Recovery For The Middle Class

My first thought this morning was “it has been forever since I’ve sat down and written and posted a blog.” But forever is a long time and that is not the case. It has been a few weeks, but here I am sitting at the computer writing again. The question then is what do I write about? It is not like there is nothing going on in the world. But, it seems like it is the same old thing. North Korea is nutty; Putin is a thug; Obama is just trying to stay out of the Democrat’s so they don’t lose the midterm elections, and Republicans have no idea what they stand for. So in that respect nothing has changed.

Economically nothing has really changed. I did read that our budget deficit is lower this year due to increased tax revenue. I think the revenue number was over $3 Trillion, and government spending was somewhere around $3.5 Trillion. Our budget shortfall has been reduced by 50%. I can’t say I am too happy about that, because it is still large, and our overall debt level is still increasing. Our economic growth is trudging along, leaving many who were middle class on the side of the road. Everyone is reporting that median income in this country has declined and continues to decline.

Although some economists have gone on record as criticizing Pitney’s work on Capital in the 21st Century, I think we can all agree with him when he states that when the owners of capital have greater financial increases than those who generate the income, we have a growing gap between the haves and the have nots. And as Galston states, “With the exception of the holders of capital, who have done very well in the past five years, almost no one likes what’s happening.”

So what needs to be done? How do we recreate a vibrant middle class? Well, one side of the aisle wants us to see the problems as “administrative policies, the stimulus, huge budge deficits during the recession, the Affordable Care Act, and the termination of Bush tax cuts for upper-income filers.” While the other side of the aisle say the problems involve “weakening of labor unions, the eroding value of the minimum wage, trade treaties that destroy middle class jobs, and an inadequate public-sector response to the biggest crisis since the 1930’s.” Maybe both sides wouldn’t say it quite like this, but I think Galston, in the WJS, has synthesized the issues quite well.

However, I think we need to remember what the definition of insanity is: Doing the same thing over and over, while expecting a different result. So looking back at either Johnson’s “Great Society,” or Reagan era policies is wrong. We are in a new age that requires new solutions. Our global economic situation is very different than how it has been in the past. The United States is no longer the only game in town. Europe and Japan, as well as China and India, are now major players in all industries.

Galston notes some very important facts. When the Soviet Union collapsed, and China opened its borders, “a billion low-wage workers” entered the labor force “coming into direct competition with American workers.” The obvious result would be the lowering of wages for all, which happened. “As new markets expanded and the costs of transportation and information declined, it became increasingly attractive to locate production facilities in those markets rather than in the U.S.” This makes perfect business sense, although the cost gap is diminishing, thus the moving of manufacturing back to the U.S. However, I do think the biggest issue facing the American worker is improving technology, which has allowed for a greater ability to substitute machines for labor. This is a cheaper option for businesses. Things have changed.

This is the reality of the new world. The American worker must be better prepared and willing to work harder if they want to maintain the current standard of living. The importance of innovation cannot be understated. The reality of Creative Destruction has reemerged. If we want to stay in the lead, we need to get hungry again. If we don’t, then we will have to learn how to live on government handouts. Glaston makes a great ending comment to his article, “Government can mitigate these trends but cannot halt them…In the longer run, wealthy Democracies will have to invest more in basic research that boosts innovation and education that raises skills while tearing down barriers to business formation and entrepreneurial minded immigrants.” I agree with this. The only thing that will bring back a strong middle class is innovation and the entrepreneurial spirit that made this country great.

And that is my thought for the day!

Jimmy Carter And Bureaucracy

Wow, I never thought I would write something about Jimmy Carter. I remember his campaign as a born again Christian running for President. I remember his brother Billy Bob and his sister the evangelist. It was an interesting time to say the least. But why raise the name Jimmy Carter at this point in time?

In 1977 Carter appointed Alfred E. Kahn to the Civil Aeronautics Board. This appointment was a part of Carter’s push for deregulation of the airlines. The Airline Deregulation Act was signed into law in 1978. “The main purpose of this act was to remove government control over fares, routes, and market entry from commercial aviation.” In 1979 Carter also deregulated the beer industry which led to an increase in home brewing, just an interesting side light.

