Killing the goose that laid the golden egg

Capitalism is described as "an economic and political system in which a country's trade and industry are controlled by private owners for profit."  That's it in a nutshell, and it's worked better and benefited more people than any other economic system the world has ever known.  But somewhere along the way our system of classic capitalism has been compromised, subverted, and dare I say even perverted.

My brother and I are the owners of a privately held corporation, meaning the two of us are the only stockholders.  On an almost daily basis we do things above and beyond what is required by any regulation because we feel it is the right way to do business.  This costs us a bit more to deliver our product, and reduces our profits somewhat, but we're still doing OK, and our clients say they appreciate our extra effort and attention.  We'll never get rich doing business this way because we're "leaving money on the table", but we sleep well at night.

Today's publicly held corporations can't afford to leave money on the table.  They must lie, cheat, and steal to squeeze every last penny from their customers.  If they don't, their thousands of stockholders will demand a change in executive leadership and/or dump their stock, possibly tanking the company.  If their product can be made the slightest bit cheaper, they'll do it.  Cutting corners has become a fine art.  Profits come first, always!

Consider this:  Pharmaceutical manufacturers employ tens of thousands of brilliant researchers who spend years developing and testing new drugs that improve our quality of life, and in many cases actually save lives.  They're amazing people doing incredible work.  God bless them!

One of their creations was "opiods", drugs that can help those with chronic pain.  This was a godsend for those hurting.  But according to the new rules of what I call "perverted capitalism", pharmaceutical company executives have no qualms at all about turning these miracle drugs into an addictive nightmare for millions (?) of people.  Opiod abuse has now become a national crisis.  Lives and families have been torn apart, all so the drug makers can maximize their profits.  Shame on them!

And, yes, they know exactly what they're doing.  They know they're producing many times more opioids every year than can safely be prescribed and used by actual patients.  Through their lobbyists they even pushed a bill through Congress last year that prohibited the Drug Enforcement Administration (the DEA) from investigating and interdicting massive opioid shipments to "suspicious" distributors.  Had the drug companies failed, the DEA would have put a huge dent in their profits, and to them their profits are more important than peoples lives.  That's just wrong!

Then we have corporate mergers that have the effect of reducing competition and inflating their bottom lines.  Remember when we had Exxon and Mobil and Chevron and Texaco?  Now we have Exxon/Mobil and Chevron/Texaco.  United and Continental merged to form the new United Airlines.  Delta and Northwest merged to form the new Delta Airlines.  American and US Air merged to form the new American Airlines.  Fares are up, and customer satisfaction is down, but airline profits are at record highs.  

Remember when Macy's, Neiman Marcus, Lord and Taylor, Saks Fifth Avenue, and many others were all independent companies?  Now they're all owned by giant retail conglomerates.  Walmart and Amazon have taken over their sectors, too.  Remember local hardware stores, mom and pop restaurants, community banks, and independent car dealerships?  There are relatively few still in business, left behind in the race to merge, "increase synergy", and maximize profits.

And do I even need to mention corporate subsidies, aka "corporate welfare"?  What the hell is that all about?  Did they think we wouldn't notice?

I've heard it said your "character" is defined by how you behave when no one is looking.  If that's so, then many of our players today have terrible character.

It's no longer about doing what's right, but only about what will make the most money and what they can get away with.  At many businesses today doing "right" will get you fired, that's how cold blooded we've become. We're being attacked from within, and we're losing.  Capitalism in 2017 is NOT your daddy's capitalism!

S

The knee bone's connected to the thigh bone, the thigh bone's connected to....

Yesterday, in the aftermath of a police shooting in Whittier, CA, the police chief said something that really stuck with me.  He said, "Police work has changed so much in just the past four years.  People today don't want to follow rules....people don't care for each other anymore."

There is so much going on in our society today that is interrelated.  The Whittier gunman had just been released from prison and was a known gang member.  Why do people join gangs?  I've heard it's because they want to belong....belong to a group, a family of sorts.  So where is their birth family?  Are they having to work multiple jobs to pay their bills and not have time to look after their kids?  Has dad (or mom) just disappeared?  Are the parent(s) trying to escape their own troubles by turning to drugs or alcohol?

Now let's connect some dots:  For many decades government statistics have proudly reported the increase in productivity for the last quarter or the last year.  This means the same number of people can now produce more with the help of new technology, or the same amount can be produced using less people.  What used to take 10 workers to do can now be done with robots being operated by just 2 workers.  So where did those 8 displaced workers go?  Unemployment statistics say they have jobs somewhere, but they're probably working for dramatically less than they were before.

To make up for the pay cut, and to be able to maintain the standard of living they were used to, many take on a second job.  Meanwhile they're being bombarded by TV, the internet, etc, urging them to buy even more stuff.  It's a viscous circle, everyone looking out for themselves, wanting more and more, while not even having time to love and care for their own kids.

Is our system of "capitalism on steroids" partially to blame for this decline in our values?  Investors, usually operating through their 401K-fueled mutual funds, and hedge fund managers, don't give a damn about the laid off workers.  They don't care about the product being produced by the companies they invest in, whether it's a quality product or not, whether rules have to be "bent" in order to squeeze out another $.50, or anything else.  All they want is maximum profits, no excuses.  If American workers can't come through for them, others somewhere else can.

