The law of Unintended Consequences is something that I have been very concerned about, ever since I found out about it. I have seen it operate so many times, and in so many ways, that although it is an economic and social law (which are often highly inaccurate) I believe that it is a cornerstons of economic and social science, and very applicable to political science.
The law of unintended consequences, often cited but rarely defined, is that actions of people—and especially of government—always have effects that are unanticipated or unintended, in its outcomes of unexpected benefits, unexpected drawbacks, and perverse results. Economists and other social scientists have heeded its power for centuries; and for just as long, politicians and popular opinion have largely ignored it. Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of government legislation and regulation. This law is also a great contributor to the public policy aphorism “Every public policy problem has a simple solution – and it’s usually wrong.”
Unintended consequences can be grouped into three types:
- Unexpected benefit: A positive unexpected benefit (also referred to as luck, serendipity or a windfall).
- Unexpected drawback: An unexpected detriment occurring in addition to the desired effect of the policy (e.g., while irrigation schemes provide people with water for agriculture, they can increase waterborne diseases that have devastating health effects, such as schistosomiasis).
- Perverse result: A perverse effect contrary to what was originally intended (when an intended solution makes a problem worse). This is sometimes referred to as 'backfire'...
I would also add, upon thinking about the law of Unintended Consequences, that is very important to remember three things:
- That we know what we know,
- That we know what we don't know,
- That we don't know that we don't know.
It is that we don't know that we don't know that often is the killer in the Law of Unintended Consequences.
The percentages of these items are often staggering as follows:
When crafting any social, economic, or political policy you should always remember what Ben Franklin said - “Doubt a little of your own infallibility” when considering and reviewing the policy. A good introduction to this topic is The Concise Encyclopedia of Economics article on Unintended Consequences.
When concerning the economic impact of any product you must factor in the life cycle costs of the product. To only examine a few stages will lead you to the wrong conclusion. The Life Cycle stages of a product are:
The design stage can consume substantial resources in labor and materials as you create the product. Given that the creation of a product goes through cycles of successful and unsuccessful efforts, it consumes labor and material in each cycle. This builds up depending on how many cycles are needed to design a completed product.
The development stage has a significant impact on labor and materials. You need to obtain or contract for the raw materials need to produce the product. You may also have to sub-contract for the parts that go into the product. Factories for these parts have to be created or modified to produce the parts required, and an assembly line will need to be developed to create the finished product.
The production of the product requires warehousing of the materials or parts, and the operational cost of the factory or assembly line. This usually consumes a great deal of the economic impact of the product lifecycle.
The utilization of the product is the warehousing of the finished product, its distribution to the consumer, the stocking of spare parts and service centers, and the actual cost of using the product (especially in the energy costs).
The disposal of a no longer utilized product also cost in labor and material. Think of old cars, appliances, computers, batteries, buildings, houses, etc. etc. etc... They need to be transported and disposed of at the appropriate location. And if there are environmental impacts of doing this the disposal cost increases. A discontinued product can also have the impact of the discontinuance of a factory or assembly line. The costs of shutting down the factory or assembly line, and disposing of their contents, can and will impact the Life Cycle cost. And if there are environmental impacts of shutting down the factory or assembly line this disposal cost will increase.
A good business person will factor all these stages into the Life Cycle cost in determining the price of the product. Not only are there these Life Cycle costs, but a business person has to factor in the overhead of the administrating the business into the price. This overhead has a myriad of items that need to be accounted for (much too many items to outline in this observation). This is known as the Total Cost of Operation of a product.
So, when you look at a price of a product remember the Total Cost of Operation when you think that the price of an item is too expensive or outrageous. It usually isn’t. A business person wants to sell as many of the product as they can to turn a greater profit, and one of those ways to accomplish increased sales is to keep the price as low as possible. But they must turn a profit, or they may go out of business, or discontinue the product.
