Jeff Neal for C.U.R.E. - Certain Unalienable Rights Endowment

Posts Tagged ‘profit’

Top Five Oil Executives – FIRE them all!

In Opinion, Regulation on May 13, 2011 at 3:36 pm

I’m disturbed that not one of the oil company executives who recently were grilled by the US Senate had the courage to tell the truth about the proceedings in that hearing room.  Asking those honest business men to defend themselves against false charges, asking them to sanction their own public humiliation in front of a bunch of spineless politicos is disgusting and unAmerican . . . but so is not defending oneself when unjustly attacked.

I suspect that they think that their public/investor relations team is correct when they advised the CEOs to bite their tongue and take it.  But in the long run, they do a horrible disservice to their shareholders when they let the companies’ assets be confiscated by the government – little-by-little-by-little.  To stand by and watch, so long as their salary isn’t at risk, is grounds for termination.  They should all be fired immediately, if not sooner, and replaced by men or women who know that making a profit is not grounds for punishment or derision.

Dancing with the devil invariably strips one of the power to stand up to his duplicitous, self-serving criticisms.  These companies have become dependent on government largess, so they dare not bite back.  They’ve let the government dictate the rules of their business.  Government controls when and how they drill for, deliver, produce and refine their products, because the big guys have spent decades helping the government draft more and more rules and regulations that quell their competition – and then they act surprised when their master wants to slap them around to make the voters think the government is protecting them from an evil corporation.  But, they grin and bear it, because they know the pain will only last a news cycle or two.

We need a new brand of politicians – and a new breed of corporate leaders who thrive in the marketplace without government protections – and SOON.

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Just Let Me Fish

In Economics, Opinion on May 11, 2011 at 10:52 am

Our government does a lot of things –  none of them are properly called ‘creating jobs.’

One popular government act that purports to stimulate job growth in the private sector is granting a tax credit or other similar gimmicks.  “Giving” tax preferences to small or large businesses can have no measurable effect on job growth.  Subsidizing new hires or new investments on the margin and otherwise trying to dictate or steer economic activity into more politically popular areas or industries ought not be the goals of good government policy.

A “tax credit” is not free, found money, a gift from the sky, with which a small business man is going to make some investment he otherwise would not make.  An entrepreneur invests in the future; letting him keep more of last year’s profit does not change his view of what will happen next year or improve his chances of success in his next venture.

These government acts are ostensibly intended to make capital available to businesses for investment.  Capital scarcity is not the problem our economy is facing – there are trillions of dollars of capital invested in stagnating businesses and industries just waiting to pounce on innovative, profitable opportunities – capital is fluid and mobile.  Further, good investment ideas are no more scarce today than at any other time in history.  What is scarce, what is missing, is the belief that an investor can trust that the rules will not change in a fashion that will make his planning and projections moot.  An entrepreneur willingly takes the risks that his customers won’t buy his product or that the cost of the component parts of his widget will increase beyond his control – those are the things he can assess and address with contingency plans, knowing that success or failure hinges on the accuracy of his judgments.  The risks he can not underwrite, the risks he will not take, are risks that at half-time the government will move the goal-line or decide that a touchdown is really worth only 4 points.

The uncertainties heaped upon business decision-making by the Obama regime are what paralyze the businessmen who would love to be making decisions that would require them to employ more workers so he can make a profit – that’s ‘job creation.’  Job growth is not a magic trick that works when the government says ‘Abracadabra’ or ‘pretty please.’  Job growth occurs if, and only if, a businessman concludes there is demand for a product or service at a price that exceeds his cost of delivering it, at which time he will hire hungry laborers to produce the product.  No amount of government action or encouragement makes those productive acts and decisions more likely to occur.  Instead, government inaction makes productivity inevitable, since man has a most acquisitive nature and an insatiable thirst for being productive – oh, and an empty stomach if he isn’t.  How do we know?  See “History, the advance of mankind.”

You know the old parable: “give a man a fish, he eats for a day.  Teach him to fish, he eats for life.”  I say “let me fish, damn it; just let me fish.”

