There are times when the local business does not carry the item I need. Otherwise, I fully support the small business community and try to buy from them for most of my needs.
As far as each one of us spending $ 100 more a year, there are 3 million of us in the county.
That looks like $300,000,000.
That’s a lot of jobs.
Post Author
Thor's Assistant
But, the sign does not say that each of us should spend $100 more than we would have, it says to spend it one place instead of another (local instead of chain). Same amount of money, but spent here instead of there, at A instead of B. Support for local businesses aside, does what they are advocating produce more jobs or not? Does it grow the economy?
Hypocrisy questioned
The overly simplistic answer is that shopping at small local businesses would help grow the LOCAL economy. The owners of these businesses would be more more likely than the corporate bosses of major chains to spend the profits locally and would therefore create more demand for goods and services within the community.
Elliot Schroeder
Not sure where they get the math. Needs to look at the margin on the product and assume that the local owner also buys local
Leah Dutra
Supposing every extra dime was put back into job creation, 3,000,000 ÷1000= a really shitty job. That said, buying local does keep the money local and create opportunity for business ownership, a great idea if you can afford to support it. I can’t always pay the premium for buying goods at sometimes higher priced mom and pops. I am paying for grad school and a kid in college, paying more for goods just to support a worthy cause is not a luxury we can afford right now. If shopping at Target or Costco allows me to raise my family’s standard of living, sorry but I have to do what is best for mine first.
AJB
So this meme must be from a town of 30,000 people ($3M/$100). Assuming that every bit of that money went to jobs, and that “thousands” refers to at least 2,000 jobs, those jobs would pay $1,500 a piece. That’s not considering the fact that this isn’t net new spending but rather is shifting the spending to local vs chain business.
Hypocrisy questioned
I am not sure that “shopping local” would make much of a difference, but at least this post did bring out the main reason we are where we are as a society (for better or worse):
This is a crucial concept, as 97.383% of the public will guess that the profit margin is far higher than reality — and this widespread misconception of profit margins is true concerning ALL businesses. Of course, most businesses have a somewhat higher profit margin than super-efficient Walmart or Costco, but it’s still much less than people think.
All discussions about having business pay more (a.k.a. “their fair share” — presumably out of profits) is predicated on the widespread economic illiteracy concerning this fact.
BTW, return to those two P&L statements and notice the corporate income tax that these corporations pay. Gee, I thought these big corporations paid little or no taxes. What gives?
Yes, some corps DO pay little or no taxes — especially the ones that, ya know, don’t make profits! Others lower their taxes by doing government-favored spending (such as alternative energy) — essentially spending some of their tax dollars on inefficient investments.
But I digress. Happy Labor Day Weekend!
Barry Jantz
Re: “main reason we are where we are as a society.”
Hmmm. If I, for instance, spend 80 bucks at a major discount retailer for items that would have cost me 100 bucks at the mom and pop shop, that’s 20 bucks I have to use as I please, including “taking care of mine” with other purchases I need (which also helps the economy), maybe even at the mom and pop, or using it for a charitable donation (also “helping mine” and the economy).
Taking care of mine is not necessarily something that hurts the economy, especially when it provides “mine” increased buying power.
Hypocrisy questioned
Barry,
My point was simply that we have become a very self-centered people and that Leah’s statement summed up exactly where we are as a society. I expressed no value judgement – I even added “for better or worse.”
Gordon Gekko wasn’t completely wrong when he famously said “greed is good.”
chris jordan
This is a good idea. if you live or own a business in San Marcos. Ship through Fedex Ground. That helps me. If you own or know somebody who has a 12 ft box truck of 17 ft step van. I’d rather buy it from you than a dealership in Indiana. So I can help you. Really.
Eric Andersen
Nothing is easier to achieve than full employment. Primitive Indian tribes and folks in Ethiopia don’t struggle from lack of work but from low productivity.
The “full employment” argument is misleading and misses the point. It confuses the means with the end.
We can get to full employment by prohibiting the use of machines and doing everything by hand.
I think the sign above misunderstands the goal of a healthy economy. It’s about prosperity not jobs.
Prosperity is the proper goal of an economy and the means to prosperity is production. Economic progress is a function of production not employment and production is about rewarding those who do the most with the least.
The progress of civilization has meant a reduction in employment, less child labor and moms getting to stay home. The more prosperous the civilization the smaller proportion of the population needs to work.
In order to create prosperity we need to remove obstacles that keep scarce resources from flowing to the areas a society values them most. Buying local when comparative goods elsewhere are less expensive undermines this natural process.
Founding Father
Eric-
Well said. If “employment” was the key, then Municipal, State & Federal government would be the most productive institutions we have.
Greed is the pejorative word we use for people acting in their own self interest. Everyone does this — in dozens of decisions every day. It makes us more efficient in using our time, more productive when working, and better consumers when we shop.
Is it “greed” when one shops at Costco vs. Sac’s 5th Ave., Rodeo Drive, or some mom and pop store with higher prices? As the term is too loosely used today, the knee-jerk answer to the question might be YES! But when we think about it, most of us would say no.
Greed is seldom a problem — except when it’s accompanied by force or fraud. Then it’s something else altogether.
Barry Jantz
HQ, understood you weren’t making a value judgement. Thus, my “Hmmm” in exchange for your “better or worse.” It heartens me to hear you quote Gekko, despite whatever Oliver Stone may have intended. To mix real and fictional quotes, although to some it may be a sacrilege, “Greed helps lift all boats.”
Hypocrisy questioned
Barry,
Expanding on your quote(?), the problem we face is that the rising tide of the last 40 years has lifted precious few boats.
Dave Rankin
What Eric Anderson said. Best answer ever.
I usually shop at chain stores and pretty much always in San Diego. That’s local, isn’t it? I suppose it depends on the definition of local. For instance, Vons might not be a local business but it’s got a store just around the corner from my house. That’s a local enough business for me. The jobs certainly are local.
The one chain I won’t shop at it Costco. What with it being the retail equivalent of a gated community.
Hypocrisy questioned
Eric,
Economic progress is a function of production AND employment.
We can have the most efficient and productive businesses the world has ever seen and that won’t mean anything to a person without a job.
We can continue to buy more and more from countries with low wages and low standards of living, but all we will accomplish is to eliminate American jobs and lower the standard of living for all Americans except the corporate bosses.
I hope that’s a quote in praise of this behavior. Rational self interest is the gateway to independence. At the end of the day, egoism is the only thing which will save these United States.
Founding Father
The Soviets had both production and employment.
What makes America different, dare I say Exceptional, is the implied work ethic from our Western Tradition & Judeo-Christian values where innovation and the entrepreneurial spirit was encouraged and loosed free to create “other jobs” in yet undiscovered industries and markets for these new products.
Without innovation, or a market where people can initiate their dreams and aspirations without draconian government regulations and oppressive tax burdens, we can still have productuion and employment-where lots of disgruntled and dispirited workers are making crappy products- Its called Socialism.
Cue Bernie Sanders.
Barry Jantz
“…the rising tide of the last 40 years has lifted precious few boats.”
I can think of a rising tide much more significant than greed in the last 40 years, although it does also start with a g.
Hypocrisy questioned
Barry,
Regardless of the reason, the indisputable fact is that the vast majority of Americans have not benefited from the greatest economic expansion we have ever seen. Again, regardless of why this is true, it is a recipe for social unrest or worse.
Hypocrisy questioned
Brian,
1. A homeowner does “what is best for mine first” by repeatedly refinancing his home to supplement his family’s income. He then defaults on the loan when home values decline leaving the lender to pay the bill.
2. A convenience store owner does “what is best for mine first” by taking advantage of a disaster and raising the price of water more than ten-fold thereby forcing residents to choose between paying the high prices or not having water.
3. A businessman who is personally worth hundreds of millions of dollars does “what is best for mine first” by setting up a
corporation to conduct a multimillion dollar deal and then having the corporation declare bankruptcy when the deal didn’t go exactly as he hoped for leaving all the other investors to pay the bill.
Which one of the above is an example of “the only thing that will save these United States?”
Eric Andersen
“Which one of the above is an example of “the only thing that will save these United States?”
If we desire to save our economy then why not think along the lines of increasing production/productivity?
How does a fisherman increase productivity? He invests his savings in a better fishing pole or boat.
Investments in bigger boats and nicer fishing poles require savings but the public sector is draining the private sector of the necessary capital and the Fed is artificially lowering interest rates removing the incentive for the fisherman to save.
