Focus on Production, Not Consumption or Wealth Transfer
A Long Friday after Thanksgiving Rant
Today, the Friday after Thanksgiving, has become as much as a focal point for the Thanksgiving season as Thanksgiving Day itself. To hear the media tell it, the fate of humankind hinges on how many shoppers flood the stores and exchange their hard earned cash for plasma TVs and Wii games.
Added content - this story about a Wal-Mart employee being trampled to death appeared a few hours after this post was published.
This is absurd. No economy based on consumption can last for long. If we’ve learned anything in 2008, it is that consumer spending is no foundation on which to build a powerful and reliable economic engine.
So now we have two choices. We can either focus on production, which we should do, or wealth transfer, which I fear we will do.
Reallocating the economic pie might make might result in a nice comfort food feeling, but it won’t do a blessed thing to help us bake more pies. Distasteful as it may sound, wealthy individuals and highly profitable companies create wealth - wealth in the form of jobs, higher salaries, and more generous benefits. There is no robbing Peter to pay Paul. Penalizing economic producers with higher taxes does not share wealth more equally, it causes wealth to move elsewhere. To the extent we support failing producers and penalize profitable ones, we will see companies move to greener pastures overseas, taking jobs and earnings reinvestment with them.
Tax Rates
Low corporate taxes should be our strategy, not a tactic. We should do everything possible to encourage companies of all sizes (and from all countries) to invest and grow in the U.S. Temporary tax cuts may change corporate behavior temporarily, but how much good does that really do?
Spending vs. Saving
We should stop regarding the practice of saving money as the 8th deadly sin. With mombo-billion dollar consumer stimulus packages and exhortations to buy, buy, buy wafting out of Washington, a U.S. citizen could get the impression that spending is one’s patriotic duty. But there’s a lot to be said for saving money. Preparing for one’s financial future and protecting future generations from debt overload have all sorts of practical and moral value.
Energy Production
The most obvious area where we can shift our focus to production is energy. Producing our own energy makes all the sense in the world from an economic and national security standpoint. What interest is served by importing it? I am concerned about the environment, but the resistance to domestic energy production puzzles me. If the health of the planet in its totality is our concern, I feel more comfortable producing energy here, where we can apply the best and safest technology in the world to energy extraction, processing, and transport. If the objective is to eliminate the use of fossil fuels altogether by putting a stranglehold on the supply, I say such a goal is unattainable and downright dangerous to pursue. On the other hand, domestic energy production, consumption, and export create jobs and would result in lower and more stable energy costs, giving us more money to spend on those plasma TV’s and Wii games. In this scenario, it would make perfect sense for the government to subsidize alternative energy development - market forces alone would not be sufficient to drive it, and yet it is not something an economy can throw together at the last minute.
Minimum Wage
Repeal the minimum wage law. Yes, you heard me. Make it as easy as possible for manufacturers to produce. Now before you start calling me a heartless bastard, please allow me to say I believe a free market for wages is the best way (not the perfect way) to ensure the best wages for the most people. I would take it even a step further and suggest we should be thinking in terms of a maximum wage. I’m being somewhat facetious here, but the underlying mindset to this concept is not all bad. As a society, we have demanded our right to a fair wage. No problem. But as a society, we should also demand our right to a productive economy. Will producers take advantage of a minimum wage-less work force? Some will try, but they will fail. The U.S. is different from the U.S. of Upton Sinclair and The Jungle. Human rights abuses, horrific or otherwise, are not so easily hidden today. Manufacturers operate in the light of day, not in the gloom of slaughterhouses hidden behind fences and guarded by armed thugs. Today, a company gets punished for putting out a YouTube video that puts maternal back pain in a bad light. Imagine the outcry if McNeil Consumer Healthcare began shackling mothers to the assembly line and beating them with whips to meet production quotas. Much has been made of the Internet, how it has raised the level of social consciousness and made information accessible to all. Now would be a good time to put it to the test.
Americans are the most productive people on earth. Think of how much better we could to if we stayed out of our own way. Please don’t get me wrong. I’m not advocating an attempt to put an end to holiday shopping. All I’m saying is, let’s focus on production and the consumption will take care of itself.
What do you think? Can we survive, let alone prosper, without ratcheting up our ability to produce?
Maybe you and I can introduce UK slang to Chicago. Brad...
Brad,
Whilst I may not agree entirely with your views on the point about minimum wages (and even on that point, I can see your viewpoint), and I love the idea of your shift from a focus on consumption to that of production.
The real key to long term economic growth lies the stimulation of positive activities on the production side of the economy, such as entrepreneurialism, innovation, investment and productivity. Whilst consumption has its part, it does not produce lasting economic gains unless it is backed up by positive action on the production side.
