Taking It to Extremes – Part 3 of 5 – Society versus the Economy

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Introduction: (Skip if you have read Part 1)

A number of years ago, I wrote an article about the famous “Golden Mean” of Greek philosophy.  The mean was basically a rule that said the best way of living is to balance extremes.  Another way of looking at what this rule implies is that evil or bad things happen when we over do something.  We need to take all things in moderation.  Thus, drugs, smoking, guns, watching TV etc., are not evil or bad in themselves but when we take them to extremes, they became dangerous and counterproductive.

Life is an ongoing struggle to find our proper balance.  However, it may never be a question of equal balance because the proper balance can never be static.  There are many dimensions or polarities in life where it is not really a matter of moderation or balance but more a matter of dynamically imposing a temporary order between two extremes.  The concept of Hegelian Dialectics comes to my mind as an aide in thinking about this process.

Dialectical thinking can be described as: “The ability to view issues from multiple perspectives and to arrive at the most economical and reasonable reconciliation of seemingly contradictory information and postures.”  This is a much more complex process than simply balancing extremes.  The more I thought about it the more I decided to add a corollary to the Greek Rule.  Since I think time has easily proved the value of the Golden Mean, a corollary by definition is a proposition that follows from and is appended to one already proved.  My corollary is as follows:

John’s Corollary:

Anytime, one concept in a set of opposing concepts is allowed to dominate the other concept, extreme dysfunction will result.

I want to discuss this more by using five pairs of concepts that I think are critical to our world today.  I want to show you how the distortion created by proponents of each concept is dangerous to life as we know it.  I do not use the word dangerous loosely or frivolously or for effect.  The battle between these ideas is destroying life as we know it on this planet.   The proponents of each side of these polarities seek to destroy the proponents on the other side.

Rather than looking at things from a systems perspective and trying to dynamically adjust the system, opponents are driven to allow one idea to dominate to the exclusion of the other idea.  Witness the name calling between conservatives and liberals today.  Each side demonizes the other side and assumes God is on their side and Satan is on the other side. Liberals are evil to conservatives and conservatives are evil to liberals.

Here are the five pairs of concepts we will look at in the next few weeks.  This week we will look at number three on my list.  We have already discussed the “efficiency versus effectiveness” dimension in part one of this blog series and the “growth versus development” dimension in part two.

  1. Efficiency versus Effectiveness
  2. Growth versus Development
  3. Society versus the Economy
  4. Conservative versus Liberal
  5. Rights of the Individual versus Rights of the Group
  1. Society versus the Economy:

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Today we are faced with an epic pandemic.  This threat has led to a battle between those who want to protect the economy and those for whom society is more important.  This is not the first time such a battle has been waged.  Four thousand years ago Moses battled Ramses over the same issue.  Pharaoh Ramses had cheap labor with the Israelites.  The Egyptian economy was purring along.  Pharaoh did not want to change anything.  The Israelites were not so happy.  Their society was in chaos as it was being slowly but inevitably destroyed by Egyptian culture.  A few hundred more years and there would be no Israelites.  A leader named Moses decided his people must leave Egypt.  He first tried to convince Ramses to simply “let my people go.”  Ramses would have none of this idea.  He had a good thing going with cheap labor and he was not about to rock the boat.

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Moses decided to play hard ball.  He brought a plague to hurt the Egyptians.  Ramses was aggrieved and decided to allow the Israelites to leave.  However, at the last-minute Ramses changed his mind.  It was a question of what would be good for the economy or what would be good for the Israelites.  The economy won out.  Moses brought another plague and then another.  Each time, Ramses would acquiesce and then at the last minute he would change his mind.  He finally let the Israelites leave but once they were “on the road” he had his last-minute regrets again and sent his army to bring them back.  The rest is (as they say) “history.”

Fast forward to the world in 2020.  A pandemic more widespread and as lethal as any in history has struck the world.  The battle is again engaged between leaders like Donald Trump who care more about the economy and leaders who care more about society.  A false dichotomy if ever there was one.  Under John’s corollary, taking either position and ignoring the other position can and will only result in a destruction of both.  You cannot have a society without an economy, and you can not have an economy without a society.  But what is the purpose of each?  What is a society and what is an economy?

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A society is a group of people, perhaps a tribe, a nation, or a family that choose to live together to share mutual resources.  People that live together beget relationships that involve feelings of community that grow out of common concerns.  These feelings range from love to sometimes hate.  There is a mutual interdependence in a society that implies the good of the society is based on the good of the individual and vice versa.  Societies develop a strong bond based on this mutual interdependence.

