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.