Category: Economic measurement

What Do I Stand For?

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure1 Comment

First and foremost, I believe that a human being can be a businessman and still maintain that precious humanity. That would be my first principle.

I hope it is obvious that flowing from this basic belief is the second, that is, there are many, many reasons to do things and money is not the only one or the most important one.

Third, I am a firm advocate of leadership. Change does not happen naturally or inevitably, and many, many times in history, we have gone backwards. A successful effort toward human values is often destroyed or turned back by the forces of greed and evil. When someone plays that song from Les Misérable, “Do you hear the people sing?,” I always disgusted. No, they’re not. They aren’t reaching for anything. It’s like one of those empty disney films where one more time they tell us to be all we can be but not really. The people like everybody throughout history get tied up and focused on the mundane, the useless, the copying and pretending that passes for life. If people change, for there to be social change, someone has to lead; someone has to point out that change is possible.

We do not live in an era of leadership.

Fourth, I believe in capitalism. I like the idea of people developing and selling goods. I like the idea of competition. But history is clear, it is a lot easier, extremely easier to make money by theft, by lies, by monopoly, by adulterating goods and by bribing or gaining favors from the government. This is so obvious to me, so clear a lesson of history repeated over and over again ad nauseum, that when someone says all we have to do is unleash the power of the market place by getting rid of law and regulation I still find myself shocked.

I have lived during the age of Milton Friedman. I believe that the free market and capitalism are tools to be used in building a healthy society not ends in themselves and certainly not a principle to held with religious fervor. I do not believe in the utopia of communism. I do not believe in a utopia based on race, or education, or religion. And I absolutely reject the idea that all decisions will be made in the best way possible economically if we only let it function without interference. The idea that you can build an ideal society on the basis of greed because it will channel decision making into the best choices to make the most capital or money or value which will produce the best outcomes is no more practical than pure libertarianism where if we have no laws everyone will behave.

I am told that what I believe is called limited capitalism. That’s probably about right. I want to buy eggs at a reasonable or good price but I don’t want to risk death for the low price. I am willing to suffer an additional cost for the government to regulate eggs. (I know I went a little long on number four but it’s important to explain that particular issue.)

Fifth, I believe in personal freedom and privacy. I think those two items are linked. I am very opposed to the surveillance society, and the lack of secrecy and security for our internet communications. I believe an e-mail should be just as legally protected as a letter sent in the mail.

Sixth, I am a patriot. I believe America is a special place because of its people and its history. Because of that, I believe this vibrant, energetic and amazing people deserve government policies to protect jobs and insure economic security. I reject, fundamentally and utterly, the charge that Americans are lazy, over paid and unwilling to accept responsibility. There is constant refrain in the media about lazy, overweight, non-saving, etc. etc, Americans. Any examination of these issues will lead to the discovery that they are far more complex than any simple moral failing.

Those are the ideas I want to put in my columns. If you think I do please tell me and if you think I don’t I need to know that even more.

James Pilant

Chinese Slaves, Robot Shareholders And Bankers Who Gamble With Taxpayer Money

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

A quote from Dylan Ratigan –

“For me, there was a radical break in September 2008. You couldn’t look at the system,–both its collapse and why it was collapsing– as anything that lived up to what I thought it should. It’s all predators. The economy is built around Chinese slaves, robot shareholders and bankers who gamble with taxpayer money. That doesn’t work.”

This quote is from an article on Alternet.

And this is the concluding quote from the article concerning his opinion on the continuing New Depression.

“There are no jobs, my man! Where are the jobs? People won’t stand for this forever.”

Internet Nirvana! Wow, Let’s All Go There!

On By southwerkIn business ethics, Capitalism, Economic measurement, Government Failure, Privatization1 Comment

Former Federal Communications Commission Chairman Michael Powell let loose his thoughts on net neutrality.

Mr. Powell’s statements quoted from the article –

“The Silicon Valley netroot community, a very powerful community, a very important constituency to this administration, is strongly, almost religiously committed to this issue in a very coordinated way and that provides a lot of power and impetus to keep this issue moving and to push the more extreme versions of net neutrality,” Powell said. He later joked the Internet was “nirvana.”

Mr. Powell is a member of the Chicago School.

When he was appointed to the FCC in the 1990’s, he is notorious for his response to a question about the “digital divide.”

“I think there is a Mercedes divide. I would like to have one, but I can’t afford one.”

In other words, internet access is a luxury that you pay for, not a right you need to function effectively as a citizen, a student or a worker.