Want a growing economy? How about limiting government and letting interest rates be set by the market?
Hypocrisy questioned
Eric,
You started your comment by repeating my question and then completely failed to address it.
As to the point you did make that the government is inhibiting productivity, I would say that if that was the government’s goal, they aren’t do a very good job of it since the world has never seen greater gains in productivity than we have over the last 40 years.
HQ: I so hate to put words in your mouth, so before I respond to your query, first answer me this: In the following example that you posted, IYHO is this businessman demonstrating greed — something that you’d want to eliminate in your Utopian society? Is this businessman an evil/unethical/immoral/criminal person? Feel free to choose your own description, if none of those fit. Is what he did in your description “wrong”? I really want to know.
***
A businessman who is personally worth hundreds of millions of dollars does “what is best for mine first” by setting up a corporation to conduct a multimillion dollar deal and then having the corporation declare bankruptcy when the deal didn’t go exactly as he hoped for leaving all the other investors to pay the bill.
***
Scott Johnston
The way that small local companies become bigger successful corporations with large market share is by exploiting a small niche in the market, by being more agile, by providing more personalized service when the large corporation is too focused on costs,…charitable consumers did not allow Apple to crush IBM and HP. Charitible consumers did not allow Whole Foods to beat many of the large supermarkets. It was not consumer charity that allowed the craft beer companies to take a huge market share bite out of Anheuser Bush, Coors, etc… In a competitive marketplace, where companies are not given favorable treatment by government over others, the little guy can beat the big guy as some of the big guys get fat and lazy.
Hypocrisy questioned
Richard,
None of the above actually. I don’t think that the businessman in my example was evil, greedy or immoral and I don’t have any problem with making a profit. However, the actions described certainly harmed (albeit legally) others and showed a lack of personal responsibility so I was only asking whether Brian thought that this “mine first” action is really “the only thing that will save these United States.”
Hypocrisy questioned
Richard,
Question for you – What did you think of the homeowner example? Is that also the type of me first actions that will keep America great?
HQ, you seem to want it both ways — first you claim that the businessman’s actions were in no way “evil, greedy or immoral,” yet you then go on to assert that his refusal to make good the other investors’ losses “showed a lack of personal responsibility.”
Let’s consider your position. There are two outcomes in most new business ventures:
1. They do well, and profits are make. Hopefully big profits — new ventures are risky.
2. The venture doesn’t do well, with much or all of the investors’ capital lost. At least half of new business ventures fail — perhaps up to 80%. http://www.forbes.com/sites/ericwagner/2013/09/12/five-reasons-8-out-of-10-businesses-fail/
Let’s trace this transaction from the start. This “irresponsible” rich businessman decides to start a business venture, but wants to assume only part of the capital risk, so he sells shares in his corporation to other investors. If the company does well, they ALL make money. But according to you, if the business fails, it’s the “responsibility” of the entrepreneur to pay back the money that the other people invested.
Gosh, if that’s the moral code we are to live by, why would this wealthy businessman allow others to buy part of his business? Under your code, he should be morally responsible to pay off the other investors if it goes bad.
Seems like a win-win for investors, and a lose-lose for your businessman. Under your scheme, the businessman should take 100% the risk, but only gets a fraction of the profits if it goes well.
Well, I shouldn’t be too critical of your assertions. That’s standard progressive thinking. And BTW, it’s the thinking of the public employee labor union bosses. If the pension investments go well, demand retroactive pension increases. If they don’t go well, then 100% of the shortfall should be made up by the hapless taxpayers.
I find your scenario quite illuminating. Thanks for presenting it, HQ.
HQ, oddly enough, I’ve been speaking out against “nonrecourse” real estate loans for many years. They are common in most states, a legal protection that is unwarranted — and results in market distortions involving trillions of dollars.
Nonrecourse loans as seen in most states in the U.S. are not the product of the private sector. It’s a government imposition in the market — which gets the government into the mortgage insurance business — with disastrous results. A free market nonrecourse loan usually demands at least a 40% loan equity, but in the U.S. we have programs designed to let people buy homes with 10% to 20% down — even ZERO down — almost all nonrecourse loans.
It doesn’t have to be. Canada issues home loans that are RECOURSE loans — the borrower is personally on the hook to pay off the loan. As a result, they haven’t had a significant housing bust like we’ve seen in the U.S. Here’s a piece I wrote on this in 2013: http://riderrants.blogspot.com/2013/02/canadas-finances-look-great-in.html
But in the U.S., we have a government that insists that just about everyone should own a home, regardless of their earning capability or credit history — and without putting much money down in many instances.
Nonrecourse loans encourages irresponsible behavior. People are told they are doing the right thing — borrowing to the hilt while putting little money down. And they are told BY THEIR GOVERNMENT that walking away from such loans is perfectly okay.
Rather than getting mad at the borrowers’ decisions, we should change the incentive system that ENCOURAGES such irresponsible behavior. Phase out subsidized or mandated nonrecourse loans — and the government insurance that backs ’em.
Hypocrisy questioned
Richard,
Your responses are very enlightenig but not surprising as most on this site are very concerned and protective of businesses but lack the same concern for the individual.
My examples were very similar. In one, a businessman borrows money from investors (maybe individuals, maybe banks) and then, when the business becomes unprofitable, defaults on paying back the loan even though he has the means to pay it back. In the other, a homeowner borrows money from investors (most likely a bank) and then, when the home loses value, defaults on paying back the loan even though he has the means to continue making payments.
Also interesting to me is that you blame government regulations for allowing the homeowner to default but ignore government bankruptcy laws as the reason the businessman was allowed to default.
Your knee jerk support of a “businessman” while condemning similar actions by a “homeowner” says all we need to know about your priorities. Thank you for sharing.
HQ, businesses AND individuals find protection in bankruptcy laws. If you’d prefer we eliminate such laws, that’s fine. But let’s be fair and eliminate BK laws for EVERYONE — not just the evil businessman.
BTW, with recourse loans, a homeowner is responsible for paying off the loan, but the homeowner ALSO has the BK option to shed that obligation. All the recourse loan does is to not let the borrower walk away from the debt, regardless of their ability (or inability) to pay off the debt.
HQ, AWESOME response! First you talk about INVESTORS in a business enterprise and the “responsibility” of the businessman to pay back those investors (read your post!!). Then when confronted with your own flawed logic, you turn right around and make those investments LOANS.
You REALLY don’t understand the difference? Well, since you are a union guy, I can’t say I’m surprised at your ignorance — real of feigned.
chris jordan
500 days until Obama leaves office. Happy Labor day.
Hypocrisy questioned
Richard,
It may surprise you, but the fact is that I have never been a “labor guy.” In addition to owning my own business for a time, every job I have every had would be considered “management.”
As for the difference between investors and lenders, thank you for pointing out my initial mistake. Now that you know that I meant lenders is your answer be any different?
Hypocrisy questioned
Eric (and those who agree with him that production is the goal and employment is not important),
“A nation without plentiful jobs is a nation without plentiful consumers. A nation in which there is a lopsided ratio between economic losers and economic winners is also very likely a deeply discontented nation. When our leaders navigate the coming disruption in our economy, their response should be shaped by these stark truths.”
Leah Dutra
Okay, maybe this was covered in subsequent posts but Hypocrisy’s assertion that my wish to take care of MY family first was somehow selfish had me scrolling down to reply before I read the rest of the discussion or I might pop a gasket. Humanity has progressed as a species, not for its unique ability to communicate or use symbols or logic or reason, but for the ability to form social coalitions.This began with those based on kinship. My brain and yours is hardwired to take care of your own family and tribe FIRST. It is why we survived and why we thrive. There is always someone worse off. How selfish are you for spending money on a computer rather than feeding Syrian refugees? Maybe you should go without lights, or take your kid out of preschool, or not buy underwear for your spouse because there is a child in Appalachia that does not have enough money to eat organic food? Are you selfish? Why am I for wanting a nice life for my family first? What if your kid is healthy and my kids need organs to live? Are you wrong for not wanting your kid slaughtered to save several lives? I happen to be a very giving person, generous with my time and money (what I can spare right now) for a whole host of causes and issues that are far more important than subsidizing small businesses that are not winning in the free market. You are a self righteous, judgmental *******, YOU are what is wrong with this country. Too many people worrying about how others are living their life without considering how they might be doing better FIRST.
