OMB: Owner-Managed Business

On Re-Rooting

Sat, 3 Mar 2012 21:42:26 -0100

Sometimes, the best way to explain something is to skip the explanation and go straight to examples. This helps the reader or hearer to use induction to discover your meaning. If an explanation is then needed, it is frequently more about boundary conditions (x is included, y is not included) and the underlying principles.

Example 1: David after his sin with Bathsheba

God exposes David's sin through the prophet, in a way that makes it quite impossible for David to pretend he was not guilty or that he did not knowingly commit a murder to cover up adultery. David's response was to begin to seek to restore his relationship with the God who had chosen him and raised him up. He also sought to have God spare the child borne out of his sin from dying of its illness, but that was not granted.

Out of that time, we get one of the most intense portraits of confession of sins and request for restoration that we have anywhere. President Clinton's ordeal (when his infidelity was exposed) was probably pretty intense, but he wasn't faced with the possibility of death. He wasn't faced with losing a lifelong relationship with God over this. He, like David, could have lost his job as national ruler, but David was also their combat hero, and his fall from office could conceivably have given the Philistines the encouragement they needed to conquer and possibly even exterminate the Israelites.

Read Psalm 51, and you see someone who was desperate, not to hold onto the throne (or the White House), but to reacquire his lost relationship with God. David wasn't concerned with appearances any more, else we'd not be able to read his prayer. Psalm 51 is not a one-time prayer. It isn't the magic words ("pray these words once and you'll be saved forever"). Psalm 51 is earnest, agonizing, desperate prayer.

Example 2: Isaiah's trip to heaven

It is difficult to determine the time-sequence of many biblical passages. However, I feel confident in saying that Isaiah was already serving God as a prophet when he was taken to heaven and given a more intense and direct calling. He didn't have a lot of time to accomplish his re-rooting. He could only return to the earth and the people of God, with a new and more intense calling and a message that is rumored to have led to his death by being stuffed into a hollow log and then sawn in half.

If you think an experience like Isaiah's is sheer pleasure, or that you want what he had, you haven't been reading his book (in a modern translation--We need to stop pretending that a four hundred years-old translation accurately represents God's message to us today. It doesn't. It is the same tradition-holding that led Catholics to continue to hold their services in Latin long after no one spoke that language anymore). While I would love to be able to see God face-to-face (or rather, see him appear in a form like that of a human) and get some important pronouncement about the future from him, the truth is, no one I know would receive that message, and I'm not tough enough to willingly allow people to saw me in half.

If you are still wanting to patty-cake it, if you still want to play games (denominational, doctrinal, political, racial/ethnic/gneder/language-spoken, or whatever other games you've been playing), if you are not willing to allow God to shake your life to its foundations, you're probably not ready for re-rooting. And that's sad, because America's churches are playing games. America's church members are playing games.

We put our denominations, organizations, affilliations, positions, and histories before the activities necessary for re-rooting, such as sitting before God without pretense or precondition, praying and reading his message (the Bible, in any decent modern translation). We put our race, nationality, citizenship, ethnic group, or the language we speak before the activities necessary for re-rooting. We put politics, left-wing and right-wing, before re-rooting. We put our adoration for celebrities and politicians before re-rooting. All of that must cease. We as believers, living in the United States, as it slips from it position of world dominance, must know that letting things slip helped to accellerate the downward path of our nation.

But it is not just our nation that is in trouble now. It is our churches, our leaders, our next generation, and ourselves.

Get desperate for a new and vital relationship with God, through Jesus Christ. Place that ahead of your political party, your political views, your views on race, on the roles of the sexes, on church governance, and even on doctrinal purity. You'll not have the relationship you desire until you are willing. God, the Bible (in a modern translation), and you. That's all you need.

Changes Afoot

Sat, 3 Mar 2012 20:47:37 -0100

Forgive the mess. I'm closing several blogs. Most of the remaining blogs will go on a short hiatus while I do some infrastructure switching. I hope to archive and restore the content of the Christians in Business, Owner-Managed Business, and Free & Open Technologies blogs. The WCC LinkBlog, La Voz de la Revoluccion, my Writings blog, and Slingshot will not return.

