you're tired and it's not worth it any more, a few more bucks might make it worth another hour's work). Workers may make more and spend more. Also, as things get cheaper you tend to buy more of them. For instance, if I'm buying tshirts to sell at DS, I get a price break at a dozen and 96. So I buy in those quantities. Also with stickers. Order 1000 and get one price; order 2000 and get them substantially cheaper. I order more. This is why at the grocery store they never say $1 off, they always say 2 for $2 cheaper. They want to make it a package deal. Buy more and save! Hell, this is the whole reason Sams Club exists.

My point is, it seems that people will spend the money they have and if things cost less, they just might buy more. If not more of what they already use, more stuff they haven't yet bought or don't usually buy. So if that savings came in the form of reduced taxes (sales tax especially), it seems that people might buy more stuff and the dollars they saved from the government would get spent and taxed anyway. And all those dollars that didn't go to the government would get passed around a lot more if more of those dollars stayed in the economy and less went to big brother. So if taxes suddenly went down on coffee, and it was slightly cheaper, you might come 6 days per week instead of 5. The increased income I received would go to (well, after hiring more employees to deal with increased traffic) (I think I just solved the jobs crisis) more steak, more whiskey, etc. So Grand Vin and Harvard Meat Market would get more of my money. And since the taxes there were less, I'd probably guy even more meat and whiskey. And they would make more money and with those profits they would...

You get the point.

Lower taxes seem to lead to an invigorated economy. Imagine what NO taxes would do.

The conclusion is that every time money changes hands, the government wants a cut. If the money changed hands more often or in greater quantities, the government would get a smaller percentage of more activity. Theoretically that would mean higher overall tax revenues because of economy stimulation. So I say they're doing it backward. Instead of the government body spending more money, they need to get all of our bodies out spending more money. That could happen by reducing the cost of spending money.

Furthermore, imagine those two things happening in tandem. Government efficiency creates a need for less tax revenues and less taxation leads to greater tax revenues. Maybe that's why they keep the tax levels where they are. It's too confusing trying to figure out how to spend less, charge less, and get more and then what do you do with the profits when you're a government? Reduce debt? Ridiculous.

Mirrors

2010-01-11T10:25:00.003-06:00

A friend posted this quote today:

"Under capitalism, man exploits man. Under communism, it's just the opposite." --John Kenneth Galbraith (1908- 2006).

Capitalism vs Ethics

2009-08-04T21:11:00.002-05:00

Audra and I were having a back-and-forth email exchange today about some things that Chip over at Topeca is doing. I feel that he is disrespecting me, and I don't like it. So I wanted to send him a note to let him know. I (wisely) consulted Audra after my second re-write and ultimately she re-wrote it to say what it should say (for the most part). She left out the part about me wanting to... oh, never mind, I should probably leave it out here too.

Anyway, something struck me about this exchange and made me think about CAPITALISM again. Audra kept bringing up "capitalism" during the discussion, but I wasn't talking about capitalism. I was talking about being neighborly, about respect, about honesty. About being a slime-ball. And Audra kept mentioning capitalism. As I thought about this, I realized that I think of capitalism in a different light than she does.

I operate in a capitalistic society (for now). That's the way our economy works. And it influences our lives in many ways. BUT my morals, ethics, values, and decisions aren't based on the economy. This is a totally separate system for me. I operate my business in a capitalistic way, but the greater, dominant code that tells me how to make decisions is an ethical, societal, quality-driven system. I can't make decisions in my business that will allow me to make more money without consulting the more important code that tells me whether it is legal, ethical, moral, will improve our quality, and is good for my employees, customers, suppliers, and of course my family and friends.

I guess some people reverse these things. Or segment them. Maybe when they're attending church functions, they abide by the rules set by the church. When they're operating their business, they abide by the rule of the almighty dollar. When they are with family, maybe they have "family values." I don't know. My question would be, what code dominates their life? I think there must be a set of rules that each of us decides is most important. So when the rubber hits the road, those are the rules we stick to. The dollar rules the prostitute and (al)most (all) politicians.

I think this is where capitalism gets a bum rap. When people operate within an orderly society and then use that order to dictate their lives, I think malevolence can come of it. Capitalism (in my opinion) wasn't meant to rule our decisions. And maybe this is what Paul meant when he wrote "the love of money is the root of all evil." (1 Timothy 6:10)

This might be a bad analogy, but it reminds me of a car. Cars can be good. They can take us where we want to go, rather quickly and efficiently, and we can carry many things without work. But you can also use it as a getaway car after a bank robbery. Or you can run someone down in cold blood. Or maybe you could use it irresponsibly by getting shit-faced and driving and then running over two cyclists. It's not the car's fault.