A Note on Energy
Energy makes the world go around. Everything that is done requires energy. Whether it be electrical, heat, chemical, or biological, all activities require energy. Most of our energy come from five main sources; oil, coal, hydroelectric, nuclear, and food and drink. Other sources of energy are solar, wind, geothermal, and others, but this accounts for only a small percentage of our energy needs. And the costs of producing the energy required to do something must also be accounted for. You often need to convert one form of energy into another to produce energy (i.e. electricity from heat), and raw materials are needed to start this conversion process. But the harvesting of these raw materials also requires energy, as well as having environmental impacts. The cost (and energy) of minimizing or cleaning-up environmental impacts must also be accounted for in the energy process. And the energy cycle goes around and around, and energy must be accounted for in all life-cycle costs.
The scientific laws of thermodynamics also inform us that converting one form of energy to another cannot be 100% efficient, some energy will be lost in this conversion. And all this production and utilization of energy cost money. This money must be accounted for in the price of all products and services.
Anybody can sue anybody for any reason it today’s society, and it seems that this is occurring more frequently in America. Who has not seen reports or advertisements of large settlements from lawsuits? Sometimes millions of dollars are awarded to individuals or classes of individuals by juries or judges.
The benefits of these lawsuits are that people (or peoples) who are injured are compensated for these injuries, and the guilty parties (and others who would engage in these injurious activities) are more careful in the future to not to be injurious. This is a benefit to society as it makes for a safer environment we live in.
But there are costs for these awards, and these costs must be understood. And most of these costs are unseen. The first cost is the increased burden on the judicial system and the fact that a large percentage of the awards are taken in legal fees (see “Types of Legal Fees” or Wikipedia article). And these burdens are not only borne by successful lawsuits, but by unsuccessful lawsuits as well. The financial cost of the judicial system and the individual plaintiffs and defendants need to be recognized and accounted for.
The other cost is who pays for these large settlements. You may think it is the losing plaintiff who incurs this cost, but you should think a second time. Most plaintiffs of large settlements are corporations or companies, and most corporations/companies have insurance to cover these settlements. Sometimes the insurance company pays all the costs, sometimes the cost is split between the insurance company and the corporation/company, and occasionally the corporation/company pays all the cost. But in any of these cases, the corporation/company incorporates the potential cost of a lawsuit in the current or future cost of the product or service they offer. If the insurance company pays the cost or partial cost they will increase their rates to cover the corporation/company, as well as other corporations/companies that engaged in the activities that brought about the lawsuit. These increased insurance rates are incorporated into the prices of the products or services of all the corporations /companies that incur an increased insurance rate, and all insurance companies will increase their rates based on a successful large settlement. Even when a corporation /company decides to absorb the cost from their profits it means that fewer dividends will be paid to the shareholders, which means fewer taxes paid by the shareholders, as well as the consequent financial impact on the shareholders. If you have a retirement fund (private or company), or own Mutual Funds or Stocks you are a shareholder and will be impacted by a large settlement. Just as in my comment "There Is No Such Thing As A Corporate Tax!" the ultimate costs of a large settlement are borne by the individual, either directly or indirectly through increased prices for goods or services.
What are the true costs and ultimate benefits for a more litigious society? I do not know, but I know we must carefully examine this issue going forward.
Capitalism is the worst form of economics ever devised by man, except for all the others. Big business is the worst form of capitalism that exists. Unfortunately, big business is an inevitable outcome of capitalism. It provides the big products and services that are necessary for a modern society. No other economic system except Capitalism has succeeded in bringing the people the goods and services they want, at a price they can afford, or in a timely manner then Capitalism. It has provided growth and innovation that benefits all Americans. Unbridled Capitalism can do harm, but tightly regulated Capitalism can do more harm. We must reach a balance in Capitalism between protecting the people, and expanding Capitalism to promote economic freedom and liberty so as to improve the lot of the people. Doing so will provide jobs growth and tax revenues, and therefore a better economic climate for all Americans.
However, you should not be blind to what big business is. Big business has only one goal, to increase the profitability of the business. As such it will do whatever it takes to achieve this goal. This includes how it treats its employees, and deals with the government, and its customers.
