Tuesday, May 28, 2013

It Takes Effort To Move Up In The Parade

"Now, as individuals differ greatly from each other, in intelligence, sagacity, energy, perseverance, skill, habits of industry and economy, physical power, position and opportunity, the necessary effect of leaving all free to exert themselves to better their condition, must be a corresponding inequality between those who may possess these qualities and advantages in a high degree, and those deficient in them ... It is, indeed, this inequality of condition between the front and rear ranks, in the march of progress, which gives so strong an impulse to the former to maintain their position, and to the latter to press forward into their files.  This gives to progress its greatest impulse."

John C. Calhoun (1782-1850)

This is not only so much a free enterprise quote, as it should be a quote about the human need to strive for freedom and for people to work on their own behalf.

But alas, when "leaders" seek to convince others that a cradle-to-grave society is not only possible but desirable, well, they then seek to secure their power to the point that they can force these economic and societal inefficiencies onto society.

Always it is foisted and sold as "progress" and "improvement."

Of course it must be forced! 

Why?  Because those doing the foisting KNOW it is neither progress or improvement!  It is simply a means of securing power and exercising control.

It's been said that if all wealth was confiscated from everyone and then returned in exact equal amounts to all - it would not be long before society would be as economically stratified as it is now. 

Mostly those who are rich now would be rich again.  Mostly those who are dependent now would be dependent then. 

Sure some might end up richer than before.  And those who inherited their wealth without any idea of how to produce it again would likely end up in a lesser condition.

But for the most part the strata we see now would re-emerge.

Why?  Because of Calhoun's first statement above.  People "differ greatly from each other in..." and he lists many ways.

How can "leaders" legislate motivation, and energy, and dreams, and desire and all those things that make us individuals?  THEY CANNOT!  

How can "leaders" spread around the wealth such that all benefit and all enjoy a more closely "equal" condition?  THEY CANNOT!  

How can "leaders" pass enough laws to prevent the thieves and scammers from taking from others to provide for themselves?  THEY CANNOT!  That scum has always been with us and will always be, no matter what laws are passed and how "equal" society is said to be.

What a myth that any of this is possible!

Now I happen to disagree with the second half of Mr. Calhoun's statement!  He lived in society where there was no public dole!  There was no entitlement mentality!  There was no political party deriving its power from how many they could convince the myth above was alive and well!

Calhoun thought those in the rear of the parade were always striving and trying harder to make their way to the front.  He called that the "greatest impulse of progress."

But if it was the "great impulse" then, it is not so now!  The very gubment we have now spends much of its time and energy, and our money, developing ways to convince more and more of our citizens that their present condition is caused by the "rich," or whomever else, and that they are entitled, ENTITLED, to receive that taken from others instead of providing for themselves.

Look around the world where things are not working so well financially or economically and you will see this mentality to be more deeply ingrained than here! 

If you want to see the future of our society, and the direction it seems to be taking, look at countries like Greece where they riot if their financial bureaucrats even speak of putting a small piece of their entitlement pie onto a different plate!

I wish the parade truly was like Mr. Calhoun experienced, where those in the rear ranks were using their Constitutionally-protected freedom, and individualism, and personal leadership to better their personal conditions and move forward in the ranks with regularity.

To ask:  do YOU think we will get to that place again?


Tuesday, May 21, 2013

The Multiplier Theory of Marbles

"I learned long ago that if you take money out of the marbles game and put them into a pile on the side they aren't being used in the game."

Judith, the Hairdresser

That was very impressive to hear!  It was The Multiplier Theory of Marbles!

This weekend I had occasion to go to the hairdresser.  No, not for me.  I went to spend some of the business profits that I am paid and call discretionary money.

As the benevolent capitalist in my family, I go into the market place every day to apply and multiply my talents in favor of pecuniary return, which I call profit.  I was asked if we could spend some of that profit on the family hair.  Being a capitalist, but a benevolent one, I agreed.  And was dragged along to the hairdresser as we had more than one thing to do.

