Welcome to today’s talk, on this rather interesting day of October, 22, 2012, yes a Monday, with an interesting stock market roller coaster and the last presidential debate. It appears that the economy is indeed still front and center. As the earnings on Wall Street roll in we see significant headwinds for our economy which will affect the outcome of this election, either a narrow margin of victory for the incumbent or perhaps a surprise loss. Some would say that this economy will be one that affects America’s future, and everyone has their views on how and why.
Since you are amongst the politically inclined, and economically wise, I think today we ought to talk about socialism and capitalism. Okay so, for this radio show or if you are reading the transcript in an online article let’s set some ground rules. First off, I talk and you listen, and after I am completed you can call in or if you are reading this online, you may leave a comment below. Realize that you must have an intellectual reason for responding, not just rehashed talking points, or something you read somewhere, we have already heard those issues – so bring your mind and comments anew. Now then, let me begin, my first topic is;
1.) Too Much Choice – Sure Blame it On Free-Market Capitalism If You Want, But I “Like” It
There was an interesting article in Brain World Fall 2012 issue titled; “I Can’t Decide – Why an Increase in Choices Decreases Our Happiness,” by Lauran Migliore. The author suggests that having too much free-market capitalism and too many purchase choices we are somehow hurting our souls, brains, and psyche, which might sound like a legitimate argument on the surface, but I would submit to you that those communists that only ate bread and potatoes could not possibly have been as happy as I am going into my local grocery store with an abundance of everything, almost anything I could possibly ever want to eat Radio Spain.
Personally, I don’t want to wear a Mao outfit like everyone else, nor do I want to drive a car like everyone else, and I would submit to you that specialization is a good thing and leads to choices to exercise our individuality, pursue happiness, and enjoy our life experiences with total freedom – “Freedom of Choice” as Milton Friedman would have exclaimed. Socialism is more often than not where individualism is reduced to the low self-esteem experience of the Borg. Where everyone belongs to the whole and is to find happiness in something bigger than self, thus, negating self, meaning self-actualization is not and cannot be realized. Don’t buy it; read Ayn Rand’s novels.
Those who condemn free-market capitalism ought to realize the benefits of choice, even the abundance of options for personalization and freedom of expression. Finding ways to further attack abundance, even for an academic “social scientist” is rather puzzling and aggrandizing in a self-serving agenda driven way. Fortunately, although this study might have amble data points to suggest their hypothesis, I for one certainly wouldn’t want the alternative – little or no choice. This is far from the first study of this type still, the opposite side of the coin isn’t so pretty either.
Do we blame large corporations for so many options in our retail marts? Are corporations with their advertising and marketing, along with branding confusing consumers, getting people all caught up in the fear of loss in case they make the wrong decision with their purchases? Are they to blame? I find that rather a harsh contrast to the socialist academic viewpoint – almost hypocritical, as the alternative would be fewer jobs, fewer companies, fewer people employed. Perhaps, everyone could only drive a white car, and they’d all be the same – would that make you happier?
There have been studies that when students wear uniforms to school that their personality shines more, and there are fewer clicks, less jealousy, and more equitable social fairness, still, I don’t like it. So, that’s my point here. Now then, if every car, home, and all clothes were virtually the same, then there might only be a few companies producing those things, and they’d need to rely on the government for protectionism – to maintain their market strangle-hold. That would be unfortunate. Now then, would that mean that saving and investing would perhaps be all the same too?
2.) What If Large Corporations Float Bonds and Slowly Pay It Back Out In Dividends Without Profits?
Right now, we have a nice window of opportunity for large corporations to issue corporate bonds at very low rates, collecting huge amounts of money in their coffers for the future. Thus, they could ride out any recession, outlasting their competitors who perhaps are not strongly rated companies unable to borrow at those levels. Does this mean that they could float corporate bonds, then sit on the money even with slow earnings, merely pay a dividend for essentially a decade without running out of cash? They might be able to do this and hold their stock valuations without strong earnings.
Perhaps an interesting article to read on a side- topic to such arguments would be “Debt Fuels a Dividend Boom – Firms Collect Payouts and Investors Get Yield; Reminiscent of the Bubble Era,” by Ryan Dezember and Matt Wirz which was published in the Wall Street Journal on October 19, 2012.