If you are an employee of the big business you should expect that the big business is more concerned about the welfare of the business, then your welfare. This means that they attempt to minimize the wages, salaries, and benefits of its employees. Only those employees that they determine will help them in maximizing their profitability will receive special compensation. The average employee will get little attention from the big business. So, if you wish to succeed in big business you must demonstrate to them that your success increases their success, and you should be rewarded appropriately. Don't be surprised if their evaluation of your success is not the same as your evaluation of your success. Many times they will decide it's cheaper to hire a new employee than to reward a current employee. You should be prepared to change employment if you feel you were not being rewarded properly, and some other big business will reward you properly. In most cases, a big business will only provide the minimum of wages, salaries, and benefits that will attract an average employee.
Big business is agnostic to public policy and politicians. It will support any public policy, or politician, that they perceive will help them increase their profitability. There is no conservatism, no liberal-progressives, no Democrats or Republicans bias, no social consciousness, and no charity in big business. Whatever they do in these areas is because they have determined it will help their profitability (sometimes just because of the goodwill it generates they determine it will increase their profitability).
If you wish to have employment in a business that has your welfare in mind, or socially conscious, or charitable, and nonpolitical you should attempt to find this in a small business. Small businesses are often run by an individual, family, or close group of owners that are concerned about these areas. They often know about you, your family, any issues or concerns that you have, and are receptive to your ideas on how to make the business better. They have a more intimate knowledge of your contribution to the success of their business and will reward you for your efforts.
Better yet, start your own small business, and run it the way you would like to see run. This is most often the most satisfying way for you to achieve your goals.
Small business is the thing that dreams are made of. Any individual, or group of individuals, who believes that can provide a better service or product, at a better price, or in a more timely fashion, dreams of creating a small business. They dream of this as a means of providing a more productive and prosperous life for themselves and their families. Every day thousands of new small businesses are created in the United States. And every day, unfortunately, thousands of small businesses go out of business. There is no guarantee that your small business will succeed. There is only hope that thru hard work, perseverance, good decision making and a bit of luck that your small business will succeed. If you have those qualities to succeed and the desire to achieve your dream, then you should start a small business. There is nothing like being your own boss and making the decision that you believe to be correct.
Monopolies happen. Whenever a company provides a product or service that the consumer is extremely desirous of a company can become a monopoly.
Monopolies are neither bad nor good. It is how a company operates when it becomes a monopoly that determines if it is bad or good.
A bad monopoly is one in which the company attempts to constrict or eliminate competition with its product or service. Such construction or elimination interferes with the free flow of the marketplace. When a company is interfering with the free flow of the marketplace it is bad. If, however, the company does not interfere with the free flow of the marketplace it is good. If a company attempts to shut down the competition, limit the growth of a competitor by exclusionary or restrictive agreements with its suppliers or consumers, it is interfering with the free flow of the marketplace. Any time any company attempts to interfere with the free flow of the marketplace its actions are harmful to the consumer. A company should be concerned with providing a better product or service, in a timelier fashion, and a better price in the marketplace. Any company that tries to alter this dynamic should be punished.
Anti-monopolistic laws should concern themselves with the free flow of the marketplace. Indeed, any commercial laws should be concerned with the free flow of the marketplace. Therefore, any laws dealing with the marketplace should be to ensure the free flow of the market.
One of the best commentaries on the effects of big business is an open letter that I recently read. While the author discusses big business in the context of U.S. Healthcare his comments are generally applicable to all big business in America; whether it be financial institutions, energy, banks, et al...
Crack down on corporate mergers is the right prescription for US health care
Published April 16, 2016
Hail to the chief. President Obama is giving big business the business, holding the corporate giants’ feet to the fire – and as a small business owner who struggles to survive in an environment of acquisitions and mergers, I’m grateful.
Over the last several months the administration has moved aggressively to stop corporate megamergers and consolidations that have the potential to be harmful not only to the marketplace, but, more importantly, to the average consumer.
Earlier this month, the Treasury Department tightened the tax code for “inversions,” a strategy by which American companies merge with foreign companies and then whisk their corporate headquarters out of the U.S., reaping huge savings on their tax obligations. The change in rules had an immediate casualty: a planned $160 billion merger of the New York-based pharmaceutical giant Pfizer with Ireland-based Allergan.
