FT135: “If corporations aren’t people than neither is government.” —Old Pithy

Posted by PITHOCRATES - September 14th, 2012

Fundamental Truth

Corporations get Wealthy by either Pleasing their Customers or Pleasing Government

Mitt Romney said during the Republican primary campaign that corporations are people.  And the Left castigated him.  While late-night comedy made jokes with that snarky, all-knowing condescension.  Because everyone on the Left knows that corporations aren’t people.  They’re evil, soulless entities.  Unfeeling and cruel.  Who care only about profits.  While poisoning our environment.  Everyone on the Left will agree with this.  And those CEOs?  They’re the worst.  A bunch of greedy, old, white men.  Except those women who shattered the glass ceiling.  Who the Left celebrates.  Even though they run evil, soulless entities.

So what is a corporation?  Other than something that comes from the bowels of hell?  Well, perhaps the simplest explanation is this.  A corporation is a business structure that lowers consumer prices.  Which reduces the cost of living for poor and middle class families everywhere.  Huh?!?  No.  That can’t be right, you say.  Because corporations are evil and soulless.  On top of that they’re not people.  So why would some evil, soulless non-humans do something that is very beneficial to humans?  In a word, greed.

There are two ways corporations can get wealthy.  Either by pleasing their customers.  With high quality, great selection and low prices.  Or by pleasing government.  Allowing them to give their customers lower quality, poorer selection and higher prices.  Because their friends in government limit competition.  So they don’t have to please their customers.  Wal-Mart is an example of a company getting rich by pleasing customers with high quality, great selection and low prices.  Wal-Mart shoppers enjoy going to Wal-Mart.  The American auto industry is an example of companies getting rich because of government.  Which restricted free market competition as much as possible in the auto industry.  Raising prices and lowering quality.  Because of this auto shoppers don’t enjoy buying American cars as much as foreign imports.  Which has made Toyota the number one car company.

The more Corporations Pursue Profits the more Choice, Quality, Variety and Lower Prices Consumers Have

Selling a large variety of high quality goods at low prices will attract customers.  And increase sales volume.  That leads to profits.  Which is what those greedy corporations want.  And one of the best ways to do this is through economies of scale.  Growing larger to have greater purchasing power.  And selling so many units that you can charge less per unit to recover overhead costs.  Thus allowing you to sell at lower prices.  And the bigger you get the more you can lower your prices.

But to get big you need to take a lot of risks.  And the biggest risk is borrowing enormous sums of money.  Because it takes money to make money.  The kind of money one person typically doesn’t have.  So how to get it?  By incorporating.  Becoming one of those evil, soulless entities.  So you can give your customers a large variety of high quality goods at low prices.  When a business incorporates a few things happen.  First of all the business becomes a legal entity.  Which protects the people running the business.  By diversifying risk to its numerous shareholders.  Who assume that risk in exchange for ownership.  Incorporating also opens the capital markets for them.  Where they can sell bonds to finance growth.  Or sell stock.  Allowing them to raise the large sums of money to open more stores/plants.  Hire more people.  And achieve economies of scale.

The more corporations that do this the more choice consumers have.  The better quality.  And the lower prices fall.  Just think of something you’ve bought recently.  And the choices you had.  The stores you visited.  The websites you visited.  How you found exactly what you were looking for and paid what you thought was a fair price.  And how you enjoyed the whole process.  Now compare that experience with, say, renewing your driver’s license.  Where you have no choice in quality or price.  Compare the friendly faces at your favorite store with the joy of waiting for them to call your number at the DMV.  When the number being served is 76.  And you have number 12.  Worse, when you make the “I have places to go look” to the civil servants behind the counter working at a snail’s pace you don’t get a friendly smile in return.  You get a look of contempt.

People in Corporations put on a more Human Face than Government Workers because they Want to Please You

When you get poor service at a store you will complain.  You will talk to management.  You will threaten to take your business elsewhere.  Or you will just take your business elsewhere without telling anyone at that business.  Giving them no chance to correct a problem that will discourage customers shopping with them.  Which is the worst thing that can happen to a business.  Because they can’t fix a problem they don’t know about.  But if they know about it they will fix it.  Because if they don’t you will take your business elsewhere.  The last thing they want you to do.  So they will strive to make your experience a good experience.

If you get poor service at the DMV, though, you don’t want to get the people who can make you wait forever angry.  Instead you smile and tell them what a great job they’re doing.  Because you can’t go anywhere else.  Which is par for the course whenever you have to deal with the government.  Where customer service is not in the employee handbook.  Which is why people usually feel fear and/or dread whenever they have to deal with a government bureaucrat.  Especially the IRS.  Which is why the dark world George Orwell wrote about in Nineteen Eighty-Four was about the oppressive world of socialism.  Not an oppressive world where corporations take over.  Because they could never do that in a free market economy.  They could only do that in a world where government chooses winners and losers in the private sector.  Which would be a world without competition.  Where there was no large variety of high quality goods at low prices.  But the grey world that Orwell wrote about in Nineteen Eighty-Four.