What Carter attempted to do was reduce government regulation of industry. He saw regulation as an increase of bureaucracy, which as Mancur Olson (the late economist and social thinker) described “as a one-way process that robs societies of their dynamism.” Some look back at the era as a broken government, Nixon and Watergate, and others view Carter as an ineffective President. Holman Jenkins described this time positively, “Yet, the country accomplished a revolution that seems almost impossible in Mancurian terms, deregulating large swaths of its transportation and energy industries while putting decades-old federal agencies to extinction.”

This still doesn’t answer the question why are we looking back at Jimmy Carter? Because our current government is attempting to turn the regulation clock back, as Holman states, “The government we have is an accretion, and encrustation. New rules pile up decade after decade and seldom are reviewed for efficacy. Bureaucracies become eternal for the reason the merger-review circus has become eternal. With each passing year, an expanding tribe of lobbyists, lawyers, and public interest advocates make their living at it: A circus of the clowns, by the clowns and for the clowns.”

Holman’s WSJ article began with discussing the Comcast- Time Warner merger. He described how Discovery Communications and Netflix both went to Comcast trying to extort benefits from Comcast or they would not support the merger. Each of these very larger companies support lobbyists, who in turn have access to our politicians. They can influence the outcomes.

Our modern age of government is becoming more cronyistic than ever. Once again the Democrats are pointing at the Republicans, but it was a Democrat who presided over a very large attempt to deregulate many of our industries. Republicans have taken of the free market charge, but they are just as guilty in creating the large bureaucratic nightmare we are in. “Washington has become a Washington of tired agencies and self-regarding bureaucrats who enjoy exercising aimless power.”

These tired agencies, and aging professional politicians, know what needs to be done, but the power of special interests keep it from happening. All this is occurring while our vital middle class erodes away. Help, we need somebody, help, not just anybody, help, we need someone, helpppppp.

And that is my thought for the day!

Are Your Interested In Your Work?

One of these days I am going to write a blog in which every paragraph has a word for the day. I downloaded an App that provides different words each day. I am doing this as an attempt to improve my vocabulary. Today’s word is exilic, which pertains to exile. Yesterday’s word was demesne, which refers to the owning of one’s own land. No one will ever accuse me of being a bibliophobe, someone who hates books. However, that will be another day, because today’s blog asks the question, are you interested in your work.

A recent Gallup poll surveyed 30,000 graduates, compared four categories of majors: business, social science and education, science and engineering, and arts and humanities; and discovered that business students are the least engaged in their work and not even the most economically secure.

I find this quite interesting, and a reality that reinforces my belief in a clear purpose behind business that does not include just money. “The poll, conducted in February and March, is part of a growing effort to tease out the value of different aspects of a college education.” The purpose behind this poll was not to measure economic success, but measured “how engaged graduates are in their work, how connected they feel to their communities, and whether they enjoy a sense of purpose in their lives.”

One question in particular caught my attention: “I am strongly interested in the work I do.” 37% of business majors agreed, which was a full six points behind the other major categories. The article I read this morning speculated that one reason for the job dissatisfaction among business majors was the lack of internships, which to me seems like a big leap, but the article does say that internship is highly correlated with job satisfaction. I am not too sure I agree with that one. However, I do agree with the second conclusion. “Business programs might be teaching textbook business but falling down when it comes to real applied learning experiences.”

Why are business students dissatisfied in their work? First I think we need to separate dissatisfaction from motivation. In this I agree with Herzberg. There are certain elements that Herzberg identified as creating job satisfaction or dissatisfaction. Those things are company policies, quality of supervision, relations with others, personal life, rate of pay, job security, and working conditions. The above survey does not address these issues. Motivation on the other hand is related to the ability to achieve, advancement, personal growth, job interest, recognition, and responsibility. This survey does not address this either.

The survey creates more questions in my mind than answers, however, it does reinforce my belief about the purpose behind why we do business. I believe that business is a powerful force that can create positive social change. I believe it can do that without sacrificing the profit motive. I believe, and this is what I teach in my classes, that profit is not the primary focus of business. The primary focus of business is mission. Therefore doing the mission of the company creates a higher purpose than just doing it for profit.

Doing something just for money is an empty proposition, but meeting a need is something else. It creates purpose. The reason business students are not happy in their work is they have been taught how to generate profit, not how to create social value. If we train our students the technical aspects of business, educate them on how to ethical do business, and convince them of the higher purpose of to whom much is given much is required, I think we will have a much more satisfied workforce; if a student studies business and Warner Pacific College, that is what they will learn.