He was for internet neutrality when it served his purposes. But now he has discovered the nearly infinite amount of money, can be made from scrapping it, he wants it gone.

Could he have some interest in the demist of the net neutrality? Well, he is on the board of Cisco. The company could make enormous sums from the end of net neutrality.

It does seem that Cisco is, well, a little ruthless in its competitive techniques.

Now, about that “nirvana” thing. The Chicago School is passionate about turning every conceivable resource into a private purchasable good. That includes water!

You see, in his mind, if you can divide it up and make money with it, that’s the logical and intelligent thing to do. If you want to maintain equal access you’re equivalent to a religious loon seeking “nirvana.”

Equal access is democratic and people centered. There is no such thing in his world. It’s like Santa Claus or the Easter Bunny as far as he is concerned.

And if you don’t see it his way, you’re just too stupid to grasp reality.

Now, the reality in his world is this, everything from politics to health care to love follows certain economic rules. These rules are dictated by nature. There is no dispute possible with their logic or power. The most effective way for a society to function is my maximizing choice, and if that choice is determined best by concentrations of economic power, than so be it.

See, the strange world we inhabit is not that world and therefore we are the mental peons he has so sadly to deal with day by day.

I feel sorry for him.

James Pilant

Hardship Withdrawals Reach Ten Year High

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

These kinds of withdrawals indicate sever financial distress. They are an absolute last resort in most households.

Quoting from the article – To be eligible for a 401(k) hardship withdrawal, individuals must demonstrate an immediate and heavy financial need, according to IRS regulations. Certain medical expenses; costs relating to the purchase of a primary home; tuition and education expenses; payments to prevent eviction or foreclosure on a primary home; burial or funeral expenses; and repair of damage to a primary home meet the IRS definition and are permitted by most 401(k) plans.

Forty five percent of those seeking a hardship withdrawal this year got one last year.

It’s another sign that his economy is not getting better. It’s getting worse.

During the last great depression, the government created jobs and increased spending, developing enormous projects like the Tennessee Valley Authority and the Hoover Dam.

America will not recover until there are jobs for every American who wants one.

James Pilant

Remember Challenger And The Ethical Failings That Killed The Crew

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure1 Comment

On January 28, 1986, the space shuttle Challenger disintegrated at 11:39AM. The crew cabin flew free of the conflagration and fell toward the earth. The initial forces on the crew were in the area of twelve to twenty times the force of gravity. These forces are not sufficient to cause death and unlikely to even cause injury. There are oxygen tanks available on the backs of the seats. These tanks are turned off during flight and have to be manually turned on. Three of four in the command section were turned on. Analysis of the amount of air used is within the bounds of what individuals would breathe during the fall to earth. The crew cabin fell to earth for two minutes and forty-five seconds. There is no clear conclusion to the question of whether or not these astronauts were conscious up to the point of impact. If they were conscious what they would have been thinking is also a matter upon which there is no clear conclusion. The crew cabin struck the ocean at two hundred and eight miles per hour. This is equivalent to over two hundred times the force of gravity.

January 27th, 1986: That evening there was a telecon meeting between Morton Thiokol, Marshal Space Flight Center and Kennedy Space Center.

The four engineers from Morton Thiokol recommended canceling the launch because the temperature at the pad was too low. They noted that previous launches at low temperatures had coincided with damage to the o-rings protecting the joints in the rockets from the contractions and movements of the launch and flight. It was pointed out that if an o-ring failed hot gas would be expelled from the resulting hole in the rocket.

NASA placed pressure on the company to launch. Morton Thiokol cleverly developed a new way to make decisions removing the engineers from the process and disregarding their report.

It should be emphasized that the men who made the decision to launch were not bad men. They were upstanding members of the community with wives and family. They had legitimate concerns about their jobs and futures. Morton Thiokol was pursuing a new contract with the government for a one billion dollar contract for missiles. NASA was trying to get a launch done while under considerable pressure from the White House to get the thing up on schedule.

It is of course also to be noted that while these upstanding members were under severe pressure to make a difficult decision, it was not quite as serious a situation as falling for two minutes and forty five seconds at two hundred and eight miles per hour into the surface of the ocean less than a day later.

No one who advocated that the Challenger be launched over the objections of the engineers lost their jobs, were demoted or punished.

