Something Rotten in America Is Coming This Way

08 Jan 2026 Leave a comment

by Dr. John Persico Jr. in Uncategorized Tags: , , , , , , , , ,

“Something Wicked This Way Comes” is a 1962 dark fantasy novel by Ray Bradbury.  It tells the story of  two 13-year-old boys, Jim Nightshade and Will Halloway, in Green Town, Illinois, who confront the sinister Cooger & Dark’s Pandemonium Shadow Show.  The show is part of a malevolent carnival that preys on people’s secret desires and fears.  Jim and Will are forced to battle evil and examine the nature of good and evil, youth and aging.  The title comes from Shakespeare’s “Macbeth”, and the story explores themes of good vs. evil, the fear of growing old, and the cost of wishes.

Macbeth is the story of a man driven by ambition and a lust for power to murder his king and seize his throne.  Like Bradbury’s novel, it is also a tale of good and evil.  The famous quote is “By the pricking of my thumbs, something wicked this way comes.” It is spoken by the Second Witch in Act 4, Scene 1, as she senses Macbeth’s evil approach, indicating his profound moral corruption even to supernatural beings.  Someone once noted that most great stories involve a battle between good and evil.  Fiction mimics reality.

The famous Gettysburg Address by President Abraham Lincoln also described a battle between good and evil and the sacrifice made to restore good.

“It is rather for us to be here dedicated to the great task remaining before us—that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion—that we here highly resolve that these dead shall not have died in vain—that this nation, under God, shall have a new birth of freedom—and that government of the people, by the people, for the people, shall not perish from the earth.”

The cause was the elimination of the evil of slavery and racial discrimination, and the continuation of a nation built on the values of life, liberty and the pursuit of happiness.  Values that were not allowed to be held by a significant portion of Americans specifically Black people, Indigenous people but also including women, gay people, Asian people, and many immigrant groups

Today, the thought rings in my mind that “Something rotten comes this way.”  Yes, a paraphrase of the Bradbury quote but it has a somewhat different meaning to me.  Something rotten smells and stinks in our country.  Carved into a White House mantel is a quote by John Adams, “May none but honest and wise men rule under this roof.”  Today something is rotten in the White House.  The foul and putrid odor has spread to the Supreme Court and both houses of Congress.  Wise men search for the odor but cannot agree on its source.  When something is smelly we generally assume that it is rotten.  Hence my reflection that “Something rotten comes this way.”  It has been coming for a long time, but the stench and fetid smell have now become unbearable.  From the White Mountains of New Hampshire to the top of Mt. Whitney in California, the rank fumes are causing people to gag and vomit and leave our country.

What is the source of this rottenness?  The smell comes from an ever-enlarging foundation of greed and narcissism that has replaced integrity and morality.  From the pulpits of many so-called Christian churches to the podiums of our once great universities, Americans are now baptized or given diplomas in greed, avarice and opportunism.  Increasingly, cowards roam the halls of Congress where statesmen once tread.  Too many of our leaders lack morals or integrity.

Sycophants earn positions as heads of government with no qualifications except an unscrupulous ability to kiss ass.  The media daily screams headlines that defy logic and comprehension while profits for news conglomerates soar to ever higher peaks.  Meanwhile, the information contained in media broadcasts bears scant resemblance to the reality that most of us face.  Lying is the norm and has become one more strategy in a congressperson’s arsenal.  A stew of lies daily spread by the internet and its media minions.   None of us can escape complicity in this economy as we all breath its rotten air.

Something rotten comes this way:

How can we expunge this rottenness?  Will singing Kumbaya work?  Will hands across the aisles work?  Will prayers and thoughts work?  Will more empathy work?  What about better communication?  What about more people going to college to get educated?  What about doing away with Social Security and replacing it with Stock Portfolios?  What about more guns?  What about?  Sorry, I am out of simple solutions.  None of these so-called solutions work because they do not confront the real problem.  The golden idol that makes money the measure of all good things in life.  It may be possible to stop the spread of this rot, but it will take a change of heart as well as a change of mind.  Many of my friends ask me if it is not too late.

I only know one thing.  Unless we change the path that we are heading down, we can kiss democracy in America goodbye.  The rottenness will eventually infect the entire nation until we are left with nothing but a country of cowards, sycophants, greedy merchants and greedy consumers.  People who will continually lie to get ahead.  People with no goals except to consume the latest do-dads in hopes of becoming happier and more satisfied with their lives.

Ironic that so many Americans want to go down this path, since not one great prophet in history has preached that owning more stuff will either make you happy or get you into heaven.  Nevertheless, today we have Christian churches preaching the “Prosperity Gospel.”  A narrative that has millions of followers subscribing to a bastardization of every great scripture that has ever been written.

The prosperity gospel teaches that faith, positive confession, and financial giving to religious leaders will bring the giver personal wealth, health, and success.  It portrays material prosperity as due to God’s favor and poverty or illness as evidence of weak faith or spiritual failure.  The Prosperity Gospel is a Super Con because it monetizes hope, blames failure on the believer, and shields itself from disproof.  People buy into it because it promises certainty and reward in an unfair economy.  It exploits vulnerability, fear, and selective success stories to convince “true believers” that it is a Christian teaching.

Robert Tilton: “I believe that it is the will of God for all to prosper because I see it in the Word… I do not put my eyes on men, but on God who gives me the power to get wealth”.

Creflo Dollar: “When we pray, believing that we have already received what we are praying, God has no choice but to make our prayers come to pass”.

John Avanzini: “Jesus had a nice big house”, “Jesus wore designer clothes”, “Jesus was handling big money”.

Joel Osteen: “If you want to reap financial blessings, you have to sow financially”. He also states, “I believe God wants you to prosper in your health, in your family, in your relationships, in your business, and in your career”.

Oral Roberts:  “Sow a seed on your MasterCard, your Visa or your American Express, and then when you do, expect God to open the windows of heaven and pour you out a blessing.”

Friends, the only solution that will save our country along with our immortal souls is to defeat the basic tenets of corporate capitalism and to cast out the evangelists of hypocrisy who spread such false gospels as the “Prosperity Gospel.”  The corruption that we see in the White House, the Congress, the Supreme Court, the Universities, the Media and many so-called Christian Churches is a symptom of the rot that is associated with our predatory avaricious Corporate Capitalistic system.

Corporate Capitalism itself must be understood as a mindless media driven machine that puts profits over virtue.  A system in which the greater needs of society are no longer the recognized or given any priority.  All that is rotten today in America today can be traced to greed and avarice.  The same motivations that caused the Israelites to build the Golden Calf.  The Golden Calf still stands—no longer forged of gold but of brands, markets, and corporate power.  We bow to consumption, give obedience to profit, and keep silent to wrongdoing in exchange for comfort and toys.  We mistake greed for progress and idolatry for economic necessity.  We do not need a rejection of markets but a rejection of markets without moral and ethical anchors.

The late Pope Francis is quoted as saying that:

“From an economic point of view, it is irrelevant to produce tanks, or candy provided the profit is the same.  Similarly, it might be the same to sell drugs or sell books if the profit figures match.  If the measure of value is money, everything goes provided that the profit does not vary.  The measure of every human being is God, not money.”

Money becomes the measure of good and evil.  Money becomes the measure of a person’s value and even life.  Today, the religion of America has become “How can I get more money.”  The true prophets throughout history have always preached the potential dangers of focusing on accruing either wealth or fame.

Christianity (Jesus): “No one can serve two masters. … You cannot serve both God and money.”

Islam (Prophet Muhammad, Hadith): “Riches are not the abundance of worldly goods; rather, true riches are the richness of the soul.”