This was great news for American taxpayers. But even if taxes hadn’t been an issue, this merger might have had serious implications for American consumers. The fact is that any merger of major pharmaceutical companies ultimately limits competition and opens the door to a dramatic rise in the already out-of-control price of prescription drugs.
And merger fever isn’t just the rage among drug manufacturers. Megamergers seem almost de rigueur among health care companies these days. Consider that six major health insurers in the last year have found dance partners and tangoed straight to the marriage license bureau. Aetna and Humana, Anthem and Cigna, and Centene and Health Net are all planning weddings. If they make it to the altar, six companies will become three, which will inevitably result in fewer health insurance policies, higher premiums, lower payments for health care professionals and fewer practitioners in the insurers’ networks. This is not a good prescription for American health care.
The bottom line is that many of these corporate mergers need to be stopped dead in their tracks, because when it comes to business, smaller and nimbler are often better. Small businesses create jobs and opportunities, and because they don’t pass the costs of overhead and inefficiencies on to the buying public, they keep prices down.
But they demand free-market principals and a level playing to compete with the big boys. Small businesses can’t afford to spend millions on lobbyists and slick, feel-good advertising, so it’s good to see the government stepping in to protect them – and us.
It’s more important now than ever because we’ve entered an age when product has a new and very powerful competitor – data. Market forces today are driven not only by a company’s share of consumers and the products it can deliver to them, but by the amount of information it possesses that can make it virtually impossible for new competitors to emerge.
The company that controls the data knows who needs its products, how best to package and deliver them and how much people are willing to pay for them. Today, when two large companies merge, they combine not only their business and products, but also their data. It’s a new type of monopoly, but the effect is the same: Controlling market knowledge makes it virtually impossible for anyone to compete.
Consider a hypothetical merger of two major car companies, say Ford and Toyota. The moment they consolidate, they do much more than combine production. They also integrate all their data on what consumers want to buy, what innovations are on the horizon, the costs of raw materials, purchase patterns and more. Such a merger would make it much harder for a new player to enter the game.
Or consider a real merger that happened just two months ago, when IBM paid $2.6 billion to acquire Truven Health Analytics, “a leading provider of cloud-based healthcare data, analytics and insights.” The acquisition brought “more than 8,500 clients, including U.S. federal and state government agencies, employers, health plans, hospitals, clinicians and life sciences companies to the IBM Watson Health portfolio.” But more importantly, it pulled Truven’s data analytics into the big blue tent.
For IBM, it was just $2.6 billion – or as they call it, peanuts. And it was well worth it, because the deal effectively shut down all potential competitors. No David will cut this Goliath down to size, because what kind of small business has that kind of pocket change? Furthermore, my impression when I appealed to the Federal Trade Commission when it considered the deal was that the people who reviewed it for possible antitrust issues had very little understanding of what they were looking at and very little knowledge about health data. In fact, one of IBM’s attorneys stated that there were not enough resources at FTC to review the deal.
Megamergers make great headlines. We love to talk about them. But once they’re completed, we may not love what follows. Too often they add up to fewer choices, higher prices and a stifling of competition and predatory pricing to the detriment of the consumer.
The complexities of data as a major company’s core asset will evolve to become a critical area of scrutiny for the government, which will have to keep a much closer watch to ensure that massive monopolies are not created.
President Obama has taken a lot of criticism from some quarters for his administration’s aggressive stance in blocking some of these megamergers, but in this case he is doing right by the American public. He is taking on an important issue that many of his predecessors have been unwilling or afraid to address, and for that he deserves our thanks. We can only hope that the agencies responsible for reviewing these mergers and acquisitions will be able to follow his lead.
Dr. Sreedhar Potarazu is an acclaimed ophthalmologist and entrepreneur who has been recognized as an international visionary in the business of medicine and health information technology. He is the founder of VitalSpring Technologies Inc., a privately held enterprise software company focused on providing employers with applications to empower them to become more sophisticated purchasers of health care. Dr. Potarazu is the founder and chairman of WellZone, a social platform for driving consumer engagement in health.