If our nation has a further deepening of our economic woes, then we could see this happening. Further, it also means more capital sitting on the sidelines without investment, expansion, or the potential for future earnings – this means fewer jobs, factories, and less research and development. It could have a further chilling effect, but completely possible if companies are sketchy on the economic future and therefore sit on the money, rather than spend it into the economy.
If so, the corporations will be glad to spend some of that money doing lobbying to get the playing field unbalancing it in their favor, and considering our pay-to-play government political system, unfortunately it would be money well spent. Still, isn’t this really the problem – isn’t this why our government is broken?
3.) The Crony Capitalism Must Be Stopped In Washington DC – Where Does the Buck Stop?
Some might say that the charge of “crony capitalism” is indeed overplayed, but is it? Look at the money funneled to Alternative Energy companies during our so-called stimulus plan, which was looking to start a new industry and have millions of Americans employed by it.
What we got were few jobs, and we didn’t invest in as much pure research as we needed to, as we had spent the money on actual businesses; picking winners and losers, or as Mitt Romney said in the presidential debates; “a friend of mine said the Obama Administration is not picking winners and losers, it’s picking only losers” which I’d say was a humorous sound bite, that is if it were not so true. It’s a sad reality unfortunately – Solyndra for instance, to the tune of half-a-billion dollars before filing bankruptcy, read The Wall Street Journal editorial;
“The Solyndra Memorial Tax Break,” published on October 16, 2012.
Indeed, I think you will be so shocked, you will be angry at the whole thing, if you are not already, as it just adds insult to injury. Oh you’d like another example, well certainly because Solyndra was no anomaly, it wasn’t a one-off. What about A123 Batteries, or heck, there are so many now, who can count all those failed businesses.
Consider if you the investments that haven’t gone South, but of the same vein, what about the investment in Tesla Motor Cars, well, Elon Musk gave $35,800 to Obama 2012 Victory Fund. This is just another example of crony capitalism in my opinion, and mind you I have a high opinion of Elon as an entrepreneur, I applaud his intensity and passion. I like the Tesla sports car, indeed, I want one. I am sure, he’s doing what he must do after Obama bailed out GM, and Tesla must compete with extreme favoritism.
Still, if Tesla Motors cannot do it without government loans, then it’s not good enough. Further if Space X, another of Elon’s companies which I very much like, if it can’t do it without bribing the government for business or guaranteed loans, then we have a huge problem. No, I am not letting Boeing, Lockheed, Northrop, Raytheon, GE, GM or anyone else off the hook, but we’ve had enough of this favoritism. Crony capitalism is a real problem, and great companies do not need the advantage, they already have it with their economies of scale and ability to secure the best talent, markets, and access to nearly unlimited capital – we spoke of corporate bonds just a moment ago, remember?
Further, the GM bailout and Chrysler too allowed those car companies to break franchising and bankruptcy rules – causing 700 car dealerships owned by smaller companies to lose their franchises, simply because they were considered a burden to the car companies. What kind of a dirty trick was this crushing small businesses like that? Further, the bond holders took it in the shorts with a wave of the magic Obama-Wand dismissing a 100-years of bankruptcy laws. If the bankruptcy laws are that onerous, then perhaps we need some deregulation, you think?
And what did we really bail out? The unions, pension funds, and Cadillac health care plans, meaning a strong voter block for President Obama’s reelection while it looks like Joe the Plumber actually did share the wealth, as those small business dealerships were bankrupted instead – terminated franchise agreements with “no recourse” wow – how does that work, because as a former franchising company founder, I’ve never heard of anything like that in my life.
Back to Elon Musk and Tesla, well, they got money, grants, guaranteed loans, but was that going to hire more workers, no, robots. Remember they’d have to compete with Chinese cheap labor right? Now then, while it is true that it takes a lot of time to train new workers to work on assembly lines and factories, and as the Los Angeles Times put it on October 16, 2012; “Factory Labor Shortage May Rise – The US lacks 80,000 skilled workers but the shortfall could go to 875,000 study says,” by Tiffany Hsu.
