Thursday, June 24, 2010

Nurturing the Wealth Creators

At my son's graduation for the local government high school, all of the speakers were politicians--the mayor and our national congressional representative. It struck me even then, why no businessmen? I know of several members in our community who work in businesses doing world-changing work. My first reaction was pretty cynical--well of course a government school promotes politicians. But after seeing the clip below, I thought about how the bias goes further than public school. I know of no private school that teaches entrepreneurship either.

Entrepreneurs and businessmen are wealth creators. Without the middlemen to bring the bacon to market--we'd have to all live on a farm. They deserve our admiration, and our nurturing when young.




Caveat: Just because I post something doesn't mean that I endorse every single thing within it--whether an article or a video clip.

10 comments:

Anonymous said...

I agree with the main thrust of Mr. Herold's comments. When our children graduate from public high school they should know how to balance a check book; how to buy a house (including the saving for the down payment part); the various things related to time value of money such as investing, amortized loans, annuities; how local governments work (real estate laws, zoning laws, business regulations, etc.); how to start a business....

High academics is fine, but most high school students will not use the stuff theylearn there, except for getting into college. The bottom line is our elementary, middle and, especially, high schools should be teaching students how to be good citizens, not how to be good academicians.

Entrepreneurship seems to be, at this point, a secret art, known only to those who are initiated through channels not discussed in the usual education.

In defense of the usual high school gradution ceremony, the leaders in the community are the local officials, from the view of the average principal. Perhaps if the local entrepreneurs volunteered throughout the year, the principals and superintendants whould know who they are and ask them to speak. My guess is that most if not all of themare invisible whenit comes time for the principal to put together a nice ceremony that will impress the superiors and families.

Anonymous1

HaynesBE said...

Anon1-

Actually, those businessmen are not invisible in this small community but are an integral part of it. Many volunteer for all kinds of things in the community--including coming and talking to the kids at the school about possible careers.

Do you disagree that businessmen are not given adequate credit for the good they do?

I more often see them be vilified in the press than praised and thanked for their contributions. Additionally, politicians frequently use them as a scape goat for problems that government intervention has caused.

Our mayor gave a great speech, appropriately aimed to the graduating seniors, putting their accomplishments into the context of our towns's history. The representative used it as an opportunity for grandstanding and politicking--as did the principal.
Sorry--but I would have much preferred hearing from a senior guy from Apple or Genentec to self-aggrandizing politicians.

It's part of the problem of government run education. Of course they are going to glorify government solutions and politicians. How are kids supposed to know where the education ends and the propaganda begins?

We need the separation of state and education---for the exact same reason that we need separation of state and religion. there is no such thing as a value free education.

Anonymous said...

good point about kids not being equipped to sort out propaganda from education. If your business people are active participants in the educational system in your town, they should be given fair representation at graduation time. Moreover, those who aren't now active should be solicited at career day time to tell their stories. Part of the problem is that if you have a hammer, every problem looks like a nail. So, public servants look to public servants; and they get kudos for giving their buddies an opportunity to get free PR.

As far as business people being vilified in the press, I attribute that to the 'if it bleeds it leads' mentality. Let's face it, the BP executive who wants to 'get hislife back' taking time out to sail in a yacht race in England, while his company is stiffing the 'little people' (BP exec's words) who can't earn a living because of what BP did is better copy than announcements that Starbuck's Eco Water has raised X amount of dollars for third worl countries, or that Bill Gates foundation has improved healthcare and education for X million people in developing countries.

This failure of the press is a direct result of the corpporatization of the press. Once upon a time, as I understand it, corporate charters were for limited times. Renwal of charters required demonstration of social benefit in exchange for the benefits of incorporation. Similarly, continued licensing by the FCC required demonstration of community service. These have gone by the wayside, being replaced by the profit motive or market forces.

Unfortunately, this has been accompanied by a diminishing of the sort of muckraking necessary to keep our democracy functioning. Exposition of government corruption is less prevalent today than in the past, probably due to elimination of investigative journalism at many news organizations and replacing it with passing along stories from the wire feeds.