There is no more issue than The Minimum Wage that is more apropos to my observations “Feeling Good vs. Doing Good” and “The Law of Unintended Consequences”. And this is an issue where you need to apply my “Think Vs. Feel - Or - Emotions Are Easy, Thinking Is Hard” observation. I could provide my observation on this issue, but a smarter and wiser man than myself has done this more effectively and wisely that I could do. Here are his Intelligence and Wisdom.
Politics and Minimum Wage
Walter E. Williams | Jan 08, 2014
There's little debate among academic economists about the effect of minimum wages. University of California, Irvine economist David Neumark has examined more than 100 major academic studies on the minimum wage. He reports that 85 percent of the studies "find a negative employment effect on low-skilled workers." A 1976 American Economic Association survey found that 90 percent of its members agreed that increasing the minimum wage raises unemployment among young and unskilled workers. A 1990 survey reported in the American Economic Review (1992) found that 80 percent of economists agreed with the statement that increases in the minimum wage cause unemployment among the youth and low-skilled. If you're searching for a consensus in a field of study, most of the time you can examine the field's introductory and intermediate college textbooks. Economics textbooks that mention the minimum wage say that it increases unemployment for the least skilled worker. The only significant debate about the minimum wage is the magnitude of its effect. Some studies argue that a 10 percent increase in the minimum wage will cause a 1 percent increase in unemployment, whereas others predict a higher increase.
How about the politics of the minimum wage? In the political arena, one dumps on people who can't dump back on him. Minimum wages have their greatest unemployment impact on the least skilled worker. After all, who's going to pay a worker an hourly wage of $10 if that worker is so unfortunate as to have skills that enable him to produce only $5 worth of value per hour? Who are these workers? For the most part, they are low-skilled teens or young adults, most of whom are poorly educated blacks and Latinos. The unemployment statistics in our urban areas confirm this prediction, with teen unemployment rates as high as 50 percent.
The politics of the minimum wage are simple. No congressman or president owes his office to the poorly educated black and Latino youth vote. Moreover, the victims of the minimum wage do not know why they suffer high unemployment, and neither do most of their "benefactors." Minimum wage beneficiaries are highly organized, and they do have the necessary political clout to get Congress to price their low-skilled competition out of the market so they can demand higher wages. Concerned about the devastating unemployment effects of the minimum wage, Republican politicians have long resisted increases in the minimum wage, but that makes no political sense. The reason is the beneficiaries of preventing increases in the minimum wage don't vote Republican no matter what; where's the political quid pro quo?
Higher-skilled and union workers are not the only beneficiaries of higher minimum wages. Among other beneficiaries are manufacturers who produce substitutes for workers. A recent example of this is Wawa's experiment with customers using touch screens as substitutes for counter clerks. A customer at the convenience store selects his order from a touch screen. He takes a printed slip to the cashier to pay for it while it's being filled. I imagine that soon the customer's interaction with the cashier will be eliminated with a swipe of a credit card. Raising the minimum wage and other employment costs speeds up the automation process. I'm old enough to remember attendants at gasoline stations and theater ushers, who are virtually absent today. It's not because today's Americans like to smell gasoline fumes and stumble down the aisles in the dark to find their seat. The minimum wage law has eliminated such jobs.
Finally, there's a nastier side to support for minimum wage laws, documented in my book "Race and Economics: How Much Can Be Blamed on Discrimination?" During South Africa's apartheid era, racist labor unions were the country's major supporters of minimum wage laws for blacks. Their stated intention was to protect white workers from having to compete with lower-wage black workers. Our nation's first minimum wage law, the Davis-Bacon Act of 1931, had racist motivation. Among the widespread racist sentiment was that of American Federation of Labor President William Green, who complained, "Colored labor is being sought to demoralize wage rates."
Income inequality is a human condition that has existed throughout human history, in all societies, and under all forms of government and economic systems. It cannot be alleviated or eliminated without totalitarian actions, and even then people will find a way to increase their wealth. This is because while all humans are created equal, not all humans have the same intelligence, talents, skills, motivations, and incentives to succeed. As Thomas Sowell has noted:
Someone is always parading statistics showing that some small number of people at the top of the income scale have more than some larger number of people at the bottom. But would we be better off if people like Bill Gates and Steve Jobs had never created things that widened our access to opportunities and enriched our lives, just because it also enriched theirs?