So what’s the difference between corporations and the government?  The people.  The people in corporations put on a more human face because they want to please you.  Because they have to please you to stay in business.  The people in government, though, don’t.  Because government doesn’t have to please you.  And don’t try to.  For where else are you going to go?

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , ,

Chinese Women outperforming American Women in the Corporate World

Posted by PITHOCRATES - August 28th, 2011

Women are Thriving in Emerging Markets because things don’t Cost that Much

Corporations are the big bad in today’s world.  Everyone hates them.  They’re evil inhuman pariahs sucking the marrow of humanity.  They should be punished.  Taxed to the hilt and then taxed some more.  Those filthy, rotten, greedy corporations.  You just can’t say anything good about them.  Never.  Except, of course, when women climb the corporate ladder (see The daughter also rises posted 8/27/2011 on The Economist).

The emerging world is home to many businesswomen like Ms Zhang. Seven of the 14 women identified on Forbes magazine’s list of self-made billionaires are Chinese. Many firms in emerging markets do a better job of promoting women than their Western rivals, some surveys suggest. In China, 32% of senior managers are female, compared with 23% in America and 19% in Britain. In India, 11% of chief executives of large companies are female, compared with 3% of Fortune 500 bosses in America and 3% of FTSE 100 bosses in Britain. Turkey and Brazil come third and joint fourth (behind Finland and Norway) in the World Economic Forum’s ranking of countries by the proportion of CEOs who are women. In Brazil, 11% of chief executives and 30% of senior executives are women.

I wonder if these women are the ones Mitt Romney was referring to when he said corporations are people.  Or are these women just soulless scum of the earth, too?

Funny.  Corporations are evil.  But women climbing the corporate ladder is good.  Even though they’re climbing the ladder of evil.  As if there was something good about being in high places in these evil inhuman pariahs.  Perhaps people think that women will do away with the profit motive in business once they’re in charge.  Instead paying everything they earn beyond the cost of sales as income taxes.  They could.  But they will fall off of that ladder pretty darn quick if they do.

So why China?  Why is it there that feminism is flourishing?  Where women can bring home the bacon?  And fry it in the pan?  Is it because of the one-child policy giving them more time to work in a corporation?  Is it a greater drive due to all of the girls aborted because parents wanted their one child to be a son?  Or is child care just cheaper in China?

Living in emerging markets offers many advantages for female professionals. Most obviously, there are plenty of cheap hands to cook and take care of children.

So in other words women are thriving in emerging markets because things don’t cost that much.  Child care.  Parent care (it’s the daughters who take care of aging parents in China).  There’s a lesson here.  If you want a smoking hot economy with opportunity for everyone, don’t make it so expensive to live there.  And that’s what high taxes and costly regulatory compliance costs do. 

Democrats feel our Pain and want to do Everything they can do to Help Us

A lot of women vote Democrat.  For they feel that Democrats care about women’s issues.  Unlike the out of touch old white men in the Republican Party who just care about profits.  Everything is just too logical with them.  They don’t feel.  Democrats feel.  They feel our pain.  And want to do everything they can do to help us.  Give us that which we crave.  Love.  Understanding.  And a job.  So you’d think they hit the mother lode with Obama.  The media loved him.  But it’s been almost three years and he hasn’t really done anything substantial to help us in the here and now (see Obama’s Enablers by Fred Barnes posted 8/28/2011 from the 9/5/2011 issue of the weekly Standard).

It’s counterintuitive, but Obama has been hurt by the media’s leniency. Both his presidency and reelection prospects have suffered. He’s grown lazy and complacent. The media have encouraged him to believe his speeches are irresistible political catnip, though they aren’t. His overreliance on words hasn’t helped.

The kind of media pressure that can cause a president to sharpen his game, act with urgency, or take bolder steps—that has never been applied to Obama. If it had, I suspect he’d be a more effective, disciplined, energetic, and popular president today. Ronald Reagan is a good role model in this regard. When the media attacked him over gaffes in the 1980 campaign, “Reagan responded like all competitive men by working to improve himself,” says Reagan historian Craig Shirley. “Experience taught him to be better and try harder.” He took this lesson into the White House…

Absent pushing and prodding by the press, the Obama presidency has atrophied. His speeches are defensive and repetitive and filled with excuses. He passes the buck. With persistently high unemployment and a weak economy, Obama recently declared, in effect, “I have a plan. See you after my vacation.” The press doesn’t goad him to lead.

Three years.  Almost.  And we still have high unemployment.  And a weak economy.  Despite all those speeches about focusing on jobs.  With a laser-like focus.  Instead we get higher taxes.  And more costly regulations.  Nothing like those women in China have to deal with.

