The Pope And Capitalism?

I am very thankful for family. Yesterday my wife and I had three of our children, a spouse and significant other, and one grandchild over for dinner. Tonight we are going out for dinner with four of our children, a spouse and significant other, and four grandchildren to celebrate my birthday. I am truly a blessed man, and God continues to heal my family and bring us together.

I am also very thankful for the level of prosperity God has allowed to come into my life. My wife and I are not rich by any definition, but we are comfortable, and we are able to give back as we choose. We are just one couple in a plethora of people in the United States who give from their abundance to help others. I think we should be happy that the United States is one of the most giving countries in the world. What has motivated me to think about our prosperity was the Pope’s comments two days ago and its so-called diatribe on unfettered Capitalism.

I will admit the Pope does say, “some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free-market, will inevitably succeed in bringing about greater justice and inclusiveness in the world.” I will also admit that the Pope said, “Thou shalt not kill sets a clear limit in order to safeguard the value of human life, today we also have to say thou shalt not to an economy of exclusion and inequality. Such an economy kills.” I would also admit that the Pope commented on the idolatry of our age, “The worship of the golden calf has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings; man is reduced to one of his needs alone: consumption.”

The more I read the Pope’s comments, the more I understand the importance of his words. “While the earnings of a minority are growing exponentially, so to is the gap separating the majority from the prosperity enjoyed by those happy few.” He made several other comments that I think are critically important such as, “ideologies that defend absolute autonomy of the marketplace and financial speculation, “ or how through the rejection of the right of states to exercise control, new tyrannies are being born, and other comments that decry the current economic state of the world.

However, having read his words now, I understand his critique is not against the economic process of creation of wealth, but with the unfettered collection of wealth and power at the exclusion of human care. I understand this and I agree with it. However, to think that this is a denouncement just of Capitalism is incorrect. The Pope’s comments are against any economic system that produces the results he is describing. Monarchies of the past, crying out let them eat cake, or Socialist systems that allow the power and resources to flow to the few. His denunciation is of a world system that eliminates any type of checks and balances. I don’t think there is a business-person out there that does not recognize the importance of government checks and balances, just not too many of them. However, I think the Pope recognizes it is because of sin this system has eroded into one that is imbalanced.

The Pope argued, “Behind this attitude lurks a rejection of ethics and a rejection of God. Ethics has come to be viewed with a certain scornful derision. It is seen as counterproductive, too human, because it makes money and power relative. . .In effect, ethics leads to a God who calls for a committed response which is outside of the categories of the marketplace. When these latter are absolutized, God can only be seen as uncontrollable, unmanageable, even dangerous, since he calls human beings to their full realization and to freedom from all forms of enslavement.”

Paulo Freire, in his classic The Pedagogy of the Oppressed, discusses the destruction of humanness that occurs both in the life of the oppressed and the oppressor. I think the Pope may have this in mind.

The Tower of Babel narrative found in Genesis 11, describes the desire of humanity to build a tower that will make a name for themselves and climb to the level of God. A Stassen comment in relation to this narrative is appropriate, “The desire to build ourselves up to God’s level and to dominate others results in alienation and loss of community with others and the earth.” There is a loss of the humane that occurs when we accumulate without the thought of others.

The system that the Pope is denouncing is one that all of us recognizes as problematic. We need an economic system, and a free-market most closely aligns with Democracy. Therefore, it comes down to our responsibility. The Wesleyian quadritlateral (what does the Bible say, what has the church said for 2,000 years, is it reasonable, and has it been proven in human experience) is a decision tool developed by Wesley to determine if something is right or wrong. However, Wesley also gave a trilateral sermon discussing the use of money. He believed, gain as much as you can, save as much as you can, and give as much as you can.

Gain all you can, described industriousness, hard work and cleverness. Some have reported that Wesley in his best years made about $1.4 million. Save all you can, was not just about putting money away it was about being frugal, and choosing wisely how one spent their money. And lastly, give all you can, according to Keith Drury, meant that the reason for making money was to be able to give it away, “(1) First, give to yourself all you need for the basics. (2) Then give to your family and employees their fair share, or you are worse than an infidel. (3) Third, give to the “household of faith” — other Christians, which we assume includes the organized work of the Lord in churches. (4) Finally Wesley says we are the give to all men in need, which includes the poor, the needy, even if they are not believers.”

The bottom-line, I agree and disagree with the Pope. I disagree because the free-market is not an evil system, people are evil, and I agree with the Pope because we do need to do more to decrease the gap between those that have and those that don’t.

And that is my thought for the day!

