I have to say, free-market commercialism, Capitalism, is the most efficient and responsive economic system. There is no perfect economic system, but the one we have chosen over the years, coupled with an overseeing government provides necessary protection and opportunity for all. Yes, there is meritocracy, but that encourages incentive, and without incentive we would not have the largest GDP in the world.
Two recent examples of the ability of free market commercialism to direct market resources are Boeing and Notre Dame. Each demonstrates the power of incentive, the invisible hand, and personal choice. I’d like to start with Boeing.
As we all know, the Boeing 737 Max is struggling a bit right now. Boeing is trying to repair the 737 Max computer system associated with two crashes. However, there are disagreements between countries about how much simulator time will be required to prepare pilots. There is also a parallel issue with Boeing involving the separation of CEO responsibilities from the Chairman’s role. Currently, Boeing’s CEO, Dennis Muilenberg, like other before him operate as both CEO and Chairman of the Board. Boeing is not the only company to practice this, and this common action has been debated for years by academics and practitioners alike. Now, with the 737 Max issue, Boeing is being advised by “proxy advisory firms,” to split the roles. As the WSJ reports, “Institutional Shareholder Services Inc. recommended in a note earlier this month that Boeing shareholders vote for a proposal that would split the leadership roles at the Chicago plane makers annual meeting on April 29th.” If you are familiar with agency theory, I think combining the two roles involves a conflict of interest, therefore they should be separated. I will vote my proxy shares for the split.
The fix for the 737 Max is turning out to be a bit complicated, but what is great is how we can see the invisible hand of the market drive Boeing to do what it needs to do. “Before the planes were grounded last month, passengers told airlines they didn’t want to fly on them” (Daniel Michaels and Robert Wall, WSJ, April 17, 2019). Michaels and Wall also reported that pilots criticized Boeing for the lack of training associated with the new software. These actions are driving Boeing to make needed changes. I have argued that Boeing should have taken the initiative and get out in front of this situation, but my argument in this post is the market will make sure the appropriate change occurs. If Boeing does not make changes that placate the market, then Boeing’s profits will take an even more substantive hit. The work of the invisible hand pushes the appropriate corporate action. I love it.
In all fairness Boeing’s CEO has stated, “that Boeing held some blame for the crashes.” And, he stated what I know to be true having been a Boeing employee, “We know every person who steps aboard one of our airplanes places their trust in us. We’ll do everything possible to earn and re-earn that trust and confidence from our airline customers and flying public in the weeks and months ahead.” Thus, the power of the invisible hand.
However, another benefit of free market commercialism is the fact we have profit. In other words, we have something left over to, of our own choice, give to meet the needs of people. In 2017 Americans gave $410.02 Billion to charity, and as reported crossed the $400 Billion for the first time. Compared to other countries the United States shines as a city on a hill. Although, there are no official numbers for global charitable giving reports show that Russia gives the equivalent of about $2 Billion, China about $13.2 Billion, Switzerland about $1.8 Billion, UK about $12 Billion, and Australia about $103 Billion. So, the United States does well.
Although, many people hate the rich, I really can’t say I hate the rich. I know a few rich people, but they are amazingly generous. But, I am sure there are some very greedy people out there. The WSJ today reported that some very wealthy people have donated about 850 million Euros to rebuild the Notre Dame cathedral. Some very nasty people have stated that the Catholic church is worth $35 Billion so why donate to rebuild Notre Dame. The only problem with that statement, the church does not own the building. The nation of France doe, so the anti-religionists lose again. I think it is amazing that people who have been fortunate enough to create wealth for themselves and the people who work for them see the importance of giving to help others. This is how Capitalism is supposed to work.
As a wonderful side note. Because of the level of giving to rebuilding Notre Dame, the GoFundme account for rebuilding the three historically black churches in Louisiana now stands at about $2 Million. Hate crimes will never win, they will only make us stronger.
I am a strong believer in the free market. I am also a strong believer in the fact that human nature is flawed. Therefore, I am not naïve when it comes to the goodness of people. There is greed and selfishness that impacts our ability to care for those who are in need. This is why we need government oversight of big business, to some level. Of course, even those in government can be corrupt, but this is the best we can do given our flawed nature.
In his excellent book, Big-Business: A Love Letter To An American Anti-Hero, Tyler Cowen states, “We live in an age when the reputation of business is under siege. Among Democrats, for instance, the world socialism now polls better than does capitalism. But Republicans, while they pay lip service to some business ideals, are not in practice much better. Many of them have quite readily followed President Donald Trump into his attacks on free trade, immigration, outsourcing, and the American Media (which is labeled enemy of the people) – all fundamentally anti-business stances.” Business is being attacked from both sides. Talk about biting the hand that feeds you, literally. Business makes and sells us what we need, and it employs us. This allows us to live our lives comfortably and care for our families. Yes, it could do better, but I’ll tell you, working for a large company like I did, it worked hard to promote on merit only, not race or gender, it worked hard to pay its employee’s the same wage for a job, no matter if you were black, brown, or female. It worked hard at employing the right person for a job nor matter gay or straight. Yes, it was sued, and yes it paid out money for infractions, but that is the power of Democratic- Capitalism.
And that is my thought for the day!