Morton Thiokol was liable under its contract with NASA for a ten million dollar penalty in the event of such a failure but was also liable for all damages that resulted from such a failure. NASA in a brilliant move released them from liability for the damages if they would immediately pay the ten million dollar penalty. (Losses from the Challenger disaster are minimally two billion dollars.) However, upon later consideration concluded that Morton Thiokol should not pay the ten million immediately but should take it out of later profits. However, there is no indication that any such money has been paid.

Morton Thiokol won the missile contract they were seeking and also continued to build the rockets for the shuttle, although there were able to charge a higher price.

The CEO was later quoted, which he said was taken out of context, as saying that the Challenger disaster had cost the company less than ten cents per share of stock.

Roger M. Boisjoly and Allan J. McDonald, the engineers who was principally responsible for raising concerns about the launch and were willing to discuss what had happened in the discussions between Morton Thiokol and NASA were shunned by colleagues and demoted.

Let us review.

No one who sent these astronauts to their deaths were fired, demoted or otherwise punished.

The company that built the malfunctioning units and whose officers had sent the astronauts to their deaths were rewarded with further contracts and improved profits.

Those that warned of the danger were demoted and shunned by their colleagues.

Their warnings had no effect. They might very well have smiled, said the shuttle rockets were the epitome of engineering perfection, and asked to be assigned to a new and promising project.

So, let us place ourselves in the position of McDonald or Boisjoly. You can object to the launch and save no one. Even if you directly participate in the decision to launch giving every possible assurance of safety when you know nothing of the kind, you will not be punished.

Goodness, this is not like your usual example in ethics is it? In the classical decision making example in the standard textbooks, you have an ethical decision which if you make you will lose your job, your income and have your future seriously damaged.

This is a real one.

You no matter what your training or experience can give an opinion based on hard evidence to your company of imminent danger based on your product and not only do they not care, neither does the consumer. When death occurs it is you that is penalized even with full national news focus on the subject and a commission of inquiry asking you whether or not you have been retaliated against. Your superiors chew you out using expletives and when found out claim they never even raised their voices. But nothing will happen to them. You rocked the boat. The company knows what you do not. They will not be penalized. You were right but you were right in the wrong way. You’re just not a team player. You don’t have the right attitude. Killing, maiming, destroying the prospects and impairing the future of your nation are not serious problems. The worst moral failing you can have is not playing well with others.

The worst thing about this little piece of history is what it says about the standards of morals and ethics at the highest level of government, media and industry. The story held to was that this was an unfortunate accident. Most people still believe that.

http://www.onlineethics.org/CMS/profpractice/ppessays/thiokolshuttle.aspx

http://history.msfc.nasa.gov/book/chptnine.pdf

http://www.jstor.org/pss/4165304

Why Is Unethical Conduct In Business So Common?

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure2 Comments

This is a re-publish of an earlier essay. I think it is on point for our current situation.