Pink Ribbons, Health Care and Money

In Economics, Financial, Health Care Reform, Opinion on April 23, 2011 at 12:18 pm

Who can argue with wanting the most affordable, high-quality health care for the most people? An abundant supply of a good thing is a desire that is unassailable by any one who wants to be a welcome participant in the public discourse. So, our challenge is to discover the best means of maximizing the supply of the unarguably good thing, right? Read the rest of this entry »

Thank Goodness for Child Labor

In Economics, Everyday Life, Financial, Opinion on March 27, 2011 at 12:17 pm

IT’S CAPITALISM, STUPID, NOT CAPITOLISM

OR

A PERSONAL STORY ABOUT CHILD LABOR

Child Labor – we only outlawed it because we could, because capitalism improved productivity enough that we could let the kids go to school instead of making a living for their families.  It’s not like mom and dad were sitting at home living off their kids’ wages.  Everyone was working and conditions sucked.

The employers of those pitiful kids were driven by the profit motive.  That term is better stated as one’s desire to own the fruits of one’s labor and to have the freedom and the ability to dispose of that fruit as one sees fit.  That one word – Freedom – is the key.  If you try to eliminate the profit-motive, you are eliminating freedom, simple as that.

The profit motive, freedom, is the reason – and the only reason – we were able to write “child-labor” laws and let the kids spend the first 18-22 years of their lives being sponges instead of having to earn their way.

Can it really be true that it was a businessman’s “greed” and evil that made him hire children for $.10 per hour (or whatever it was) instead of hiring his mother or father for $5.00 to toil in his factory?  It was a necessity, it was the only way he could make a profit, and without a profit, the job wouldn’t have existed, the child and his family would starve.  Without the potential to make money, the businessman could not have borrowed or otherwise raised the money it took to build the factory to begin with.  It had to start somewhere.

Were there examples of “evil” and crooked businessmen who abused their power over a small portion of the labor force?  Of course there were.  But, be serious – if that practice were as widespread as we’re often led to believe, where were all the complicit, cruel parents, and why did they sit idly by?  The kids were working because the family needed them to, don’t you think?  If the vast majority of the businesses that employed child labor were the monsters we often see portrayed, and the families didn’t really need the extra money, wouldn’t the parents have let their kids stay home or at least do the work themselves?  The jobs were low-skill, low-pay jobs that enabled the factory owner to keep the factory open – and open the next one and the next one, increasing productivity and replacing, eventually, the kids with machines.  God bless those factory owners who fed families – including his own, by the way – while building a world in which the next generation of kids could spend their youth contemplating and protesting the evils of child labor, instead of shoveling manure out of the family barn.

Do you really think, for example, that a small businessman, a family farmer in Davenport, Iowa in 1905 worked his whole family from dawn ‘til dusk because he hated his only son, Frank E. Neal, Sr., or because he wanted to, God forbid, make a profit off of his own child?  No, we know he did it that way, because otherwise the family wouldn’t have had enough to eat – Frank, Sr. would have starved.

Because he didn’t starve, and since we live in a free country where innovation is driven by the profit motive, that farmer’s son later moved to Tennessee, became a letter carrier for the US Postal Service and sent his third son to Isaac Litton High School in Nashville.  That son then attended an insurance company’s training program, sold property and casualty insurance for several local and national agencies, and raised six children, four of whom make their living working for the independent insurance agency he founded in 1975.

Which of those two men – the farmer in Davenport or the businessman in Nashville – is an ogre, using the labor of his children to line his own pockets.  Neither.  My father, Frank E. Neal, Jr., is the same man as his grandfather and his father – just standing on their shoulders.  I’m grateful that my great-grandfather pushed my grandfather out of bed every morning to milk the cows and tend the crops.  If that’s abusing child labor, I’m all for abusing child labor.

Glenn Beck and Finance

In Financial, Opinion, Regulation on March 27, 2011 at 10:31 am

Mr. Beck,

You contributed to the downfall of America on March 1 by perpetuating a couple of myths.

First, oil speculators CAN NOT force the price of oil up.  In every futures contract, there is a ‘long’ side and a ‘short’ side.  For a speculator to make money on the way up, someone has to lose money; for there to be a gain on the UP position, some third party will have speculated on the opposite movement, DOWN, and his loss is the first speculator’s gain.  So, unless there is a complicit, knowing loser on the other side of the trade, forcing the price up by speculation is impossible.  To say otherwise is to feed fear, the last thing we need.