The real question is how we as a people can help others to succeed and increase their wealth. My "Message to Americans" in the "Forward" observation is a good place to start, and I would refer you to that observation. Basically, it is to obtain the best education possible, apply your education, create a strong family, and engage in civil discourse. If you engage in these activities you will be able to achieve the economic success that can lead to a better life.
What we as a society need to do is establish a governmental, legal, and economic environment that allows people to utilize their intelligence, talents, skills, motivations, and incentives to succeed. We also need to assure that success is obtained only through legal, moral, and ethical efforts and that no individual, group, or company interferes with another's individual, group, or company effort to succeed through legal, moral, and ethical efforts.
No governmental law, action, regulation, or judicial decree should be applied to the wages, salaries, prices, compensation, or decisions that an individual, group, or company determines is in its best interest. Governmental law, action, regulation, or judicial decrees should only be utilized to assure that no individual, group, or company is interfering in the legal, moral, and ethical actions of another individual, group, or company. Governmental action is appropriate to assure that the Human, Constitutional, and Civil Rights of all are being observed by individuals, groups, or companies, as well as to assure that no harm (in a strict sense) is being done to society by an individual, group, or companies efforts.
The free flow of the marketplace is the best way for individuals, groups, or companies to succeed or fail. Governmental action is appropriate and desirable to assure the free flow of the marketplace. Governmental action should be utilized to set the boundaries (and very wide boundaries) of the free marketplace and to assure that individuals, groups, or companies are operating within these boundaries. Any activities of individuals, groups, or companies outside these boundaries should be swiftly halted and punished as appropriate.
As Abraham Lincoln said in the October 15, 1858 debate at Alton prior to his election:
"It is the eternal struggle between these two principles -- right and wrong -- throughout the world. They are the two principles that have stood face to face from the beginning of time, and will ever continue to struggle. The one is the common right of humanity and the other the divine right of kings. It is the same principle in whatever shape it develops itself. It is the same spirit that says, 'You work and toil and earn bread, and I'll eat it.' No matter in what shape it comes, whether from the mouth of a king who seeks to bestride the people of his own nation and live by the fruit of their labor, or from one race of men as an apology for enslaving another race, it is the same tyrannical principle."
If the income inequality is obtained through legal, moral, and ethical efforts; to take from those who earned it, and give to those who did not, it is the same tyrannical principle that Lincoln espoused.
“The inherent vice of capitalism
is the unequal sharing of blessings. The inherent virtue of
socialism is the equal sharing of miseries.”
- Winston Churchill
"You work and toil and earn bread,
and I'll eat it." No matter in what shape it comes, whether from
the mouth of a king who seeks to bestride the people of his own
nation and live by the fruit of their labor, or from one race of
men as an apology for enslaving another race, it is the same
- Abraham Lincoln
Democratic socialism, wealth redistribution, income inequality, tax the rich, occupy Wall Street, free education, free healthcare, etc. is all the same principle – socialism or "You work and toil and earn bread, and I'll eat it." To implement these items requires that you take from one class of people (those that work and toil) and give to another class of people (those who do not work and toil). And it is accomplished through Government intervention (coercion through threats of fines and/or imprisonment). The government decides what and how much to take, and what and how much to give. This is not the same as taxes, as taxes are levied to support the necessary functions of the government for the good of all, not for the good of some. Therefore, with socialism, the government is the master of all the citizens, and the citizens are the serfs of the government.
The Socialism model requires that all decisions being made would be, directly or indirectly, made collectively and be applied equally to all members of the society. This would require that a government decide (either through direct democracy or indirect representative democracy) what is best for its citizens (and we all know how good bureaucrats are at deciding what’s best for us), as well as central planning by the government on economic decisions (which has never worked throughout history).