It’s interesting to note - at an individual level, it never seems to be the compulsive consumers that streak ahead over the long term, but those who are motivated by service, productivity, initiative and creativity. Perhaps, just perhaps, it’s production focused economies which streak ahead as well.
Andrews last blog post..Why firms should pay bills on time
Hi Andrew, Thank you for sharing your views. The whole topic of the minimum wage would be a good one for you to address on your blog, if you ever feel the urge to pursue it. I agree with the spirit of the minimum wage law; I just think another approach would better achieve its goal. As for productive economies being the real winners - absolutely. Slow and steady wins the race. Today I think most everyone would love some slow and steady. The volatility of the markets in disconcerting to everyone and saps the strength of consumers and producers alike.
The shift from all the positive, thoughtful reflections on things we’re grateful for (Thanksgiving) to “spend spend spend” the day after… is baffling to me.
I think I’d like the UK to borrow the thanksgiving holiday… but not if Black Friday came too!
Joanna Youngs last blog post..Words on Gratitude
Joanna, The contrast between those two days has grown more and more extreme every year. Where will it end?
Brad Shorrs last blog post..Focus on Production, Not Consumption or Wealth Transfer
Hi Brad - it totally makes sense to give financial incentives to companies who are running their businesses well and providing jobs; as opposed to propping up badly run companies.
I have mixed feelings on removing the minimum wage though. Before it came in, I had some really sucky paying jobs. But on the other hand, I’ve taken folk on, spent a lot of time trying to train them and had to pay them a pretty high wage for their capabilities.
As for consumerism, I was pretty shocked that so many people were shopping today. Do these people really think they’re helping the economy by squandering cash on worthless junk? And the Walmart incident was just sickening.
Cath Lawsons last blog post..Does Your Business Really Understand People?
My husband and I have been shaking our heads over the idea that we can help our economy by giving people checks to spend for more goodies. For years we’ve been doing our shopping before Thanksgiving to avoid the Christmas craziness. It’s always struck us as sick. The period between Thanksgiving and Christmas has always been a quiet, reflective one for us.
Jean Browman–Cheerful Monks last blog post..Our Garden in the Woods
Cath, People who are part of these frenzied swarms probably aren’t thinking much about anything, unfortunately.
Jean, It’s hard to be reflective with so much commercial noise, but we try. It’s good that you and your husband are able to.
Brad Shorrs last blog post..Focus on Production, Not Consumption or Wealth Transfer
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Brad,
in Germany they tell the people to spend more money - I think Germany is the country with the highest savings rate. I am very shocked reading about a waltmart employee being trampled down. On the other hand last summer in Berlin a similar thing happened in Berlin: one of those multimedia shops opened with many fantastic offers, which lead to a trampling down of glass doors. People were hurt but nobody was killed, but that was just lucky. Here in Germany the car industry is having a breakdown with effects on other industries. The car industry has always be one of the strong industries in Germany, so it’s rather shocking for us.
Ulla Hennigs last blog post..Old and New - A Story from Berlin
Ulla, Things seem to be very much alike between our two countries, which is good in many ways but not good in this way. I hope your economy picks up - did not know your automakers were having trouble. They have a very strong reputation in the U.S.
Brad Shorrs last blog post..Focus on Production, Not Consumption or Wealth Transfer
Well said, Brad. Someone said that in his long work life of everthing from fast food counter help to successful executive, “I never got a job from a poor person.”
Rather than handing out goodies to failing companies or encouraging people with huge credit card debts to spend even more, we should be encouraging productivity and thrift.
Hi Lillie, We’ll see what happens, but I don’t think the incoming administration will see things this way. But life is full of surprises … something I was reminded of reading your book!
Brad Shorrs last blog post..Focus on Production, Not Consumption or Wealth Transfer
Thanks Brad,
I may include some discussion on minimum wages during my current series on employee rights.
I must apologize about your last comment on my blog - I only noticed about an hour ago that it was held in moderation and was not visible in the discussion.
My apologies.
Andrews last blog post..Why firms should pay bills on time
Sorry I’m late to this particular party, Brad, but bravo on saying it so well! I’m with you on every point, too. Most people only look at the minimum-wage issue from the point of view of the worker. But it can cause a lot of problems for the employer, which ultimately hurts the workers with fewer jobs. As you say, the spirit of the law is OK; it’s the execution that needs work.
Robert Hruzeks last blog post..What I Learned From… the Generosity of Others
Robert, Instead of well intended laws, we need well intended laws that work. Didn’t you run on a similar platform earlier this year?
Brad Shorrs last blog post..Interview with Author Lillie Ammann this Wednesday