Leah Dutra
Okay, so I finished reading and I still stand by my previous post, he was way judgmental in a passive aggressive way. Not that judgmental is always bad, as long as the argument is good. That wasn’t the case.
As for the further discussion, much of it deals with economics outside my knowledge base, but what caught my attention was the comment about boats not being lifted. Wrong. Income inequality, yes, but what about what the poor has today? The bottom income earners live quite a better lifestyle than those of the 1930s. Focusing on the numbers and not the way people are living misses the fact that the bottom 20% almost all have cars, microwaves, televisions, a/c and an obesity problem. This is because the goods are cheaper from other countries who are working for low-wages that are usually the best paying jobs with the best working conditions in the entire country (though they might really suck by US standards). Lets see, who is selfish? You want to take the best jobs they ever had away from developing nations AND take away all of the lifestyle enhancements of America’s poor too? So we can artificially inflate wages here? That won’t be harmful at all, how thoughtful and selfless.
As to the production argument Eric made, Hypocrisy missed the fact that the fisherman was funding expansion and buying supplies. Did they materialize out of the nothing or did somebody get hired to make the new bigger order of fishing rods? Government does not create jobs without stealing money from the citizens. Government sets the stage for self actualization through the least restrictive means. Confucius knew this to be the role of the state thousands of years ago, some are a bit slow to catch on, even when we see what happened when the legalist thinkers won with their massive bureaucracy and numerous regulations.
As to the lame scenarios about looking after yours first, poor argumentation, and irrational nonsense. As though taking care of one’s own first automatically means a decent into moral bankruptcy and that this self interested frame of mind is without limits. The slope has to be a vertical cliff to descend so quickly from buying cheaper goods at a big box to taking advantage of disaster for monetary gain.
What is best for America is if we take care of our own old people without getting money from the state. If our neighbor is sick or out of work, we make food for them instead of them going on food stamps. We create a culture of self sufficiency, personal responsibility AND duty to community, not a state enforcement of these things.
HQ, let’s again go back to your ever-changing example:
“A businessman who is personally worth hundreds of millions of dollars does “what is best for mine first” by setting up a corporation to conduct a multimillion dollar deal and then having the corporation declare bankruptcy when the deal didn’t go exactly as he hoped for leaving all the other investors to pay the bill.”
In other words, a startup company (a “shell” company, if you like) with no assets or collateral, offering only an idea. So who lends money to such a company — with no collateral?
In your example, the wealth of the rich guy (it’s always a [white] guy, isn’t it?) is not pledged as collateral. The lenders understand this. So why on earth would anyone lend such a worthless high risk venture money? You are presenting a straw man example. The only lenders in such a circumstance are loving family members, loan sharks (who “take” the borrower’s body as collateral!) and sucker taxpayers (via the Small Business Administration, etc. — crony capitalism).
Sooo, in the real world, how does a start-up gain funding from others? By selling off much of the future profits (if any) to INVESTORS! That’s what all these hated venture funds offer — funding in exchange for EQUITY interest in the business — and usually significant control as to how the business is operated.
HQ, feel free to once again change your question after the fact. I understand — it’s just what you do.
Hypocrisy questioned
Richard,
My goal was to give three examples of “what is best for mine first behavior” that I didn’t believe was indicative of what Brian called “the only thing that will save these United States.” I will take the fact that you agreed with me on one (and failed to address another) as a victory.
Hypocrisy questioned
Leah,
I was clearly not making a value judgement on your “mine first” comment. I was simply pointing out that the comment was indicative of the direction our society is headed and truth be told, it is indicative of how I generally live my life as well.
I do, however, take exception to almost everything else you subsequently posted. While it is true that the poor are better off today than they were during the Great Depression it of the 1930’s, it is definitely not true that the poor or the (ever shrinking) middle class are better off than their counterparts from the 1970’s, 80’s or 90’s.
You pointed out how today’s poor are obese, but that is not a factor of wealth. The reason is simply the plethora of fast food establishments and convenience stores and the scarcity of grocery stores and healthy food options in the poorer neighborhoods.
You point to the ownership of “cars, microwaves and television sets” as a sign of increasing prosperity but cars, microwaves and television sets were also plentiful in the 70’s and the extent that the poor and middle class can afford these and other “luxuries” today is due to something that wasn’t plentiful in the 70’s – the two-income family. When I was growing up, my mother stayed home and took care of me and my siblings. Today, I know of very few stay-home moms (or dads) and very few who could afford to be if they so choose.
Two last points:
1. You and Eric should stay away from fishermen as an example. The days of the independent fisherman have long since passed in this country, just one more middle class career that can now, with few exceptions, only be found in the history books.
2. You are correct that that in many cases, sweatshop work in a third world country is better than most other work there. However, if our goal is to “take care of mine first,” should we really be outsourcing what used to be middle class American jobs?
“Which one of the above is an example of “the only thing that will save these United States?””
All three are great examples; the problems come when government tries to socialize the losses from those on the other side of the trade;
1– the vast majority of American homeowners don’t extract equity and default but, if we removed government guarantees from mortgages, lenders would price that factor in (they already do to a small extent),
2- the pricing mechanism, in a crisis, is the single best way to allocate scarce resources. Watch what happens when wildfires start; I hoover up all the cheap water on the grocery store shelves. If the store raised the prices of water to $15/ case, there would be plenty of water three days into a shortage.
3- business people who do that usually have a difficult time raising cheap capital. Equity markets, for the most part, price that risk best because they are less regulated by the centralized planners
Hypocrisy questioned
Brian,
Thank you for your response. I respectfully disagree as did the 7-11 Corporation who revoked the franchise of the store owner in question. Perhaps they believed that you could keep water on the shelf during the crisis by limiting the amount each person could purchase rather than by limiting who could purchase one of life’s necessity based on ability to pay the inflated price.
Leah Dutra
As the daughter, and granddaughter, and great-granddaughter, and likely greatX10 granddaughter of commercial fisherman, I know intimately the demise of the profession. It was due to government regulation relating to purse seine fishing. It is a perfect example.
Also I found some facts that show the 70s were not better for the poor. Here are some common products the low in CA/middle everywhere else class need to buy showing hours of work needed to buy them:
adult jeans: 1975 price was $6.99 (or 1.4 hours); 2013 price is $19.99 (or 1.0 hour)
television (19″ color): 1975 price was $294.95 (or 60.6 hours); 2013 price is $129.99 (or 6.6 hours)
30″ kitchen all-electric range/oven: 1975 price was $159.95 (or 32.8 hours);2013 price is $369.99 (or 18.6 hours)
I stayed home, or later worked part time, on a plumber’s income in the 2000’s and sent my kid to private school. It is a choice for more than you think. Those for whom it is not lost the choice during the Obama administration. Look at your friends again. Is it really about not being able to stay home, or an image of what lifestyle they want? Do they live like our parents did? Are all their meals cooked at home? Do they pack a lunch? Do they have to have starbucks every morning? Do they have to have a 200-300 cell phone bill? Do they have 1 car? Are their closets tiny and their wardrobes mended and handed down? Do they vacation every year in a hotel or do they go camping every other year or not at all?
HQ, odd response. What victory? The victory being you’ve stopped making the case that the heartless businessman you described is doing something wrong?
I take it you’ve simply stopped making the case, recognizing your own flawed thinking. Just not clear how that’s scored as a “victory.”
As to the home loan defaults, that’s a structural problem where the government ENCOURAGES default. The free market has been overridden by this market intervention. I think we do agree that is wrong. The solution is to get the government out of the lending business — both borrowers and lenders will act more responsibly when that happens.
As for your third example (a shortage), raising prices in shortages is a market method of encouraging more product shifted to where it is most needed. If the price doesn’t change, there’s little incentive for people outside the area to make extraordinary efforts (and incur extra expense) to make the same level of profit (which is rather slim) as they make on their domestic sales.
Moreover, shifting product to an area that has a temporary shortage risks of running into competitors doing the same thing, with the resulting (hoped for) sales not occurring — a common end result when a temporary shortage is solved by market response that exceeds demand. That risk can be offset by the prospect of higher prices — if that’s allowed (government tends to forbid charging more).
As for a local vendor raising prices, they have to think longer term. Are the extra profits worth the alienation of their regular clients? People get pissed when vendors raise prices in such circumstances, and that might not be good for business. Walmart, for instance, generated tremendous goodwill by hustling to bring in needed product without raising prices. I prefer such self-governing considerations compared to government price fixing.