An economy is a means of providing resources for a society.  It is the means towards an end.  The end being the perpetuity of the society.  No society can exist without an economy.  Social economies have existed since the cave people and at one point simply involved people hunting and gathering together.  In modern times, we see economies based on a much more complex web of “hunting and gathering.”  The hunting and gathering in a modern society may involve Internet hunting or gathering crops at the local supermarket.

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A supply chain exists in modern societies based on what economists’ call “comparative advantage.”  This involves multiple components of a supply chain each doing what they do best.  Farmers raise dairy cattle.  Dairies make milk.  Trucking companies transfer the milk.  Retail stores sell the milk and other dairy products.  Consumers work at some part of a supply chain (there are thousands of supply chains that exist in the world today) to earn money to purchase goods and services sold at one or more other supply chains.  This is a simple version of an economy.  The bottom line is that in the 21st Century, no jobs mean no money.  No money means no ability to purchase goods and services.  Ergo, you starve to death or rely on the charity of your neighbors in your society.

Since the Covid-19 Pandemic began, leaders seem to have chosen sides in a fruitless and ignorant battle between “society” and the “economy.”  Over and over again we have seen leaders propose one extreme position or the other.  “We must shut everything down or we must open everything up!”  In the USA, there has been endless wrangling over a second stimulus bill.  Instead of intelligently looking at the balance between society and the economy, both Democrats and Republicans have used the crisis to further their own goals and agendas.

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This lack of leadership of both parties directly dovetails with the lack of leadership set by the former President of the United States.  A man whose own agenda was based on keeping an economy going to further his chances for reelection.  For a man who scorned Marxism and socialism, he realized that the economy always plays a major role in the life of the common person.  He thought that if the economy was going strong, people would overlook the thousands of deaths of their friends and neighbors.  He created a narrative that the entire pandemic was “false.”  The deaths were false.  He claimed falsely that the hospitals were reporting everything as Covid-19 deaths when they were actually due to something else.  I personally talked to many Trump supporters who told me that doctors and hospitals did this because the reimbursement rates were higher for deaths due to Covid-19 than for other causes.

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I served four years in the United States Air Force.  I learned while in the military that a commander, whether of a battalion, a squadron or a platoon has a major responsibility to keep his soldiers as safe as possible.  Any military leader who recklessly and needlessly puts his or her soldiers in harm’s way will be tried and court martialed for “dereliction” of duty. Following are two examples from a Marine publication titled: “Leadership, Ethics and Law of War Discussion Guide for Marines” by Marine Corps University, Lejeune Leadership (2008)

“The platoon commander was charged with violations of Article 92 (Dereliction of Duty), Article 109 (Willful and wrongful damage to an automobile), Article 118 (Premeditated murder) and Article 133 (Willful and wrongful failure to safeguard the detainees) of the Uniform Code of Military Justice on 1 Feb 2005.”

“1st Lt Lawson was charged with dereliction of duty for failing to account for LCpl Rother’s welfare by posting him alone as a road guide. He was also charged with disobeying an order for two violations: failing to post guides in pairs as Judgment Case Study 5 Dependability Proficiency as directed and failing to provide a roster of the guides to the logistics officer before they were posted.”

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We have a former President who claims to be the Commander in Chief, yet he violated every canon of military law by recklessly and needlessly putting the entire US population in harm’s way by his disregard for the lives of these people.  His actions resulted in the deaths of thousands and yet I hear no outcry for justice.  I hear no strong voices noting his responsibility for these thousands of deaths.  As the primary person responsible for politicizing this Pandemic, he must be held accountable for these deaths.  The liars and sycophants who supported him must also be held accountable.

I blame the Democrats for their continuing stupidity to face reality.  I blame the Republicans for their lack of integrity and for their greed.  Both parties have made the pandemic in the USA much worse than it needed to be.  The lack of courage on one side and the greed on the other side created a perfect storm for the Covid-19 Virus to spread.  As I speak, we are witnessing a spike and increase in cases that seems beyond belief.

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Part of the reason for the increase in Corvid-10 cases has been the rush by both parties to open the schools.  So-called well-meaning educators and health experts even supported this rush.  On one side it was the belief that “day care” was needed to get the economy going again and on the other side, it was the need for teachers and schools to regain income.  Both sides used such flimsy excuses as “students need socializing” and would not get it at home or “students would fall behind” if they did not have direct contact with teachers.  No one ever defined what “socializing” children means or how schools accomplish this.  As for students falling behind, were they talking about their ability to take these ridiculous standardized state tests which add little or nothing to a student’s ability to think and reason for themselves?   No one ever defined what these children would be “falling behind.”