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Our Civic System

My graduate and post-graduate studies have focused on organizational systems. How can organizations function efficiently and effectively? This would include a positive outcome for all stakeholders. In the civic realm, I am convinced that we have a moral obligation to do the best we can, but assist those who are disadvantaged in the realms of procedural and distributive justice.

I am a free market person who believes in the principles of Capitalism. I believe in the right to own property. I believe in the right of entrepreneurs to receive rewards for taking risks. I believe in profit. However, I also believe in human responsibility. I have finished several books, and therefore have renewed my focus on Stassen’s “A Thicker Jesus.” I have also purchased “The Broken Covenant,” by Robert Bellah, and I am reading “Ethics In Context.” Over the Christmas holidays, I will be focusing on the responsibility side of the commerce equation.

Bellah was the first to get me thinking this morning. “The story of America is a somber one, filled with great achievements and great crimes. Ours is a society that has amassed more wealth and power than any other in history.” Bellah then concludes the section I read this morning with a comment warning about the inability of humanity to gain this power without incurring some level of self-destruction. Bellah initially wrote this book in 1975, and his words are just as true today as it was then.

Uncle Ben told Peter Parker “with great power comes great responsibility,” while Jesus tells us “to whom much is given much is required,” both pushing the point that we need to rethink how we title success. Buffet, Gates, and the others in the Billionaire Club are giving away billions of dollars to help people, but they only represent 210 people of the worlds wealthiest, what about the others?

Sometimes I think our concepts of humanity become too polarized. We either take the Panglossian path of rose-colored glasses, or the darker path of depravity. We view humanity as either good or fallen, when the fact is we are a fallen race, Adam fell and this reality is passed on to all of humanity, but God has provide a path of redemption, where we can move closer to original intent. I am a believer in the death and resurrection of Jesus Christ, which is the path God has provided for us. But I also believe that humanity does still reflect the common good of God’s original plan. If humanity were not capable of displaying the good the God had originally intended, then there would be no love, no care, no giving, etc. Ultimately, there is a tension that we navigate in society between the good and bad within us all.

The reality of this is seen in the dominant metaphor of this age with which we “understand social and political interaction.” Everything that occurs in our modern society is framed within an economic understanding. Stassen, after making this argument states, “How we interpret the economy has hugely influenced how we interpret the rest of life.” I believe that Stassen is correct in this assessment.

Bill Clinton, George W. Bush, and President Obama have presided over a time of deregulation and tax reductions. As I write this I am reaffirming that I think that deregulation is good for commerce, but I am conflicted over the tax situation. I do agree with Stassen when he states that the SEC, in its kindler and gentler expressions, allowed Bernie Madoff to get away with his crimes too long, so I do believe in what Dr. Suess called a Bee Watcher.

I also agree with Stassen when he argues that the lack of oversight of our mortgage industry led to abuses resulting from greed. “Agents benefiting from huge incentives on each loan arranged regardless of how irresponsible the loan was.”

However, I do not agree with Stassen’s comments about the reduction of taxes leading too greater levels of debt; $1 Trillion during Reagan’s Presidency” to our current situation of $17 Trillion.” The problem is not just the reduced tax rate it is the waste related to government spending. There was not an equal reduction in spending related to the revenue reduction due to lower taxes.

Stassen concludes his comments, “The naïve belief in the invisible hand working via laissez-faire ideology without checks and balances came crashing down in the Great-Recession – the largest crash since the Great Depression – in the last year of the George W. Bush administration. How could policy makers be so naïve about sin, about the needs for checks and balances.”  Stassen’s book was published in 2012, so he was writing during Obama’s administration, so the lack.  of comments about Obama’s role in the accumulation of debt is telling. QE’s 1-3 had a huge impact on our debt level.

All of us are looking at our civic situation from our worldviews. The fact is that the Deistic, liberal church, view of the goodness of humanity does not work, and focusing on the fact that humanity is fallen is not enough. There is a middle road, common ground, where we need to find dialogue and solutions. I still believe this is possible, but is it probable? Who knows, but we will see.

And that is my thought for the day!

Business And Government: A Match Made In Heaven?

In my Economics course I always go over the circular flow of the market. Firms go to the factors of production market and hire individuals from households. These firms then pay these individuals for their service. In turn these individuals from the households go to the product market and buy the products supplied by the firm. Therefore, the people in the households earn money and then spend that money at the firm. Everything works well until something within the system creates inequity. To ensure the minimum amount of inequity, the government takes on the role of arbiter, thus acting as a referee, if you will, concerning the process.