Bottom line: Raising or lowering prices to reflect current market factors is the way the market is SUPPOSED to work. Beats the alternative — government price controls. Just ask Richard Nixon! Well . . . that might be difficult.
EXCERPT: In 1980, approximately 78 percent of families with children were headed by married parents. In 2012, married parents headed only 66 percent of families with children. In a new report, Bradford Wilcox and Robert Lerman explore the role of family structure with new data and analysis, and document how this retreat from marriage is not simply a social and cultural phenomenon. It has important economic implications for, amongst others, men’s labor force participation rates, children’s high school dropout rates and teen pregnancy rates. Since these factors are highly correlated with economic opportunity and the ability to move up the income ladder, this suggests that income inequality and economic mobility across generations are critically influenced by people’s decisions and attitudes towards marriage.
The two-parent family has declined rapidly in recent decades. In 1960, more than 76% of African-Americans and nearly 97% of whites were born to married couples. Today the percentage is 30% for blacks and 70% for whites. The out-of-wedlock birthrate for Hispanics surpassed 50% in 2006. This trend, coupled with high divorce rates, means that roughly 25% of American children now live in single-parent homes, twice the percentage in Europe (12%). Roughly a third of American children live apart from their fathers.
Does it matter? Yes, it does. From economist Susan Mayer’s 1997 book “What Money Can’t Buy” to Charles Murray’s “Coming Apart” in 2012, clear-eyed studies of the modern family affirm the conventional wisdom that two parents work better than one.
“Americans have always thought that growing up with only one parent is bad for children,” Ms. Mayer wrote. “The rapid spread of single-parent families over the past generation does not seem to have altered this consensus much.”
Hypocrisy questioned
Leah,
You make some good points about a few low cost items. Here is the other side:
Note the numbers only go to 2008 so you can’t blame President Obama, although I am sure you will find a way.
“Let’s start by examining the cost of homes from 1975 to 2008. Our statistics are drawn directly from U.S. Census Bureau data. The average house price in 1975 was $39,500. Using the Bureau of Labor Statistics inflation calculator, we find that comes to $158,000 in 2008 dollars.
The average (mean) house price in December 2008 was $301,200 — almost twice the 1975 cost. To be exact, 90.7% higher. In other words, in an “apples to apples” comparison adjusted for inflation, homes cost almost twice as much as they did in 1975.
Next, let’s look at the standard measure of affordability described above: household income compared to the cost of a house. Here is an analysis of the Census data 1975-2008.
* 1975: median income $42,936, median house price $148,800
Home price/income ratio: 3.46
* 1975: average income $50,137, average house price $158,000
Home price/income ratio: 3.15
* 2008: median income $50,303, median house price $245,300
Home price/income ratio: 4.87
* 2008: average income $68,424, average house price $301,200
Home price/income ratio: 4.4
In other words, a house cost 3.15 years of average income in 1975, and 4.4 years of average income in 2008. By that measure, homes in 2008 were 39.6% costlier when measured in income than they were in 1975.
The numbers are remarkably similar if we look at median incomes and home costs: the 2008 ratio (4.87) is 40% higher than the 1975 ratio (3.46). These numbers reveal that affordability as measured by average income has dropped significantly since 1975.”
This one does go to 2015 so I am sure it is all President Obama’s fault:
“cost of living chart
Source: David Stockman
This is a very telling chart. First, let us look at the biggest line item with housing. A new home today costs $270,200. That 1975 home adjusting for inflation would cost $209,417. This is a “real” increase of 29 percent. A new car costs $31,252 while that 1975 car adjusting for inflation would cost $16,578. This is a true doubling of cost here. Public college costs are up over 150% while private college costs are up over 160%. And you wonder why we have over $1.3 trillion in student debt outstanding.
What is more affordable relative to inflation? Milk, eggs, and a postage stamp. Unfortunately these are tiny line items on your household budget.”
You really should stay away from definitive statements such as “you are wrong.”
Hypocrisy questioned
Richard,
Maybe you missed the point that the convenience store owner increased the price of WATER at a time of disaster. This fact wasn’t lost on the 7-11 Corporation; they removed the owner’s franchise.
At least we agree that families are much stronger with two parents.
I can make an argument that raising prices is the moral thing to do as well, HQ because it more appropriately rations the water for long-term survival.
The negative PR is usually why stores don’t raise prices so irrational thinking rules the day. Cunning scavengers (like me) buy and hoard the water during a crisis. We go store to store and buy the max amount available so that we have water if the crisis lasts at least a week.
Why are we scavengers so “greedy”.? The answer is self-interest. The cheap water becoms an extraordinary bartering tool at crisis+7. I could barter for a lot of things then–and I won’t be interested in green pieces of paper.
In a sane world, we’d appreciate the retailer who took the long-time view and accepted green pieces of paper for a life sustaining resource. It’s so much easier for the unprepared and lazy to scream “profiteering” than it is to do the hard work
Leah Dutra
Low cost items are what poor people buy most. The high cost items all can have the inflated price traced to government intrusion on the market. Cars, efficiency regulations and houses due to the push for financially irresponsible ownership and the 250k out of 500k priced new home that is due to permits, fees, exactions and regulations. College has soared because of the free money and easy loans, allowing administration to balloon into a cash sucking beast.
As for the water profiteering, looks like no government needed. Social pressure on the free market worked just fine. It is in the financial interest of 711 to enforce fairness. Morality is the realm of the people, not the state. They can foster ethics, but it is far more ethical to be wary of mandating them.
Hypocrisy questioned
Brian,
So the moral thing to do is to allow the law of supply and demand and an unfettered free economy dictate who has access to goods, even goods that are essential for life, such as water. I am not sure that Jesus would agree with you. I know that I don’t.
Hypocrisy questioned
Leah,
So society would be better if individuals were left to their own devices to make all of their own self-interest decisions free of government interference since government regulation is the cause of all of society’s ills. There are a lot of facts to back up this supposition and I would be tempted to agree with you if it were not for one stubborn fact – the government you rail against was put into place by individuals who were left to their own devices to each make their own self-interest decision on who to elect.
“So the moral thing to do is to allow the law of supply and demand and an unfettered free economy dictate who has access to goods”
It already does. If the government could supply water, directly to your home, why would anyone need to purchase water from a grocery store? (oh wait, the government already DOES supply water directly to your home)
It’s not the water which people purchase; it’s the storage and portability of it which they purchase from the grocery store. There is nothing stopping people from filling up bottles from the tap (at a much reduced price, I might add).
People value the CONVENIENCE of bottled water and, in a crisis, that CONVENIENCE has a greater value if the supply of convenient water is restricted. When the government interferes with a voluntary purchase, for a good which the government provides en masse, at 1/100th of the cost, it admits that its utility as a resource provider has failed
Leah Dutra
I never said government was the root of all evil, it just happens to be the problem in the arguments made. Government best when it assists the individual harmonize the pursuit of SELF actualization, duty to one’s OWN family, and duty to community through the LEAST restrictive means. When you supplant the individual through with an emphasis on collectivism, you dilute personal responsibility and morality and suppress innovation.
The pursuit of government should not be extreme utilitarianism, or an excessive “greater good” mentality. It needs to focus on how it can benefit society while maintaining a strong sense of individualism in the citizenry.
Hypocrisy questioned
Brian,
My example was a real life situation (as I am sure you know) and there was no tap water available, hence the crisis.
I actually have no problem with allowing the free market to set the price of “convenience” items. I do have a problem allowing it to be the sole determiner of the cost of items essential for life.
Hypocrisy questioned
Leah,
I cannot disagree with any of that and I apologize if I misread your earlier posts as blaming government for all of society’s ills.
“My example was a real life situation (as I am sure you know) and there was no tap water available, hence the crisis.”
What crisis was that? Was it the crisis which drove the apparatchiks to order armed men to keep “the people” away from “the people’s supply” of water at the publicly-owned reservoirs? Those same apparatchiks who impose price controls and rationing on convenience stores who carry bottled water?
That’s what happens in a “crisis”. Keep in mind that the apparatchiks are the same people who ran the Mustang Ranch into the ground. They couldn’t sell booze and hookers, to truckers, in the middle of the desert.
THEY decide how to best allocate other people’s resources when they fail to do it properly and hoard the water supply?
click for a larger image
Comments 58
There are times when the local business does not carry the item I need. Otherwise, I fully support the small business community and try to buy from them for most of my needs.
As far as each one of us spending $ 100 more a year, there are 3 million of us in the county.
That looks like $300,000,000.