I realize that I have digressed from my original thesis.  To sum it up, a failure to balance the needs of both the society and the economy has led to disastrous results.  Add to this, the overall lack of leadership by the US President and both parties and we have a crisis that has never before been witnessed in the USA.  Some of these same problems beset the rest of the world.  The stupidity we have seen is not simply a manifestation of American ignorance, greed, and short-sightedness.  The world abounds in bad leadership.  Will we learn anything from our mistakes?  Will we admit that we were so polarized that neither side would listen to the other side?  Will we make progress under a new President?  Only time will tell.

It’s the Economy Stupid! The Five Myths of Capitalism – Part 2 of 5

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In my last blog, I asserted 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 on theory or just observations.  It is based on the in-depth work 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.  Myth #2 is:

  1. Corporations are self-regulating entities for the common good

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Let me explain what I mean by this.  There is a doctrine or concept in economics called “laissez faire.”  Laissez faire is a belief that business and the marketplace works best without the interference of any government agencies.  It implies that there is an invisible hand which controls the dynamics of markets.  This invisible hand ensures that markets reach some kind of an equilibrium.   One example of this is the “law of supply and demand.”  When demand is high, prices will be high, and supplies will be low.  Not everyone who wants the product will be able to find them or afford them.  Producers will then create more of the product to meet demand.  As product quantity rises, prices fall until an equilibrium price is reached that allows everyone who wants the product to purchase the product at a price that is fair to them and allows the manufacturers to make a profit.  Governments can intervene (as they have done) by price controls or subsidies.  Such efforts by the government are generally felt to destroy the inherent equilibrium of the market.

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government-warning-poster-mock1_1024x1024People who believe in the idea of “laissez faire” want us to think that corporations can regulate themselves and do a better job of it then when government interferes with rules, policies, laws and regulations.  Business leaders do their best to hype this belief and to create the idea that government run organizations are always less efficient than those run by private entities. Conservatives and Republicans subscribe to this belief and spend a great deal of time and effort trying to thwart those who disagree.

The conservative mantra is that “no government is good government.”  In the past forty or so years, there has been a concerted effort by conservative politicians to eliminate government regulations and to allow private for-profit business to take over such services as public education, wastewater treatment plants, social security, Medicare, and prisons.  The argument is always the same “private business can do it more cost effectively than government.”

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Here is the catch or hypocrisy in the above argument.  It is only heard when businesses can easily make a profit.  When there is an easy market with lots of potential and lots of potential customers, business leaders want the government to stay out of the way.  However, when things turn sour and profits turn to losses or when the loss potential is high, business then want the government to step in.   The mantra that “No government is good government” soon turns to “We need help, or we will have to declare bankruptcy.”  Suddenly, the government that has been spurned and criticized for being too intrusive and for screwing up the equilibrium of the market is now called upon to help save private companies.  Here are some recent headlines that highlight this hypocrisy:

  • Airlines will receive billions of dollars in grants and loans to pay flight attendants, pilots, and other employees
  • Boeing still expects to get some help from the federal government
  • Trump administration eyes paying oil companies to keep crude in the ground
  • Coronavirus Stimulus Shows Big Government is Back
  • Washington is gripped in a bailout frenzy. Nearly every industry is sending its lobbyists to ask Congress for handouts
  • The coal industry wants permission to stop making payments to miners with black lung disease.
  • The hotel industry alone has requested a $150 billion bailout

For a complete list of companies or industries that have received government bailouts going back a number of years see ProPublica Bailout Tracker.  There are almost a thousand major corporations on this list.

During the recession of 2007 and 2008 government bailouts in the form of loans and outright grants were given to a wide range of American companies.  Many times the argument was heard that “They are too big to fail.”  Some Conservatives actually opposed these bailouts and some Democrats were in favor of them.

Now understand this please.  I am not necessarily in favor of letting all businesses fail.  The Austrian school of Economics would argue in favor of letting them fail.  They call this  “Creative Destruction.”