Socialism is immoral as it requires that the will of the majority be imposed upon the minority. If the socialist majority decides that abortion, or alcohol consumption, or drug and marijuana usage, or gambling, or vegetarianism, etc. is wrong and not to be allowed, then those that disagree must acquiesce and accept their decision. There is no freedom or liberty to choose what you believe is right. This freedom to choose is essential to our human rights. As such, socialism is a violation of human rights.
Socialism is also contrary to human nature. Mankind, as well as all other animal life, is competitive. We and animals compete for food, shelter, and mates as well as for other reasons. We also compete to improve our and our family’s lot in life. Socialism requires that we repress this competitiveness and act in the best interests of all. Human nature is that part of our psyche that is a result of millions of years of evolution. It is a basic part of all humans. We must all acknowledge our human nature and account for it in our dealings with others, as well as in the creation and administration of social policy. To not do so will result in much effort, time, and monies being spent on a task that is doomed to failure. And failure is what is inevitable if you do not account for human nature. Socialism denies or disparages, and sometimes thinks it can eliminate the competitive instinct of human nature. For someone to deny human nature, or not acknowledge human nature, is foolish, and you should not pay attention to fools.
It is also true that socialism never works in the long run. There is simply not enough earned by those that work and toil to support those that do not work and toil. It stifles the incentive to work and toil and encourages non-work and non-toil. The incentive to invent, innovate, and expand a business decreases as the government takes more of the fruits of your sweat and toil. The economy will stagnate, falter, then collapse the longer socialism is in-place. This is readily apparent in Europe in the last half of the 20th century, and the first part of the 21st century, as many European nations economies are faltering and collapsing due to the weight of socialism. The end results of socialism can be seen in South and Central America as economies have collapsed and the citizens are impoverished and destitute (Venezuela is an excellent example of the end result of socialism).
Therefore, to implement socialism also requires that government restrict the freedoms and liberties of its citizens, as well as violate the human rights of its peoples. So, when you hear someone advocating any form of socialism it is to advocate the serfdom of its people, and this should be resisted always and in all places.
Capitalism is the worst economic system ever devised by man, except for all the others. Capitalisms primary thrust is to provide as much goods and services, and in as an expedient and economical manner as possible, while rewarding those who provide the goods and services that other people want. No other economic system except Capitalism has succeeded in bringing the people the goods and services they want, at a price they can afford, or in a timely manner than Capitalism. It has provided growth and innovation that benefits all. Unbridled Capitalism can do harm, but tightly regulated Capitalism can do more harm. We must reach a balance in Capitalism between protecting the people and expanding Capitalism to promote economic freedom and liberty so as to improve the lot of the people. Doing so will provide jobs growth and tax revenues, and therefore a better economic climate for all.
Unbridled Capitalism can be oppressive if it evolves into monopolies or near monopolies, but this can be regulated through appropriate laws. However, capitalism provides the freedom for people to better themselves, and to better the lot of all people. Just look at the Information Technology tycoons of the last half of the 20th century and the 21st century. Most all of them started from modest or poor means, and by utilizing their intelligence and hard work, and through capitalism means they have built large companies that provided wealth to themselves and others, jobs and economic opportunities to their employees and suppliers, and provided products and services that vastly improved the quality of life for all who utilize their products and services.
Capitalistic economies also feed the world. Capitalistic farming provides an overabundance of food supplies that are often shipped to parts of the world that suffer from undersupply. Most of those undersupplied countries have an economic system that is not Capitalistic, and as statisticians would say this is a causality, not a correlation. Without Capitalism, many of the people of the world would die of starvation. Capitalism is also responsible for inventing prescription drug treatments, medical technology, and medical techniques that save many lives and increase the quality of life. Capitalism was also responsible for changing society from a manually intensive, back-breaking, animal labor agrarian basis to a mechanized and electrical labor-saving industrial basis. It then was responsible for changing society to an electronic and informational basis that has significantly reduced mental drudgery. All this societal change has provided economic benefits to the people and made life easier and more enjoyable for all. All of this is a result of Capitalism. This is also true for many other products and services as well, especially when it comes to supplying products and services required for basic human needs.
Can you point out a single socialist economic system that has accomplished any improvements in the quality of life? I don’t think so. Therefore, Capitalism is of great benefit to mankind!