I also have two blogs hosted on Google's Blogger site: OpenTech and Open Source REXX Blog, and two blogs hosted on Wordpress.com: Opportunity Knocks, and LAMPJR. I believe I want to merge Open Source REXX Blog and LAMPJR, at LAMPJR's address (at least, for now). I am not sure whether OpenTech will stay on its own, whether I'll merge it with Opportunity Knocks, or whether I'll merge it with Free and Open Technologies.

Tax Breaks For The Rich?

Sat, 18 Feb 2012 01:26:30 -0100

In the last couple of months, there has been a real push to repeal Bush-era tax cuts under the pretense that only the upper income benefitted from them. The funny thing is that I clearly remember that time. I was making about ten grand per year, which means that I ran out of money and food every pay period. Suddenly, the amount of money deducted from my paychecks changed. I could eat all month!

If you hear someone talking about "tax breaks for the rich", ignore them. They have just shown their ignorance of economic issues.

Does the US need to increase its tax revenue? Yes, certainly. But even more, we need to recognize that the continued expansion of federal agencies into areas that properly belong (via the plain meaning of the text in the Constitution) is the primary reason why state and local governments across the country are struggling to stave off bankruptcy (except in California and a few other big states, where a similar concentration of tax revenues and power is at the root of their troubles).

How would one raise taxes? There are some simple things that could be done to raise tax revenues.

Eliminate deductions and tax credits. Does anyone really believe that we should make people who are not married pay extra, so that married people can pay less? In a nation with a 50% divorce rate, do we really want people to marry for financial reasons, rather than for deeper reasons of personal commitment? Do we want people to have children or buy a home because they expect to receive a tax benefit? Because it seems pretty obvious to me that we want people to make most of their decisions without being tempted by tax benefits.

Make corporate loan repayments come out of their after-tax revenue. Currently, if a business want to raise funds to buy a piece of equipment, it has two main choices. It can raise equity, which means that the current owner have to contribute funds to the company or have their interest diluted by additional investors. Returns on equity are paid after taxes have been taken out. Or it can take on loans and pay interest. The interest is paid out of pre-tax income, meaning that the revenue used to pay interest on loans is deducted from the company's taxable income. Another way to describe this is taxpayers subsidize business loan repayment.

We should also institute a unary tax system for corporation-like entities. This is where the total pre-tax revenue of all of the company's affiliates & subsidiaries world-wide is used in calculating tax liability, based on the percentage of that revenue that is related to US activities. So that way, selling products to the US subsidiary at inflated prices will no longer result in lower US taxes.

But that is not nearly enough. The US was, until very recently, involved in three (3) wars. One of them, Afghanistan, was justifiable by the 9/11 terror attacks, but Iraq and Libya? Why are we sending our young to die in foreign lands where a sizable majority of the local citizenry was not already, prior to our arrival, engaged in fighting for their own freedom? Is it that we have too many young and wish to "cull" the ranks? Or is it that we wish to emulate the Soviet Union's model of imposing by force a system of government and politico-military alliance on nations too weak to protect themselves from us?

Secondly, we need to get the federal government out of K-12 schooling. Schools need to be funded and controlled as close to the local level as possible. Does it surprise anyone that the more we centralize funding and control of our schools, the less they are able to respond to the needs of the communities and the society they serve? Do you really believe that a pack of politicians and bureaucrats in Washington know more about what your kids should learn and how they should learn it and how much it should cost than local parents and teachers?

Thirdly, there are a number of other federal agencies that unnecessarily reproduce state-level functions exactly the way that the Department of Education does. We can trim such agencies. We have spent a lot of money on equipment to scan people's scrotums at airports in the name of security. We have spent a lot of money creating and publicizing the "rainbow of doom" terror alert level system and doing similar "security theater" activities. Isn't it time we stop wasting money on them?

Time to Stop Lying To Ourselves

Sat, 18 Feb 2012 00:33:26 -0100

It is time to stop lying to ourselves, and to stop letting our political and financial leaders lie to us.