The problem with government doing this; at times it will overstep its bounds. In Switzerland last week the government attempted to overstep its bounds by legislating a maximum wage for CEOs. Initiative 1:12 stated that CEOs should not make more in a month than what employees make all year. I think the thought is nice, but there is nothing that would be more of an initiative killer than legislation similar to this. It appears the Swiss agreed. They voted the initiative down by a two-to-one margin.

I am a firm believer in a mutually beneficial, although distant, relationship between government and business. When this relationship gets to close, it will result in cronyism. However, if it becomes too distant, where government is hurting business, the outcomes may even be more devastating. My fear is that is what we have now.

Last week the WSJ had its annual CEO council meeting. Many of the nation’s leaders were present discussing the current relationship between government and business. It appears that there is a huge chasm between how well the government thinks it is doing, and what the CEOs think.

We are at a critical juncture in this relationship. Business is growing again, employment is slowly climbing, but the stalemate in government is hindering the pace of growth. “Democrats and Republicans at the conference again decried a failure of leadership – by the other guy.” President Obama did express a willingness to change the process for dealing with immigration reform, but the fissure between business and government on health care issues is miles wide. “We’re just at the start of the problems with the rollout. They aren’t business people. They don’t understand the bad effects down the line of what they started,” said one worried CEO of finance.

Five main issues needing action were identified by the CEO’s last week. The first issue involves immigration reform. There is a huge need to attract and retain talented foreign workers. Second, “the US needs to invest in education to train employable workers, starting at the K-12 level, with a focus on and respect for multiple pathways.” This would include colleges and universities, trade schools, and apprenticeships. Three, tax reform! The current tax system hurts American business’ ability to compete. Fourth, business and government should build better bridges of communication. Lastly, there needs to be a concerted effort to create better health care outcomes. The level of waste in this system is measured at $765 billion annually.

It will be interesting to see what will happen. My prediction is the due to the dysfunction in Washington nothing will change, at least until the next Presidential election. Until our pseudo leaders decide it is time to become the servant leaders they are supposed to be, nothing will change. Democrats and Republicans need to see each other in the same way business leaders want to partner with government. The CEOs crafted this comment for the government. “Business and government should build better bridges to each other – rather than viewing each other as adversaries – to advocate for free enterprise and share prosperity.” Amen!

And that is my thought for the day!

 

 

 

The Complexity Of Management, And The IAM

Today’s comments in the Economist, written by Schumpeter, were very interesting. Starting with the complexity of political systems, illustrated by the Austro-Hungarian Empire, and ending with self-organizing systems, the author effectively describes how difficult it is to manage organizations in this modern environment.

Several comments stood out to me. “Businesspeople are confronted by more of everything than ever before: this year’s Global Electronic Forum in Shanghai featured 22,000 new products.” This illustrates the need for faster decision processes, and a greater level of risk. It also illustrates the new reality. Complexity is no longer abnormal, it is the norm, and change theorists call this a white-water environment.

Management of complexity then is the new reality; therefore, the old norms are no longer valid, which is a lesson the International Association of Machinists (IAM) has missed, and as a result will probably drive thousands of good paying jobs from Washington State. Bruce Ramsey, editorialist for the Seattle-Times, discussed this reality in today’s paper.

The IAM rank and file has thought in the past and currently that the Boeing Company bluffs in its contract negotiations. The only problem with this is Boeing doesn’t bluff. Four years ago the company asked the IAM for concessions concerning strikes. The company wanted at ten-year respite from strikes, or they would build a second assembly line for the 787. The IAM said no, and the next thing you know they built another assembly line in South Carolina. No bluffing there. There are many other examples of how this occurs, including the current negotiations over the new airplane, 777X.

Ramsey describes the current decision-process, “The yes-voices were resigned and quiet, the no forces prideful and shrill. The no side accused Boeing of having big profits and Chief Executive Officer Jim McNerney of having obese pay and benefits. They accused Murray and Inslee of wanting to look good for voters by keeping Boeing in Washington.” Murray is one of our Senators, and Inslee is our governor. Instead of rationally thinking this through the rank and file were behaving emotionally.

The IAM is known as the “Fighting Machinists,” a moniker from years gone by, one that is antiquated and not necessary anymore. The machinists are paid anywhere from $33 to $43 per hour, depending on their job, and their benefits are stellar. They are also the last union in Boeing that still gets a traditional pension. And their pay is protected from inflation with a Cost-Of-Living-Adjustment (COLA).

To remind you of the current situation, Boeing recently approached the IAM with a new eight-year contract proposal that would ensure keeping the 777X in Washington State. The so-called Fighting Machinists said no, because they were fighting for future employees, a noble cause.