Neither is it capitalism's.

At least that's my opinion.

At least he did something right

2009-03-17T09:45:00.002-05:00

A guy walked up to the counter today with a buddy, who bought him a cup of coffee.

Isaiah said, "You still job hunting?"

The guy said, "No, I started my own company."

I said, "Did Obama help you out with some money for that?"

He said, "Yeah, I'm drawing unemployment plus I got a $25 raise...

At least he did something right."

Spreading the Wealth

2009-02-20T11:11:00.010-06:00

A friend forwarded this link to me today. It's a brief excerpt from a 1979 discussion between Phil Donahue and Milton Friedman about capitalism vs. other systems. To sum up, Friedman argues (effectively, to me) that capitalism most closely resembles human nature and encourages innovation. Yes, it's greedy, and it rewards greed, but that's how we are, as humans. We are collectively acting in our separate self interests. Let's not fight it: let's use a system that rewards that natural instinct. After all, the only system worse than this one is every other one.

Generally, I agree with Friedman. However, what we as a society seem to be missing is that it is in our own long-term self interests not to be so greedy, not to push the system as far as it will allow, not to take advantage of every opportunity when it is disadvantageous to someone else, because the collective failure of the system is bad for our self-interests. The mortgage crisis is a perfect example of that: too many people acting greedily, without regard to harm to others, and eventually the system collapses from being pulled in too many opposing directions. Then we all suffer. And then, suddenly, we collectively whine and moan and demand for someone (i.e., the government) to do something about it. And the government responds. Like a parent to a naughty child.

Lots of folks get upset at the phrase "spreading the wealth." Folks don't want government sticking its nose in our finances and playing some modern-day version of Robin Hood. But we're screaming for that help now, as shut-downs, layoffs, loan-freezes, and other market-stopping events happen as a result of our collective poor decisions. We would have no need for oversight, for bailouts, for multi-billion-dollar stimulus packages were it not for our own irresponsibility. --If mortgage companies had thought about the long-term harm of bad loans with variable interest rates rather than the short-term benefit from selling those loans; if home buyers had stayed within their means; if appraisers had not continued re-upping the "value" of real estate; if any one type of player in that system had thought about what was good for everyone involved in those transactions. If we had been more responsible, we wouldn't be here, begging for help.

So, we can blame our representatives, our presidents, our governmental bodies for spending all of this money for the various rescue attempts; but they are only doing that which we've requested. We're the guy who went parasailing in a hurricane. Should we leave him stuck in the tree because of his stupidity? Or do we organize a rescue effort?

I don't really know the right answer to the question. My instinct is to let us get ourselves out of that tree, to learn something from the painful stupidity. But I'm not an economist, and I don't know if we can get ourselves out. Irrespective of the right way to get out of this mess, though, I think we should be sure to (to paraphrase the evil catch-phrase from the election) "spread the blame:" we wouldn't be talking about nationalized banking systems and bailouts if we had managed ourselves better.

On Darwin and Capitalism and Bailouts

2009-02-12T19:31:00.005-06:00

I heard this tonight on NPR Marketplace. It said much of what I've been considering lately about capitalism, bailouts, and whether there is room for compassion in capitalism (or, if so, in what way there is room).

Kai Ryssdal: Today is Charles Darwin's 200th birthday. He is, of course, the English scientist who came up with the theory of evolution. Over the years, that theory's been applied to all sorts of fields beyond just science and biology. If ever there was a place the phrase "survival of the fittest" applies you'd think it'd be Wall Street. But commentator Natasha Loder says recent events show us that selection in business is far from natural.

Natasha Loder: When the economy is strong it is easy to kid ourselves that the market is Darwinian. In other words, that the least fit companies go out of business leaving only the strongest. But in times like these, it is much easier to see why this isn't how our world works.

If nature were to run its course in markets right now we'd see a mass extinction. But because many businesses serve vital social functions, we are not letting this happen. We need the banks to survive, so we are bailing them out. Ditto Fannie Mae and Freddie Mac, or AIG.

Artificial selection is what humans do. We regulate everything from how much capital banks must have, to how companies treat their employees. Sure, there is some natural selection going on out there--Microsoft killed Netscape using its power as the dominant breeder. And of course there are more companies out there than can survive. But the big companies with political leverage are currently getting the bailouts. Is this really the invisible hand at work?