Judaism (Talmudic/Midrashic Thought): “The truly rich are those who are satisfied with what they have.”

Baha’i Faith (Baháʼu’lláh): “Material comforts are only a branch, but the root of the exaltation of man is the good attributes and virtues which are the adornments of his reality.”

Red Cloud (Oglala Lakota): “I am poor and naked, but I am the chief of the nation.  We do not want riches, but we do want to train our children right.  Riches would do us no good.  We could not take them with us to the other world.  We do not want riches.  We want peace and love.”

If we want to rid our nation of the rottenness and stench that is rapidly covering it, we must rid ourselves of the obsession that capitalism seeks to instill in us with every media at their disposal and every commercial that they can provide.  It is an obsession to own more, to possess more, to have more, to buy more, to shop until we drop.  You can have a heart attack so long as you have spent your last dollar.  Christmas has become $Mas.  Our world has become one big shopping mall.  We are speeding on a spending train to oblivion.  Next stop HELL. 

What Can We Do?

If the disease is moral, the response must be moral as well.   We must all:

  • Refuse to lie or accept lies
    • Reject those who tell lies to get ahead for any reason
  • Refuse to worship money and wealth
    • Reject anything to do with the “Prosperity Gospel”
  • Refuse to relate success with goodness
    • Teach that success is not always associated with morality or doing the right thing
  • Teach our children to be responsible
    • Responsibilities are as important as rights. Develop children who accept responsibility for their lives
  • Choose sufficiency over excess
    • Corporate Capitalism thrives on “wretched” excess. Ask yourself what you really need to be happy not what some commercial tells you that you need.

The single most important thing we can all do is to get off the spending train.  Substitute empathy for others for greed.  Substitute kindness for strangers and immigrants instead of suspicion and hatred.  Substitute charity for all for a desire for more stuff and more toys for oneself.  Substitute compassion for the poor and the needy instead of worrying about what you are going to get.  Substitute mercy and forgiveness for hatred and retribution.

Above all remember that we are all one people.  There are about 180 or more countries in the world.  Karen and I have only been to 45 now, but we have found that everyone in every country that we have been to want the same things:  Meaning for their lives.  Peace for their nation.  Safety for their families.  A decent place to live.  A good meal each day.

We must embrace the idea that everyone is entitled to these elements of a satisfactory life and not just people in our circle or community or nation.  People in every country of every color of every religion and of every political and economic philosophy deserve the same thing.  Life, liberty and the pursuit of happiness.  

Five Westerns and Five Moral Universes: What Old TV Shows Still Teach Us About America

09 Dec 2025 9 Comments

by Dr. John Persico Jr. in Uncategorized Tags: , , , , , , , , ,

By John Persico (with a lot of help from Metis)

In the late 1950s and early 1960s, American television was overrun with cowboys.  Westerns galloped across nearly every network, each one promising a different angle on courage, justice, and the messy human struggle to build a society out of dust and gun smoke.  We tend to remember the big ones—Gunsmoke, Bonanza, The Rifleman—but tucked in that crowded landscape were several thoughtful, sometimes surprisingly philosophical shows that tried to answer deeper questions about right and wrong.

I have always loved cowboy shows.   My favorite cowboys when I was growing up were Hopalong Cassidy, the Lone Ranger and Roy Rogers.  Most of these men got their start in the 30’s but their shows migrated to the TV medium when it was first started.  Many episodes of Hopalong were taken from his early movies.  Later, TV started to develop its own cowboy series with weekly episodes of tall, dark and handsome heroes.  By this time in the late 50’s and early 60’s I was not watching TV anymore.  I was in my early teens and had better things to do than watch TV.  Thus, I never watched the five shows that I am going to talk about in this blog when I was young.

I only started to watch these old TV shows a few years ago.  I was rather amazed at the quality of the stories that they told.  They were nothing like many of the TV series that came around later characterized by many more shootouts and gun fights.  These early TV shows tried to convey a strong sense of morality and featured a more discreet and thoughtful use of gunplay.   Many of the heroes in these shows eschewed violence and attempted to use reason to end a fight rather than gunning down a villain.   

Five of these Westerns—The Tall Man, Wyatt Earp, The Restless Gun, Tombstone Territory, and The Texan—offer a fascinating window into how Americans of that era imagined moral life on the frontier.   Each operated in a different moral universe.  Together, they reveal a whole spectrum of values still relevant in 2025: authority vs.  independence, violence vs.  restraint, institutions vs.  personal codes, loyalty vs.  law.

Here’s what these shows have to teach us when we dust them off and look again.

The Tall Man: Tragedy, Friendship, and the Gray Zone of Morality

Among these Westerns, The Tall Man stands out for its dramatic complexity.  Rather than presenting the frontier as a struggle between clear-cut good and evil, the series explored the psychological and moral tensions between Pat Garrett and Billy the Kid—historical figures already steeped in myth.  The show emphasized the tragic inevitability of their relationship: Garrett, the reluctant lawman; Billy, the charming outlaw whose charisma repeatedly outpaced his judgment. These were not cardboard heroes and villains; they were complicated men bound together by loyalty and destiny.

The morality here is not a simple endorsement of law or rebellion.  Instead, it suggests that human loyalties are fragile, destiny is unforgiving, and justice often emerges from personal conflict rather than abstract principles.  It is a Western operating in shades of gray, reflecting an America grappling with Cold War dilemmas where allies and enemies were not always easy to distinguish.  Viewers recognized themselves in the struggle between duty and friendship, a theme uncommon among early Westerns.

The underlying message was that life often puts us in situations where justice isn’t neat.  Friendship can clash with duty.  Good intentions can slide into the wrong choices.  And sometimes the person you care about most becomes the person you eventually have to confront.

In that sense, The Tall Man feels strikingly modern.  It understands that real life doesn’t divide neatly into good guys and bad guys—something America in the Cold War era was just beginning to wrestle with.

Wyatt Earp: The Comfort of the Uncomplicated Hero

If The Tall Man reveled in moral ambiguity, Wyatt Earp offered the opposite: a mythologized portrait of the West’s greatest lawman, played with crisp, upright dignity by Hugh O’Brian.  This series promoted a worldview in which society advances only when firm, principled authority imposes order on chaos.  Earp serves as the archetype of the responsible American leader—a man who does not relish violence but accepts it as a necessary instrument of civilization.

Earp represented the belief that civilization requires firmness.  Order doesn’t grow on its own—it has to be imposed by strong, decent people who are willing to shoulder responsibility.  For postwar America, still anxious about the atomic age and the looming tensions with the Soviet Union, this moral clarity was reassuring.

The show’s moral message resonated with 1950s ideals of stability: strong institutions, disciplined citizenship, and faith in the ability of virtuous leaders to “keep the peace.” It aligned neatly with postwar values, especially the belief that social progress requires firmness rather than moral compromise. Earp rarely doubted himself, and the series rarely doubted him either.  Its clarity, even rigidity, provided reassurance during an era troubled by atomic anxieties and Cold War uncertainty.

Earp didn’t struggle with his conscience—he was the conscience.

The Restless Gun: Pacifism in a Violent Landscape

In sharp contrast to both Garrett and Earp stands Vint Bonner of The Restless Gun, one of the few early Western heroes who actively sought alternatives to violence.  Bonner modeled the idea that courage is not measured by willingness to kill but by the ability to resolve conflict through empathy, reason, and patience.  Yes, this was a Western.  Yes, he still ended up in gunfights.  But the moral direction of the show pointed firmly away from killing and toward understanding.