What am I talking about? Well, many things, but let us start with a couple of the whopping big lies we're being told.

LIE: Youth must finish high school and go on to college, or they won't be able to get good jobs. In actuality, you mean corporate jobs in a higher-paying industry? High school, followed by trade school or possibly college is a requirement, but not a guarantee of obtaining one of those jobs. On the other hand, most of the jobs being created in our nation are not in higher-paying industries, but in low-wage service industries such as hospitality (hotels, motels, restaurants, fast food, retail, janitorial services). By telling students that they must attend college, we are burdening them with humongous student loan debt, which will take them most or all of their working lives to repay, yet most of them will not increase their earnings enough to make college financially worthwhile.

Actually, there is substantial doubt as to whether there are enough high-paying corporate jobs available for the number of college graduates anyway. As more and more people attend college, and as more and more corporations cut domestic (e.g., US-based) staff and rely on outsourced overseas labor, it gets more and more questionable whether your kids or mine should invest the time and the effort required to obtain a degree, knowing that they are likely to find that either "Gree-C Burger" or that big blue discount store are the only places that will hire them.

I would rather hire a "Liberal Arts major" instead of an inside candidate for any kind of management or supervisory position, all else being equal. No matter what education or experience someone has, the employer (or more accurately, the employer's staff) will have to train that person, and if that person's background within the field or industry is extensive, that person will have much to unlearn before being ready to start learning.

LIE: The reason you should attend college is to get a better job. There was a definite connection in the first 20-30 years after World War II, when large, out-of-area corporations (LOOACs) were strong and growing, and export markets around the world were eager to snap up anything that was marked "Made in USA". Since the late 1970s, first high school diplomas, then many community trade school certificates, and finally college degrees (at the associate and then bachelor level) overtook the number of positions available for those who completed said schooling. The reality is that the best reason for attending college has always been the broad, general perspective that graduates bring with them once they hit the workplace.

I was a business administration major. I also worked my way through school. As part of that, I went through a number of supervisory and lower-level management training courses. In my experience, people whose training only includes company-specific "management" training are far less prepared when something unexpected comes up. Likewise, those whose work experience only includes one company or one industry are far less prepared to deal with the changing environment that is a reality for most businesses these days. A career-changer or someone whose college degree is in a completely different subject than the job being offered is likely to perform better than someone "reared-up" within a particular industry or enterprise?assuming, of course, that the person has the aptitude and motivation to learn the job and the industry, and to ask questions and tap the subject expertise of those who have been reared up in the industry and / or company.

The truth is, I would rather hire a "Liberal Arts major" instead of an inside candidate for any kind of management or supervisory position, all else being equal. No matter what education or experience someone has, the employer (or more accurately, the employer's staff) will have to train that person, and if that person's background within the field or industry is extensive, that person will have much to unlearn before being ready to start learning. The liberal arts major will have a broad background, but little specific knowledge of the company or industry. If he / she is motivated, he or she will be performing at the expected level in 90 days, where the insider will just be reaching the point where the employer's staff can begin teaching the person the specifics of the job.

That is not to say that an applicant without work experience but with a college degree would be worth hiring. If you send your kids to college, make sure they get at least a part-time job, and that they keep it all the way through school. Yes, they will find their employing organizations are not the love-and-kisses lands portrayed on recruitment materials. Yes, they will have to compete for more work hours during slow periods and find ways to prevent work schedules from interfering with their progress in their classes. They'll also have to learn to keep their hormones from affecting the workplace. Most importantly, they will learn (I hope) to apply themselves to the task at hand.

LIE: Not everyone is cut out for entrepreneurship. Some people are just worker bees. Back in the 1940s through the early 1970s, this may have been a reasonable perception. But with corporate loyalty to employees lower than it has been since the days of Teddy Roosevelt, even if you have a job, you need to treat it like you are an independent contractor?including keeping close track of work tasks, work training, compensation for work performed, being sure to obtain and document outside training and education, trends in available work opportunities in your local area and in your field of work, managing your reputation online and off (i.e., stop that repeated whining on Facebook about your life), and probably the most important, managing your financial life such that you forgo purchases that may later have a negative impact on your credit rating or ability to save money for the future?so that you are prepared for the day when that job is gone. I have read that the average American worker is now expected to have six "careers" during his or her lifetime. If you fail to prepare for the end of your current job and your current industry, you are being foolish.