Markets are more likely unruly gardens than the wild forest full of nature red in tooth and claw. And we are always trimming, weeding and fertilizing this garden so it grows the way it suits us. It's just the same inside companies. What goes on is artificial, more like domestication of cattle than anything natural. Companies decide what kind of employees they want, whether they are selecting for ruthlessness or brilliance. If you want to change a company, you buy a stud CEO, cross-breed him with all the suitable specimens on staff, and send the rest off to slaughter.

It might sound brutal, but that doesn't make it Darwinian. Darwinian is having bank bosses fight to the death for their bonuses armed only with letter openers. Listen. I'm not saying bad companies never get weeded out, just that what goes on is nothing like natural selection. Should we let more companies fail? Darwin might think so. In the long term, propping up companies has got to be bad for efficiency. But nobody is really looking at the long term right now.

--Natasha Loder is the science and technology correspondent for The Economist magazine.

Bail out?

2009-01-29T09:50:00.002-06:00

I love the term "Bail Out."

Have you ever been in a boat that you had to bail out? I have. You have to bail it out because it's taking on water. Because it either has a hole in it or the boat has too much weight in it to float.

No matter how much you bail, the boat continues to take on water unless you fix the problem. And eventually the water will fill faster than you can bail and then the boat winds up on the bottom of the pond. But that's ok because it makes good cover for the fish and therefore a good place to throw in your line.

I don't know about you, but I'm pissed that our government continues to give money to failing companies. Our economy is set up in such a way that when one company fails, other companies come in to take advantage of the opportunity in the market, if there is one. By supporting failing companies we are weakening our economy. A better idea would be to cut our taxes. Then WE would spend money at companies that we want- ones that are valuable to us. And the companies that should survive, would survive.

I'm pissed enough that I actually went online and tried to email the Congressmen from Oklahoma. I know, I know... it won't do any good because they don't give a shit what I think. The process of trying to email my representatives pissed me off even more. I found out that these Congressmen have insulated themselves from us even more by not accepting emails. They all have webmail forms to fill out on their websites. I went to each site and filled out every blank, and even then, Tom Cole, Frank Lucas, and Mary Fallin wouldn't let me email them my thoughts. My zip code wasn't right (I'm not in their district), so they don't want to hear from me.

Anyway, in my opinion we have problems. Our government is out of control. You should try to contact them. Here you go:

http://coburn.senate.gov/public/index.cfm?FuseAction=ContactSenatorCoburn.Home

http://www.house.gov/boren/emailsignup.shtml

https://forms.house.gov/lucas/contact-form.shtml

http://fallin.house.gov/send_email_zip_authentication.shtml

http://inhofe.senate.gov/public/index.cfm?FuseAction=Contact.ContactForm

http://www.cole.house.gov/contact-tom.html

http://sullivan.house.gov/zipauth.html

To govern or not to govern

2008-11-03T13:24:00.003-06:00

With the election tomorrow, I was thinking about the differences in people's mind-sets. A lot of people seem to be staunchly one way or the other. I'm not sure how many of us have valid (or validatable) reasons, but we seem to have opinions that steer toward one party or the other; one political philosophy or the other.

Correct me if I'm wrong, but it seems like there are two general groupings - and I know there are the in-between or outside the groups people. But generally, it seems like people either think:

- government is the problem

- government is the solution

And with that basis, we either want more government influence in our lives or less.

Just curious which side you guys fall on and why...

Anyone?

Capitalism and Coffee

2008-05-14T12:42:00.002-05:00

Interesting discussion on capitalism as it pertains to the coffee market over at Brian's site. So far, it looks like a lot of the issues we've been discussing here will be debated with real-life examples.

doubleshotcoffee

Greed.

2008-04-07T16:47:00.009-05:00

In the last couple of weeks, I have heard from two friends who have encountered the opposite of the compassionate capitalism we are exploring in this blog. Here is one of their stories.

This friend lives in DC and was looking to buy a small condo (which takes a small fortune in that market). After reaching an agreement on price (what one might think to be the main sticking point in a negotiation), he ran into a roadblock with some of the terms of the purchase contract. The seller--a corporation that had built these new-construction units--insisted upon a term in which, should the buyer die before the closing date, the sale would be required to continue through the estate of the deceased buyer. In essence, the seller was going to force the sale upon the grieving family of a deceased son or brother or husband if death should happen before closing. The burden upon the corporation simply to put the unit back up for sale would be small. The emotional and financial burden upon the grieving family of the buyer would be enormous.