This places The Restless Gun closer to a moral philosophy of restorative justice than frontier retribution.  In many episodes, Bonner functioned as a mediator, teacher, or counselor.  The villains were not always evil; they were often misguided, desperate, misinformed, or trapped in circumstances they could not manage.  The show’s worldview subtly challenged the Western convention that justice flows from the barrel of a gun.  Instead, it argued that America’s future might depend more on understanding than dominance.

This made the series unusually modern, anticipating later Westerns such as Have Gun, Will Travel, which incorporated moral complexity into the traveling-gunman archetype. Though the show ended early, its worldview remains distinctive in the genre.

In a genre built on bullets, The Restless Gun dared to say: there is another way.

Tombstone Territory: Justice as a Public Responsibility

Tombstone Territory offered a more institutional perspective on frontier justice. Structured around the fictional Tombstone Epitaph newspaper, the show dramatized the challenges faced by Sheriff Clay Hollister in maintaining order within a volatile, fast-growing community.  Unlike Wyatt Earp, where the marshal’s authority was never questioned, Hollister constantly wrestled with public scrutiny, political pressure, and misinformation—issues that eerily foreshadow the modern news cycle.

The moral heart of the series lies in its quasi-documentary tone. Hollister must uphold the law not simply by enforcing it, but by navigating competing interests, calming mobs, and maintaining legitimacy.  Truth, evidence, and due process—rare elements in early Westerns—become central themes. The show’s structure echoes the belief that justice is not merely an individual virtue but a collective responsibility.  It encourages viewers to appreciate the difficulty of governing rather than merely celebrating the lone hero.

In many ways, Tombstone Territory anticipated the later rise of procedural dramas where law enforcement is portrayed as an institution rather than a personal crusade.

The show’s moral center was institutional: justice requires process, evidence, and the difficult work of maintaining legitimacy.  It wasn’t glamorous.  But it was honest.  In many ways, Tombstone Territory speaks more directly to our modern world than some of the bigger Westerns of its time.

The Texan: The Noble Drifter and the American Myth of Honor

Rory Calhoun’s The Texan returned to the classic Western figure of the noble wanderer—a man whose moral code is internal rather than institutional.  Bill Longley, a Confederate veteran, embodies the Western ethos of individual honor: help the vulnerable, confront injustice, and ride away when the dust settles.  The show foregrounds personal integrity over law, suggesting that character—not institutions—ultimately preserves the frontier’s fragile social fabric.

This worldview reflects an enduring American belief in self-reliance and moral autonomy. Longley’s wanderings represent not rootlessness but a spiritual quest to repair the world one town at a time.  His code is chivalric, almost knightly, and he stands as a corrective to the bureaucratic tensions seen in Tombstone Territory.  While he respects the law, he serves a higher standard—his own conscience.

Longley wasn’t defined by the law, nor by institutions.  His moral compass was internal.  He showed that a single person—armed only with decency and grit—could make things a little better wherever he went.

It is the Western as America likes to imagine itself: independent, honorable, and self-reliant.  Even if it rarely works that way in real life, the aspiration is part of our national DNA.

Five Shows, Five Moral Visions

When you line up these Westerns side by side, the moral variety is remarkable:

  • The Tall Man explores the tragedy of conflicting loyalties.
  • Wyatt Earp celebrates firm authority and disciplined leadership.
  • The Restless Gun champions compassion and restraint.
  • Tombstone Territory elevates due process and public trust.
  • The Texan extols personal conscience as the highest law.

Together, they show how deeply Americans were thinking—even through half-hour cowboy shows—about law, justice, violence, and the kind of people we wanted to be.

And perhaps that is the most interesting lesson of all: Westerns weren’t just entertainment.  They were moral storytelling, played out on horseback.

In dusting off these forgotten classics, we rediscover a whole range of ethical possibilities—some stern, some gentle, some tragic, some idealistic.  The frontier wasn’t just a place; it was a metaphor for the ongoing journey America has always been on: trying to figure out how to live decently in a world that is not always decent.

What Happened to These Shows and the Morality that They Tried to Convey?

  1. The Tall Man (1960–1962)

Why it was cancelled:

  • Ratings sagged as audiences drifted toward lighter, family-friendly Westerns and bigger stars.
  • NBC also faced increasing difficulty with script standards: portraying Billy the Kid sympathetically clashed with emerging TV violence guidelines.
  • Production costs were rising, and no strong sponsor stepped in to keep it going.
  1. The Life and Legend of Wyatt Earp (1955–1961)

Why it was cancelled:

  • After six seasons, the formula grew repetitive, and the mythologized Earp no longer impressed audiences seeking the grittier realism of later Westerns.
  • Hugh O’Brian wanted to move on, and ABC saw declining ratings.
  • The Western market was oversaturated by 1961.
  1. The Restless Gun (1957–1959)

Why it was cancelled:

  • Despite solid ratings, Payne’s contract and salary demands increased, and NBC hesitated to renew at higher costs.
  • The show’s gentler tone was overshadowed by edgier Westerns.
  • Payne himself said he felt the stories were becoming repetitive.
  1. Tombstone Territory (1957–1960)

 Why it was cancelled:

  • Transition from ABC to syndication hurt the budget.
  • Stiff competition from higher-budget Westerns.
  • The semi-documentary framing was admired but not loved; viewers were shifting toward character-driven stories.
  1. The Texan (1958–1960)

Why it was cancelled:

  • It had strong early ratings but lost its time slot advantage to more modern “adult” Westerns.
  • Calhoun’s outside film commitments strained scheduling.
  • CBS was phasing out lower-budget half-hour Westerns in favor of hour-long dramas.

Each show ended for slightly different reasons, but the common story is:  the genre evolved faster than these earlier, simpler morality tales could adapt.  Americans wanted more “grit” more “violence” and yes even less morality.  The change from John Wayne to Clint Eastwood capped the change that we would see in Westerns from morality tales to tales of vengeance and retribution.  America was becoming more jaded.  We did not want heroes any more who were goody two-shoes.  We wanted anti-heroes and the studios offered them up in droves. 

Looking at American politics today, I often wonder where, when and how the decline in values, integrity and morality started.  Some would say it started with the decline in religion.  I don’t think religion has in the last 200 years in the USA been that big of an influence in terms of morality and integrity.  Karl Marx always believed that economics was the major driver of most social trends.  Many people who disagree with him nevertheless admit that the primary influence on voting behavior is the state of the economy.  In my opinion, this influence goes much deeper than voting behavior.  Capitalism thrives on avarice and stupidity.  It needs a large mass of people who want more and more stuff and too brainwashed to realize that the stuff they are buying is not going to bring them happiness. 

Madison Avenue became a major influencer with the advent of TV.  Go back and look at some of these early Westerns.  Smoking was de rigor.  Many of the heroes of these early Westerns died of lung cancer.  Legendary figures like John Wayne, Gary Cooper, and Chuck Connors, with numerous other actors, musicians, and public figures from that era also falling to the disease, highlighting smoking’s heavy toll in Hollywood.  But while these heroes were dying, Madison Avenue was perfecting the use of TV to sell all kinds of products. 

I always laugh at the fact that so many men have been conned into buying what I call “piss beer” from Budweiser, Miller and Coors.  Large macho football players posing in a bar with these watered down beers spent years on TV regaling their followers with the virtues of light beer.  Would be macho males stormed the liquor stores to buy their six pack of piss beer that they could swill down while watching their favorite football teams playing.  The average person is brainwashed by Madison Avenue on a daily basis.  Watch some of the old TV shows and see how much more sophisticated the ads are today.