That’s a lot of jobs.
Author
But, the sign does not say that each of us should spend $100 more than we would have, it says to spend it one place instead of another (local instead of chain). Same amount of money, but spent here instead of there, at A instead of B. Support for local businesses aside, does what they are advocating produce more jobs or not? Does it grow the economy?
The overly simplistic answer is that shopping at small local businesses would help grow the LOCAL economy. The owners of these businesses would be more more likely than the corporate bosses of major chains to spend the profits locally and would therefore create more demand for goods and services within the community.
Not sure where they get the math. Needs to look at the margin on the product and assume that the local owner also buys local
Supposing every extra dime was put back into job creation, 3,000,000 ÷1000= a really shitty job. That said, buying local does keep the money local and create opportunity for business ownership, a great idea if you can afford to support it. I can’t always pay the premium for buying goods at sometimes higher priced mom and pops. I am paying for grad school and a kid in college, paying more for goods just to support a worthy cause is not a luxury we can afford right now. If shopping at Target or Costco allows me to raise my family’s standard of living, sorry but I have to do what is best for mine first.
So this meme must be from a town of 30,000 people ($3M/$100). Assuming that every bit of that money went to jobs, and that “thousands” refers to at least 2,000 jobs, those jobs would pay $1,500 a piece. That’s not considering the fact that this isn’t net new spending but rather is shifting the spending to local vs chain business.
I am not sure that “shopping local” would make much of a difference, but at least this post did bring out the main reason we are where we are as a society (for better or worse):
“I have to do what is best for mine first.”
I’ll pose my own question here for readers. When you spend a dollar at evil-Walmart, how much (what PERCENT) is profit? How about at Costco?
Shucks, I’ll make it easy for y’all. Here’s recent P&L’s. Do the math. I daresay you’ll be surprised.
http://finance.yahoo.com/q/is?s=WMT
https://finance.yahoo.com/q/is?s=COST
This is a crucial concept, as 97.383% of the public will guess that the profit margin is far higher than reality — and this widespread misconception of profit margins is true concerning ALL businesses. Of course, most businesses have a somewhat higher profit margin than super-efficient Walmart or Costco, but it’s still much less than people think.
All discussions about having business pay more (a.k.a. “their fair share” — presumably out of profits) is predicated on the widespread economic illiteracy concerning this fact.
BTW, return to those two P&L statements and notice the corporate income tax that these corporations pay. Gee, I thought these big corporations paid little or no taxes. What gives?
Yes, some corps DO pay little or no taxes — especially the ones that, ya know, don’t make profits! Others lower their taxes by doing government-favored spending (such as alternative energy) — essentially spending some of their tax dollars on inefficient investments.
But I digress. Happy Labor Day Weekend!
Re: “main reason we are where we are as a society.”
Hmmm. If I, for instance, spend 80 bucks at a major discount retailer for items that would have cost me 100 bucks at the mom and pop shop, that’s 20 bucks I have to use as I please, including “taking care of mine” with other purchases I need (which also helps the economy), maybe even at the mom and pop, or using it for a charitable donation (also “helping mine” and the economy).
Taking care of mine is not necessarily something that hurts the economy, especially when it provides “mine” increased buying power.
Barry,
My point was simply that we have become a very self-centered people and that Leah’s statement summed up exactly where we are as a society. I expressed no value judgement – I even added “for better or worse.”
Gordon Gekko wasn’t completely wrong when he famously said “greed is good.”
This is a good idea. if you live or own a business in San Marcos. Ship through Fedex Ground. That helps me. If you own or know somebody who has a 12 ft box truck of 17 ft step van. I’d rather buy it from you than a dealership in Indiana. So I can help you. Really.
Nothing is easier to achieve than full employment. Primitive Indian tribes and folks in Ethiopia don’t struggle from lack of work but from low productivity.
The “full employment” argument is misleading and misses the point. It confuses the means with the end.
We can get to full employment by prohibiting the use of machines and doing everything by hand.
I think the sign above misunderstands the goal of a healthy economy. It’s about prosperity not jobs.
Prosperity is the proper goal of an economy and the means to prosperity is production. Economic progress is a function of production not employment and production is about rewarding those who do the most with the least.
The progress of civilization has meant a reduction in employment, less child labor and moms getting to stay home. The more prosperous the civilization the smaller proportion of the population needs to work.
In order to create prosperity we need to remove obstacles that keep scarce resources from flowing to the areas a society values them most. Buying local when comparative goods elsewhere are less expensive undermines this natural process.
Eric-
Well said. If “employment” was the key, then Municipal, State & Federal government would be the most productive institutions we have.
Greed is the pejorative word we use for people acting in their own self interest. Everyone does this — in dozens of decisions every day. It makes us more efficient in using our time, more productive when working, and better consumers when we shop.
Is it “greed” when one shops at Costco vs. Sac’s 5th Ave., Rodeo Drive, or some mom and pop store with higher prices? As the term is too loosely used today, the knee-jerk answer to the question might be YES! But when we think about it, most of us would say no.
Greed is seldom a problem — except when it’s accompanied by force or fraud. Then it’s something else altogether.
HQ, understood you weren’t making a value judgement. Thus, my “Hmmm” in exchange for your “better or worse.” It heartens me to hear you quote Gekko, despite whatever Oliver Stone may have intended. To mix real and fictional quotes, although to some it may be a sacrilege, “Greed helps lift all boats.”
Barry,
Expanding on your quote(?), the problem we face is that the rising tide of the last 40 years has lifted precious few boats.
What Eric Anderson said. Best answer ever.
I usually shop at chain stores and pretty much always in San Diego. That’s local, isn’t it? I suppose it depends on the definition of local. For instance, Vons might not be a local business but it’s got a store just around the corner from my house. That’s a local enough business for me. The jobs certainly are local.
The one chain I won’t shop at it Costco. What with it being the retail equivalent of a gated community.
Eric,
Economic progress is a function of production AND employment.
We can have the most efficient and productive businesses the world has ever seen and that won’t mean anything to a person without a job.
We can continue to buy more and more from countries with low wages and low standards of living, but all we will accomplish is to eliminate American jobs and lower the standard of living for all Americans except the corporate bosses.
“I have to do what is best for mine first.”
I hope that’s a quote in praise of this behavior. Rational self interest is the gateway to independence. At the end of the day, egoism is the only thing which will save these United States.
The Soviets had both production and employment.
What makes America different, dare I say Exceptional, is the implied work ethic from our Western Tradition & Judeo-Christian values where innovation and the entrepreneurial spirit was encouraged and loosed free to create “other jobs” in yet undiscovered industries and markets for these new products.
Without innovation, or a market where people can initiate their dreams and aspirations without draconian government regulations and oppressive tax burdens, we can still have productuion and employment-where lots of disgruntled and dispirited workers are making crappy products- Its called Socialism.
Cue Bernie Sanders.
“…the rising tide of the last 40 years has lifted precious few boats.”
I can think of a rising tide much more significant than greed in the last 40 years, although it does also start with a g.
Barry,
Regardless of the reason, the indisputable fact is that the vast majority of Americans have not benefited from the greatest economic expansion we have ever seen. Again, regardless of why this is true, it is a recipe for social unrest or worse.
Brian,
1. A homeowner does “what is best for mine first” by repeatedly refinancing his home to supplement his family’s income. He then defaults on the loan when home values decline leaving the lender to pay the bill.
2. A convenience store owner does “what is best for mine first” by taking advantage of a disaster and raising the price of water more than ten-fold thereby forcing residents to choose between paying the high prices or not having water.
3. A businessman who is personally worth hundreds of millions of dollars does “what is best for mine first” by setting up a
corporation to conduct a multimillion dollar deal and then having the corporation declare bankruptcy when the deal didn’t go exactly as he hoped for leaving all the other investors to pay the bill.
Which one of the above is an example of “the only thing that will save these United States?”
“Which one of the above is an example of “the only thing that will save these United States?”
If we desire to save our economy then why not think along the lines of increasing production/productivity?
How does a fisherman increase productivity? He invests his savings in a better fishing pole or boat.
Investments in bigger boats and nicer fishing poles require savings but the public sector is draining the private sector of the necessary capital and the Fed is artificially lowering interest rates removing the incentive for the fisherman to save.
Want a growing economy? How about limiting government and letting interest rates be set by the market?
Eric,
You started your comment by repeating my question and then completely failed to address it.