Even so, I would submit to you that it is not the government’s responsibility to train new workers for corporate jobs. If we do, we can tack that onto the already insane view of the need for corporate welfare. Because that’s what it would is if you are training workers to work in a factory on the taxpayer’s dollar – all in hopes that you will collect more taxes from them in the future – that is a bad investment, and it’s not the taxpayer’s responsibility anyway.
You see, many of those workers will not work in the same factory five years from now, and they will need retraining once more. If you give them retraining twice, and they work for two companies five years each, now they have paid into Social Security for their minimum ten-years, and even if they never worked a day in their life they have worked there 10 years, so when they reach retirement age they get full benefits; forever, for the rest of their lives. That’s not a winning proposition for the taxpayer, that’s not a good use of money.
Lastly, why are we giving companies large grants, stimulus bailout money, or guaranteed taxpayer loans when they are building robotic factories? If our intention is to bring more jobs back in the marketplace, this is a failed strategy from the get-go.
Now then, I am okay with Six Sigma efficiency, more power to productivity, regardless if it is a robot or a human doing the work, efficiency creates abundance, better profits, lower prices, but we have to stop this flow of taxpayer’s money, and the government isn’t supposed to be in the business of funding companies, or saving inefficient stagnant bureaucratic ones, and back to Ayn Rand, isn’t this just a replay of one of her novels showing the problems with socialism and crony capitalism?
4.) Forward, March! Socialism Is Marching to New Heights In America
We’ve built the greatest nation ever in the history of mankind, we did it with free-market capitalism, and it’s worked nicely. Socialism has just been a disaster where ever it has been tried, just look at the state of Europe right now. Would you just look at what’s going on in the world? In Europe we have a complete denial when it comes to free-market capitalism. In fact, in the Economist March 31, 2012 edition there was an interesting article titled; “An Inconvenient Truth,” where he showed a graph and chart where respondents in France were asked if they thought the free-market system was the best. The percentage is down from just over 40% in 2002 to 30% in 2010. Even lower now in 2012 but no estimate was given.
Of course, France isn’t the only nation which has turned its back on free-market capitalism, all the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) have as well but that’s okay they’re doing even worse. Why we are allowing the United States of America to slip into the grass of socialism is beyond me. We’ve seen where that debt cliff leads to in this in far too many nations in human history. Look at the state of affairs in Argentina, Bolivia, Venezuela, and Ecuador to just name a few. Not long ago, I got an interesting question from a young entrepreneur who wanted to start a business in Ecuador he asked;
5.) Should I Start a Mobile Oil Change Business in Ecuador?
The answer is absolutely not, it would be a bad idea. It doesn’t make sense to start a business in a socialist nation. After all, if you are a business person, and you make money, you will be taxed to death, and all the while mistreated, and labeled as the bad guy. Why would anyone want to put themselves through that? Speaking of which, why are we doing it here in our own country. Mitt Romney in the recent presidential debate noted that small businesses account for two-thirds of our employment. Many socialist academic elitists believe that those are not good jobs. That’s baloney, ask someone who has a job at a small business if they’d rather not have a job.
It may be true that those jobs do not come with Cadillac healthcare benefits, union wages, or inherently impossible pensions (unsustainable), but I would submit to you that many union jobs only exist because of protectionism, government intervention, and crony capitalism in the first place. The small business person is a free-market enterprise. This is where buyers and sellers come together of their own free will and free choice – remember we discussed free choice in free-market capitalism previously.
Many government unions are also unsustainable. There was a very interesting article in the Los Angeles times on October 20th discussing some of the challenges that San Bernardino is going through trying to provide pension and benefits to 1600 retired workers, those underfunded pensions are a huge concern, and one of the issues with their bankruptcy. Also read the Wall Street Journal article “City Challenges Norm on Pain into CalPERS,” by Michael Corkery. I think by the time you are done reading those two articles you might just change your views, if you happen to disagree with me.
Just because companies can promise pensions today, doesn’t mean they will be able to pay them tomorrow, just as many city, county, and state government agencies will not be able to either. The federal government might be a different story in that regard because they can keep printing money, but that just makes everyone else’s money worthless. Welcome to socialism, and the calamity that awaits us if we continue down this path. The real challenge is that many Americans are totally oblivious to this reality, they watch the debates, listen to the news media, and watch a few political ads on TV and assume they are informed voters; they aren’t.