I cannot fathom the selfishness and greediness that would have prompted a party to put this clause into a contract in the first place. I have even less understanding why a party would continue to insist upon enforcement of such a clause if the unfortunate death were to occur. In my friend's case, it would have saddled his widowed mother with the emotional and financial burden of traveling to DC from Arkansas and, in addition to handling whatever probate issues he might have had, find some way to continue with this significant purchase (certainly in Arkansas or Tulsa property terms) and/or try to work out some kind of a sale.

No doubt many people enter into such agreements because they feel it is the only way to obtain that which they seek--a house, a loan, a business proposition--and many don't consider the effect of such clauses, which is what the corporation counts on. Luckily for my friend in the above-scenario, he, being an attorney and well-versed in our profession to imagine the worst possible scenario happening, walked away from the deal. He didn't have to have the condo, though he would have liked to own it.

In many others' cases, though, the option of walking away may not be there, nor do they have the bargaining power to negotiate a clause out of the agreement because of the financial disparity of power. One would think that such a time might be the perfect opportunity to be more fair; I think most see it, however, as simply one more business opportunity.

It is one thing to negotiate fairly and even-handedly to a deal's resolution, and to hold a party to that deal. It is quite another to negotiate a deal to take advantage of another's weakened position simply for financial gain, or, alternatively, to hold a party to an unfair position when one has no need for the term for which one has bargained and it is clearly a term that is a hardship on the other party.

And it remains my opinion that exercising such greed is harmful not only to the unfortunate party to the deal. In the condo scenario, it would have financially ruined possibly three families--my friend's estate, his mother, and his sister--and that financial burden would have trickled into other financial obligations, and so forth. In other circumstances, exercising continued greed can mean the difference between an employee bonus in a small corporation and barely staying afloat. It doesn't just affect you.

Another commentator on responsibility in the market

2008-03-25T20:40:00.008-05:00

I heard this today while in the car. It seems to me to pull together a lot of what we've been discussing about the repercussions of irresponsibility in capitalism, as it pertains particularly to the mortgage crisis.

NPR Commentary Transcript

Calling all thoughtful citizens

2008-03-24T09:50:00.004-05:00

Sometimes it takes me a while to figure out the point of things and to express it clearly. I knew that the biopic on John Adams had struck something in me. I tried at the time to figure out what it was. Poorly. I think I now have it figured out.

What amazes me about it all is that it was such a small number of young idealists who pushed through seemingly insurmountable obstacles and created a republic and a free market. It took hope, belief, courage, and teamwork. And it changed the course of world history.

What is that saying I see so often by Margaret Mead? [pause while I look it up]. "Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has."

What we need now, in my humble opinion, is a small group of thoughtful citizens. Compassionate with each other and with those around us. Compassionate in our capitalism. I don't know that it will create a world revolution, but maybe it will help just one person. Or two people. Or a handful. Or a city. Maybe it will catch on.

It is also my opinion that the self-governance for which people like John Adams and Thomas Jefferson fought cannot sustain itself without self-discipline and attention to the high ideals that formed the basis for it. Otherwise, we give the government the justification to intervene to protect the many from the tyranny and overstepping of a few. Which, in turn, gives the government the opportunity to overstep. It is an endless cycle of selfish opportunism. The only way to stop that cycle is to behave in the opposite manner: to be responsible for ourselves and responsible toward others.

That's this one citizen's opinion.

It could have turned out differently...

2008-03-16T20:09:00.009-05:00

This entry isn't really as much about capitalism, per se, as it is about the freedom part of the free market.

I've been watching the historical rendering of David McCullough's John Adams. I just watched the portion addressing the Boston Tea Party and the restraints placed upon Massachusetts after the revolt, including removing the independent governance of Massachusetts, removing the enforcement authority of the Massachusetts courts, imposing a quasi-martial law, and the economic strangling imposed when the Crown stopped all exports and imports from Massachusetts not approved by the Crown.

It's not all pretty or romantic. The frustrations of the people, as throughout history, resulted in barbaric acts--tar and feathering, public beatings, inappropriate vilification, and misplaced heroes. And despite the high-mindedness of a few individuals, they couldn't bring themselves to abolish slavery at that time. It wasn't perfect, by any means.