In certain ethnic groups and certain neighborhoods, entrepreneurship is even more important. First of all, you have to understand what entrepreneurship really is. It comes from a French word that means risk-taker. But that does not adequately describe it. An entrepreneur is someone who attempts to take control of the supply side (that is, earning income) of his or her financial and economic life. I consider it even riskier to rely upon the LOOAC or government agency where you currently work to still have work for you at your current pay level or better (inflation-adjusted, of course) than it would be if you left to start your own business, but entrepreneurship is not necessarily starting or running a business. Entrepreneurship is taking control of your own income, whether that means starting a business, pro-actively leaving one employer for another, or starting / becoming active with a local non-profit.

Black and Hispanic Americans (US citizens, nationals, or residents) are the least likely to obtain employment, the least likely to earn at least a middle-class income, and the least likely to keep their jobs during recessions or corporate outsourcing / offshoring. It is the height of foolishness to tell young minority kids that their hope for staying out of poverty is to get in with LOOACs. LOOACs have been mostly eliminating people since the late 1970s, and few of them are in the impoverished urban neighborhoods where many members of ethnic minority groups live.

LIE: We'd be better off if only the were out of office. The fact is, Democratic policies hurt ethnic minorities in urban areas and Republican policies hurt those who work hard, save their money, and invest it in stocks and bonds. Democrats control the cities, and have huge bureaucracies that necessitate high taxes. They also enact insane numbers of regulations which prevent low-income residents from starting businesses in their homes. Republicans fight against regulations that help level the playing field for smaller, locally-owned businesses (SLOBs) in order to enable top executives of large, out-of-area corporations (LOOACs) more freedom to overpay themselves, defraud their investors, underpay their employees in the name of competitiveness, and to selectively use bundling and underpricing to lock out competition.

Ethnic minorities and those who live in urban areas need to start building businesses. Smaller businesses. Locally-owned businesses. Locally-managed businesses. Businesses that are staffed by people in the local community. Businesses that can begin to pay their workers enough to make it desirable for local youth to come and work at those businesses instead of selling and consuming illegal intoxicants.

LIE: Minorities, especially in urban areas, get welfare and use it to buy illicit drugs. That's why there are so many of them in prison, and why so few of them have jobs. Before I answer that, let me point out that I don't like or use recreational intoxicants other than alcohol, and I probably consume about twelve beers each year. One time, I had a prescription for hydrocodone. I had never heard of it, but soon found that it had intoxicating effects I found unpleasant. Within a couple of days, I had flushed it down the toilet. I find the whole experience of not being in control frightening. So I am not a drug user, nor am I an alcoholic. I am also not in favor of drug abuse, although I do believe our drug laws have failed and we need to look at an alternative.

Anyway, the last time I saw numbers, whites were more likely to use illicit drugs and more likely to use hard drugs. It isn't blacks that fly bundles of pot across the border, and it isn't blacks driving the vehicles with all the secret compartments to hide dope. Having said that, there are a lot of blacks that use drugs, just as there are a lot of every other ethnic group that use drugs. There are also a lot of people in every group that do not use drugs. I should also point out that wealthier people (usually white) use white powder cocaine, while poorer people buy cocaine adulterated with baking soda, known as "crack". Last I heard, using cocaine with non-intoxicating baking soda mixed into it would bring a longer prison sentence than just using the original substance.

Furthermore, there are more whites on welfare than any other ethnic group. I am sorry to burst your bubble of racial pride and politics, but there are good people and bad people in every ethnic group.