Second, you spoke at some length about “bear-runs” – circumstances where companies’ stock prices were “forced” down by short sellers.  For starters, see above – there are two sides to every trade – some one else believed the opposite, that the share prices would be stable or rise.  In addition, the examples of Bear Strearns and Lehman are telling.  The problems in those two situations were not the short-sellers; the main problems were those companies’ business plans, plans which the short sellers believed would fail.  The short sellers invested their money such that they would profit if their assessment of the plans turned out to be accurate.

In the case of Bear, that problem was worsened by US Treasury Department intervention to (1) assume all of the liabilities of Bear Stearns and (2) sell the remaining assets for a price that didn’t take that $30 Billion white-wash into account.  JP Morgan stole the company with the government’s sanction, getting to keep the assets with the assurance that the contingent liabilities that were on Bear’s balance sheet would be paid by the government – nice work, if you can get it.

With Lehman, the government doomed Lehman when it said “we’re not saving Lehman.”  (I’m not suggesting the government should have ‘saved’ Lehman – the government should have never been involved in the matter.)  We will never know if Lehman could have made it out of their over-commitments to real estate, but they were never given the chance.  Instead government intervention and mark-to-market accounting forced them into insolvency.  Eventually, Lehman filed for bankruptcy and, notwithstanding all the predictions to the contrary, the world did not end.  The market deals with failure almost as well as it does success.  It cleanses the system of bad business plans, and government intervention to keep the market from finding the bottom, so it can bounce, prolongs the pain and moves the bottom DOWN further.

Much can and has been written – much of it wrong – about the financial crisis of 2008.  More populist, anti-Wall-Street-trader rhetoric will not help the country avoid future crises.  More regulations, more government and more mud throwing will all worsen the problem and lead to worse outcomes.  A more clear understanding of how markets function – including how they function to punish failure – will make for a less interventionist government and better outcomes.

Has anyone read BHO’s Chamber speech?

In Opinion, Political Critique on February 8, 2011 at 9:20 am

Barack Obama is widely praised for his walk across Lafayette Park to visit the Chamber of Commerce.  His speech is being scored as another ‘move to the center’ and as part of his acknowledgment that his reelection chances in 2012 hinge on convincing the independent voter that he is not anti-business, that he is not a leftist, socialist, collectivist, big-government liberal. WOW!  A little gesture here, a couple of speeches there and, voila, a new man is born.
READ THE SPEECH.  He’s the same man even if he’s not calling businessmen evil to their face or decrying their desire to make a profit.  Instead, he told their lobbyists in Washington (The US Chamber of Commerce) to make their clients behave correctly, i.e. the way the government wants them to behave.  In his lecture, he instructed the lobbyists that businesses have a responsibility to create jobs and share the wealth – or maybe he said ‘spread’ the wealth.  Businesses owe that to the government in exchange for the government’s ‘investment’ in infrastructure and all the other good things it does for business, like strong-arming China into buying things from America (that China can’t buy anywhere else), like implementing rational free-trade policy with South Korea, or like de-regulating the over-regulated economy (another fib – see our letter published in The WSJ HERE).  Business owes the Obama Administration its compliance, its profits and a Thank You note, too. A large part of his administration’s economic policy (can we please call that what it is – state planning) is basically “do as we say with YOUR money, or we’ll tax it.”  Isn’t that what a “tax credit” is about?  As with all of such policies, the government dictates (or nudges, as Cass Sunstein would say) certain behavior.  Invest the right way, hire the right people, eat the right food, drive the right car, buy the right ethanol-infused gasoline, buy enough solar panels, build the right house . . . and get a tax-credit.  Isn’t a tax-credit government spending in disguise?  The government deigns to let YOU spend YOUR money the way the government wants you to . . . or it tak[x]es it away from you. Demanding ransom while holding businesses (aka American men and women) hostage to ‘business-friendly’ government policy is not a move toward business, is not about freedom or free markets.  Speaking in a language that implies a ‘partnership’ between government and business can be seductive, but it’s not the American way.  Putting a gun to the head of economic freedom and threatening to pull the trigger UNLESS the Chamber of Commerce gets in line is not a move to the center, is not being a pragmatist, is not doing a Clinton-pivot or a Reagan mid-term adjustment that will save his presidency. Those are all signs that the government is taking control of the economy, and they make a travesty of our constitution.  Disguising all of it in duplicitous language and having the nerve to give the speech to men who purportedly know better are bold, but they’re not a sign of a politician changing his stripes.  They are characteristic of tyranny. WE CAN DO BETTER, AMERICA.  Yes YOU can.