And that is my thought for the day.

The So-called Recovery

Warner Pacific has had an adult education program for over 25 years. I am a firm believer in the power of education, and its ability to help people provide for themselves a better standard of living. I also believe in the power of business to improve the overall health of a community. A combination of large companies that provide the financial backbone and a cadre of small businesses that are built to provide goods and services for this community is a healthy economic system. I think this is the kind of economy that works for average American families. Some would say that this type of economy has not existed since the end of the Clinton administration.

The following is why they make such a statement. According to the U.S. Commerce department the median household income for 2013 was $51,939. This amount is 8% lower than the median in 2007 the year before the great recession. “Households in the middle of the income distribution earned about $4,500 less last year than they had six years earlier.”

The Federal Reserve triennial survey reported that the top ten percent of wage earners in this country, with annual incomes averaging $400,000, did see a slight gain between 2010 and 2013. “Families headed by college graduates eked out a gain of 1%, while those with a high school diploma or less saw declines of about 7%.” The current reports demonstrate the economic recovery has been slow and minimal, even though we have spent an incredible amount of stimulus money to encourage growth.

One of the most telling statistics though deals with the number of workers participating in the workforce. In 2007 there were 108.6 million American fulltime workers, and in 2013, the number had dropped to 105.9 million. “Although jobs are being created, too many of them are part time to maintain growth in household incomes.” According to the Bureau of Labor Statistics the amount of people working part time, but wanting a full time job, “jumped to 7.2 million from 4.6 million.” These are the numbers being reported as job growth. Ultimately we need to recognize two things when it comes to our economic situation. First, wages have stagnated. Second Americans want more hours of work. The question in my mind is why is this happening?

How big is the U.S. economy? In 2013 the world Gross Domestic Product, which is a number used to understand the size of an economy, is $74.1 Trillion. The United States GDP for the same period of time was $16.2 Trillion. The U.S. economy makes up about 22% of the world economy, so we are a wealthy nation. So why hasn’t the “American Economy worked for average families since the end of the Clinton Administration?” I think that is a very important question, but one that is difficult to address.

In 2013 17,487,475 students were attending 4,140 colleges and universities across the United States. Also, 11.57% of Americans have a Masters, and/or Doctorate, and/or professional degree; and 41.5% of Americans have a Associates, and/or Bachelor’s degree. We have a lot of educated people in this country, yet our economy is slipping. So education may not be the problem.

However, a January 19th Economist article may give a clearer picture of why this recovery has been so weak:

“According to a survey conducted by Harvard Business School last year, many firms are still deciding against basing activities in America. Professors Michael Porter and Jan Rivkin asked HBS alumni who were running businesses about their choices of location and found that many of them were deciding to leave because they thought wages abroad were lower than at home. Another important reason, though, was to be near customers in big new markets, which this report does not see as offshoring in the conventional sense. Messrs Porter and Rivkin argue that firms are now ready to reconsider offshoring. They realise that in many cases they overdid it, and are discovering hidden costs in moving production a long way from home. But, the authors argue, America’s government is not making the country’s business environment attractive enough for companies to want to come back.”

They latest indication of this reality is inversion, companies moving their headquarters to other countries to avoid the heavy taxes of the United States. On paper the U.S. corporate tax rate of 35% ranks as highest in the world, but there are so many variables in corporate tax law that it is difficult to identify one number. So it really does come down to a company decision based upon strategy and profit margin. Globalization and American market saturation, as well as lower costs, are the main reasons for much of the offshoring of American work.

The question then what needs to be done? I want you to know I think about this all the time. I want to find another answer than just forcing companies to onshore, or reduce corporate tax rates. Currently, I think the answer lies in the realm of innovation. All of our educated people need to get the innovation religion. Come up with new product and service ideas. This is what entrepreneurship is all about. Come up with ways of doing what these large companies are doing, but doing is cheaper and here in the United States. Through the power of innovation and creativity show these large companies what they are missing by not using American workers to create, build, and provide their product and services.

This may seem simplistic and naïve and maybe it is, but that is how creative destruction works. Maybe it is time to fall in love with creativity again. Then maybe those corporate fat cats will see just what they are losing by racing to the bottom. More detail to come.