LIE: The abortion debate is about women's reproductive freedom. It is pro-choice versus anti-choice. In the US and many other countries, legalizing abortion has always been about suppressing the growth of ethnic minorities. In the US, Planned Parenthood's founder wrote about using abortion and other means to suppress the propagation of unwanted groups, such as blacks, hillbillies, and those of Greek or Italian ancestry. Countries like China and the Soviet Union did likewise. Late in the USSR's existence, ethnic Russians were declining as a percentage of USSR population, as people in the southern (Islamic) Soviet Socialist Republics had higher fertility rates. In response, there was a campaign to limit population growth in those SSRs, while encouraging ethnic Russians to have more babies.

Pro-abortionists are better called exterminationists, since they would exterminate black babies until there were no more blacks here. Incidentally, this shows why it is a LIE that right-wing groups are racist, but left-wing groups are not. Both sides branched from the same rootstock in the early 1900s. Fascists got their name from the Italian name for "bundle"; a bundle of sticks being the symbol of the socialist labor movement at the time. Nazis got their name from a shortening of "national socialists" in the German language. There is little difference in their tactics and little difference in the end result of their rule.

If you want to stop lying to yourself and your offspring, where should you start?

Recognize that government is not going to take care of you. Social Security is a good example. It's original purpose wasn't to provide retirement, but solely to get older workers to leave the workforce, so that younger workers could be hired to replace them. Thus, the government never planned for things like the end of the baby boom, because it was never designed to last this long. Neither Democrats nor Republicans have the guts to tell us the truth, which is that the federal government has been spending that money since the 1930s, that there is no "social security fund" where the SS taxes that have been collected all these years accumulate. Instead, the government takes the money, spends it, and replaces it with a bond (an IOU) that is supposed to be repaid with tax revenues from future generations. Once the baby boomers all retire, it is expected that there will be three workers paying taxes for every two retirees. On top of paying into the SS fund for their own retirement, those workers are each going to be taxed an additional amount to cover 2/3 of a retiree's benefits. Face it: it is all a LIE.

Recognize that no LOOAC, no large corporation, no large bank, no large organization of any kind is going to take care of you and your family the way you want. You need to stop expecting it and to stop living like it. That means you have to start doing the things I mentioned above as entrepreneurial tasks. It might even mean that you will have to start a business. If you are a member of an ethnic minority group, starting a business, even if it is only part-time, on the side while you keep your existing job, is definitely something you should look into.

Recognize that the "American dream" stories where someone starts out on the bottom and works his / her way to the top are rare. If you are working for a large organization, your ability to receive a reward for your effort is constrained by the organization's pay policies, which generally attempt to cap pay levels within different job titles and ranks. If you desire to get paid more, to get more benefits, or to be sure you will have a job when hard times come, you will very likely have to change organizations at least once, and more likely, you will have to start your own (or help someone else start their own) organization. You will have to work hard, and you are accepting all the risks of failure. But it is mostly your own decisions that will make or break your own organization, while it is "those bozos in headquarters" who will decide your fate in an existing organization.

If you are a young adult who is just beginning the trek through college, get a job while you are in school. Be aware that there will probably not be jobs available that meet the expectations you've been fed. Do not be afraid to start working somewhere that has nothing to do with your major. Neither should you become loyal to any employer, since you can be fired or laid off at any time. Instead, you should always be looking for your next gig.

Technorati Tags: economy, politics, college, entrepreneurship

Icerocket Tags: economy, politics, college, entrepreneurship

On SOPA, PIPA, and Copyright Maximalism: How We Must Respond

Sun, 22 Jan 2012 18:44:49 -0100

Joel Spolsky - Google+ - Two things about SOPA/PIPA and then I'll shut up :) (1) …

(1) The internet seems to ignore legislation until somebody tries to take something away from us... then we carefully defend that one thing and never counter-attack. Then the other side says, "OK, compromise," and gets half of what they want. That's not the way to win... that's the way to see a steady and continuous erosion of rights online.
The solution is to start lobbying for our own laws. It's time to go on the offensive if we want to preserve what we've got. Let's force the RIAA and MPAA to use up all their political clout just protecting what they have. Here are some ideas we should be pushing for:
Elimination of software patents
Legal fees paid by the loser in patent cases; non-practicing entities must post bond before they can file fishing expedition lawsuits
Roll back length of copyright protection to the minimum necessary "to promote the useful arts." Maybe 10 years?
Create a legal doctrine that merely linking is protected free speech
And ponies. We want ponies. We don't have to get all this stuff. We merely have to tie them up fighting it, and re-center the "compromise" position.