As to the point you did make that the government is inhibiting productivity, I would say that if that was the government’s goal, they aren’t do a very good job of it since the world has never seen greater gains in productivity than we have over the last 40 years.
HQ: I so hate to put words in your mouth, so before I respond to your query, first answer me this: In the following example that you posted, IYHO is this businessman demonstrating greed — something that you’d want to eliminate in your Utopian society? Is this businessman an evil/unethical/immoral/criminal person? Feel free to choose your own description, if none of those fit. Is what he did in your description “wrong”? I really want to know.
***
A businessman who is personally worth hundreds of millions of dollars does “what is best for mine first” by setting up a corporation to conduct a multimillion dollar deal and then having the corporation declare bankruptcy when the deal didn’t go exactly as he hoped for leaving all the other investors to pay the bill.
***
The way that small local companies become bigger successful corporations with large market share is by exploiting a small niche in the market, by being more agile, by providing more personalized service when the large corporation is too focused on costs,…charitable consumers did not allow Apple to crush IBM and HP. Charitible consumers did not allow Whole Foods to beat many of the large supermarkets. It was not consumer charity that allowed the craft beer companies to take a huge market share bite out of Anheuser Bush, Coors, etc… In a competitive marketplace, where companies are not given favorable treatment by government over others, the little guy can beat the big guy as some of the big guys get fat and lazy.
Richard,
None of the above actually. I don’t think that the businessman in my example was evil, greedy or immoral and I don’t have any problem with making a profit. However, the actions described certainly harmed (albeit legally) others and showed a lack of personal responsibility so I was only asking whether Brian thought that this “mine first” action is really “the only thing that will save these United States.”
Richard,
Question for you – What did you think of the homeowner example? Is that also the type of me first actions that will keep America great?
HQ, you seem to want it both ways — first you claim that the businessman’s actions were in no way “evil, greedy or immoral,” yet you then go on to assert that his refusal to make good the other investors’ losses “showed a lack of personal responsibility.”
Let’s consider your position. There are two outcomes in most new business ventures:
1. They do well, and profits are make. Hopefully big profits — new ventures are risky.
2. The venture doesn’t do well, with much or all of the investors’ capital lost. At least half of new business ventures fail — perhaps up to 80%.
http://www.forbes.com/sites/ericwagner/2013/09/12/five-reasons-8-out-of-10-businesses-fail/
Let’s trace this transaction from the start. This “irresponsible” rich businessman decides to start a business venture, but wants to assume only part of the capital risk, so he sells shares in his corporation to other investors. If the company does well, they ALL make money. But according to you, if the business fails, it’s the “responsibility” of the entrepreneur to pay back the money that the other people invested.
Gosh, if that’s the moral code we are to live by, why would this wealthy businessman allow others to buy part of his business? Under your code, he should be morally responsible to pay off the other investors if it goes bad.
Seems like a win-win for investors, and a lose-lose for your businessman. Under your scheme, the businessman should take 100% the risk, but only gets a fraction of the profits if it goes well.
Well, I shouldn’t be too critical of your assertions. That’s standard progressive thinking. And BTW, it’s the thinking of the public employee labor union bosses. If the pension investments go well, demand retroactive pension increases. If they don’t go well, then 100% of the shortfall should be made up by the hapless taxpayers.
I find your scenario quite illuminating. Thanks for presenting it, HQ.
HQ, oddly enough, I’ve been speaking out against “nonrecourse” real estate loans for many years. They are common in most states, a legal protection that is unwarranted — and results in market distortions involving trillions of dollars.
Nonrecourse loans as seen in most states in the U.S. are not the product of the private sector. It’s a government imposition in the market — which gets the government into the mortgage insurance business — with disastrous results. A free market nonrecourse loan usually demands at least a 40% loan equity, but in the U.S. we have programs designed to let people buy homes with 10% to 20% down — even ZERO down — almost all nonrecourse loans.
It doesn’t have to be. Canada issues home loans that are RECOURSE loans — the borrower is personally on the hook to pay off the loan. As a result, they haven’t had a significant housing bust like we’ve seen in the U.S. Here’s a piece I wrote on this in 2013:
http://riderrants.blogspot.com/2013/02/canadas-finances-look-great-in.html
But in the U.S., we have a government that insists that just about everyone should own a home, regardless of their earning capability or credit history — and without putting much money down in many instances.
Nonrecourse loans encourages irresponsible behavior. People are told they are doing the right thing — borrowing to the hilt while putting little money down. And they are told BY THEIR GOVERNMENT that walking away from such loans is perfectly okay.
Rather than getting mad at the borrowers’ decisions, we should change the incentive system that ENCOURAGES such irresponsible behavior. Phase out subsidized or mandated nonrecourse loans — and the government insurance that backs ’em.
Richard,
Your responses are very enlightenig but not surprising as most on this site are very concerned and protective of businesses but lack the same concern for the individual.
My examples were very similar. In one, a businessman borrows money from investors (maybe individuals, maybe banks) and then, when the business becomes unprofitable, defaults on paying back the loan even though he has the means to pay it back. In the other, a homeowner borrows money from investors (most likely a bank) and then, when the home loses value, defaults on paying back the loan even though he has the means to continue making payments.
Also interesting to me is that you blame government regulations for allowing the homeowner to default but ignore government bankruptcy laws as the reason the businessman was allowed to default.
Your knee jerk support of a “businessman” while condemning similar actions by a “homeowner” says all we need to know about your priorities. Thank you for sharing.
HQ, businesses AND individuals find protection in bankruptcy laws. If you’d prefer we eliminate such laws, that’s fine. But let’s be fair and eliminate BK laws for EVERYONE — not just the evil businessman.
BTW, with recourse loans, a homeowner is responsible for paying off the loan, but the homeowner ALSO has the BK option to shed that obligation. All the recourse loan does is to not let the borrower walk away from the debt, regardless of their ability (or inability) to pay off the debt.
HQ, AWESOME response! First you talk about INVESTORS in a business enterprise and the “responsibility” of the businessman to pay back those investors (read your post!!). Then when confronted with your own flawed logic, you turn right around and make those investments LOANS.
You REALLY don’t understand the difference? Well, since you are a union guy, I can’t say I’m surprised at your ignorance — real of feigned.
500 days until Obama leaves office. Happy Labor day.
Richard,
It may surprise you, but the fact is that I have never been a “labor guy.” In addition to owning my own business for a time, every job I have every had would be considered “management.”
As for the difference between investors and lenders, thank you for pointing out my initial mistake. Now that you know that I meant lenders is your answer be any different?
Eric (and those who agree with him that production is the goal and employment is not important),
The UT Labor Day editorial (http://www.sandiegouniontribune.com/news/2015/sep/06/the-foreboding-future-of-work/) said it much better than I ever could:
“A nation without plentiful jobs is a nation without plentiful consumers. A nation in which there is a lopsided ratio between economic losers and economic winners is also very likely a deeply discontented nation. When our leaders navigate the coming disruption in our economy, their response should be shaped by these stark truths.”
Okay, maybe this was covered in subsequent posts but Hypocrisy’s assertion that my wish to take care of MY family first was somehow selfish had me scrolling down to reply before I read the rest of the discussion or I might pop a gasket. Humanity has progressed as a species, not for its unique ability to communicate or use symbols or logic or reason, but for the ability to form social coalitions.This began with those based on kinship. My brain and yours is hardwired to take care of your own family and tribe FIRST. It is why we survived and why we thrive. There is always someone worse off. How selfish are you for spending money on a computer rather than feeding Syrian refugees? Maybe you should go without lights, or take your kid out of preschool, or not buy underwear for your spouse because there is a child in Appalachia that does not have enough money to eat organic food? Are you selfish? Why am I for wanting a nice life for my family first? What if your kid is healthy and my kids need organs to live? Are you wrong for not wanting your kid slaughtered to save several lives? I happen to be a very giving person, generous with my time and money (what I can spare right now) for a whole host of causes and issues that are far more important than subsidizing small businesses that are not winning in the free market. You are a self righteous, judgmental *******, YOU are what is wrong with this country. Too many people worrying about how others are living their life without considering how they might be doing better FIRST.
Okay, so I finished reading and I still stand by my previous post, he was way judgmental in a passive aggressive way. Not that judgmental is always bad, as long as the argument is good. That wasn’t the case.