Capitalism may have short periods of economic downturn, but it recovers, and in the long term the economy continues upward. Capitalism is, therefore, the best economic system ever devised by mankind.
The question is then would you choose the unequal sharing of blessings or the equal sharing of miseries? For me, I will choose the blessings rather than the miseries. For if you have blessings you can assist those in misery. If everyone is in misery there is no hope of achieving blessings except the overthrow of the system that is causing your misery. Why would you implement a system that you would eventually have to overthrow? An overthrow that could cause more misery and even massive deaths.
The solution to the unequal in a capitalistic economy is three-fold; a growing economy, educating and training, as well as safety nets. A growing economy raises all boats, as it provides more and better jobs for all. We should also provide a proper education (see my observation on “Public Schools”) or re-training for those at the bottom of the economic ladder. The creation of safety nets is to help the most impoverished and destitute of our citizens. This safety net should only impact a small percentage of our citizens (low single digits percentage of the population). To expand the safety net to a larger percentage of the population is to implement socialism in a slippery slope manner and must be avoided at all costs.
Employees deserve decent wages, salaries, benefits, and safe working conditions. Employee unions are a good means of obtaining this, but today they are not the only means. When Unions have concerned themselves as to these matters they have been a great boon to society. But when unions have diverted their attention to other matters, such as political auctioneering, and not considering the impacts of their demands on the employer, they can also be a great bane on society.
Today we have employment laws and regulations that often deal with working conditions and benefits to employees. And for the most part, this has been a good thing for employees and society. But today we are also getting involved with wages and salaries of employees through laws and regulations, and this often has a negative impact on employees and society (see my observation on “The Minimum Wage” for more information).
Today it is easy for a large business to uproot itself, and seek a more economical climate in which to operate. Whether it is taxes, labor costs, laws and regulations or other factors a large business will decide if it is economically advantageous to relocate or to restructure their business. They will factor in all the financial costs of such a move or restructuring, but they will rarely factor in the human costs of such a move or restructuring. This is because their primary motivation is to provide the best return on investment for their owners or shareholders and to assure that continued survival of the business. If taxes, labor costs, laws, and regulations or other factors start to have a negative impact on their profitability they will start to examine the possibility of relocation or restructuring of their business. In either case of a relocation or restructuring, the current employees and the communities in which they operate are negatively impacted.
I the case of a restructuring it often means closing down some operations of the business, or the layoffs of employees of other operations of the business. This has a devastating impact on those employees that are laid off, and the communities also suffer as a result of reduced taxes from the business and laid off employees, and the increased social services for the laid off employees. This situation is even worse for the employees and communities when a business decides to relocate.
Unions and employees must always keep in mind this possibility when negotiating their wages, salaries, and benefits. Their demands may often be the tipping point that starts the process of restructuring or relocation. In some cases, their demands could mean the end of the business. Be careful what you ask for, because you may get it, and you often may not like the impacts of what you get.
I am also concerned about the impacts of political auctioneering by unions (especially Public Employee Unions which I have discussed in my observation “Government Of The People, By The People, And For The People”). This political auctioneering often tips the balance of power in politics and results in laws and regulations that have a negative impact on businesses, which could result in a restructuring or relocation of a business. I would suggest that we eliminate direct political auctioneering for individual candidates and political parties by unions, but support political auctioneering for the laws and regulations that impact employees. The Union could recommend to their membership that a political candidate or party support a Union position, and recommend that the members provide financial and volunteer assistance to the candidate or party, but the Union could not provide direct financial or direct organizational support for a candidate or party. The Union could establish a Political Action Committee (PAC) to accomplish these goals, which they would recommend that their members support, but no union dues or organization support of the PAC could come directly from the Union.
I also believe that what is good for the goose is good for the gander. I would support these same restrictions for businesses, trade groups, and government lobbying organizations as well.
The question is how can we accomplish this within Constitutional constraints? To that I respond it will take a lot smarter and wiser person than myself to figure this out. The good news is that I am highly confident that there are a lot of smarter and wiser persons than myself who can figure this out. I am just providing this suggestion as a direction that I think we should take.