Were you aware of the extensive corruption at MMS? The drinking, drugging and sleeping together between the regulators and the industry representatives? Apparently Salzar was trying to clean that up when BP happened. I don't think it got national play, but, given that the offenders were in the local office where I live, the local press picked it up...very briefly. Then they got back to what LindsayLohan was doing, or the trial of the punk who killed a local sports hero in a drive by shooting.

I'm sure that if journalists cared to look at the conflicts of interest and unethical behavior of those in our national, stae and city governments there would be enough material to fill many healthcare-bill-sized publications. Like I've mentioned before, I would really like to know how the few representatives or senators who come from humble backgrounds and spend a career making $150,000 a year, plus or minus, turn up as millionaires within a few years of arriving in Washington.

HaynesBE said...

Anon1
1.
Some businessmen are jackasses. Some politicians are genuine and have good intentions.

But--what I object to is vilification of businessmen per se and profit per se. (So I guess I should also be more specific about my denigration of politicians.)

I was all ready to agree with you on the BP exec making snide remarks, but wanted to know more about the circumstances first. Here is what I found: The exec making that remark is Scandinavian and English is not his first language. One interpretation of his remarks is that he was genuinely concerned about small businesses effected by the spill. I honestly don't know which interpretation is right. Do you?

2. You continue to pique my interest about corporations.

3. I think we agree that business + government = special interest politics = bad news for the "little people." Regulatory capture is a well known phenomenon. Where we probably part ways is on the solution to that problem.

Anonymous said...

Well, it would be nice if the market could take care of regulatory issues because if it could, K-street Lobby headquarters, USA, would cease to exist, and no industry or corporation could gain advantage by cultivating relationships with government representatives, whether elected or appointed. However, there are countless examples from industry that this is not the case (See BP and voluntary installation of disaster prevention equipment; or, check out the long list of infractions by the pharmaceutical industry regarding safety, promotional claims, contracting deals, etc.; or, check out the defense industry: on the other end of those $5,000 hammers that evoke anger over wasted money is a profit motive player, and on and on....).

Another example is Massey (sp?) Energy. They apparently had a long record of failing to follow safety regulations. The free market model says that (1) the workers will stop working for thecompany and (2) consumers will stop buying fromthe company. Unfortuantely the stickiness of employment or the economic friction associated with leaving a job and moving apparently outweigh the desire to do so. On the other side of the equation, coal is purchased by power companies and it is fungilbe. So, just as we are powerless to stop Iran from selling its oil, we can't shut Massey down economically.

If companies don't follow regulatory law despite millions of dollars of possible fines AND the negative market forces that the free market theory says should alter their behavior or shut them down, there is no reason to believe that they will voluntarily behave appropriately when left to their own devices. There is no reason I can see (point one out if you have one) that regulatory law should diminish the negative market effects of the behaviors corporations regularly exhibit, so the present situation has a double deterent to the behaviors regulation is supposed to inhibit. Yet, those behaviors are still present. At least 'we the people' get something back when we catch the perpetrators. I see no other way to protect ourselves, except for 'we the people' to appoint regulators...and keep a close eye on them. It appears that despite its flaws, some regulation is better than none.

Related to this is the recent Supreme court ruling that corporations are persons. But that is another story. I'm still interested to hear what you or Garret has to say about the consistency of the corporate form with Objectivism, and to hear your response to my gedanken experiment regarding the city-state and the free loader.

Anonymous1

Mo said...

If companies don't follow regulatory law despite millions of dollars of possible fines AND the negative market forces that the free market theory says should alter their behavior or shut them down, there is no reason to believe that they will voluntarily behave appropriately when left to their own devices. There is no reason I can see (point one out if you have one) that regulatory law should diminish the negative market effects of the behaviors corporations regularly exhibit, so the present situation has a double deterent to the behaviors regulation is supposed to inhibit. Yet, those behaviors are still present. At least 'we the people' get something back when we catch the perpetrators. I see no other way to protect ourselves, except for 'we the people' to appoint regulators...and keep a close eye on them. It appears that despite its flaws, some regulation is better than none.