Anesthetics, Job Growth and The Bazooka

In Economics, Financial, Opinion on February 5, 2011 at 4:46 pm

Notwithstanding that none of them actually say this, a read of the books and reports about the financial panic of fall 2008 leads to this conclusion: the capital markets will remain relatively stymied and stagnant until they are freed of government intervention and arbitrariness. “Saving” GM and AIG and similar acts that purported to prevent or eliminate the pain of failed business plans are the equivalent of giving the financial system anesthesia. When the drug wears off, unless the disease has been cured, the pain returns and is usually worse. That’s where the US economy is headed. Government actions are propping up the price of certain assets and securities, but government actions are driving down the value of those assets and securities, particularly in the real estate sector. When price finds value, as the market forces say it must, it will be a steep and painful fall that will destroy trillions of dollars in wealth.

Markets seize up due to what has been called ‘regime risk,” and that is the primary cause of the loss of value – the lack of liquidity; money is not flowing to its most productive, profitable uses.  Uncertainty in the rules of the road paralyzes the market, robbing it of one of its key supporting characteristics – the truth. Other risks can be assessed and quantified; regime risk can not be.  When capital seeks safety, risky, innovative ventures starve, and we get lackluster job growth.

To get a sense of why the investors are reticent to bet on the future, one might read Hank Paulson’s book On the Brink. It is a confessional about how he, among other abuses of power, scared Congress into giving him a “bazooka” so he would have enough power to “save the financial system as we know it” (and feed the victims to whichever bank or crony was on the right side of the conference table). That kind of arbitrary, extra-legal behavior by the government makes market participants keep their wealth in protected, safe investments, rather than deployed in risk-taking, innovative ventures. None of the capital market’s participants who are not ‘lobbied-up’ will step up to the black jack table so long as the politicians are in the back room deciding with the lobbied-up crowd whether sometimes the dealer’s 23 beats 21.

Oh, and now the “other” team has the bazooka, a development that Mr. Paulson reveals that he does not appreciate. He writes that he was surprised when candidate Obama, previously having been so engaging during the 2008 campaign, stopped talking to Mr. Paulson the day after winning the election. DUH, Mr. Secretary; the bazooka conveys with the presidency. “What use are you to me now?” was President-elect Obama’s clear message to outgoing Secretary Paulson, and poor Hank had no idea he’d done it to himself.

A Personal Note on government Health Care

In Health Care Reform, Uncategorized on February 2, 2011 at 5:30 pm

A week or so ago, I replied to a comment posted to a blog by Don Boudreaux on his site, CafeHayek (LINK to his piece here).  In brief, Mr. Boudreaux made the case that the new health care law distorts markets and reduces freedom and choice, all at a cost of worse health care in general.  The comment was written by a Mr. Smith who suggested that the government should inject itself into the health care business, otherwise cures for deadly diseases might go undiscovered.  I wrote:

Mr. Smith:

Are you suggesting in your comment that the government has been the leading force in developing the ‘miracle’ drugs and processes that we’ve seen come out of the pharmaceutical industry in the last, say, 50 years?

My 15-year old son was born with severe club foot in both feet.  Had, for example, his 48-year old father been born with the condition, he’d have never walked.  Thanks to years and years of for-profit medical research that preceded his being born, my son is an accomplished wrestler, golfer and baseball player – and he stands up tall and hugs his father as often as I ask him for the favor.

No government agency did that for him.  In exchange for money, the highly-trained, for-profit staff at Georgetown Medical Center did it for him.  Keep your grimy hands off of that business, or move to Canada, sir.