There are several factors. The first was the advent of the baby boomers to power and authority replacing the Depression and the World War Two Generations. Probably the best date for this transfer would be 1976 when Jimmy Carter became President. He was the first President to not have served in the Second World War since Truman. The significance of this was huge. The previous generation had solid memories of the failures of financial sector and the long hard times that resulted. The difference between study and experience are dramatic. It’s even worse when it’s collective experience. The new generation had stories, movies and television to remind them of the pain of those years, but it didn’t carry the power of the emotions involved, the collective helplessness of more than fifteen years when everything that generation knew was in peril.
The second factor I point to is the advent of the Chicago School of Economics and the doctrines of Milton Friedman. I point in particular to Friedman’s 1970 article in the New York Times Magazine, The Social Responsibility of Business is to Increase its Profits. This is my favorite quote.
But the doctrine of “social responsibility” taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collectivist doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. That is why, in my book Capitalism and Freedom, I have called it a “fundamentally subversive doctrine” in a free society, and have said that in such a society, “there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
I want you to understand that it appears to me that included in “the doctrine of social responsibility” is duty, honor, religion and patriotism, to name a few. (I like to tell my ethics class that the no religion agrees with this doctrine that doesn’t practice human sacrifice.) Here we have a rejection of those values that constitute Western Civilization. From Wikipedia:
The concept of western culture is generally linked to the classical definition of the Western world. In this definition, Western culture is the set of literary, scientific, political, artistic and philosophical principles which set it apart from other civilizations. Much of this set of traditions and knowledge is collected in the Western canon.
These things that make us human, these things that convey the values – the principles, that are the result of thousands of years of human experience are swept away in a simple doctrine that justifies any action within “the rules of the game.”
I want to point out one more thing: notice that the principles of “within the rules of the game” and “open and free competition without deception or fraud” are in many ways contradictory. If you can make or influence the rules why should you compete? Now get a load of this: Friedman tells businessmen that they are free of any restraint, every limitation of conduct, but they are supposed to hold to the duty of engaging in open and free competition without deception or fraud: Do whatever is necessary to make a profit but be good boys and compete.
The third element is the gradually increasing wave of deregulation which begins in a small way in 1971 when the Nixon Administration recommends the rail and trucking industries be deregulated. By the time, Jimmy Carter is elected the doctrine has gained enormous strength and much wider application. The basic implication that government regulation damages business success hampered any attempt at new regulation no matter what happened. This attitude is critical to what happens next.
The fourth element can be dated roughly as beginning 1981. Hostile takeovers and corporate raiding become regular parts of the business news. The basic significance of this is that it is a war. A war fought between manufacturing and finance, with manufacturing losing at every turn. The secondary effects were only a little less worse. You could make money at it. Not little money like people made from developing new products and making things, big money. T. Boone Pickens, one of the major corporate raiders of the period is worth three billion dollars and is rated currently as the 117th richest man in the world. Now let us add in a related development, the financing of these takeovers. Drexel Burnham Lambert paid Michael Milken 550 million dollars a year during its heyday. What did Michael Milken do to merit this: he created high yield bonds, junk bonds. The era of “financial innovation” begins here. Continuing to the present day, more and more bizarre mathematical creations will be used for investment, financing and speculation.
Now, let’s combine them. Those Americans familiar with the pain of the results pass on the reins of power to a new generation. The Chicago School of Economics will provide the philosophical basis for discarding societal responsibility. The government reacts with deregulation which makes it exceptionally difficult to re-regulate industries. The financial industry begins destroying manufacturing in its search for profits.
All the elements are now in place for what has happened and continues to happen. The American population without previous experience of the fruits of financial speculation have no common idea of what should be done. The ethic of the business world is converted from a complex set of factors motivated by religion, philosophy, the myriad other factors that tie us to one another as a people to one of profit as the only value. The government accepts this philosophy and applies it, making deregulation and not regulating pretty much the official doctrine of the government. The financial industry begins destroying healthy companies making hundreds of millions of dollars for what might kindly be described as little effort. The government does not intervene to stop this, which is a clear demarcation line in history that the power of that part of American that makes things is eclipsed by the power of the deal makers, the part of American society that moves money.
Out of this history we grew a generation of Americans who knew with certainty (and unfortunately with accuracy) that going into the financial industry, taking risks, and pushing the boundaries of the rules could make one a multi-millionaire in short order. The most capable of the students at the great universities many of them Ivy League schools went into finance. Those individuals were supposed to be a wide variety of things especially the keepers of the flame, the torch that is passed from one generation to another, the moral standards, the courage, the willingness to sacrifice for their country and their fellow man so that all can prosper. It is difficult to maintain a system of morals when the rewards are so extreme. My understanding is that ivy leaguers can start at a Wall Street firm for as much as $350,000 in salary. And after that if you are willing to do “what it takes,” the path to being a mere millionaire is quick and easy. These people were supposed to be crusading attorneys, publishers, politicians, administrators – all those things that make societies function. There is an ancient precept that nations succeed based on the wisdom of the learned, the courage of their soldiers and the efforts of the workers. Our best and brightest don’t go there. They go to make money in a moral vacuum.
We are going to pay for this for a long time. When the basic doctrine, the ethos of a country becomes devoted to the acquisition of wealth with not even a tiny lip service to virtue you get unethical conduct on a broad front across the business world. Everything that has happened since then, has grown out of these events that I described. The Savings and Loan Etc. (I was going to list them but you know as well as I do what they are and I find it too depressing to make such a list just at the moment) are all explainable out of these elements.
Well, I wrote this in two hours. It’s a quick and dirty summary of what I think. A lot of it is just a portion of my thought and I will probably develop the elements over time.
I wouldn’t mind hearing what you think and you can be brutal. When I was in grad school, I thought that if some teacher marked on my papers, I would be terribly offended. A professor named Don Hoover literally marked out more than a third of what I wrote in a quite lengthy article with great big red pen strokes and I discovered to my astonishment that it didn’t bother me at all. I made the corrections and turned it back in. So, if you find the time it what must be a very busy schedule to comment I will be pleased.
James Pilant