“According to Schumpeter (A leader in the school of Austrian Economics), the “gale of creative destruction” describes the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”.  — Wikipedia

“Creative destruction is a process through which something new brings about the demise of whatever existed before it.  Old industries and firms, which are no longer profitable, close down enabling the resources (capital and labour) to move into more productive processes.” — Economics Help

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In other words, if Boeing and United Air and General Motors and all the other companies that want a bailout can’t hack it, them let them fail.  Let them declare bankruptcy and get out of the way so new more productive and more efficient firms can enter the marketplace.  This is a little like the Theory of Evolution in which the weaker species die out and the stronger species survive.   Thus, company bankruptcies and jobs lost will in the long run result in a more efficient industry.

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I am not against bailing some companies out.  The one thing I have learned in my years on this earth is that there are always exceptions to every rule.  There may be times when we should let businesses fail and there may be times to help them survive a rough patch.  I have no problems with the foregoing thoughts.  What I do have a problem with is the laissez faire argument that ends with “Leave us alone when we are making heaps of money but help us out when things turn bad.”  This is a deceitful and duplicitous argument which has led to an extreme gullibility on the part of many Americans.  Too many Americans now believe that “Government is the Problem” to quote Ronald Reagan.

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Here is a short list of how private business benefits from Government:

  • Copyright protection
  • Trademark protection
  • Patent Rights
  • Tax breaks for siting a new business
  • Police protection
  • Fire protection
  • Military protection for overseas business
  • Research and development studies
  • Mineral rights
  • Right of ways
  • Land ownership at sometimes exceptionally low prices
  • Tax concessions, such as exemptions, credits, or deferrals
  • Assumption of risk, such as loan guarantees.
  • Government procurement policies that pay more than the free-market price
  • Stock purchases that keep a company’s stock price higher than market levels
  • Subsidies for externalities that could not be recovered at competitive costs
  • Tariff protections
  • Subsidies for farmers, oil companies and many others
  • Job training programs for workers
  • Education programs for workers 

https___blogs-images.forbes.com_adamandrzejewski_files_2018_08_Forbes_USFarmRecipients-2Corporations are liars.  They say they want to live in a laissez faire environment.  They say they want fewer government regulations.  They say the government only interferes and adds no value to their products.  They say they don’t want the government telling them what to do.  The lie is that they do want Government involvement.  They want the government to bail them out of a situation when they will suffer losses or see lower profit margins.  They want the government to give them preferred bankruptcy conditions.  They want the government to side with them in labor-management disputes.  They want the government to help them out with all of the items on my list above.  Do some research.  Find out how many companies and industries get government handouts.  Check out Government Subsidies.

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Thus, the myth that organizations are self-regulating is the myth of the impossible.  You might as well believe in a perpetual motion machine.  It does not exist because it is impossible.  The Second Law of Thermodynamics states: “That there is a natural tendency of any isolated system to degenerate into a more disordered state.”  Thus any entity or organism or system needs energy from outside in order to maintain a state of equilibrium.  If the energy is less than needed, the entity will eventually degrade into a state of maximum entropy or disorder.”  For instance, when we die, we will degrade into dust.  If you do not periodically clean and organize your home, it will degrade into a garbage bin.  You cannot expect any system to maintain a steady state without input from outside.

The bottom line is that no corporation including illegal ones like drug cartels and the mafia can exist without independent inputs from outside their system.  Corporations are dependent on governments for their very survival.  Anyone who thinks that Corporate Capitalism could survive (much less thrive) without the input of Government is either stupid, naïve, or trying to sell you the Brooklyn Bridge.  It is about time for politicians and Americans to realize that business needs government and government needs business.

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Enough with these moronic arguments made by right wing protestors to do away with government.  A capitalistic economy without a government to monitor its excesses and to protect it from the vagaries of the marketplace would soon evolve into a system of chaos, lawlessness and monopolies that would be totally dysfunctional and destructive. The present emphasis on deregulation, privatization and less government has been taken too far and with too little appreciation of the need for government balance and oversight.  If we continue down this road, we will destroy our country and any vestige of the ideals of a free marketplace.  There is no such thing as free.  A free market requires policies, regulations, and rules.  There is no such thing as an economic system without some form of government to oversee, watch out for and protect its lawful interests.  Even illegal systems court the interests of governments albeit with bribes and threats rather than lobbyists and special interest groups.

Some of you might find the following article interesting.  It was published several years ago in the Harvard Business Review.

Does Privatization Serve the Public Interest? by John B. Goodman and Gary W. Loveman from the November-December 1991 Issue of Harvard Business Review.

 

 

 

 

 

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