Mr Spolsky is expressing thoughts that all of us should be thinking. In fact, I've partially expressed some related concepts before. Only, now that they've been expressed, we need to discuss them, modify them as needed, and then implement them. I encourage you to go to his post on GPlus and read the whole thing.

Why Startups? Why Small, Locally-Owned Businesses?

Sat, 31 Dec 2011 00:44:37 -0100

I, Cringely » Blog Archive » Why big companies can't change - Cringely on technology

At the polar opposite position from big industrial companies sit startups, nearly every one of which begins with an effortless expression of why? Big companies ask What? then How? but almost never Why? according to Sinek, who I think has it absolutely right. But good startups are motivated from birth by Why?
Nearly every good startup begins with why? and that why? is traditionally quite simple — because the founders want one for themselves. A hardware device or software application doesn't exist and they'd really like one, so they invent it. For startups why is easy. If it isn’t easy then you probably don’t have a good startup.
If as a founder your answer to why? is "to get rich" you are in the wrong job.

This is one of the paradoxes of our time. We send our youth to college to prepare them to get jobs in large corporations. But overall, large corporations started laying off more people than they hired back in the 1970s, and that trend has not, to my knowledge, changed. We need to be preparing our youth to start, manage, and thrive within smaller, locally-owned businesses (SLOBs), instead of large, out-of-area corporations (LOOACs).

If you're working for a large organization, you know what it is to have a great idea, but not have the autonomy at work to enable you to try it out. Likewise, if you're like most people in large organizations, you are mostly just trying to hang on until you can retire, so you do not want to make waves and wind up in the next wave of layoffs. And yet, you know the resources are abundant, because the executive team are always getting bonuses.

On the other hand, in a smaller organization, at least one that isn't run by a miniature Idi Amin, you are likely to have the autonomy to try out things, but you might not have the desired resources.

SLOBs:

broader range of job tasks
more autonomy as to how you do your job
less formal policy
smaller chain of authority

LOOACs:

narrower, more specialized job tasks
less autonomy as to how you do your job; how and what you do is likely scripted by policy edicts
more formal policy, including written policy
deeper and broader chain of authority; more oversight; more intermediaries

Imagine yourself creating a product or service to be produced by your current employer. Is your boss (and your boss's boss, all the way up to the top) likely to approve of your ideas for new products and services if all you have is the why it should be done? Or is he/she more likely to block it?

If your employer is a big company (a LOOAC), it is likely that your answer was 'block it'. You do not want this for yourself, and you should not want it for your children. Encourage them to find a SLOB (small, locally-owned business) or start one. Their future--and our nation's future--depends on it.

Why Should Your Focus Be On Local Buying? This Infographic Explains

Sat, 17 Dec 2011 14:44:41 -0100

(Click to enlarge)

Source: eLocal.com

For the past few years, we've been talking about the advantages that SLOBs (Small, Locally-Owned Businesses) bring to their communities. Our plan is to continue doing this, and to highlight others who are doing the same.

[Capitalism 101] Minimum Wage Laws Are Good For The Economy

Sun, 20 Nov 2011 03:07:02 -0100

I see a number of libertarian-leaning people posting online about their opposition to minimum wages. Most such posters claim to support "free market" principles. The previous post established that corporations naturally act to destroy free markets. Given the choice (and sufficiently-compliant regulators), corporations would knock most employees' pay down to just pennies per day, to the point where they had to build "company towns" again in order to house their workforces.

In other words, corporations seek to return to the conditions found under the robber barons of the 19th century. Corporations wish precisely the same conditions that would ignite a massive Marxist revolt.