What strikes me, though, is how it all could have turned out so differently. It was only a small group of young idealists who met for the Congress, including John Adams. They were young and had only known governance under the monarchy. Jefferson was 33 when he wrote the Declaration of Independence. John Adams was a lawyer and worked his own farm (without slaves, incidentally) while trying to care for his wife and 4 children. They still had hope for peace under and loyalty to the Crown. Adams even had been asked to be a representative for the British. Adams became involved in the Congress only when the Crown overstepped and began strangling Massachusetts, economically and forcefully. And they were all labeled treasonous and subject to hanging for their rebellion against the King.

It could all have turned out so differently. The irrational reaction of anger could have driven the new government into a very different set of governing documents, or the fear of something different could have postponed action until it was too late. But these young men (and, in Adams' case, his wife Abigail) fought against the tyranny and followed integrity in their governing responses. It was a delicate balance.

I suppose this is relevant to this blog because it was the economic strangling by the Crown more than any dictatorship-like brutality or slavery that caused our country and its principles to come into being. --The right to earn a living and care for our families and have the dignity of self-governance. It was the overstepping and greed of the monarchy that sparked the revolt. And it was that overstepping that caused the common, government-less men and women to fight back together, just for the right to care for themselves.

It humbles me to read the writings of these men (and of Abigail), the integrity and courage of their responses in government and in war. They could have quietly stood by, but they didn't. They sacrificed their comfortable positions with the monarchy and their families' safeties (Adams' family was 5 miles from Boston and on the front lines), and they did so with level-headedness. They were so young--many of them younger than I--and yet they had wisdom I'm not sure I have.

It could all have turned out so differently. As we sit in our McMansions and go through our drive-thrus and buy $300 dollar jeans, we would do well to remember that and to remember that these people were fighting for the right to purchase sugar and flour and other basic staples for the winter cold. We would do well to sacrifice some of our comfort and our own greed in memory of that.

Economic Darwinism

2008-03-10T18:37:00.001-05:00

I came across this article today. I am still digesting it, but I thought others might be interested.

Economic Darwinism

Personal Responsibility

2008-01-29T13:17:00.000-06:00

There's a lot going on here. This is an abysmal topic.

So let me say one thing and then we'll move on for now. If the "system" (which is really not an object at all, rather a name we put on the way we humans barter our time) is not a moral system, whether it be immoral or amoral or anything else, I see a problem. I've voiced this to Jason and Audra already, but thought I'd drop it here as well.

I was listening to NPR yesterday. They were talking about whether our morals are inborn or taught (nature vs nurture). A caller said if most of us are ruled by morals, there must be people on the earth who are amoral and maybe we can study their genetics to find out what is different- and maybe what causes a person to have morals.

The scientist on the show said that was an interesting question and that there are people on the planet who are amoral. They have no bias as to whether an action is "right" or "wrong." They are psychopaths. Their decisions are made based on something other than morals, thus they are more likely to take the path of least resistance or the most personally profitable route. Thereby murdering, raping, bilking people out of money, or whatever else they choose.

And that's the problem I see with capitalism. It's "market forces" push people to do things that are immoral, because the "system" doesn't make decisions based on right or wrong, rather supply and demand, profitability, risk-reward.

Now, I'm open to the possibility that there are other institutions that are in place (or should be) to steer us to modify our behavior despite the market forces and do what is right and just. Could religion be a guiding force? Laws? I assume so.

But the market is so big and diverse and clouded by marketing, it's hard to steer. And most people don't care.

Here's my question for the moment.

If we are to take personal responsibility, despite what the market tells us to do, how far do our responsibilities go? Am I responsible for treating my employees fairly? What about my creditors/suppliers? What about my customers? What about the farms that produce the coffees I roast? What about the people who pick the coffee cherries and cultivate the coffee trees on those farms?

What should I be accountable for?

Whither Thou Goest, Capitalism? Morality, Amorality, or Immorality?

2008-01-25T20:40:00.000-06:00

The blog authors got into a lively debate today about several things, culminating in the discussion of whether capitalism was amoral or immoral. Two of us (Jason and I) argued that it is amoral, as capitalism is a concept with no conscience, and that while individuals can act within that concept in a moral or immoral manner, the system itself cannot. Brian argued that yes, of course the system can be immoral, if it has immoral results.