I agree with Ramsey when he says that the intent of the IAM is good, but a huge miscalculation. “The company said it will choose a site within three months.” I also agree with Ramsey when he stated that Boeing has billions of dollars in sunk cost in Washington State, which hopefully will weigh heavily in Everett’s favor. However, the Boeing Company does not bluff, and it has a long-term plan.

I do not believe that Boeing wants to move it’s manufacturing from the State of Washington. To do so will be extremely expensive. However, I also know that Boeing management recognizes the complexity of managing in this global age, and is looking for ways to maintain its narrow profit margin. Successful organizations are those that can find simplicity within complexity. This is what Boeing is trying to do, reduce the variation in the process of providing a very expensive product to a narrowly defined group of customers.

I hope the IAM hasn’t missed the boat, but I am afraid they have. As such, their miscalculation will cause thousands to miss out in a future Boeing job that pays a wonderful wage, with many excellent benefits.

And that is my thought for the day!

The Covenant

As I mentioned in my previous blog, the 60 Minutes report from Sunday was very good. I displayed it in two of my classes yesterday. SE 101 Introduction to Social Entrepreneurship was asked a series of questions after watching the 12 minute clip, as was the students in URB/EC420 Microenterprise Development. Great discussions in both classes, however, I am continuing to ponder this issue of great wealth and social responsibility.

Milton Friedman argued from a classical economic perspective that the only social responsibility required for business is to act according to the law. If the agents of the company, managers, did anything else they would be violating the principle’s rights of ownership. The agent, according to Friedman, has the ethical responsibility to maximize the returns on investment for the principle, or owner.

R. Edward Freeman countered that perspective with an argument that each company has a series of stakeholders who either provide or receive benefits for the organization. As such each of the stakeholders, called so because they have a stake in the company, should get a return in relation to their commitment to the organization. The shareholder does not have primacy in this equation.

Placing these two perspectives in juxtaposition demonstrates the demarcation that has led to a greater participation of corporations in socially responsible activities. However, Stassen in his work “A Thicker Jesus” describes another argument that is similar to Freeman.

Stassen argues, successfully I might add, that the economy suffers when we become extremely individualistic. I am a free marketer who believes in the power of private ownership, but when we gather too much manna, without thinking of others, we hurt not only ourselves, but the community too. It appears the Buffets, Gates, Cases, and others have learned this lesson and are willing to give away at least one half of their fortunes to help the community. To join this club you need to have a net work of at least one billion dollars and are willing to give away at least half of your fortune.

Stassen says this, “Anyone who makes wealth in this society is benefiting from the education that society gives to workers and consumers, from society’s justice supported both by the legal system and police and the character and consent of the governed, from the transportation systems provided in large part by people and government working together, and from the natural resources that are a gift of God – many of which will not grow back once they are consumed.” This is a very interesting point.

Stassen is taking a Stakeholder perspective, and is spelling out who the stakeholders are, and who the company, or the mega-rich, is beholden to. I am agreeing with Stassen’s argument of “Benefiting from all this creates a covenant obligation by the wealthy to the community.”

I am not saying the Wealthy would only be successful with the help of others, because the Entrepreneurs that Buffet has convinced to give away over half of their wealth took the risks to be successful. Reward should always be coupled with risk. However, I am saying that I agree with the concept of covenant. That if the entrepreneur is rewarded for taking risk, it is because the invisible hand has chosen the product of service provided by that entrepreneur, and decided that it had value. This indicates a relationship that is mutually beneficial.

Synonyms of the word covenant are contract, agreement, commitment, and guarantee. I agree with Warren Buffet when he stated during the 60 Minutes report that “incremental wealth has no utility.” To continue to pile money on top of money when you have enough does not have to be dynastic, but the amassment of wealth can be used to do good.

Bill and Melinda Gates though their charitable giving have almost eradicated polio from the world. They learned many lessons about how to give during this process, but they have demonstrated what can be done when you take collected resources and apply them to a specific social problem. The editor for Forbes Magazine made a comment that I think is critical to this discussion. Government is incapable of solving the big social issues of the day. However, using the principles of business focusing on efficiency and effectiveness a difference can be made. I love Social Entrepreneurship, which this is describing, and it will be interesting to see where these ideas will takes us.

And that is my thought for the day!

How To Get By On $500 Million

Last Sunday night 60 Minutes had a very interesting program. I had missed the original broadcast, but a colleague or mine told me about it and I watched it this morning. The moderator interview Bill and Melinda Gates and Warren Buffet, as well as seven other Billionaires who are a part of their club.