I once asked all my MBA students if they thought that TV ads had much influence on their buying patterns.  The typical answer I received was “No, I make up my own mind when I go shopping.”  Most people do not even know that they are brainwashed.  The cigarette industry spent years lying to people about the medical effects of cigarettes.  Today, it is the liquor companies that are lying to consumers.  But all of Capitalism and advertising has one major motive when it comes to making a sales pitch.  That motive is too make you feel inferior.  To make you feel needy.  To make you feel inadequate.  Once you feel like you are somehow lacking something, they can pitch you their product.  Their pitch will always be that you will be better, smarter, faster or happier with their product or at least you will be better, smarter, faster and happier than your next-door neighbor who did not buy their product.

I believe the decline in morality and integrity in the USA can be directly linked to Madison Avenue and the brainwashing they conduct on consumers.  If you are on the producers side of the economic equation, you cannot have any qualms about what you are selling or the side effects or the unintended consequences of the use of your products or services.  If you are on the consumer side of the economic equation, your whole reason for being is to buy more and more stuff regardless of its impact on your health and sanity or the environment.  This callousness on both sides has resulted in a society that is unparalleled in terms of greed and avarice. 

The old Westerns were like some of the early fairy tales.  They had a motive beyond entertainment.  They existed to convey a morality that eventually seemed too simplistic and certainly too limiting.  Morality is a unique virtue in the sense that it not only asks you what you are doing for yourself, but it also asks what are you doing for others. Morality cannot coexist with Capitalism any more than Capitalism can coexist with Communism.  We need a new economic system based on principles of love, trust and compassion for ALL the people in world and not just our friends or relatives or the people in our own country. 

It’s the Economy Stupid! The Five Myths of Capitalism – Part 4 of 5

08 May 2020 11 Comments

by Dr. John Persico Jr. in Uncategorized Tags: , , , , , , , ,

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I stated in my three previous blogs that unless we change our attitudes and policies regarding Corporate Capitalism, it will destroy our country, our way of life, our freedoms, and our environment.  Furthermore, we will undoubtedly take some of the rest of the world along with us.  This is a serious accusation and one I do not take lightly.  I have been a business educator in higher education and a management consultant to some of the top corporations in the world.  My opinion is not based just on theory or observations.  It is based on the in-depth work that I did with over 32 companies during the time I was actively consulting.  There are many good people working in corporate America but as Dr. Deming once said “You put a good person in a bad system and the system will win every time.  There are Five Myths of Capitalism that are largely responsible for the mistaken policies and laws that have allowed Corporate Capitalism to become a dangerous disease infecting our way of life and causing untold damage to our country.

In my previous blogs, I described the first three myths.  In this blog, I will describe Myth #4 and how it contributes to the destruction of our country.  Myth #4 is:

4.  Corporations are Efficient and Always More Efficient than the Government

In 1986, I was hired by Process Management Institute (PMI) to help merge organization development with statistics.  I had just finished my Ph.D. degree in Training and Organization Development from the University of Minnesota.  Lou Schultz, the CEO of PMI had started the company about three years before I joined.  The company was founded on and sold the methodology and philosophy of Dr. W. Edwards Deming.  Lou had met Dr. W. E. Deming when Lou worked at Control Data (CD).

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Lou was a manager at CD when sometime in the early 80’s Control Data hired Dr. Deming to help them implement his famous quality improvement process.  Lou realized that Dr. Deming had something that America needed, and he decided to leave Control Data and start a consulting firm.  The focus of this firm would be to help bring the Deming Philosophy to businesses in the USA.  Dr. Deming helped Lou in many ways by encouragement and referral of potential clients.  Lou assisted at more than 60 of the 4-day seminars that Dr. Deming had started after he was featured prominently in a TV documentary on quality.  Dr. Deming’s popularity soared after the NBC White Paper TV documentary called “If Japan Can, Why Can’t We” was broadcast.

“If Japan can … Why can’t we? was an American television episode broadcast by NBC News as part of the television show “NBC White Paper” on June 24, 1980, credited with beginning the Quality Revolution and introducing the methods of W. Edwards Deming to American managers that was produced by Clare Crawford-Mason[ and reported on by Lloyd Dobyns.

The report details how the Japanese captured the world automotive and electronics markets by following Deming’s advice to practice continual improvement and think of manufacturing as a system, not as bits or pieces. Crawford-Mason went on to produce; in collaboration with Deming, a 14-hour documentary series detailing his methods through lecture excerpts, interviews, practical demonstrations, and case studies of companies that adopted his methods.”  — Wikipedia

Dr. Deming started a series of four-day seminars to teach his philosophy and methods.  These seminars were a mixture of experiential activities, teaching, discussion, lectures and always Dr. Deming talking about what management did not do right and what they should be doing.  At the time, he had created his famous “14 Points for Management” which together with his statistical philosophy formed the basis for the four days of activities.

IMG_8176-540x405Dr. Deming would do two or three of these a month all over the USA.  He continued these four-day seminars until about six months before he died at the age of 93 in 1993.   Dr. Deming always required help at these seminars since as many as 500 people would usually attend.  I was fortunate enough to help out at four of these seminars.  After getting to know Dr. Deming fairly well, I brought several consulting clients to his home in D.C. to discuss with him personally his ideas on what we were doing right and wrong.  Dr. Deming was always very candid and blunt.  This endeared him to some people, while it turned other people off.

But it is time to get back to the point on corporate efficiency.  I worked with over 32 different clients in my years at PMI and my later independent consulting work.  I worked with clients in government, in military, in non-profit and in for-profit sectors of the economy.  I worked with industries in mining, trucking, healthcare, manufacturing and education.  I published two books on quality and over fifty papers for seminars, journals and presentations.  I did a monthly column for a noted quality journal and did some pro-bono work for various organizations.

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The crux of my client work was to facilitate what we called a quality transformation.  From a system that emphasized production quantity and inspection to a system that emphasized process improvement and quality.  Quality was never a final end state but always a quest for continuous improvement.  Improvement not to meet client expectations but to exceed them.  Deming often pointed out that clients and customers often did not know what they wanted.  “No customer” he would say “was clamoring for a handheld calculator in the seventies.  You must always innovate and delight the customer with new products and new features as well as meeting existing expectations for quality products.”  Dr. Noriaki Kano summarized some of these quality ideas in his famous “Kano Model.”  I had the good fortune to attend one of his seminars in Tokyo while I was on a two-week study mission to Japan in 1993 to visit Japanese companies and study their methods firsthand.  My trip was a joint venture between PM and Komatsu Corporation.  I brought along several clients and we had about 15 participants in all.

“Customer expectations?  Nonsense.  No customer ever asked for the electric light, the pneumatic tire, the VCR, or the CD.  All customer expectations are only what you and your competitor have led him to expect.  He knows nothing else.” — W. Edwards Deming at his Seminars

Later on when I left full-time consulting and went into college teaching, I started using a variety of models to educate my MBA students.  One I was fond of using was a metaphor of a coin to emphasize what a business must do to be successful.  “On one side of the coin is efficiency and on the other side is effectiveness.  An organization must deliver both of these elements to prosper and be successful,” I would preach.   I would then go on to say that traditionally, we think of businesses as being efficient but not necessarily effective.  Efficiency is doing things right while effectiveness is doing the right things.  In other words, business strives to use inputs as efficiently as possible to create a product or service where the value added is greater than the combination of inputs used.  If it does this and has a product or service that is wanted or needed by customers, it will make a profit and stay in business.