As for the further discussion, much of it deals with economics outside my knowledge base, but what caught my attention was the comment about boats not being lifted. Wrong. Income inequality, yes, but what about what the poor has today? The bottom income earners live quite a better lifestyle than those of the 1930s. Focusing on the numbers and not the way people are living misses the fact that the bottom 20% almost all have cars, microwaves, televisions, a/c and an obesity problem. This is because the goods are cheaper from other countries who are working for low-wages that are usually the best paying jobs with the best working conditions in the entire country (though they might really suck by US standards). Lets see, who is selfish? You want to take the best jobs they ever had away from developing nations AND take away all of the lifestyle enhancements of America’s poor too? So we can artificially inflate wages here? That won’t be harmful at all, how thoughtful and selfless.
As to the production argument Eric made, Hypocrisy missed the fact that the fisherman was funding expansion and buying supplies. Did they materialize out of the nothing or did somebody get hired to make the new bigger order of fishing rods? Government does not create jobs without stealing money from the citizens. Government sets the stage for self actualization through the least restrictive means. Confucius knew this to be the role of the state thousands of years ago, some are a bit slow to catch on, even when we see what happened when the legalist thinkers won with their massive bureaucracy and numerous regulations.
As to the lame scenarios about looking after yours first, poor argumentation, and irrational nonsense. As though taking care of one’s own first automatically means a decent into moral bankruptcy and that this self interested frame of mind is without limits. The slope has to be a vertical cliff to descend so quickly from buying cheaper goods at a big box to taking advantage of disaster for monetary gain.
What is best for America is if we take care of our own old people without getting money from the state. If our neighbor is sick or out of work, we make food for them instead of them going on food stamps. We create a culture of self sufficiency, personal responsibility AND duty to community, not a state enforcement of these things.
HQ, let’s again go back to your ever-changing example:
“A businessman who is personally worth hundreds of millions of dollars does “what is best for mine first” by setting up a corporation to conduct a multimillion dollar deal and then having the corporation declare bankruptcy when the deal didn’t go exactly as he hoped for leaving all the other investors to pay the bill.”
In other words, a startup company (a “shell” company, if you like) with no assets or collateral, offering only an idea. So who lends money to such a company — with no collateral?
In your example, the wealth of the rich guy (it’s always a [white] guy, isn’t it?) is not pledged as collateral. The lenders understand this. So why on earth would anyone lend such a worthless high risk venture money? You are presenting a straw man example. The only lenders in such a circumstance are loving family members, loan sharks (who “take” the borrower’s body as collateral!) and sucker taxpayers (via the Small Business Administration, etc. — crony capitalism).
Sooo, in the real world, how does a start-up gain funding from others? By selling off much of the future profits (if any) to INVESTORS! That’s what all these hated venture funds offer — funding in exchange for EQUITY interest in the business — and usually significant control as to how the business is operated.
HQ, feel free to once again change your question after the fact. I understand — it’s just what you do.
Richard,
My goal was to give three examples of “what is best for mine first behavior” that I didn’t believe was indicative of what Brian called “the only thing that will save these United States.” I will take the fact that you agreed with me on one (and failed to address another) as a victory.
Leah,
I was clearly not making a value judgement on your “mine first” comment. I was simply pointing out that the comment was indicative of the direction our society is headed and truth be told, it is indicative of how I generally live my life as well.
I do, however, take exception to almost everything else you subsequently posted. While it is true that the poor are better off today than they were during the Great Depression it of the 1930’s, it is definitely not true that the poor or the (ever shrinking) middle class are better off than their counterparts from the 1970’s, 80’s or 90’s.
You pointed out how today’s poor are obese, but that is not a factor of wealth. The reason is simply the plethora of fast food establishments and convenience stores and the scarcity of grocery stores and healthy food options in the poorer neighborhoods.
You point to the ownership of “cars, microwaves and television sets” as a sign of increasing prosperity but cars, microwaves and television sets were also plentiful in the 70’s and the extent that the poor and middle class can afford these and other “luxuries” today is due to something that wasn’t plentiful in the 70’s – the two-income family. When I was growing up, my mother stayed home and took care of me and my siblings. Today, I know of very few stay-home moms (or dads) and very few who could afford to be if they so choose.
Two last points:
1. You and Eric should stay away from fishermen as an example. The days of the independent fisherman have long since passed in this country, just one more middle class career that can now, with few exceptions, only be found in the history books.
2. You are correct that that in many cases, sweatshop work in a third world country is better than most other work there. However, if our goal is to “take care of mine first,” should we really be outsourcing what used to be middle class American jobs?
“Which one of the above is an example of “the only thing that will save these United States?””
All three are great examples; the problems come when government tries to socialize the losses from those on the other side of the trade;
1– the vast majority of American homeowners don’t extract equity and default but, if we removed government guarantees from mortgages, lenders would price that factor in (they already do to a small extent),
2- the pricing mechanism, in a crisis, is the single best way to allocate scarce resources. Watch what happens when wildfires start; I hoover up all the cheap water on the grocery store shelves. If the store raised the prices of water to $15/ case, there would be plenty of water three days into a shortage.
3- business people who do that usually have a difficult time raising cheap capital. Equity markets, for the most part, price that risk best because they are less regulated by the centralized planners
Brian,
Thank you for your response. I respectfully disagree as did the 7-11 Corporation who revoked the franchise of the store owner in question. Perhaps they believed that you could keep water on the shelf during the crisis by limiting the amount each person could purchase rather than by limiting who could purchase one of life’s necessity based on ability to pay the inflated price.
As the daughter, and granddaughter, and great-granddaughter, and likely greatX10 granddaughter of commercial fisherman, I know intimately the demise of the profession. It was due to government regulation relating to purse seine fishing. It is a perfect example.
Also I found some facts that show the 70s were not better for the poor. Here are some common products the low in CA/middle everywhere else class need to buy showing hours of work needed to buy them:
adult jeans: 1975 price was $6.99 (or 1.4 hours); 2013 price is $19.99 (or 1.0 hour)
television (19″ color): 1975 price was $294.95 (or 60.6 hours); 2013 price is $129.99 (or 6.6 hours)
30″ kitchen all-electric range/oven: 1975 price was $159.95 (or 32.8 hours);2013 price is $369.99 (or 18.6 hours)
More reality here:
http://cafehayek.com/2013/01/cataloging-our-progress-using-sears-com-selection-on-new-years-day-2013.html
I stayed home, or later worked part time, on a plumber’s income in the 2000’s and sent my kid to private school. It is a choice for more than you think. Those for whom it is not lost the choice during the Obama administration. Look at your friends again. Is it really about not being able to stay home, or an image of what lifestyle they want? Do they live like our parents did? Are all their meals cooked at home? Do they pack a lunch? Do they have to have starbucks every morning? Do they have to have a 200-300 cell phone bill? Do they have 1 car? Are their closets tiny and their wardrobes mended and handed down? Do they vacation every year in a hotel or do they go camping every other year or not at all?
You are wrong.
HQ, odd response. What victory? The victory being you’ve stopped making the case that the heartless businessman you described is doing something wrong?
I take it you’ve simply stopped making the case, recognizing your own flawed thinking. Just not clear how that’s scored as a “victory.”
As to the home loan defaults, that’s a structural problem where the government ENCOURAGES default. The free market has been overridden by this market intervention. I think we do agree that is wrong. The solution is to get the government out of the lending business — both borrowers and lenders will act more responsibly when that happens.
As for your third example (a shortage), raising prices in shortages is a market method of encouraging more product shifted to where it is most needed. If the price doesn’t change, there’s little incentive for people outside the area to make extraordinary efforts (and incur extra expense) to make the same level of profit (which is rather slim) as they make on their domestic sales.
Moreover, shifting product to an area that has a temporary shortage risks of running into competitors doing the same thing, with the resulting (hoped for) sales not occurring — a common end result when a temporary shortage is solved by market response that exceeds demand. That risk can be offset by the prospect of higher prices — if that’s allowed (government tends to forbid charging more).
As for a local vendor raising prices, they have to think longer term. Are the extra profits worth the alienation of their regular clients? People get pissed when vendors raise prices in such circumstances, and that might not be good for business. Walmart, for instance, generated tremendous goodwill by hustling to bring in needed product without raising prices. I prefer such self-governing considerations compared to government price fixing.
Bottom line: Raising or lowering prices to reflect current market factors is the way the market is SUPPOSED to work. Beats the alternative — government price controls. Just ask Richard Nixon! Well . . . that might be difficult.