And that is my thought for the day!

Corporations, The Bane Of Our Existence?

Every time I hear the name Alibaba I think of forty thieves. Today, however, Alibaba is the name of a huge Chinese company that has just experienced the largest initial public offering ever. $22 Billion was just spent by US investors to buy up shares in this company, and the overall value of the IPO was $200 Billion. Not too shabby. But what are the facts that surround this company? How large is its market?

“The value of goods sold” for Alibaba is equal to Amazon and eBay, and with 600 million Chinese now using the Internet the potential market for this company is huge. Its mission is “to make it easy to do business anywhere.” Jack Ma has been quoted as saying “We want to help small businesses grow by solving their problems through internet technology. We fight for the little guy.” The Alibaba business model is very western, but as analysts have stated, “Alibaba’s smart business strategy and charismatic leadership comes with a massive risk.” China bans foreign ownership of companies it deems as strategically important. If this is the case then what did US investors buy with $22 Billion? They bought a “piece of a shell company in the Cayman Islands with a contractual right to a share of the profits.”

The risk associated with this company is immense. The US-China Economic and Security Review Commission has warned against this type of arrangement. “This intricate ruse is a way of making the business appear to be Chinese-owned to Chinese regulators while claiming to be foreign-owned business by foreign investors.” This according to the commission is illegal in China. Will the Chinese government come to a point where Jack Ma is to charismatic for its taste, or will Alibaba be considered too western for the good of China? This will be interesting as we watch this play out on the world stage. This investment may turn out to be completely worthless, or it could turn out to be very profitable. This is what investment is all about.

Alibaba is a huge company, but there are many other companies we invest in. I have a concern with these large global companies whose budgets are greater than many countries. The concern involves how they are managed. Who controls these companies when they are more powerful than the countries in which they operate? It turns out I am not the only one who feels that way.

The first CNBC/Burson-Marstellar Corporate Perception Indicator, resulting from a survey of 25,000 people and 1,800 top executives, tells us there is a disconnect between corporate leaders and the regular joe on the reputation of the corporation in our society. Business leaders view corporations as favorable, while the general publics view is somewhat lower. 82% of leaders see corporations as favorable, while 52% of the general public view them as favorable. These numbers are from leaders and people with the developed world. The results from the emerging world, such as China, are a little different. 72% of the general population see corporations as favorable.

In the United States the general public see corporations as a source of hope (36%) or fear (37%). While 84% of the Chinese people see corporations as a source of hope. More than 51% of the US general public see strong and influential corporations as bad.

There are more numbers that I could display here, but I think we need to ponder what these numbers mean. First, these numbers give an indication of what has occurred over the last two decades. In order the strengthen margins companies have moved a lot of work offshore. Of course the places where this work has moved to will have strong feelings of good for those companies. And the love affair the US general population has with low prices has helped foreign-owned corporations to provide opportunities for their countries. So these numbers don’t surprise me.
Should a CEO be concerned with how the public views their corporations? Or should they disconnect from people and make sure their employees are cowering somewhere? I think they should be concerned with the feelings of the consumer who make up their markets. 70% of these folks say that corporations play a positive role in creating economic growth, and 67% say they drive innovation. The fear that people have about these large entities is the lack of concern for the wellbeing of people. People see these large companies shutting down workplaces, driving high unemployment, and they are concerned. Therefore, CEO’s should pay attention to this.

I agree with Donald Baer’s comment “For business leaders, six years after the financial crisis and amid continuing economic uncertainty, the challenge is to show how they use their positions of power to contribute to the common good.” I know business is about profit, and I get that global risk is a part of the equation, but good business is about good relationships. And good relationships must be exercised with all stakeholders not just the shareholder. If these large companies, that have many resources, get this we can all win.

And that is my thought for the day!

The War On Poverty

I like Thomas Sowell’s economics. Personal initiative, effort, and just plain hard work are important characteristics associated with his economic system. However, sometimes I don’t agree with him. In the “Vision of the Anointed” (1995) Sowell stated, “Among the many other questions raised by the nebulous concept of greed is why it is a term applied almost exclusively to those who want to earn more money or to keep what they have already earned – never to those wanting to take other people’s money in taxes or to those wishing to live on the largress dispensed from such taxation. No amout of taxation is ever described by the anointed as greed on the part of government or the clientele of the government.” There are words in this quote that I agree with and some I don’t.