By that very reasoning, one could argue that since the current laws in the book are not followed, since criminals are still around, that the government must watch all of us, 24/7, just to be sure we never break the law. But it does not follow, since from the fact that some people are criminals, despite all the laws against it, that the government have the right to treat everybody as guilty until proven otherwise.

Mo said...

Another example is Massey (sp?) Energy. They apparently had a long record of failing to follow safety regulations. The free market model says that (1) the workers will stop working for thecompany and (2) consumers will stop buying fromthe company. Unfortuantely the stickiness of employment or the economic friction associated with leaving a job and moving apparently outweigh the desire to do so. On the other side of the equation, coal is purchased by power companies and it is fungilbe. So, just as we are powerless to stop Iran from selling its oil, we can't shut Massey down economically.

What "market model" assumes that people will stop working for this company because it failed to follow some "safety regulations" (which had no rational justification in the first place)? Also, consider a major reason why people are unwilling to quit a job just like that: other various government interventions that make it hard for people to get a job. Also, what if they value the job greater, because of the greater pay (probably as compensation for the higher risks involved in this type of job)? Also, so what if companies continue to make business with this company?

It seems like your under the impression that if the market does not put this company out of business, for failing to obey government regulations (for which there is no real justification in the first place), then it proves we need government regulations and then some. It is a total confusion at best, but most likely a straw man-argument against the idea that on a free market bad businessmen will, in the long run, be put out of business because of the market forces.

HaynesBE said...

Mo--
Thanks for the comments on risk. I agree that as a culture we are becoming less risk tolerant--and consequently looking for someone to blame when outcomes are less than perfect.

I think you high light the absurdity of the precautionary principle. If applied consistently across the board, you could never act at all!

The key is to weigh the risk/benefit---and assure that the individual making the decision reaps the benefits and pays the costs and then decides what risks are worthwhile. The harder part is when the risks and benefits affect third parties--the whole positive/negative externalities issue of economics. We are quick to assign culpability for damages (sometimes appropriately, sometimes not) but much slower and often negligent in giving credit for benefits.

I do not have a ready-made system to recommend that solves this problem in every case--but I believe the answer lies in attempting to hold the widest context possible (which in the case of drilling for oil would include the multitude of benefits that petroleum products have provided to the advancement of our standard of living), and putting our efforts into developing a clear understanding of property rights,determining criteria for objective harm and setting reasonable limits of culpability.

If a medical treatment is known to be effective and has become standard therapy for a particular illness, a physician would be held negligent not to inform a patient of that treatment. It seems to me a similar standard would be reasonable for holding a company accountable for safety equipment. That does not mean we need a law or regulation mandating that specific medical treatment or safety equipment.

What do you think?

Mo said...

Hi HaynesBE

In considering the BP oil disaster, no matter whether the safety of a given procedure is established by government or privately, it involves making a judgment of the risk-to-reward ratio as you said. The problem is that we are addicted to drama. No matter what the current problem might be, we behave as though it's new under the sun. Although our better judgment knows that a wide range of outcomes is possible, it's always the worst case scenario that grabs hold of our brains.

It is not possible to implement the idea: take no risk. The only approach to implementing that is: do nothing, don't produce. Once one realizes that the standard of zero risk is irrational, the whole question of regulation takes on an entirely different aspect. The premise of the pro-regulation camp is the irrational idea: the government should stop all risky operations.

All risk, risk as such, is eliminable only for the dead.

As to how address this issue, this link provides a potential solution http://ronpisaturo.com/blog/2010/06/21/how-a-capitalist-government-would-handle-the-bp-oil-spill/

HaynesBE said...

Ha!
Just came across that article in my weekend reading pile...along with these two other timely and relevant items on risk which I recommend reading. :)

Value Avoidance

Why BP is not very slick in an emergency