Friday, February 11, 2005

The Great Disparity

Wealth distribution, is just not going to be equal, get over it folks. There are going to be have nots, and have gots. What we want is equal oppurtunity. Some examples of what I mean:

This is from an Op-Ed, but it illustrates the point nicely.
Corporations do not pay taxes, people do. This is not a contest between capitalism and socialism, or good and bad, or Wall Street and Main Street. It just is.The buck does not stop at a corporation, it is just passed through. This is the nature of the beast. When a corporation is taxed, any one or all three of the following pass-throughs happen in some measure.
1. The corporation will raise the price of its goods or services by the amount of the tax and the cost of compliance, if competition allows. Dale Jorgensen, Ph.D., Harvard economist, estimates the federal income tax system requires tax-and-compliance premiums amounting to 20 to 30 percent of each product’s or service’s price. These premiums are hidden in the cost of every good or service bought in or exported by our country. Think about that as we try to sell American-made goods overseas.
2. Often global competition (and WalMart) will not allow pricing to absorb the entire cost of taxes/compliance. What is the next corporate move? Reduce the cost of labor. Who loses their jobs to efficiency or foreign manufacturing? It is our low-income friends again, taking it on the chin and out of their wallets.
3. Now, assume prices are as up as they can be and labor costs are as down as they can be, and there are still taxes/compliance costs to pay. What do corporations do? Lower profits to their shareholders. For a mom-and-pop, that means a lesser lifestyle for Mom and Pop. That means later or no retirement. For Wall Street, that means union pension funds experience lackluster performance when invested in domestic corporations. This may not be a big concern for the low-income, working poor, but that certainly puts a double whammy on the working class. Fewer jobs and threatened pensions. And then there are the undue burdens our fixed-income retirees. Yet again, the very groups we set out to protect with corporate income taxation are those we punish most. Attacking the wrong solution misdirects the well
intentioned.


A discussion here points to some of the issues involved specifically in the WalMart debate, and a very detailed response can also be found here:
After all, if the economy is operating at anything resembling efficiency, then labor costs don't have a high degree of demand elasticity. Employers cannot pay lower wages, without losing workers. Employees cannot demand higher wages, without losing jobs. An efficient economy will not base wage-rates on a normative and subjective definition of "fairness", but on a market defined proper allocation of resources. Price, after all, is simply a piece of information, reflecting the overall value of any given product or service.
So, is the eventual "race to the bottom" leading inevitably to lower and lower labor costs? To some extent, yes. Business will always seek to lower their costs....since, after all, consumers do the same. But that's the beauty of a free market. We simply don't know how to allocate our resources - for one thing, because the proper allocation of resources changes from day to day - but a properly functioning price mechanism allows us to distribute those resources based on what value we place on them. Will Wal-Mart be around and on top forever? Of course not.
I'd remind you of who Wal-Mart replaced on the Dow Jones Industrial Average: Woolworth. A company that achieved market dominance by "undercutting the prices of local merchants". Of course, they were criticized for driving local merchants out of business at the time. And then, in 1997, they closed the remainder of their stores. Why? "Analysts at the time cited the lower prices of the big discount stores and the expansion of grocery stores to carry most of the items five-and-ten-cent stores carried as factors in the stores' lack of success in the late 20th century."
Short version: Wal-Mart, Target, grocery stores and others had found a better business model. Woolworth was a dinosaur. In time, Wal-Mart will be replaced, too. And we'll probably hear complaints that the new business model, which almost eliminates employees altogether, is harmful. Never mind that we're getting "more for less", freeing up "more for something else". The same argument has been made for centuries, but the fact remains: in a free market, wages are simply a piece of information defining the value of a resource. If that information is inaccurate, it will be forced to change.


And here as well is a detailed defense of the mega-retailer:
On the whole, if one doesn't like Wal-Mart and finds it to be of greater utility to support their local mom-and-pop stores for an assortment of cultural and non-economic reasons, then they may do so. If consumers wish to obstruct the development of a Wal-Mart store in their small town, they have scores of non-bullying options to pick from in order to try and persuade their fellow townsfolk that a new Wal-Mart is not the best option. It's interesting to observe that the consumers who denounce Wal-Mart are often the same folks who take great joy in reaping the rewards of corporate bigness, such as saving money with sales, clearances, and coupons, being able to engage in comparative shopping, and taking advantage of generous return policies.
When all's said and done, Wal-Mart employs lots of people; provides heaps of things you need in one place at the lowest prices you'll find; and gives millions to charities every year. Add up the charitable giving of all the mom & pop stores in the country and it probably won't equal that of one giant corporation.
To be sure, if Americans didn't love Wal-Mart so much it wouldn't be sitting at the top of the 2002 Fortune 500 with $219 billion in revenues. And we do love Wal-Mart. We love it because it gives us variety and abundance. We love it because it saves us time and wrangling. And we love it because no matter where we are, it's always there when we need it.