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When it comes to “effectiveness” or doing the “right” things, we have a concept here with highly subjective connotations.  “Right” for a business might be doing what they think is best for their customers or their bottom line.  However, doing what is best for a customer, might not meet the needs of other stakeholders.  For instance, customers may desire cigarettes but the negative impact to society as reflected in externalities can be very “un-right” to the rest of the population.  An externality is any difference between the private cost of an action or decision to a business or agency and the social cost.  In simple terms, a negative externality is anything that causes an indirect cost to society.  In the case of cigarettes, this cost is reflected in a number of ways including lost wages, medical costs and insurance costs.

maxresdefaultBy the way, when we think of government organizations it is usually as being much less capable in the efficiency area and much more focused on effectiveness or doing the right things for society.  I suppose that is one of the reasons why it is so easy to ridicule government.  Senator Proxmire was famous for his “Golden Fleece Awards “in which he belittled government agencies for their waste and lack of efficiency.  I have worked or consulted in many government agencies and I have to admit that “efficiency” was often sorely lacking.

Some critics point out that there are negative repercussions from too much emphasis on efficiency.  (HBR, January-February 2019 Issue: Rethinking Efficiency) They argue that organizations need to balance efficiency with resiliency.  One critic noted the problems with Deming’s emphasis on efficiency could lead to sub-optimization of the organization.  It is clear that this critic never read much of Dr. Deming who always emphasized that an organization needed to be looked at as a whole and not piecemeal.  Over emphasis on any one part of an organization could result in a decline in another part.

“Management of a system requires knowledge of the interrelationships between all of the components within the system and of everybody that works in it.” — Dr. W. E. Deming, “The New Economics”

Now you might be agreeing with me that business is not always effective.  However, you may still want to know why (or prove my claim) I say that business efficiency is a myth?  What do I base this assertion on?  I am going to provide three reasons for my claim and explain each of them.

  1. Most corporations do not understand or pursue continuous improvement

For a business to be truly efficient it must focus on the continuous improvement of all operations including people, materials, methods, equipment and information.  The cost of all inputs continually rises and when costs go up and other factors of production stay the same then efficiency declines.  The core of the Deming Philosophy was “Continuous Improvement.”

“Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.”  — W. Edwards Deming, “Out of the Crisis”

Many of my clients understood this basic message of the need for continuous improvement, but as I was told by one Japanese management consultant, “You Americans are short-term thinkers.  You worry about the quarterly dividend, the daily stock price and your quarterly financial reports.  In Japan, we do not think quarterly, we think centuries.”  Thus, it was easy for US companies to embrace this message in the late eighties and early nineties when it seemed that everywhere you looked, they were losing market share to the Japanese.  The “Japanese Miracle” was eroding the economic competitive of US business and companies in the US flocked to Dr. Deming to tell them how to emulate the Japanese.

“The pay and privilege of the captains of industry are now so closely linked to the quarterly dividend that they may find it personally unrewarding to do what is right for the company.”  ― W. Edwards Deming, “Out of the Crisis”

The Japanese had assimilated the continuous improvement message of Dr. Deming since it was not really that foreign to their basic worldview.  So what if it took a few years or even decades, the Japanese could be patient.  Unfortunately, American management did not have the same patience.  Quality went gung-ho throughout the US in the nineties.  American corporations bragged about reaching or nearly reaching parity with the Japanese on many measures of the exalted Six Sigma standard of quality.  But Americans have always adored technology and the quick fix over labor inputs and long-term improvements.  The steam engine, the assembly line, the computer and robotically automated processes were all technological advances that have helped the United States become the major economic power in the world.  There is no doubting the positive advances that technology has made in terms of productivity and efficiency in the US.

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The trouble with only relying on technological advances for the next leap forward is similar to a ball team that only relies on home runs rather than base hits.  The base hits may not be as grand as hitting a home run, but they are the key to winning the game.  When computers, automated processes, robots and the Internet started to really proliferate in the US business world, you could start to see the fascination with continuous improvement wane in the eyes of many managers.

“In its 2018 Human Capital Trends report, Deloitte found that 47% of business and HR leaders were concerned that modern collaboration tools weren’t actually helping businesses achieve their goals. Between chat windows, project management tools, meeting alerts, and emails, workers find themselves in a constant state of reactive busyness—rather than proactively focusing on meaningful work.” — The Productivity Myth by Ben Taylor, March 19, 2019

O, they still have their quality departments and their six-sigma training but too many companies have gone back to the old standard of “Its good enough” or “Well, we are meeting expectations.”  The drive for continuous improvement has slowly but inexorably dissipated since the early nineties.   US Corporations have once again gone back to the idea of looking for the home run.  Too many hope to find this home run in mergers and acquisitions with new companies that display the dynamism lacking in their older established corporations.

“Since 2000, more than 790,000 transactions have been announced worldwide with a known value of over 57 trillion USD.  In 2018, the number of deals decreased by 8% to about 49’000 transactions, while their value has increased by 4% to 3.8 trillion USD.”  — Institute of Mergers and Acquisitions.

You may well ask then, “How successful are these mergers and acquisitions in terms of adding value for the corporation or even more so for the customers?”  One study done by the Harvard Business School in 2015 found that between seventy to ninety percent of all M&A’s failed.  In my opinion, too many companies want to grow quickly hoping either for an increased economy of scale or to obtain the creativity that has been weaned out of their now bloated bureaucracy.  Too many US companies have abandoned the idea of continuous improvement as too time consuming or too slow.  Hoping to hit more home runs, they would rather focus on a spectacular breakthrough rather than on a slow incremental improvement strategy.  It is strange and sad, that US companies feel it is an either-or trade off.  Either we work on continuous improvement or we work on hitting home runs.  The best strategy is to focus on both.  Few games are ever won by simply using a single strategy.

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2. Goals of short-term profits often lead to long-term losses

For the sake of so-called efficiency, employees are laid-off, training budgets are cut, salaries are frozen, pensions are renegotiated, employee perks are downsized, key processes are outsourced, and supplies are purchased on the basis of low bidder.  My sister always says, “Buy cheap and weep.”  Too much of American industry assumes that cutting costs in the short-term will lead to long-term profits.  Nothing could be further from the truth or more short-sighted in thinking.

Minimizing costs in one place can often lead to maximizing costs in another. Only management is responsible, and I mean top management, for looking at the company as a whole, to minimize total cost and not the cost here or there or there… must get departments to work together. That is difficult in the face of the annual rating… because they get rated on their own performance. — Dr. W. E. Deming

One of Dr. Deming’s 14 Points called for eliminating performance measures for employees and MBOs for management.  I have seen little evidence since Dr. Deming died that companies have made much effort in either area.  Admittedly, you can go on line and find dozens of companies that claim to have streamlined or improved their performance management/appraisal systems but they are still useless since they measure the wrong thing.  Dr. Deming taught that 90 percent or more of the problems in a system or variation in any process are caused by the system and not by the individuals.  Managers work on the system and are thus responsible for making changes and taking out barriers to efficiency that prohibit work from being more productive.  Unless these changes to the system are made, any attempt at measuring or encouraging worker performance or goal setting are ludicrous.  Goals should be set for the system based on realistic measures of its capability but not on individual employees.

 “People with targets and jobs dependent upon meeting them will probably meet the targets – even if they have to destroy the enterprise to do it.”  — W. Edwards Deming

3. Inefficient business practices are epidemic in most organizations

When I started consulting in 1986, it was not unusual to find corporations with 10 or more levels of management.  The chain of command was epidemic in most US companies.  The old idea of “span of control” was imbued in the management practices that guided most businesses.  This large bureaucracy of span of control and chain of command rivaled the inefficiency found in most government organizations.  I could go into dozens of other examples of inefficient business practices, but one will suffice.