As long as corporations exist, unions and minimum wage laws are necessary to counter-balance their naturally anti-worker attitude. Minimum wage laws, when the wages are reasonable and fully-enforced, prevent desperate workers from cutting their own throats in an effort to obtain more money.

Economists have long recognized that the employer-employee relationship has some quirks that can lead to employees agreeing to things that are not in their best (long-term) interests. For instance, dangling more paid hours in front of someone may get them to agree to a small reduction in the amount they are paid per hour. Dangling a chance at a promotion and pay raise may get them to agree to work off the clock (that is, unrecorded and unpaid). Conversely, cutting wages below a certain point tends to cause employees to be willing to work greatly expanded work schedules in order to put food on the table.

It has also been recognized that once people can take care of their basic needs, they start to desire more. In the workplace, they desire to improve themselves and to have their job tasks become deeper (job enrichment) or more varied (job enhancement). They may even seek career advancement. They also begin to purchase more goods and services. Instead of little Johnny being a latchkey kid, he may be sent to day care.

That additional spending helps to generate jobs elsewhere in the economy, and the shift in the types of goods and services purchased may also bring about some additional jobs.

If you're familiar with the economist's "circular flow of income" concept, you'll realize that higher incomes equal more jobs in the community, ceteris parabis.

Thus, within reason, placing a floor on allowable hourly wage rates lifts not only the affected workers, but many others within their local communities. What about cost-push inflation, one may ask. In most fields where minimum wages are an issue, price increases don't come from increased wages, but from the employer's desire to cap employee compensation at a fixed percentage of net revenue. If imaginary burger chain Gree-C Burger caps its labor costs at 20% of net revenue, then when minimum wage rises, even though the increase may be less than 1% of their net revenue, they will tend to raise prices enough to knock labor costs down below their cap again. In fact, they will tend to try to increase their share of the revenue (e.g., profit) by at least as much as the wage increase. In other words, minimum wage doesn't tend to cause cost-push inflation, reflexive price increases by employers causes cost-push inflation.

I will try to clarify this in a future post in this series. You can follow this series here.

[Capitalism 101] Corporations Violate Key Tenet Of Capitalism

Sat, 19 Nov 2011 02:20:10 -0100

Many people claim to favor capitalism and free markets, yet see no problem with the existence and dominance of for-profit corporations. The same people often oppose labor unions as being a damaging force, coming between employer and employee as they do. Such people lack understanding.

Labor unions are an attempt to use aggregation to obtain "market power", which can be defined as the power to unilaterally set prices and terms of an economic transaction. Likewise, corporations exist for that very purpose: to aggregate or pool resources in order to obtain more market power than the individuals involved could exercise on their own.

Did you see that? Corporations, like unions, exist to obtain market power, so that they can reduce costs, increase prices, and grow their profits. In the process, they violate one of the key conditions that much of capitalist economic theory is based upon--it is no longer about freely negotiated prices between buyers and sellers who cannot on their own affect market prices--it is now about growing your corporation's size, scope, and market share enough to force suppliers, customers, and employees to accept prices and terms that are more beneficial to the corporation.

In doing this, they break out of the area that capitalist theory likes to discuss. They instead move toward something much less appealing than the invisible hand. Corporations, by virtue of their size, life spans, and resources, tend to acquire enormous and outsized influence with governmental entities. They tend to seek out protected spaces, areas in which they may exercise quasi-monopoly or quasi-oligopoly power in exchange for filling the king's hand with coin. That is to say corporations always seek to corrupt governments in order to perpetuate themselves and expand their financial and political power.

So when Johnny, your son who recently graduated from high school or college, goes to apply for a job at "BigCo, Inc", he may not understand that regardless of his prior training or experience, regardless of his enthusiasm, regardless of how hard he works, the corporation's policies constrain his ability to negotiate a wage more in line with the quality and quantity of his output. If BigCo is large enough, the corporation's pay policies will also affect the ability to receive rewards for production at other employers in the same geographical area, or industry.

Although Johnny may not understand it, the corporation, by its anti-competitive nature, constrains and controls his ability to "earn what he's worth" ... it is not "free enterprise" nor "free markets" when a corporation controls what one can earn. It is market failure, caused by the anti-competitiveness that is inherent in corporations.