Of course, this is not the popular view. The funny thing is, everyone seems to know what the wealthy should do with their money, but if they are all so good with money, why aren't they wealthy. Sorry folks, you don't get to the top by giving away everything that you work for. The wealthy know just fine what to do with their money, and most of their holdings are in stocks and other investments which support the economic prosperity you enjoy now.

Finally, the ARI weighs in:
"No business has the right to be protected from competition," says Dr. Locke. "Innovative businesses of all types replace competitors with better value for the money. This is the way capitalism works--automobiles replaced the horse and buggy, sound movies replaced the silents and computers replaced the typewriter. The business that offers the customer the best value for the money wins.
"Nor does any city have the right to dictate local wages, directly or indirectly. Wal-Mart's low prices, which are especially beneficial to lower-income individuals, are made possible in part by paying lower wages than those paid by unionized stores. But no business can force an employee to work for a given wage without the employee's consent. Wages, like other prices, are properly set by the free market.
"Wal-Mart should not be feared but admired--as an American ideal--a rags to riches story in which a single five-and-dime store in a small Arkansas town grew into the largest corporation, in term of sales, in America.
"Trying to stop Wal-Mart is not only morally wrong, it is un-American."


Again here:
The wealthiest 1 percent includes the most productive people in America--the entrepreneurs and executives who direct the course of the nation's businesses. These people work hard and shoulder enormous responsibilities. They provide the knowledge, the entrepreneurial energy, and the investment capital that drives our economy. Yet they are vilified as idle swindlers by the left--and the right is too timid to defend them openly.


and here:
In the minds of leftist economists, the economy does not exist so that productive individuals can enjoy the fruits of their labors. It exists for only one purpose: to divert money from the successful to the unsuccessful. If these economists seek to "stimulate" the economy, it is only so that productive people can, temporarily, become more vigorous draft-horses to drag along a cart loaded with an ever-heavier crowd of unproductive hitchhikers.


and here:

To know how to fix our economy, we must first identify what is wrong with it. Here, analysts have it mostly right when they cite a decline in business investment as a major roadblock to recovery. But the problem is actually broader than this. Not only are businesses investing less money in new technologies, new manufacturing plants, and research and development--all of which are crucial to long-term profitability and therefore economic growth--they are reluctant to enter mergers, to formulate new strategies, to take risks. Hewlett Packard CEO Carly Fiorina says her company and others are "less likely to undertake bold moves, even if you feel those are vital to the future of your company."
America's economy is stagnating because America's businesses are stagnating. The cause--and the factor that must be removed to revive the economy--is the government's ongoing regulatory crackdown on business.



UPDATE: As if to punctuate:
SIGN OF THE TIMES? Carly Fiorina, CEO of Hewlett-Packard, has announced her departure.
At first blush, the Carly Fiorina story seems like that of a highly visible female CEO perceived to have failed. But her firing as head of Hewlett-Packard sheds some light on how business is changing, no matter what the gender of the person in the corner suite.
Indeed, the executive turmoil at HP shows that corporate boards, in a post-Enron world, are becoming more active overseers. This means close scrutiny of the wheeling and dealing, the acquisitions, the corporate culture, even the pay package. And CEOs under the microscope, such as Ms. Fiorina, are finding they have less time to produce results. In fact, a CEO's tenure at the top is starting to look a lot like a politician's term in office with a small group of voters sitting around a boardroom table.

8 Comments:

Blogger M.T. Daffenberg said...

Yeah. I relate about your job(from your comment on mine).

I have a beef with the idea that hard work equals better pay, benefits, etc. It does not. From my experience, and I can cite dozens of people on a personal level who agree, the harder the job, the less I have made: the easier the job, the cushier the conditions, the more money I made. Lesson--hard work leaves you at the bottom of the ladder. It just is not right.

Socialist points. I don't mind supporting people who can't work, I deem it a moral obligation (it is a very rare case that someone refuses to work altogether). If everybody had a place to live, food to eat, and a doctor to see, nearly every other problem we have involving the economy, crime, and most social ills would evaporate. Let's provide the basics, to all, then the people who only live by the basics are the ones who cannot complain about the rich, because then the playing field is level.

On a side note, now that I know your a worker bee like me, doesn't it disturb you that George W. Bush had a great educational opportunity at an Ivy League college and blew it by earning a C average? I know if I had that opportunity, I would have made the best of it, but I just wasn't rich enough to blow off college like it was a drunken frat party. And now this ignorant mass of skipping out of military duty, failed businesses, and daddy hand outs is our president. Weird world.

2nd side note--Thanks much for the parlay on this issue! :)

1:34 PM  
Blogger Sarah Beth said...

If by hard you mean physical labor as opposed to mental labor than I would agree with you. More often than not, physical hard work pays less.
Capitalism is not anti-benevolence. You should be able to choose to give as much as you like to whomever you like, but it should not be expropriated from you by government regulation forcing people to give to causes they do not support. People do not need to be forced to be moral, that in and of itself is what is immoral and taints any good that could come of it.
GWB is a strawman, don't get me on him, he's certainly not my hero. But I certainly think he too is a sign of the times. I wouldn't prefer to have Kerry after all. If times are to change they have to change from a metaphysical standpoint. Altruism has never left the scene entirely, but in our greatest periods of prosperity, it was the least visible.
Thank you for the parlay,:) It is most enjoyable!

1:51 PM  
Blogger Chris Granger said...

OK, I'm at the tail-end of a no-sleep two day orgy of coffee and metabolism-revving pills endorsed by Richard Simmons. It's times like these that I most want to jam an angry thumb into the eye of the modern zeitgeist until my nail hits brain. If I can quote the late, great commedian, Bill Hicks, "It's time to evolve ideas. You see because we're creative children of God and well . . . that's kinda our role." (sic, quoting myself , quoting Bill)

Why can't we bitch slap the status quo, remember how we saw the world as children, and build our ethos afresh. Instead of worrying about the economy, which to quote Hicks again, "Is fake anyway." Time to evolve ideas, because times change, society's grow, thinking evolves, and institutions, consequently become irrelevant.
Yes, I'm in a Star Trek Socialist mood tonight. Because, if we could erase all borders, do away with money, and realize that we're all one (viz. Korzybski Semantics) then maybe we could look to something bigger than making a buck. The Star Trek World will eventually happen I feel, as long as we don't kill ourselves in the meantime. Of course, as Ronald Reagan once eerily (?) remarked, it may take a threat from an extraterrestrial civilization to bring us together.

This has been discursive to a schizophrenic-like fault, and poorly thought out, and for that, I apologize.

10:02 PM  
Blogger jomama said...

I'll stick with 'making a buck' for
now, til it hits the skids. (It's
on it's way.)

After that I'll probably open a
donkey sales lot with all the
then ex-socialists I knew over
the years.

10:21 PM  
Blogger Sarah Beth said...

Good God, if I'm ever stuck selling donkeys with a bunch of Spock eared cynical socialists (Wait-don't that have a commune like that in So Cal?) I think I'll turn that nifty phaser on myself.
[LOL] Talk about nightmares.

10:10 AM  
Blogger Chris Granger said...

I think the Vulcans will remain capitalists. They were impassive and chilly.

7:15 AM  
Blogger M.T. Daffenberg said...

I really don't mean to beat a dead horse, but I'm still reaching for my bat, and the horse is still steaming in the night.

We have laws. Laws enforce moral decisions. Without laws, we have chaos, and no way to enforce morality. Are you an anarchist? That would be the only alternative to eliminating forced adherence to morality. I know there are about a thousand spokes off this point, but I wonder if you think we need laws at all. I went through an anarchy stage for a while, myself. It led me into my objectivist phase.

2:33 PM  
Blogger Sarah Beth said...

No I'm not an anarchist, but you are mixing up the proper function of government. A government, is chosen by and paid for by the people for protection. Without a proper philosophy, where do these morals come from anyway? Whose morals are to be enforced? Right now, that is exactly the problem we are seeing. The religious and ultra conservative groups are looking to use government power to force morality. Morality cannot be forced, first of all, and second of all the very fact that government has the sole right to initiate force makes it immoral for them to abuse that by initiating force on us for every inanity that we don't even agree with, since they are working off of tax dollars which they force us to pay whether we agree with their morals or not. The proper role of government is solely protection so that each individual can live out their life as they see fit, provided it doesn't hurt anybody else. And no being offended is not the same as being hurt.

3:49 PM  

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