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In 1998, I was hired by the Metropolitan Council in Minnesota as a Principal Strategic Planner.  The Metropolitan Council was a regional government agency and planning organization in Minnesota serving the Twin Cities seven-county metropolitan area.  This area accounted for over 55 percent of the state’s population.  My job was to help streamline processes at the Metropolitan Council Division of Environmental Services (MCES) and to help the division improve its delivery of key services.  The MCES was responsible for the management of eight wastewater treatment plants in the seven-county metropolitan area.

Over the years, various teams that I established undertook many processes and successfully improved them.  Always looking for new ideas and areas to improve, I struck upon the idea of doing more on-line meetings and also allowing more employees to work from home.  Both of these ideas were fully supported by existing technology in 2000, but I made little headway in establishing these ideas.  These two ideas ran counter to traditional management philosophies of command and control.  We had entered the 21st Century, but our work processes were still dictated by 20th Century ideas and beliefs.

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When I left the Met Council in 2001, I joined the American Express Technology Division (AET) of American Express Corporation.  I literally jumped out of the frying pan and into the fire.  I had wrongly assumed that they would be more progressive than the Met Council and much to my dismay they were even less progressive.  It was difficult to get my manager to allow either myself or co-workers to work from home since “How would I know what you are doing” was a prevalent theme.  I gave notice only six months after joining American Express.

So now we are in the middle of a world-wide crisis caused by a virus.  The internet has allowed millions of workers to “work from home.”  Many of these Gig workers had been allowed some latitude in working from home but for many of the new Internet workers it was a new and pleasant experience.  However, it took a Pandemic catastrophe to free up the thinking of too many managers in terms of “How will I know what they are doing.”  Such a thought seems ludicrous in the extreme to anyone with a half grain of common sense.

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Unfortunately, many work processes in organizations are still mired in 20th and even 19th century beliefs of how work should be done.  These inefficient and archaic ideas stop many corporations from being nearly as efficient and productive as they could be.  The bottom line is that the vaunted supremacy of private for-profit corporations over government entities is vastly exaggerated and overrated.

I want to end this long blog with a stern reminder.  Few companies have demonstrated any ability to take on the “effectiveness” dimension of government agencies with better results than the government has shown.  Private for-profit charter schools and colleges have been disasters.  Private run prisons are not fairing much better.  They have continued to show a propensity for a lack of cost-effectiveness, security and safety concerns, poor health conditions, and the potential for corruption (see “The Problem with Private Prisons”).  In terms of the privatization of wastewater and water treatment plants, one study of household water expenditures in cities under private and public management in the U.S., came to the following conclusion, “Whether water systems are owned by private firms or governments may, on average, simply not matter much.” — Wikipedia

It hardly seems likely that many people in the US would like to see fire departments, police departments, the military and many regulatory agencies turned into for-profit entities regardless of how efficient they may claim to be.

 

It’s the Economy Stupid! The Five Myths of Capitalism – Part 1 of 5

18 Apr 2020 6 Comments

by Dr. John Persico Jr. in Uncategorized Tags: , , , , , , , , ,

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There are many theories about what drives progress and change in the world.  Some say Ideology changes the world.  Some say Technology is the main driver of change.  Karl Marx, one of the most famous or infamous men in history, (depending on your beliefs) argued that Economics is the main driver of change in the world.  Much of Marx’s theory is summed up by the term Historical Materialism which can be defined as:

“A theory of history which states that a society’s economic organization fundamentally determines its social institutions and the way that people live and benefit from the means of production in that society.”

marxism-capitalism-1-638Most of what people learn about Marx is far removed from his actual ideas.  Given that Capitalism has been diametrically opposed to the very name of Karl Marx, it is not surprising that he is routinely disparaged.  Even at the University level, it is rare to find anyone studying Marx very deeply.   Many educators and instructors describe Marx’s economic theories as “Totally Discredited.”  Few people in America have any good words for Karl Marx.  Any politician in the USA who might suggest that Marx ever said one good thing or had one good idea would court instant political death.  Marx is the devil in our Capitalistic system.

the economyMarx did of course hate capitalism.  He saw Capitalism as a system that exploited workers and allowed the greedy to benefit at the expense of those less fortunate or less aggressive.

“Capitalism: Teach a man to fish, but the fish he catches aren’t his. They belong to the person paying him to fish, and if he’s lucky, he might get paid enough to buy a few fish for himself.”  — Karl Marx

10665231_470379489743928_2447670465163187643_nThe antipathy directed towards Marx and his critique of Capitalism has discouraged any real in-depth understanding of the limits and myths of Capitalism by most Americans.  Capitalism resides in America on the same level as Mom, God, and Apple Pie.  Woe to anyone who would dare to attack Capitalism.  In the United States, Capitalism is as hallowed an institution as Christianity.  In fact, most Christians think that Capitalism and religion go hand in hand, which to a large extent they sadly do.  Unfortunately, not all Capitalism is the same.  In America, we have a home-grown version that is more appropriately called Corporate Capitalism.  What is the difference you might ask?  Well it gets even more complicated since economists define four types of Capitalism.  These are:  oligarchic capitalism, state-guided capitalism, big-firm capitalism, entrepreneurial capitalism.  The type of Capitalism that I am going to talk about is known as Big Firm Capitalism or Corporate Capitalism.  It has been defined as:

“Corporate capitalism is characterized by the dominance of hierarchical and bureaucratic corporations… A large proportion of the economy of the United States and its labor market falls within corporate control.  In the developed world, corporations dominate the marketplace, comprising 50% or more of all businesses.  Those businesses which are not corporations contain the same bureaucratic structure of corporations, but there is usually a sole owner or group of owners who are liable to bankruptcy and criminal charges relating to their business. Corporations have limited liability and remain less regulated and accountable than sole proprietorships.” — Wikipedia

Before we proceed further, you need to understand one thing.  I am not against corporations per se.  We gain many benefits from corporations.  Corporations are a large part of the foundation of our economy which from strictly a monetary perspective has been phenomenally successful.  The USA has perhaps the most successful economy in history.  I have no problems with the monetary contributions of corporations.

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The problems arise however, in that there are Myths of Corporate Capitalism which serve to hide the negative impacts that corporations have on our country and the rest of the world.  Today, corporations are global entities and their excesses are felt not just in this country but all over the globe.  I believe that unless these excesses are reined in by intelligent oversight and a rewriting of corporate law, they will destroy this country.  Each of these excesses is a Deadly Disease that by itself could do the destruction.  Together these five excesses are leading America away from the vision of our founding fathers.  Life, liberty, and the pursuit of happiness were based on the belief in a democratic system of government that was of the people, by the people and for the people.  We are increasingly standing by while our country becomes a government of the corporation, by the corporation and for the corporation.

The Five Myths of Corporate Capitalism that are destroying America:

  1. Corporations are people

supreme court decisionOver the past 40 years, the Supreme Court has radically expanded constitutional rights for corporations.  The original charters for corporations written in the late 19th century, allowed corporations powers never before seen in companies.  The abuse of these powers soon led to a considerable amount of legislation designed to reign in some of the most egregious of these abuses.  Laws such as the Sherman Anti-Trust Act passed in 1890 to stop monopoly practices and the Clayton Antitrust Act passed in 1914 to stop unethical business practices were somewhat successful at ameliorating corporate abuses.  Unfortunately, corporations were still left with considerable power to thwart the goals of democracy and good government.