“Private sector job growth is good,” he said in Alpha, Illinois. In reality, it’s bad and getting worse. “The economy is now growing again,” he said. Barely. Obama said trade deals and patent reform would promote hiring, if only Congress would approve them. But it’s the president who has delayed the trade treaties, and both houses of Congress have passed patent reform measures.

The media routinely give Obama a pass on such stuff. On the tour, Obama insisted, as he has many times before, that he saved the nation from a “Great Depression.” So far as I know, the press has never challenged this dubious claim. But it is belied by the fact the recession came to an official end in June 2009, months before Obama’s policies could have played more than a minimal role.

This reminds me of an episode of Scrubs.  The Janitor was making some ridiculous claims.  So Carla asked the janitor if he is familiar with the term ‘delusions of grandeur’.  He replied, “I believe I coined that term.”

If you can’t Raise Revenue via Income Taxes because of a Bad Economy, go after Wealth

So what if anything is the Obama administration doing to address the problems of this nation?  Well, for one, they’re doing a pretty good job of transferring wealth from the private sector to the public sector (see Banks seeking relief from regulators as deposits swell by Bradley Keoun, Dakin Campbell and Dawn Kopecki posted 8/26/2011 on The Washington Post).

Deposits are flooding into the biggest U.S. banks as customers seek shelter from Europe’s debt crisis and falling stock prices. That forces lenders to raise capital for a growing balance sheet and saddles them with the higher deposit insurance payments. With short-term interest rates so low, it’s hard for financial firms to reinvest the new money profitably…

The extra deposits are problematic because they’re subject to withdrawal, so banks have to park the money in low-yielding short-term investments, Litan said. With few other choices available, banks have stashed their excess deposits at the Fed, which means the cash gets counted as assets.

Do you have a 401(k)?  If so, how did you pick your funds?  Well, if you’re young you probably leaned towards high-yield risky growth funds.  If you’re close to retirement, you probably leaned towards low-yield ‘safe’ income preservation funds.  Young people can ride a few boom and bust cycles and not lose money in the long run.  When you’re close to retirement you can’t.  So you park that money where it’s safe.  Knowing it will be there when you need to withdraw it.

In a volatile world, people and corporations with money act like people who are close to retirement.  They will sacrifice yield to keep their money safe.  Even pay a small fee.  For they don’t want to see their wealth disappear in a crashing stock market.  Or a collapsing bond market.

Now Keynesians attack this ‘hoarding’ of money.  This is the reason why there is no demand.  Which is keeping the economy weak.  Because no one is taking any chances with their money.  So what is a government to do?  Get rich.

If the FDIC agreed to forgive some fees, it would have to give up some of the extra premiums that it’s counting upon to rebuild the Deposit Insurance Fund, which covers customers for $250,000 per account in the event of a failure. That makes the agency unlikely to grant a waiver, one of the people said, adding that the existence of the insurance is one of the reasons banks are able to attract the deposits.

The FDIC’s fund, which fell into a deficit of almost $21 billion after a wave of bank failures, turned positive during the second quarter for the first time in two years, the agency reported this week. On April 1, the FDIC changed its formula for assessing premiums, increasing the cost for most large banks and adding to their deposit expenses.

Yes.  They saw all that money and said I’ll take some of that.  They increased their FDIC fees.  Which is ridiculous because the money is just sitting in the bank.  As if there was no such thing as fractional reserve banking.  Which is the very reason why they created FDIC.  In case banks loaned out too much money when faced with a lot of depositors demanding their money back.  At the same time. 

FDIC was a way to prevent a bank run.  If you know your money is insured even if a bank is going under, you won’t run to the bank to get your money.  But with virtually 100% of these deposits held in reserve, everyone could run to the bank and demand their money back.  And the bank could repay every depositor. 

So why raise the FDIC fee?  Why not?  If you can’t raise revenue via income taxes because of a bad economy, go after wealth.  Especially if it’s just sitting there.  For all intents and purposes, the FDIC fee on funds that a bank does not lend out is little more than a wealth tax.

A Growing Public Sector Oppresses Women whereas Capitalism Unleashes their Potential 

So women are climbing the corporate ladder in emerging countries.  While the world’s number one economy sputters and spits along.  Despite nearly three years of applying a laser-like focus on job creation.  Which in Washington-speak means writing more job-killing regulations.  And thinking of creative new ways to transfer wealth from the private sector to the public sector.

So what’s the big difference between the U.S. and these emerging markets?  Legacy costs.  The U.S. was once an emerging country.  But now it’s a Big Government social democracy like in Europe.  China doesn’t have long established entitlements growing greater than the government can ever hope to fund.  And it doesn’t have an established environmentalist movement choking the life out of free enterprise.  China doesn’t have these.  And their economy is booming.  And women are shattering the glass ceiling.

The lesson is a simple one.  A growing public sector oppresses women.  Whereas capitalism unleashes their potential.  And that is the lesson of the booming emerging markets.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , ,