Becoming a Solution Based Society

From Thinking Outside the Boxe’s Sydney Correspondent: Many people in the first world today live in societies that are ‘problem’ oriented. The prevailing mindset is that there is something wrong, or a variety of things wrong with us, and with society itself. It seems almost that having problems are a badge of honor. Do so many people really need therapy? Is a child on the autism spectrum if he or she doesn’t sit still in class? This is not to say that many people don’t have a legitimate reason to complain. Losing your job and house because of your employer’s greed is a very good reason. 

The Occupy protests and recent riots in London were born out of a real sense of anger that is probably very justified. It is hard to feel anything but anger when you hear of individuals who made fortunes by betting that people would default on her home loans. The unfortunate part of our society is that it becomes ‘reactive’ to problems, real or perceived. We believe that there must be a quick cure, and so we are glad to hear our doctor say there is a drug that will make us feel better even if the problem itself is not cured. The alternative is for us to work toward long term solutions – not quick fixes sold by snake oil peddlers.

In a capitalist, democratic society the ‘solutions’ can only be economic and they must benefit all of society. The first thing we must realize is that although we should aspire to increasing our wealth it is not possible to live beyond our means. Recent events have demonstrated that. Every individual must have the opportunity to reach his or her productive potential. A country like ours has shown in the past that economic growth and greatness can be built upon strong successful and productive industries, not debt. It is important to understand that capitalism requires two things: the production of goods, and the consumption (or purchase) of those goods. It can correctly be argued that this is over simplified. We also want to purchase goods at the lowest possible price. So even if an American company makes a product, if there is a cheaper alternative available that is made overseas, most people will buy the latter. Toy Story figurines are made in China for this very reason. It’s also interesting to note an article in China Daily Pacific online that a Chinese person can buy an ipad more cheaply in the U.S than he can in his or her own country.

Now to return to the argument for the need to produce and consume equally. As Satyajit Das points out in his insightful book Extreme Money we are in the bizarre situation where we don’t actually even make anything anymore. CEO’s and Directors are paid multi million dollar bonuses for making as much money as possible, not for providing high quality products, or the best service. And so it is not surprising to find ‘investment companies’ such as Kohlberg Kravis Roberts (KKR) who exist with the sole purpose of making money by buying other companies then stripping and/or selling the assets. The inevitable result being large job losses. To merely continue to provide examples would be a hypocritical exercise. We need to consider possible solutions as well.

Capitalism is not ideal, but, as the saying goes, “it’s the best system we’ve got”, and as such our responsibility is to try to make it work for every member in society. Warren Buffet recently made the case for the wealthy to pay higher taxes. As Buffet stated it was absurd to think that his secretary paid more in tax than he did. The benefit of more taxes flowing into Government is so obvious that it doesn’t need to be discussed. But there still exists a belief in our country and others that successful entrepreneurs should not be heavily taxed as this would provide a discouragement to them and therefore the jobs of the people they employ would be put at risk. This is the ‘trickle down effect’. The suggestion that some of the wealth of the few would end up benefiting many underneath them. However, this is based on the assumption that the rich employer was actually making something (not just money, as Das points out), and that he or she had the interests of his or her employees at heart. In the past this somewhat romantic notion may have contained a certain element of truth, but not anymore. We cannot make the wealthy look after their employees, or poorer people in general. But we can make them pay taxes and use these taxes to help the less fortunate and to help or encourage them become producers as well. After all, one thing that the American people do not lack is entrepreneurial spirit. This spirit is a resource that must be encouraged and supported because it can become the engine room of our economy: providing jobs for people making real products, and providing real services for the good of all involved.

It is the job of our elected representatives to rise above personal, and party interests and put in place a structure that ensures that entrepreneurs can not only start businesses, but succeed. And of course, existing businesses must also be supported and nurtured, especially in these difficult economic times. A good idea is always a good idea, and the individuals who have those ideas must be encouraged and given the resources and tools to turn their ideas into reality, and then to become competitive and healthy businesses capable of employing others as well. If there are to be financial incentives or tax breaks, it should be for these people not the investment bankers or Warren Buffet’s of this world – they have enough money already. These entrepreneurs must be able to easily access start up funding without having to contend with endless red tape and bureaucratic hurdles.

Sources:

Satyajit Das, Extreme Money: Masters of the Universe and the Cult of Risk, Financial Times Press, 2011.

http://www.washingtonpost.com/business/economy/steven-pearlstein-on-billionaires-secretaries-and-taxes/2011/11/21/gIQABG6ZzN_story.html

http://www.chinadailyapac.com/article/putting-more-emphasis-imports

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