From the early 20th Century onwards, corporations continued to use their power to bribe, cajole, and persuade policy makers to give them privileges that once again extended their power. They have since more than made up for the power that they lost in the early part of the 20th century.

“Today, the biggest companies have upwards of 100 lobbyists representing them, allowing them to be everywhere, all the time.  For every dollar spent on lobbying by labor unions and public-interest groups together, large corporations and their associations now spend $34.  Of the 100 organizations that spend the most on lobbying, 95 consistently represent business.”  — “How Corporate Lobbyists Conquered American Democracy” — The Atlantic, Lee Drutman, April 20, 2015.  

corporate powerCorporate interests easily dominate the interests of the common person.  The common person has nowhere near the financial clout of corporations.  In 2010, the Supreme Court passed the Citizens United Decision which gave corporations unlimited power to finance and support political candidates running for office as well as to lobby on behalf of any laws that they wanted.  This decision basically upheld the idea that corporations had a right to free speech much like any citizen of the USA and that campaign spending was simply a manifestation of free speech.  Corporations are now being treated as living breathing people despite the fact that corporations can live forever, and corporations are not organic entities.  They are not born, and they do not die like any other creature on the face of the earth.

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Corporations already had almost unlimited power to influence and coerce politicians to do their will.  The Citizens United Decision took all the brakes out of the system.  You have often heard the parody of the Golden Rule “He who has the gold makes the rules.”  This trope is now a fact of life in America.  Many people no longer bother voting because they believe that voting is a waste of time.  Everyone knows that politicians need an exorbitant amount of money to support their campaign and that once elected they immediately start building their money up for their reelection.   They get the lion’s share of this money from big business interests and associations that support big business interests such as the National Rifle Association (NRA).

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According to campaign finance reports filed with the Federal Election Commission that cover activity from January 1, 2019 through June 30, 2019, congressional candidates collected $389 million and disbursed $172.2 million, political parties received $353.7 million and spent $279.9 million, and political action committees (PACs) raised $958.2 million and spent $818.7 million in the six-month period.  If you total these figures up for money raised in just the first six months of 2019, it equals $1.701 billion dollars.  If there were 100 people in the US Senate and 435 people in the US House of Representatives, this equals approximately $3,179,400 dollars for every one of those politicians in office.  Of course, some will get more, and some will get less, but the majority of this money will be spent helping to support the reelection of each and every one of these honorable men and women.

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Here is a little experiment to show you what this campaign funding could buy.  Consider that the Federal Minimum Wage in the United States as of 2020 is $10 dollars per hour.  A person on minimum wage working full time earns approximately $21,000 dollars a year.  According to the Bureau of Labor Statistics, 1. 8 million Americans work full-time at or below the minimum wage.  If you double the average election campaign fund to equal a full year of collecting money you will get approximately $6.2 million dollars.  Now divide this campaign fund by the average yearly minimum wage of $21 thousand dollars and you get 295.  In other words, one year of campaign funding (an average) would fund a person now working on minimum wage for 295 years.   If you earn the national average of $86,000 dollars a year, it could support you for 72 years.

To say that something is wrong here is an understatement.  We have a sort of self-perpetuating money machine here.  Every year corporations get greedier and seek more profits.  According to Corporate Law that is their primary reason for existence.  Numerous pundits and corporate sympathizers extol the virtue of greed.

“Workers Should Be Very Thankful That Corporations Are So Greedy” by Jeffrey Dorfman

greed is goodOne of the most popular movies in the eighties was Wall Street.  In the movie, Michael Douglas gave a “Greed is Good” speech which was actually applauded by audiences all over the United States.  Some corporations have been sued by stockholders for not being greedy enough.

Every year budding politicians need more and more money to get elected.  Corporations are money banks for anyone desiring to run for office.  Corporations provide the funds that politicians need to wage a successful election campaign.  Once elected, elected officials are then beholden to the major corporations and lobbyists whose help they will need to raise the money to get reelected.

Corporations are more than happy to support candidates who will pass bills that help them to make more profits.  Other bills they like are designed to ensure that they can pay less taxes, have fewer environmental regulations, fewer safety and health regulations, pay lower wages, decrease employee pensions and benefits, defeat unions and avoid onerous consumer liability claims.  Any politician who is willing to support the former goals can find numerous corporate lobbyists willing to donate money to help them get elected.  The Citizens United Decision guarantees that corporations can give as much money as they want without breaking any laws.  After all, it is free speech.

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“Warren Buffett worth nearly $80 billion dollars points to the Forbes 400, which lists the wealthiest Americans.  ‘Between the first computation in 1982 and today, the wealth of the 400 increased 29-fold — from $93 billion to $2.7 trillion — while many millions of hardworking citizens remained stuck on an economic treadmill.  During this period, the tsunami of wealth didn’t trickle down.  It surged upward’.”  — Entrepreneurs, January 24th, 2018

In Part 2, I am going to cover the second myth of Corporate Capitalism.  The Myth that laissez faire will somehow result in corporations being self-regulating entities for the common good.

“According to a survey from the Pew Research Center last year, 60 percent of American adults think that three decades from now, the U.S. will be less powerful than it is today. Almost two-thirds say it will be even more divided politically. Fifty-nine percent think the environment will be degraded. Nearly three-quarters say that the gap between the haves and have-nots will be wider. A plurality expects the average family’s standard of living to have declined. Most of us, presumably, have recently become acutely aware of the danger of global plagues.”  — The Atlantic, Kate Julian, April 17, 2020

I think you will enjoy my five part series. I write for the understanding of the average person and not necessarily the economist or the Ph.D. However, if you want a more rigorous and thoroughly detailed analysis of the problems with the Capitalist system. See the following study by the Roosevelt Institute.

https://rooseveltinstitute.org/publications/new-rules-for-the-21st-century-corporate-power-public-power-future-american-economy/#:~:text=In%20New%20Rules%20for%20the,thinking%20about%20the%20role%20of

Why Do We Need “Free Enterprise”?

09 Mar 2014 3 Comments

by Dr. John Persico Jr. in Uncategorized Tags: , ,

free-enterprise_logoLast week we looked at the problems of government.  This week, I want to look at the issues both pro and con with “Free Enterprise”.  First of all, let’s start with the obvious:  “Free Enterprise” does not exist.  It is like the Holy Grail, a wonderful concept but a myth.  There are no free lunches and there are no free businesses.  The purpose of a business is as follows:

To provide goods or services that people want or need at a price they can afford and that allows the business enterprise to make a profit. 

Businesses provide value.  If they do not provide value, they become extinct but much faster than dinosaurs.  Businesses exist in an extraordinarily dynamic environment where rapid change and obsolescence creates a life span for most companies that is less than fifty years.  It is a rare organization that makes it to one hundred years or more.

Why we need enterprise is an easy question to answer.  It is clear that people have myriad wants and needs that must be provided for.  However, why not let the Government do it?  Why should enterprise be free?  Why not have planned economies as in socialism?

Both theory and experience can show us the reason why enterprise should be free.   But first, what do we really mean by free.  We certainly do not mean that products, services, land, capital and human resources are free.  Each of these elements is required for a successful business but they must be bought and paid for.  So what do we mean by free?  What are most people talking about when they equate “Free Enterprise” with mom, God, baseball and apple pie?  

Most people talking about “Free Enterprise” have no clue where the term originated or what it really means.  However, these same people take great umbrage at anyone who questions the role of “Free Enterprise” in the USA.  It is interesting how people will defend things they know very little about.  President U. S. Grant questioned how the average Confederate soldier could support the Southern plantation system when the majority of soldiers were about as poor as most slaves and saw little or no benefit from the system they were giving their lives for.  The same is true for many Americans.  Most people in this country are not entrepreneurs nor are they owners.  In fact, most people own little or no stock in any company.   Yet the average American thumps their chest and cries out with great pride that “I support “Free Enterprise”.