Actually, HQ, perhaps the biggest reason for “income inequality” is the growing number of single parent families. We measure income by “household income.” And BTW, we don’t count welfare benefits and subsidies as income.
http://www.forbes.com/sites/theapothecary/2014/11/19/the-biggest-reason-for-income-inequality-is-single-parenthood/
EXCERPT: In 1980, approximately 78 percent of families with children were headed by married parents. In 2012, married parents headed only 66 percent of families with children. In a new report, Bradford Wilcox and Robert Lerman explore the role of family structure with new data and analysis, and document how this retreat from marriage is not simply a social and cultural phenomenon. It has important economic implications for, amongst others, men’s labor force participation rates, children’s high school dropout rates and teen pregnancy rates. Since these factors are highly correlated with economic opportunity and the ability to move up the income ladder, this suggests that income inequality and economic mobility across generations are critically influenced by people’s decisions and attitudes towards marriage.
Or this excerpt from the WS JOURNAL:
http://www.wsj.com/articles/SB10001424052702303603904579493612156024266
The two-parent family has declined rapidly in recent decades. In 1960, more than 76% of African-Americans and nearly 97% of whites were born to married couples. Today the percentage is 30% for blacks and 70% for whites. The out-of-wedlock birthrate for Hispanics surpassed 50% in 2006. This trend, coupled with high divorce rates, means that roughly 25% of American children now live in single-parent homes, twice the percentage in Europe (12%). Roughly a third of American children live apart from their fathers.
Does it matter? Yes, it does. From economist Susan Mayer’s 1997 book “What Money Can’t Buy” to Charles Murray’s “Coming Apart” in 2012, clear-eyed studies of the modern family affirm the conventional wisdom that two parents work better than one.
“Americans have always thought that growing up with only one parent is bad for children,” Ms. Mayer wrote. “The rapid spread of single-parent families over the past generation does not seem to have altered this consensus much.”
Leah,
You make some good points about a few low cost items. Here is the other side:
From http://www.dailyfinance.com/2010/02/14/home-prices-must-drop-40-more-to-reach-normal-affordability-lev/ :
Note the numbers only go to 2008 so you can’t blame President Obama, although I am sure you will find a way.
“Let’s start by examining the cost of homes from 1975 to 2008. Our statistics are drawn directly from U.S. Census Bureau data. The average house price in 1975 was $39,500. Using the Bureau of Labor Statistics inflation calculator, we find that comes to $158,000 in 2008 dollars.
The average (mean) house price in December 2008 was $301,200 — almost twice the 1975 cost. To be exact, 90.7% higher. In other words, in an “apples to apples” comparison adjusted for inflation, homes cost almost twice as much as they did in 1975.
Next, let’s look at the standard measure of affordability described above: household income compared to the cost of a house. Here is an analysis of the Census data 1975-2008.
* 1975: median income $42,936, median house price $148,800
Home price/income ratio: 3.46
* 1975: average income $50,137, average house price $158,000
Home price/income ratio: 3.15
* 2008: median income $50,303, median house price $245,300
Home price/income ratio: 4.87
* 2008: average income $68,424, average house price $301,200
Home price/income ratio: 4.4
In other words, a house cost 3.15 years of average income in 1975, and 4.4 years of average income in 2008. By that measure, homes in 2008 were 39.6% costlier when measured in income than they were in 1975.
The numbers are remarkably similar if we look at median incomes and home costs: the 2008 ratio (4.87) is 40% higher than the 1975 ratio (3.46). These numbers reveal that affordability as measured by average income has dropped significantly since 1975.”
2. From http://www.mybudget360.com/cost-of-living-compare-1975-2015-inflation-price-changes-history/ .
This one does go to 2015 so I am sure it is all President Obama’s fault:
“cost of living chart
Source: David Stockman
This is a very telling chart. First, let us look at the biggest line item with housing. A new home today costs $270,200. That 1975 home adjusting for inflation would cost $209,417. This is a “real” increase of 29 percent. A new car costs $31,252 while that 1975 car adjusting for inflation would cost $16,578. This is a true doubling of cost here. Public college costs are up over 150% while private college costs are up over 160%. And you wonder why we have over $1.3 trillion in student debt outstanding.
What is more affordable relative to inflation? Milk, eggs, and a postage stamp. Unfortunately these are tiny line items on your household budget.”
You really should stay away from definitive statements such as “you are wrong.”
Richard,
Maybe you missed the point that the convenience store owner increased the price of WATER at a time of disaster. This fact wasn’t lost on the 7-11 Corporation; they removed the owner’s franchise.
At least we agree that families are much stronger with two parents.
I can make an argument that raising prices is the moral thing to do as well, HQ because it more appropriately rations the water for long-term survival.
The negative PR is usually why stores don’t raise prices so irrational thinking rules the day. Cunning scavengers (like me) buy and hoard the water during a crisis. We go store to store and buy the max amount available so that we have water if the crisis lasts at least a week.
Why are we scavengers so “greedy”.? The answer is self-interest. The cheap water becoms an extraordinary bartering tool at crisis+7. I could barter for a lot of things then–and I won’t be interested in green pieces of paper.
In a sane world, we’d appreciate the retailer who took the long-time view and accepted green pieces of paper for a life sustaining resource. It’s so much easier for the unprepared and lazy to scream “profiteering” than it is to do the hard work
Low cost items are what poor people buy most. The high cost items all can have the inflated price traced to government intrusion on the market. Cars, efficiency regulations and houses due to the push for financially irresponsible ownership and the 250k out of 500k priced new home that is due to permits, fees, exactions and regulations. College has soared because of the free money and easy loans, allowing administration to balloon into a cash sucking beast.
As for the water profiteering, looks like no government needed. Social pressure on the free market worked just fine. It is in the financial interest of 711 to enforce fairness. Morality is the realm of the people, not the state. They can foster ethics, but it is far more ethical to be wary of mandating them.
Brian,
So the moral thing to do is to allow the law of supply and demand and an unfettered free economy dictate who has access to goods, even goods that are essential for life, such as water. I am not sure that Jesus would agree with you. I know that I don’t.
Leah,
So society would be better if individuals were left to their own devices to make all of their own self-interest decisions free of government interference since government regulation is the cause of all of society’s ills. There are a lot of facts to back up this supposition and I would be tempted to agree with you if it were not for one stubborn fact – the government you rail against was put into place by individuals who were left to their own devices to each make their own self-interest decision on who to elect.
“So the moral thing to do is to allow the law of supply and demand and an unfettered free economy dictate who has access to goods”
It already does. If the government could supply water, directly to your home, why would anyone need to purchase water from a grocery store? (oh wait, the government already DOES supply water directly to your home)
It’s not the water which people purchase; it’s the storage and portability of it which they purchase from the grocery store. There is nothing stopping people from filling up bottles from the tap (at a much reduced price, I might add).
People value the CONVENIENCE of bottled water and, in a crisis, that CONVENIENCE has a greater value if the supply of convenient water is restricted. When the government interferes with a voluntary purchase, for a good which the government provides en masse, at 1/100th of the cost, it admits that its utility as a resource provider has failed
I never said government was the root of all evil, it just happens to be the problem in the arguments made. Government best when it assists the individual harmonize the pursuit of SELF actualization, duty to one’s OWN family, and duty to community through the LEAST restrictive means. When you supplant the individual through with an emphasis on collectivism, you dilute personal responsibility and morality and suppress innovation.
The pursuit of government should not be extreme utilitarianism, or an excessive “greater good” mentality. It needs to focus on how it can benefit society while maintaining a strong sense of individualism in the citizenry.
Brian,
My example was a real life situation (as I am sure you know) and there was no tap water available, hence the crisis.
I actually have no problem with allowing the free market to set the price of “convenience” items. I do have a problem allowing it to be the sole determiner of the cost of items essential for life.
Leah,
I cannot disagree with any of that and I apologize if I misread your earlier posts as blaming government for all of society’s ills.
“My example was a real life situation (as I am sure you know) and there was no tap water available, hence the crisis.”
What crisis was that? Was it the crisis which drove the apparatchiks to order armed men to keep “the people” away from “the people’s supply” of water at the publicly-owned reservoirs? Those same apparatchiks who impose price controls and rationing on convenience stores who carry bottled water?
That’s what happens in a “crisis”. Keep in mind that the apparatchiks are the same people who ran the Mustang Ranch into the ground. They couldn’t sell booze and hookers, to truckers, in the middle of the desert.
THEY decide how to best allocate other people’s resources when they fail to do it properly and hoard the water supply?
Place not your trust in princes, my friend