Monday, June 23, 2008
Permanent Things - Laws of Economics
H.L. Mencken (1880-1956) in his Chrestomathy claimed the American people do not believe the laws of economics apply to them. Old "H.L." hit the nail on the head good and hard! Believe it or not, the basic laws of supply and demand are at work in the world, in human affairs. They are part of "The Permanent" things that Conservatives respect and factor in decision making. They are timeless, and yet Americans believe their federal government can create a $9.3 trillion debt by printing money left and right to fund its escapades without having economic blow back. Witness the skyrocketing price of oil in 2008. The supply of oil and demand for it have not changed substantially. What has changed is the cascading supply of paper currency chasing each tangible barrel of oil. Hence, prices for gasoline at the pump keep rising as the federal government keeps its printing presses churning out more and more "fake" money. It is amazing. More and more paper chases a fairly stable pool of natural resources. The public cannot make the connection between printing fake money and the rising costs of oil/gasoline/diesel - and the costs of food because it takes more and more fake money to pay for the transport of the basics of life. Both parties in America, Democrat and Republican have agreed to creating "fake" money to pay off their patrons. It is also indirect taxation without representation - big time. It is also a gargantuan man-made financial bubble, which is going to blow up with devastating effects similar to the Great Depression of 1929. As Taoism teaches, only bubbles burst. It will burst in this case because the basic laws of economics, supply and demand, kick in and have the last word. They will provide a painful reality check again. What is amazing and disturbing are the charlatans who masquerade as Conservatives have been leading this charge to economic ruination. They are little more than stooges for crime families. Meanwhile, the laws of supply and demand grind slowly but surely. The laws of economics are among "The Permanent Things" that define Conservative thought and temperament. They apply to Americans too, whether they want to believe in them or not. This persistence of ignorance about the laws of economics, despite billions spent on public education, is a phenomenon that deserves a separate post/discussion. Meanwhile the current course of events will in time painfully prove again the insight of H.L. Mencken about Americans not believing the laws of economics apply to them.
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Lester Thurow, MIT economist, in his 1995 "The Future of Capitalism," predicted a backlash against the rampant predatory capitalism loose in the world right now. The majority if it wants to stay alive will have to reassert limits to the predatory greed of the minority. This has ethical implications for how we shape our future as the following learning activity from my online course on business ethics suggests. This learning activity is a form of ethical trend casting, a "Future Studies" technique.
Chapter Three: Slicing and Baking Economic Pies
Chapter three explores the business ethics of how the American economy decides or ought to decide financial rewards today – how we “slice our economic pies.” It applies the following ethical concepts from chapter two again:
1. Utilitarianism argues that we ought to slice up our economic pie for “the greatest good for the greatest number.” Utilitarianism provides a rationale for giving unions the biggest slices of pie because they represent the majority interest.
2. Libertarianism, a political expression of Egoism, argues that we ought to reward and protect individual effort and forget the social loafers who are parasites on the productive individuals who drive prosperity. The winner takes all of the pie!
3. John Rawls, a Yale political theorist, argues for extreme egalitarianism along the lines of Immanuel Kant. In effect, he argues that nobody, minority or majority, ought to get any goodies unless everybody gets goodies. Float all boats!
As my deceased friend John Johnson taught me, we have in North America designed an economic system that rewards the winners. Because most of us believe we are going to be winners someday, we let the system keep running as it is, instead of designing it to serve the needs of the majority of us, who will always work for somebody else, instead of for ourselves. John argued that our society has crafted a myth of success through individual effort in order to justify the winner-take-all ethics.
Our textbook focuses on “slicing pies.” It explores the business ethics of how we divide up the goodies. It glosses over how we can “bake bigger pies” to “float all boats” in the spirit of a John Rawls. Slicing a stagnant economic pie is a zero-sum game. If I get something, you must lose something, and vice versa. It is a win-lose scenario. Instead, we perhaps need to focus on win-win scenarios in which we can bake ever-bigger pies in which everybody has an ever-larger slice of pie. I find this oversight interesting, because the textbook in chapter three gets heated about the collapsing middle classes in North America. It laments this trend; it does not suggest what kind of business ethics must be in play to reverse this trend. In effect, the textbook talks about how to share or divvy up the golden eggs from the golden goose; it is virtually silent about how to get the golden goose to lay more golden eggs without killing the golden goose in the process. Therefore, our second discussion question for week three is based on chapter three’s concern about the collapsing middle class. Here it is
Week 2 – Discussion Question 2 – Chapter 3
1. Which one of the following three systems of business ethics best explains the collapse of our middle classes today – and why: Utilitarianism, Libertarianism, Extreme Egalitarianism (John Rawls)?
2. Which one of these three systems of business ethics would provide the best way to reverse the collapse of our middle classes and restore their previous health – and why?
3. Which one of these three systems of business ethics most closely resembles your own – and why?
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