“New data from Pew Research suggests that more than half (53 percent) of Americans have absolutely no money in the stock market, including retirement accounts.  The Pew data show that just 15 percent of people with a family income of less than $30,000 per year are invested in the stock market; as families earn more, their participation in the stock market increases.  Fifty-five percent of those who earn between $30,000 and $75,000 per year are invested in the market, while 80 percent of those who earn $75,000 or more are.”

Investopedia explains “Free Enterprise”:  “The “Free Enterprise” movement started in the 1700s, when many individuals were restricted from starting and owning their own business without the permission of the government.  The movement looked to reduce ownership and other related restrictions, such as how one should operate their business and who they were allowed to trade with.”  In other words, “Free Enterprise” is about being able to run your own business without the government telling you what to do.  A government that probably could not manage a paper bag factory efficiently.

A number of years ago there was a brilliant economic thinker by the name of Adam Smith (1723-1790).  Smith theorized that the most efficient markets would be laissez faire.  Basically, without knowing the terminology of self-organizing systems which we now speak of today, Smith recognized that the laws of pricing and its attendant mechanisms would best provide for a rationale distribution of goods and services that people wanted.  Today, we talk about Complex Adaptive Systems with elements of sensitive dependency and strange attractors and we understand that the Free Market is best described by such terms.  Pricing may be a strange attractor and value one of many conditions that are described as sensitive dependency to initial conditions.   No human being or government can possibly have the capacity or information to efficiently regulate a complex adaptive system.

Nevertheless, today we realize that rules, policies and regulations are essential to a “Free” market.  Think of a sporting event without rules, referees, penalties or umpires.  What you would have these control mechanisms would be chaos and not a game.  You cannot have an Efficient Market (A more appropriate term than Free Market) without rules.  You would have anything but efficiency and no one would benefit.  So some structure and planning is needed.  The problem becomes one when too much structure and too much planning intrude on the operation of the market. This is what you had in the Soviet system and it ultimately led to the collapse of the Soviet Union.

Centralized government planning can be invaluable in helping a nation’s economy.  Countries like Japan and Taiwan which have had a close collaboration between government and private enterprise have done quite well in terms of productivity and economic success.  Even in the USA, there is a great deal of unseen and seen collaboration between government and private enterprise.  However, it is the extremes which create the dangers.  Seldom has government planning been taken to the extremes that it was in the Soviet Union or China before the uprisings in 1989.  Consider the comments of David Elton Trueblood from the Ludwig von Mises Institute:

“It is easy to see, then, that the Soviet system represents a far more radical innovation than it would if it were concerned merely with ownership. The nationalization of the means of production involves a radical shift in the power structure, especially in the eminence accorded to the central planning bodies. The system enables the party machine to have a monopoly of power, for they have all but the legal attributes of ownership. Above all, it allows a few who are the new elite to seek to control the total lives of the masses.” 

EcoPillars for free enterpriseWhat most people despise about communism and centralized government planning is not just the inability to allocate resources effectively and efficiently, but more importantly, the attempt to control the economic choices of citizens and the destruction of entrepreneurial spirit.  Soviet communism went well beyond simple economic planning when it decided that all enterprise would be run by the government.  The profit incentive would be eliminated and the proletariat would control the means of production.  Everyone would be free from being a “wage slave.”  However, this so called freedom actually meant that no one would have any freedom over their economic decisions.  Whether or not the odds favor any of us becoming a billionaire, we all enjoy the hope and dream that we someday might be another Bill Gates or Warren Buffett.  Communism kills that hope and dream.  However, it was the Communist policies towards individual initiative which destroyed the dream and not any single model of centralized government planning.  There are many advantages to some centralized government planning and to throw out all such planning is to throw the baby out with the bathwater.

Free Markets left to their own accord can be monstrously inefficient and ineffective.  Here are some typical examples of market failure:  (Source:  Economics Online)

Productive and allocative inefficiency

Markets may fail to produce and allocate scarce resources in the most efficient way.

Monopoly power

Markets may fail to control the abuses of monopoly power.

Missing markets

Markets may fail to form, resulting in a failure to meet a need or want, such as the need for public goods, such as defense, street lighting, and highways.

Incomplete markets

Markets may fail to produce enough merit goods, such as education and healthcare.

De-merit goods

Markets may also fail to control the manufacture and sale of goods like cigarettes and alcohol, which have less merit than consumers perceive.

Negative externalities

Consumers and producers may fail to take into account the effects of their actions on third-parties, such as car drivers, who may fail to take into account the traffic congestion they create for others. Third-parties are individuals, organizations, or communities indirectly benefiting or suffering as a result of the actions of consumers and producers attempting to pursue their own self-interest.

Property rights

Markets work most effectively when consumers and producers are granted the right to own property, but in many cases property rights cannot easily be allocated to certain resources. Failure to assign property rights may limit the ability of markets to form.

Information failure

Markets may not provide enough information because, during a market transaction, it may not be in the interests of one party to provide full information to the other party.

Unstable markets

Sometimes markets become highly unstable, and a stable equilibrium may not be established, such as with certain agricultural markets, foreign exchange, and credit markets. Such volatility may require intervention.

Inequality

Markets may also fail to limit the size of the gap between income earners, the so-called income gap.  Market transactions reward consumers and producers with incomes and profits, but these rewards may be concentrated in the hands of a few.

I hope you are impressed by the large number and substance of possible market failures.  No doubt there are other examples of “Free Market” failure.   What can be done about these failures?  The answer is simple.  It is the government’s job is to try to rectify these failures but with as light a hand as possible.  Too heavy a hand and it actually ends up stifling and distorting the “Free Market.”  It is apparent from the current animosity towards the government that it is either failing in these tasks or exerting too heavy a hand in the administration of these tasks.  For instance, government critics might point out:

It is hard to imagine any small business or large business having to sort through this many regulations.  Either the business is inundated with red tape and cannot prosper or any prospective business person is discouraged from even trying to start a business.  Both are not conducive to a productive and prosperous economy.

Conclusion: 

We need ““Free Enterprise” or a “Free Market” because it nurtures the human soul.  It is also generally more efficient and effective than any centralized government planning.  We need “Free Enterprise” as the cornerstone of a dynamic democratic government wherein citizens have the liberty to choose their economic endeavors.  No economic system has yet proven to be as resilient and productive as a “Free Market.”  However, there are no perfect systems.  The “Free Market” must have oversight mechanisms.  Like it or not, without government regulations (just like the rules needed in any game), the economic system would devolve into chaos, confusion and a distorted disequilibrium that would quickly have citizens clamoring for a dictator like Hitler and Mussolini who would promise to restore order.  Unfortunately, people would be buying order at the expense of their freedom.  Hitler and Mussolini both made the markets efficient again but at the price of liberty, justice and equality.  If we do not want to pay that price, we must rely on our government to provide the rules, policies and regulations that will keep our economic system viable and FREE.  See my blog “Why do we need government” for an explanation of what citizens must do to insure that government does its job. 

Time for Questions:

What does “Free Enterprise” mean to you?  Have you ever started or run your own business?  Have you ever thought about running your own business?  What is stopping you?  Can you think of any other country where it would be better or easier to start a business than the USA?  Where?  Why?  Do you think that any business has a responsibility to society? Why or why not?

Life is just beginning.