Why is greed applied mostly to the rich? Historically I think it appropriate. Even Warren Buffet recognizes that some people just cannot live on $500 million, or so they think. Therefore, I disagree with Sowell’s point here. However, I also think it is just as bad to apply greed to all people rich. I know many well off people that give away millions of dollars to people who need a hand up, not a hand out.

I do agree with Sowell when he ponders why the government is not seen as greedy. The government has never taken a dollar that it doesn’t spend and then some. So I agree with him there. However, I also disagree because there are those marginalized folks that just don’t have the same opportunities as those who live in the more affluent areas of our nation.

In this age of growing economic inequity we as a society must recognize we are our brother’s keeper. As such we need to figure out a way to help those that are trapped in poverty to “move from dependency to self-sufficiency.” The question is how do we do this?

The first question needed to be asked, is our current actions working? According to the New York Times there are currently 14.3 percent of American living in poverty. This equates to about 46 million people. The Federal government operates around 122 different antipoverty programs “ranging from Medicaid to the tiny Even Start Program for Indian Tribes and Tribal Organizations.” According to Gary McDonald this number is 126 programs. He also reports that these programs, along with state run programs, are spending $1 trillion dollars per year. Yet no matter how much we pay for these programs there doesn’t seem to be any change. The number of people locked into an impoverished life style is stagnant.

I do agree with Paul Weyrich, a conservative activist, when he says that “poverty is the Achilles heel of capitalism,” however just because it is a weakness doesn’t mean we through the baby out with the bathwater. We deal with it. Let me give you an example of how this is happening. I had a recent graduate come visit me yesterday. He is now working at Fritolay. He has done well for himself, but he told me that the company feels very strongly about Corporate Social Responsibility. He said he was surprised at how ingrained it was within the workforce and company culture. Thus, just because poverty is the weakness of a system, donesn’t mean we can’t use the system to mitigate the weakness.

Nobody disagrees with the importance of a safety net to help those who need a hand up. However, what are we getting for the $1 trillion we are currently paying? If we divide $1 trillion by 46 million, we get the number $21,700 per person. For a family of four that is about $87,000. That value is well above the poverty line. Giving a family locked in poverty this amount of money may not seem practical, but would it be more effective than what we are doing now?

If the current system is inefficient, then what do we do? I am a huge proponent of social entrepreneurship. Therefore, I think we need more entrepreneurial activities that help people move from dependency to self-sufficiency. The government can provide opportunities to fund those businesses that are training people stuck in poverty to work in the new environment.

I think another important part of the puzzle is not punishing those who work harder to get ahead. The current social net takes support away when a person makes too much money. Subsequently the person, or family, suffers because they have gone above a threshold. The system needs to award those that want to improve themselves. Figuring out a process that allows a hand up to get to the next level is critical. Work needs to pay enough to live on and save.

I do think whatever we do, we need to focus on creating a system that provides equal opportunity. The conservatives always say that people stuck in poverty just don’t want to work. I totally disagree with them on this. The system is skewed to one side of the social spectrum. We need to ensure that the economic system awards all who work hard and take innitiave, we do not need a system that forces equal outcomes.

I do agree with those who think government programs are hugely inefficient. These programs should be looked at as a system and redesigned for effectiveness and efficiency. But even more important, results should be measured. The government should be held accountable for how they transform its inputs, tax dollars, into results. And if its not getting what we think it should produce then we need to adjust the system.

Those who think that we need to shut down the safety net are wrong. Those who think the safety net should focus on handouts are wrong. Usually the truth lies somewhere in the middle, and this situation is no different. We have some smart people in this country. It is time to think outside the box.

And this is my thought for the day!

Revitalized On Sunday!

Wow what a morning! I slept well last night, had a good morning of reading, and went to church. I did go to church this morning for a specific reason. I was looking for guidance. There are many difficult and complex issues associated with modern living, some of which are very confusing, and I went to church this morning looking to the One who I knew has the answers. He did not disappoint. I have a renewed sense of peace and action.