Jen Lamoureux Writes In Support Of Sustainability

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics

Jen Lamoureux writes with approval of Philip Brookes’ argument about having values greater than money. She also elaborates on her economic and social ideas. It is quite provocative. You should read it. jp

So true! We cannot expect eternal economic growth. At some point, an economy will either stabilize (optimistically) or will decline. A growth of 4%-5% may not sound like much, but compounded over time, it is simply unsustainable. 4% is actually a very large sum of money when one is talking about an economy. One must also consider who the consumers are. One must either export goods and/or services, which means depleting the economy of another country by monopolizing their citizens as our own consumers, or one must continually find new ways to increase the money being spent within the economy of one’s own country. That, in turn, means finding ways to increase efficiency. Typically, increasing efficiency in this country means more deeply exploiting the work of the lower classes so that the higher echelons may earn more money. This causes the disparity between the upper classes and lower classes to widen. At some point, we must see that allowing a small portion of people to control the wealth and monopolize the consumer power in this country is not a sustainable model. At some point, we must realize that this sort of disparity causes social unrest and a dehumanization of those with less earning capability. And, at some point, members of the upper classes will have reached a critical mass in the amount of goods and services they are able to consume, which will lead to a decline in consumer spending, and thus penalization of the lower classes in the forms of pay-cuts and layoffs. I am not necessarily advocating for communism or even socialism; rather, I advocate for a model in which workers are paid a living wage by their employers and people are allowed a fair chance at creating pleasant lives for themselves. While it may be true that a labor force of unskilled workers is easily trainable and thus, replaceable, it is no less true that their labor is what creates the goods and services being sold and managed by those who are “skilled.” The idea of any company, good, or service is absolutely worthless if one does not have the labor capital necessary to change those goods and services from concept to reality. If we continue without acknowledging these very basic truths of labor and commerce, the societal effects will indeed be dire.

Look At This!

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

I found this on the web last night. It’s a video of American unemployment by county. The film runs month by month and in about a minute you see how unemployment developed in the U.S. over the last two years. It starts in January 2007 and runs until May of 2010. High employment counties have light colors. High unemployment counties are darker. You can watch the whole nation darken in a two year period, it’s very striking.

Is Greed (Or Avarice) A Deadly (Death Dealing!) Sin?

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics

Gary Bender, a friend of mine, has added his thoughts to a previous blog post of mine talking about telecommunications companies, law breaking and greed. He cites books I am unaware of and an author who I shall have to pay attention to. It is pleasure to present the thoughts of Gary Bender.

Oliver James, author of Affluenza: How to Be Successful and Stay Sane (2007) and The Selfish Capitalist (2008) ‘asserts that there is a correlation between the increasing nature of affluenza and the resulting increase in material inequality: the more unequal a society, the greater the unhappiness of its citizens’ and that ‘Selfish Capitalism is a particularly aggressive form of capitalism found predominantly in English speaking nations – the US, UK, Australia, Canada and New Zealand. James argues that in these countries, around 23% of the population has suffered from some form of mental illness such as depression or anxiety in the last 12 months compared to an average of 11.5% of German, Italian, French, Belgian, Spanish and Dutch people who, James argues, live under a system of social or unselfish capitalism.’ He has been criticized for including Japan, which has a high suicide rate, as an unselfish capitalist state.

Besides the points you make, James, on ethics, there is sound scientific evidence to show that avarice is, indeed, a deadly sin.

Personal Change Doesn’t Equal Social Change

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics3 Comments

Kendra Langdon Juskus writes this in the website, Evangelicals for Social Action. In an article called “The Danger of Small Steps,” she questions the notion that individual action by itself can produce meaningful change. In fact, she says that it gives a false feeling of doing something successful and significant whereas the larger problems go unaddressed.

The degradation of the environment and the degradation of business morality happen over long periods of time, thus, our perspective is limited. It gives individual action a veneer of success when the problems are long term and not easily understood by individuals.

There is a section I recommend where they discuss “shifting base syndrome.” This is when you measure progress based on your earlier perception not the actual baseline. In other words, you consider normal to be inside your experience when in fact normal is based before or outside your view of the situation.

Small, incremental personal changer is good but not good enough. The forces that confront us ,with their lack of care for the environment and their pervasive lack of moral judgment, are enormous. Those forces can damage society permanently whether we change our own lives or not.

I have no doubt in the wisdom and importance of personal change. But without a larger vision it is inadequate to defend us against moral vacuums and wrongdoing.

James Pilant