Archive for the ‘community’ Category

Profit Maximization is Self Annihilation

April 21, 2015

“Some states (i.e., nations – ed.) have lost their liberty by particular accidents: But this calamity is generally owing to the decay of virtue. A people is travelling fast to destruction, when individuals consider their interests as distinct from those of the public.” – John Dickinson, Letters of a Pennsylvania Farmer, 1768

 

Profit maximization is self annihilation or, PM = SA in economese, should one feel the need to mathematize the phenomenon, but profit maximization first emerged not of mathematical modeling, or validated by empirical evidence, but by commentary that tickled the vice of greed.

In 1970, Milton Friedman wrote an article for The New York Times, “The Social Responsibility of Business is to Increase Profits.”

And with that commentary, Friedman kicked off one of the most singularly damaging ideologies that would go on to send the global economy over a cliff.

In this writing, Friedman argued for the singular focus of business to be profits. This myopic view of business endeavors completely ignored the negative externalities that could unfold from such a concentration and, being an economist, Friedman should have understood the concept of negative externalities.

No doubt he did, but only in areas of economic theory that supported his ideology. That’s the beauty of neoclassical economic theory, the orthodox teachings of most economic departments today: With its mathematical elegance and a priori thinking, one can make neoclassical economic theories say anything one wants. For the uninitiated, such theories appear “scientific” thanks to the abstruse mathematics. And while the mathematics provides a patina of science, in fact neoclassical economic theories are diametrically opposed to sound scientific endeavor, as a conclusion is assumed before a hypothesis is empirically tested.

And that is exactly what Friedman does in this perennial favorite of C-suite management: he assumes the conclusion, otherwise known as “begging the question.”

Ignored in his argument is that a singular, obsessive focus on profits completely discounts the reality that profits are a means to an end, not an end unto itself.

The ultimate goal of business – yes, and even economics – is social welfare. Business and economic institutions reside in a society to serve the needs of that society’s individuals, its citizens.

For those in the audience who are thinking, “Uh oh, here comes the corporate social responsibility speech,” or for the lesser minds who enjoy clinging to hyperbole, a case for “socialism,” guess again.

A singular focus on profit maximization not only destroys markets, an economy or other macroeconomic entities, it also destroys that other twin-obsession to profits, “shareholder value.”

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Globalization’s Mausoleums: The Former Factories of the Rust Belt

April 8, 2015

At any street corner the feeling of absurdity can strike any man in the face. – Albert Camus

 

 

The story that follows isn’t unique to this Rust Belt city.

It has occurred, over and over, across the Rust Belt – across the U.S. – for the past 35 years.

What’s amazing is it is still unfolding.

What’s even more amazing is how complacent everyone has remained.

About the loss of jobs.

About the weak or non-existent development efforts for local economies.

About how the U.S. will sink into serfdom, not by the threats of socialism (as Hayek suggested)…

…but by the reality of our apathy, our denial, or our ignorance.

I simply wanted to commit this story to writing, as a way to preserve it, in case anyone ever asks, “What happened?”

That is, if there is anyone left who cares enough in the future to ask.

No one is asking now. [1]

Globalization’s Mausoleums

The spirits of past General Electric workers reside here.

Bldg Demolition

This is one of the buildings currently under demolition at General Electric’s Broadway campus in Fort Wayne, Indiana. To the right is an opening where another GE building, of similar size, once stood.

Last year, GE closed down a testing lab, the last operation of any kind on the campus. It employed some 28 people at the end.

At its height, General Electric employed over 10,000 employees in Fort Wayne; almost all were well-paying jobs.

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Decentralizing economies.

December 3, 2014

Over Thanksgiving break, a vandal scrawled the following graffiti across an exterior wall at Indiana University’s Kelley School of Business:

“Fuck Capitalism.”

It may be a convenience for a graffiti artist to use “capitalism” as a monolithic term – just as “socialism,” “communism” or “anarchism” are treated in the same fashion – but it is indeed small minded to maintain this monolithic treatment within serious discussions. There is – surprise – more than one type of capitalism, and the time to discuss the alternatives has arrived, now.

The attempt to erase the "Fuck Capitalism" sentiment, added to the Kelley School of Business in November 2014, was in vain.

The attempt to erase the “Fuck Capitalism” sentiment, added to the Kelley School of Business in November 2014, was in vain.

The arguments against (centralized) capitalism are numerous, and the examples of the dysfunctional nature of centralized capitalism – as it has emerged over the past couple of centuries – are readily found. But I remain supportive of (decentralized) capitalism because I believe there is something intrinsic in the nature of humanity that desires recognition for one’s efforts.

Sadly, this “recognition” has been translated by centralized capitalism to mean one’s salary, but that is a very empty translation. We can live in trendy neighborhoods, drive expensive vehicles and join the exclusive clubs but at the end of our lives, on our deathbeds, we realize we were just another anonymous gnat on the ass of the universe. The world, at large, does not know us, appreciate us, or can even comprehend what in the hell we actually accomplished while manipulating spreadsheets on our computer monitors. Centralized capitalism – with the exception of the very few – renders us anonymous, insignificant, and isolated.

Decentralized capitalism holds the potential to render us valuable, as being significant, as holding meaning… within a local community, within a local economy. I may be nothing more than the village butcher, baker or candlestick maker, but I provide an invaluable service to the local residents of my neighborhood or village. I am recognized for my work, and the value I bring to a community. Such recognition, value and sense of dignity cannot be bought with a paycheck. (more…)

The Destruction from Local Tax Abatements

December 19, 2012

A great new post over at Bacon’s Rebellion looking at the problem of tax abatements and tax incentives for the purposes of local economic development. Randy Salzman wraps the issue of tax abatements around the required rise in property values required to cover the losses realized in tax abatements. This, in turn, directly affects the funding of school systems, roads and highways, parks and recreation facilities, etc., etc.

The Catch 22 of Growth | Bacon’s Rebellion.


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