This process of growth got me thinking about the challenge from Dr. Luke Goble to identify my top ten books. I have read several thousand books and wondered what I would consider my top ten. So I sat down and looked at my Ipad and my bookcases to see if I could narrow it down. I have read books from a plethora of genres that have impacted me over the years. Shakespeare, Durkheim, Kant, McIntyre, and others have influenced me. But what are those books that have made me who I am today? That was an interesting thought process especially after my revitalization this morning at church.

The question is who am I? I am a Christ follower first and foremost. Therefore, what were those books that have influenced my walk with Christ the most? Secondly, I am a thinker who doesn’t follow the left or right path, but one that usually falls in the middle, which means I have the opportunity to make both sides of the social and political spectrum upset. I am a selfish individualist who at times drives my wife and children crazy because of my drive to accomplish things. Lastly, I am a man who has come to believe that business can be done in a way that economic equality can be gained through hard work and tenacity. However, I also believe that the system is skewed to the rich, who need to see their responsibility to help those that do not have the same opportunities. So what are those books that have helped me get to this point in my life?

The most important book in my life is the Bible. I am not ashamed of this, nor will I apologize for this. Those who say that Christians are haters, have no idea who this guy Jesus Christ is. I met Him in the pages of the book, and I intend to walk with Him for the rest of my life.

The second most influential book that has made me who I am today, is the book “With Christ in the School of Prayer.” Andrew Murray’s books have had a huge impact on my thinking and ability to meditate and reflect on my relationship with God.

The third book, The Pursuit of God, by AW Tozer has had an incredible impact on my life. This was a book that, along with Murray, helped me to cultivate an inner life that hungers and thirsts for God. It has helped me to accept the grace of God.

The fourth book is actually two short stories in one book. “Father Sergius” was the story of an ambitious man who became a monk. However, his ambition follows him into this new role and almost destroys him, but he eventually finds the path of service. “Master and Man” is a short story about a businessman who though his impatience puts he and his servant in jeopardy. They are traveling to another city and get stuck in a blizzard in Russia. The master learns humility by keeping his servant warm through the night, but dies in the process. The businessman’s lessons were incredibly instructive for me.

The fifth book was Habits of the Heart. It was written by Bellah, Tipton, Sullivan, Madson, and Swidler. This book taught me about the complexities associated with modern living. It also convinced me that success is never just an individual effort. There are people who have supported us, counseled us, and helped us have the strength to attain our accomplishments. I don’t think there is such a thing as bowling alone.
The sixth book was a recent read. Niall Fergusson’s book “The Great Degeneration: How Institutions Decay and Economies Die” explores the economic stagnation of the west due to increasing debt, and the lack of economic mobility. Low wages and the ability of a corrupt and monopolistic elite to exploit the system to their own advantage are considered socially regressive. This book has helped me to see what the major cause of a stationary economy is, one that is characterized by the rich exploiting the poor. It is the result of laws and institutions. In other words entrenched systems that favor one group over another. I am a firm believer in personal initiative, but if a system has been established that does not allow each individual to prosper through initiative and innovation, then Houston we have a problem.

The seventh, and the most related to my current position as department chair, “Rethinking Undergraduate Business Education: Liberal Learning For Professions,” by Colby, Ehrlich, Sullivan, and Dolle. This book has helped me to see how important engagement in the classroom is, and how important practice is in the community. It has convinced me that there is no better place to study business then in a liberal arts institution.

The eighth book was written by one of my favorite modern authors, Phillip Yancey. “The Jesus I Never Knew,” helped me to think outside of my western evangelical box to see a Jesus that is closer to the real one. A companion to this book would be “Imaginary Jesus” by Matt Mikalatos. Often we create our own Jesus’s to fit our own selfish desires.

The ninth book on my list probably should be a little higher on the list. “The Making of a Man of God,” by Alan Redpath is one of those books that transformed my life. When I was younger I was very insecure, and I was afraid to try anything because I was afraid of failing. By looking at the life of David through the words of Redpath my life was truly transformed.

The tenth book was written by Malcolm Gladwell. David and Goliath was a timely book in my life. It helped me to confront those giants I was facing. “David and Goliath is a book about what happens when ordinary people confront giants. By giants, I mean powerful opponents of all kinds.”

So there you have it. This is not by any means an exhaustive list. I am sure I have left many books off the list that have impacted me, but for who I am right now, these are the big ten.

And that is my thought for the day!