This is also important to understand because the present #OWS (Occupy Wall Street) protest movement has, like many others, conflated corporations' [mis-]behavior with capitalism. Corporations, and those who manage corporations (including financial corporations) work to prevent capitalist free markets, because their profits would naturally be eroded as rational and aware people realize that the corporate media companies seek to convince consumers that high current spending (and borrowing) is good, and curbing spending in order to save for future needs is bad.

The media don't do this on their own. They do this in order to enlarge the profits of other corporations and to improve the fortunes of politicians whose policies benefit them and their customers.

The truth is entirely different. Corporations are anti-capitalist and anti-free-market. They are pro-monopoly and pro-oligopoly when dealing with their customers (or their customers' customers in the case of Microsoft). Corporations are pro-monopsony and pro-oligopsony when dealing with their suppliers. Corporations decry any attempt for the other parties in the transaction to seek to balance their market power.

The #TeaParty movement also confuses these things. One of their hot-button issues is "socialized medicine", yet they fail to see that it is not possible to have a free market in health care, simply because you will give or promise to give anything that the doctor requests in order to have a few more years or relatively pain-free living. The doctor knows it, and so he or she can charge you very high rates. It is this market failure that led to the rise of third party payers, such as Medicare, Medicaid, and insurers. These organizations aggregate numerous patients in order to obtain (monopsony or oligopsony) market power against providers (hospitals, doctors, nurses, technicians, medical groups) and in the process have also been able to exercise monopoly or oligopoly powers against patients and those who pay the premiums for the patients' coverage.

So if you claim to support free markets, I would encourage you to start opposing corporations and their activities. Start seeking locally-made products from small, locally-owned businesses (SLOBs) and replacing purchases of products of large, out-of-area corporations (LOOACs) with these local purchases.

CA, NV Finally Going After Mortgage Industry; US Strangely Quiet

Fri, 18 Nov 2011 04:50:30 -0100

California attorney general subpoenas Fannie, Freddie: report - Yahoo! News

(Reuters) - The California attorney general's office has sent subpoenas to Fannie Ma e and Freddie Mac in a wide-reaching probe into the government-backed mortgage giants' lending and foreclosure practices, the Los Angeles Times reported Thursday.
The subpoenas are seeking information about how Fannie and Freddie are handling thousands of foreclosed properties, as well as details about their mortgage-servicing and home-repossession practices, the LA Times reported, citing sources families with the matter.
California regulators are also investigating how Fannie and Freddie bought and sponsored securities holding toxic mortgages, and how their activities might have contributed to the wave of foreclosures in California, the sources told the LA Times.

I am glad that they are finally doing something about the outrageous behavior that went on in the financial industry. Unfortunately, I believe the response is too little and too late. The proper thing to do would have been to show up with a few hundred law enforcement and accounting personnel, lock down the agencies' buildings and networks, and then collect the evidence before anything could be shredded, altered, deleted, or otherwise destroyed. And of course, to take top management into custody on no-bail warrants for "suspicion of fraud" to prevent them from organizing a cover-up. And this should have happened two or three years ago.

Waiting this late means that people's memories are fuzzy, some documents may have unintentionally gone missing, and any possible cover-up has had ample time to generate false documentation. Further, unless all of the mortgage giants' former managers turn in their passports, any that are obviously dirty now have a chance to take a "vacation" to some no-extradition country.

Let me say it again: I am glad to see some action. I also note that the NV attorney general is also pursuing mortgage-related fraud. I hope that both states go after the upper managers without whom widespread fraudulent activities could not have taken place. That article notes that there is a civil action going on pitting all fifty states and the federal government against five of the largest banks in the country, but notes that rather than seek appropriate criminal remedies, they are talking about giving the banks a free pass in exchange for 25 billion dollars. I think that any agreement should mandate that former and / or current top managers should serve time behind bars and disgorge any benefits they received (i.e., bonuses and raises) as a result of the misconduct.