The purpose of this club is to practice philanthrocapitalism. The members of this club must have at least a billion dollars, and be willing to give at least one half of it a way either throughout their life or in their will. It doesn’t make any difference what cause they give the money to, just that they are doing good with their money.

The members include Gates and Buffet, as well as Larry Ellison, Richard Branson, several of the Walton’s (Walmart), and even Carlos Slim. There are about 210 members of this club with a combined wealth of $4.6 trillion.

During the 60 Minutes program a point was made by the wife of Steve Case, founder of AOL and part of the club. These billionaires can do something that governments can’t do due to the fact of the power of their combined wealth when it is focused on doing good in the world.

Warren Buffet has chosen to give away over 90% of his multibillion-dollar wealth. He was the one who convinced Gates to do the same thing. Together these two men have done an incredible job of convincing other entrepreneurs to recognize the continued amassing of wealth makes no sense. Instead give away the wealth as they continue their entrepreneurial endeavors and do good with the money. Case’s wife said that the Gates Foundation has almost eradicated polio from the world. Not bad stuff.

I know that some would say that it is wrong for these individuals to amass so much wealth to begin with, but the fact that they are doing good with it now must not be overlooked. Jeffrey Skoll is using his billions to raise awareness on many social issues. His movie making business produced the movie Contagion that helped congress see the danger of the spread of disease and stopped the cutting of funds for the CDC.

I applaud these billionaires who instead of passing all of their wealth on to their children, thus perpetuating the managerial aristocracy, are using the majority of their wealth to take care of those who can’t take care of themselves.

At the end of the 60 Minutes report Buffet made an interesting statement. When he calls these billionaires to talk to them about joining the club, several say yes, but many say no. He then ended with a comment that his next book will be entitled “How To Get By On $500 million.” I think it would be a very interesting read.

Keep up the good work gang, and make a difference.

And that is my thought for today!

Obama, Benton, Boeing, And The IAM: A Hope For Mulligans

There are so many really dumb statements made by smart people who would love to take those comments back. “I think there is a world market for maybe five computers, “ was said by Thomas Watson, chairman of IBM. “Radio has no future. Heavier-than-air flying machines are impossible,” William Thompson. “Everything that can be invented has been invented,” Charles Duell, 1899. It is amazing what people have said.

Obama makes the statement, “you’ll be able to keep your current insurance.” I think he’d really like to take that back now. His approval ratings are at an all time low, and, according to reports this morning, 49% of Americans wish now they had voted for Romney, while 45% are glad they voted for Obama. I know our citizens are fickle so we need to take these numbers with a grain of salt.

I wonder if David Madore and Tom Mielke still feel they had done the right thing by appointing Don Benton as Clark County Environmental Director. They had both said that he had the qualifications for the job, while the Columbian newspaper continues to question whether that is true or not.

On the other hand, Don Benton continues to show his true colors. He has threatened a county resident, Ed Barnes, who has been complaining that Benton is not qualified to do the job he was appointed to. Benton seems to think he is a private citizen, and as one he cannot have someone saying bad things about him. However, when he was appointed, and the county residents expressed dismay, he became a public figure. As Lou Brancaccio stated this morning in the Columbian, Benton is wrong to threaten someone for speaking their mind about a public figure, which Benton is one. I think this will be one of those moments that Benton will look back at and wish he hadn’t said what he said. Benton is a bully, and if appears he has always been one.

This morning the Columbian published a great political cartoon. It showed a motorcycle and a sidecar with the motorcycle rider being identified as Boeing and the person in the sidecar being identified as the IAM. The sidecar was left behind while the motorcycle kept going forward.

The illustration reflects the fact that the 777X, the new airplane that is at the center of the dispute between the company and the union, had huge sales at the Dubai Air Show. 150 airplanes were sold for $100 billion. However, the IAM, claiming high ideals, rejected the contract proposal from the company for elimination of pensions prior to the air show. Now the 777X will be built somewhere other than Everett, Washington. The IAM is saying now is the time to stand up for the middle class. How does one do that when a decision ends up driving all of the work out of the state? One of the last Washington State employers that pay a marvelous wage will now take its work somewhere else. How do you call that a win? The IAM will look back at this and wonder why they did what they did. They have not learned from their negotiations with Caterpillar.

On the other hand, Boeing, your make the irreversible demands on your workforce while McNerney is guaranteed $265,000 per month of retirement pay? How is that fair. This will be one of your moments that you will look back and say why did we do that.

The lack of leadership in all of the above situations is just incredible. But just like the movie executive who said that who would pay money to hear actors speak, the above individuals are going to look back at these events and say why did I say or do what I did.

All of us wish we could get a mulligan once in a while.

And that is my thought for the day!