I had difficulty with this concept because of my abstract thinking, but, as always, Brian makes me re-think my premises. Unable to stop the questions in my head from Brian's points after our discussion had ended, I did some research. While I was just SURE that the three of us were the first group on the planet ever to have this philosophical debate (I mean, our capitalist system just evolved on its own, right?), turns out other people are also having the same discussions, and several think the system is mostly moral. I'm not nearly as smart as I think I am (we're nearing deficit territory), which likely comes as no surprise t0 many of you, and which only makes me want to be more educated about it.

So, I turn to you good folks out there who may be reading this (including my co-authors) for any advice on reading materials about this issue. I'd like some book recommendations, both on the question of whether a system can be moral or immoral and on proposed answers to problems with capitalism, irrespective of the author's opinion on the question in this blog's title. Anyone?

(It's probably not my turn to post, guys, but I figured a call for assistance doesn't count. Forgiveness requested for jumping to the head of the line. And I'm loving the discussions and what they're making my brain do.)

It's just business.

2008-01-24T16:12:00.000-06:00

Growing up, I remember watching The Godfather and being confused about the famous refrain from Michael Corleone to his brother, Sonny: "It's not personal; it's strictly business." They were, of course, talking about killing a cop and paying off a newspaper to make it look like the cop was dishonest and mixed up in the drug racket. This, naturally, was accompanied by other similar "business" practices, like famously leaving the head of a prized racehorse in a dissenter's bed.

Apologies to all the guys out there who love The Godfather, but I didn't get it then. And I still don't get it. I have continued to hear that refrain repeated by others in the business world--It's just business--when talking about lesser evils: duping someone into paying more for a product or a piece of property than they think it is worth, or buying something for "a steal." Certainly nothing illegal about any of that. What we are made to understand by this refrain, though, is that what seems to me like taking advantage of another human being's poor circumstances or lack of education or lack of understanding is merely "business," and is an accepted and even lauded practice. We shouldn't let our emotions or our compassion stand in the way of a good business decision, no matter the cost to the other person on the other side of the table.

I have often questioned this practice to myself (and, of late, to Brian). The ethics of it don't work for me. It seems immoral, selfish, and downright mean. But this isn't a blog about morality (mostly); it's a blog about capitalism and the practices in it. I posit, however, that acting as though everything is "just business" without considering the effect to the person on the other side of the table is bad, not just because it lacks compassion, but because it IS harmful to persons other than the ones on the losing side of the deal. In other words, I posit that a compassion-less capitalism is harmful to capitalism.

As an example, take the recent subprime mortgage debacle, in which banks lent money at greater than 100% on the dollar to people who likely were never going to be able to pay it off. It was a get-rich scheme taking advantage of the real estate boom, low interest rates and, most importantly, many people who didn't understand the financial trap into which they were entering. It was lucrative for a while. But then interest rates went up, the economy went down, and now the largest lenders are having to request bail-outs, and massive foreclosures in some areas are driving real estate values into the toilet. And it hasn't only hurt the players in the deal--the mortgagor and mortgagee--it is now affecting the entire world market as fears about the United States credit situation cause massive sell-offs elsewhere.

And yet, meanwhile, CEOs in charge of the lending institutions at the heart of the problem exit with massives payoffs. (A much more reasoned and informed discussion of this can be found here: http://www.newsweek.com/id/98099).

It seems to me that this should be an obvious corollary of the butterfly effect: A lender takes advantage of a financially naive hourly wage-earner, and across the ocean, the Chinese market collapses.

But I'm not an economist, and I'm only recently a business-owner. I'm more of a humanist, hoping that there is a place for me in capitalist societies. Hoping that, just maybe, it's not just business.

I look forward to hearing what others think.

Thanks, Brian, for raising your hand.

I'm raising my hand

2008-01-24T15:56:00.001-06:00

I feel sort of like I did in college. Sitting in class with questions in my head, thoughts to share, things to say, but not really wanting to speak. I'm not sure, but I think it was a combination of things that kept me from it, and possibly the same things today: perceived apathy on behalf of my classmates, not wanting to draw attention to myself for fear the teacher would think I had some answers (and I might be wrong), and the knowledge that if I didn't know the answers to my questions, no one else in class did either (so someone else might ask or we'd all stand a chance of getting it wrong). I prefer to sit back and listen. I learn more by listening than I do by talking, usually.
But I guess this time, it's not enough to sit in the back of class and hope someone else asks the questions I have.
I have opinions, but are they right? Maybe a running dialogue will help sort out some of the opinions I have that may have holes in them.
So... let's talk about capitalism.