What has happened to us?  Capitalism is a great system, fact, but somewhere we stopped working for the common good and started looking out only for #1.  One extreme wants others to give them something, while at the other end they yell "I've got mine, screw you!"

Rarely do we need much more stuff.  A coffee maker is a coffee maker.  If you can't see your 65" TV, you don't need a 75" TV....you need glasses!  There's no need to trade in your 3-year-old car with 40,000 miles for a new, shinier model.  We're being suckered by marketing.  We want our friends to look at us and think we're really "cool".  We've become narcissists to one degree or another.  "Look at me, look at me!"

Here's the final conundrum:  We can live very comfortably with less, giving us more time to care for our kids, hopefully keeping them out of gangs and off drugs.  But if we don't buy more and more stuff, more people will lose their jobs, and we begin the cycle all over again.  Productivity is good....to a point.  Then we must face the unintended consequence of being too productive for our own good.  That productivity sweet spot is elusive.

Problems are easy to identify.  Answers are hard to find.  *sigh*

S

"A fast nickel is better than a slow dime"

I recently saw a short 5-minute video presentation by Nick Hanauer, a mega-millionaire capitalist.  He had an interesting perspective that really got me to thinking.  You can see it here if you're interested.  His position is that the rich will benefit more in the long run if we raise taxes on them now and in effect subsidize the middle class.  Huh?


He disputes the idea that raising taxes on the rich will kill job creation.  He says entrepreneurs do create a few new jobs initially, but unless the middle class has enough disposable income to buy what the new companies are selling, the new businesses will stagnate or even fail.  Only when a company has more customers than it can comfortably serve will it expand and hire and thrive.  Why would a company hire new people unless they had enough customers to keep them busy?  The 1% can't buy enough to compensate for the millions of unemployed/underemployed who can't buy much of anything.  It's a simple numbers game.


Then the next day I read a news article that said the Big Three automakers are booming, running their factories at near 100% capacity, and are adding more shifts and hiring new people, just like Mr. Hanauer suggested they would.  I doubt the 1% are buying very many Chevys, Fords, or Chryslers.  (They're more the Mercedes / Lexus / BMW type.)  This is all due to middle class demand.


The middle class and only the middle class have the numbers to be able to consume in the quantities necessary to stimulate the economy and create jobs.  And when the companies they own thrive and become hugely profitable, the 1% will benefit handsomely.  Give up a little today (higher taxes) to get a lot more tomorrow (higher profits).  It's called "priming the pump."


It's just like the business advice my dad gave me decades ago:  "A fast nickel is better than a slow dime."  Think about it.


S


(For the record, I'm a moderate Independent, distrustful of both political parties.)

I want THEIR tax guy....

Several news sources reported over the weekend that the most valuable, most profitable company in the world, Apple, is a tax-paying lightweight.  Or to put it another way, Apple is a tax-avoiding heavyweight.  


Last year Apple had profits of $34.2B dollars, yet paid only $3.3B in taxes.  That's a rate of just 9.8%, which is 1/3 less than the average corporate tax paid by other Fortune 500 companies.  By comparison, Walmart paid a rate of over 24% in corporate income tax.


And it's all perfectly legal.  How'd they do it?  By claiming that most of their profits were made by Apple entities located in foreign, low-tax places such as Ireland, the Netherlands, and various post office boxes in the Caribbean.  US taxes are paid based on where "value is created".  If you were making cars or appliances or almost any other tangible product, the place where the factory is located would be where "value is created" and that's where taxes would be paid.  But with intangibles like patent royalties and intellectual property that can be pretty much anywhere they want it to be.  That's why 70% of Apple's profits are made *wink* outside the US.


I don't blame Apple or any other company who takes advantage of this gaping tax loophole.   I blame our congress who created it and does absolutely nothing to fix it.  But with a TRILLION dollar deficit why wouldn't they at least try, you ask? 

Simple....campaign contributions, aka legal bribes.  "Big Bidness" likes our tax system juuuuuust the way it is, thank you very much....subsidies, loopholes and all.  And they make lots of "contributions" to make sure it stays that way.  (And BTW...they're "legal" bribes only because those receiving the bribes are the same ones who get to define "legal".  Pretty sweet, huh?)

S

Does "fairness" take sides?

"If the minimum wage had kept pace with the rise in executive salaries since 1990, America's poorest paid workers would today be making more than $23 an hour."

I'm not suggesting the minimum wage should be $23 an hour.  If that were the case we'd never export anything and we'd be covered up with ridiculously cheap imports....which would mean maybe 2 guys would be making $23 an hour and the rest of us would be unemployed.  What I am suggesting is that executives make too much.

How do you maximize profits?  It's easy.  Make people work twice as hard for less pay.  Look around you....that's how business works today.  They cut staffing, increasing everyone else's workload, yet raises (if there are any) barely cover inflation.  Raises for everyone, that is, except the executives.  I don't see this as a liberal / conservative / socialist / capitalist issue.  To me it's just a matter of fairness.  Does "fairness" take sides?

Pendulums swing both ways, you know.   

S