The salon had eight chairs, and only one was being used.

As the members of my family were waiting to be helped, the first in line to receive us was a hairdresser named Judith.  Judith was older than any of the other employees in the salon, 50s I guessed, and not festooned with the same flamboyancy of hair or dress.  Interestingly, the youngest member of our group liked Judith immediately and sat down.

In such circumstances I like to poke my beak into the nest to see how things are going.  Since there were other chairs available, I waited a while and then pulled one up and sat down.

Judith was very pleasant and I began talking with her.  I asked my favorite question - "How's business for you Judith?"  (I like to use the person's name - it was on her name tag.)

She frowned.  "People don't have as much money as they used to.  So much is being taken from us we are all having a hard time just living.  Fewer people show up like you have.  I learned long ago that if you take money out of the marbles game and put them into a pile on the side they aren't being used in the game."

Wow!  I had never heard the economy referred to as that before!  Here she is struggling in a micro-economic circumstance, with her many empty chairs, and simplifying the macro economy down to a game of marbles!

She went on.  "When so many marbles are taken out of the game, the game slows down, fewer people are interested in playing.  And it's harder to win the marbles that are left.  And that pile on the side no longer used in the game isn't helping it at all.  I don't care what they say, things aren't getting much better."  

That is pretty astute economic analysis!  I said, "Do you know what that is called in economic terms?"  She did not.  I said that when money is left in the economy it has its own velocity as it travels around the economy, used for this and that.  It is used for basic economic activity.  People have more to be able to spend more, people invest more, and people use it to start businesses.  More money for investment leaves banks with more to lend.  As they lend, and that money gets used in business start ups, it is called the "multiplier theory of money."  The money creates activity which creates more money which creates wealth.  The economy grows.  The money is essentially multiplied!  

Removing so much from the economy, or the game of marbles as you put it, there is less floating around and less for economic wealth creation.  There is less money for people to get their hair done.  And the money is negatively multiplied.  Less is created.  The economy slows down.  There are, as you say, fewer marbles left.  And yet they want to make the pile on the side even larger!

"Isn't that the truth!  You really explained it to me!"

No, Judith, you explained it about as well as I have ever heard!  She understands and explained 


Here we have a nondescript hairdresser in a nondescript hair salon understanding macroeconomics in a way few do.  She has woken up.  Small business truly is the engine of the economy.  Judith wants the engine to make things go.

I think more and more people are beginning to wake up to free enterprise.  Is it in time?

Tuesday, May 14, 2013

Clunky But Savvy Free Enterprise

"Because I do more stuff."

Jay, the Lawn Care Specialist  

As a kid I did a lot of different things to make money. 

I started delivering the morning paper at 12.  At that age I was so small the bag nearly dragged on the ground.  Later in the morning I mowed lawns in the neighborhood.  Then during the afternoons we went to local golf courses and got golf balls out of the lakes to sell back to the golfers.  At night, on the weekends, I flipped hamburgers at a Burger Chef, and was a cashier before the cash register told you how much change to return.  At the end of the day my tray was always perfect.  Which was important as I had to pay back any deficit!  And I only made $.95/hour.

Of course, I rode my bike everywhere.

When I asked my mother if I could start mowing neighborhood lawns she said yes, but that I had to buy the lawn mower.  She would pay half because I would use it to mow our lawn too.

It disturbed me she wouldn't pay me to mow our lawn.  "It's OUR house..." is what I heard.

She also said I had to buy my own gasoline and lawn-care tools.

There was a lot of competition in the neighborhood.  Even a girl up the street.  Her father bought her a lawn mower and she was mowing a couple of lawns.  The nerve that a girl thought she could mow lawns!  Of course, she was bigger than I was and could probably beat me up, but still, what nerve!


In print shop at school I designed and printed my own business cards.

I selected, set and blocked the type, spacing and centering it in each line and the card, pounded it level, chose the very professional color and printed 250 one by one on the hand printer with the lever.  (This is 1966)

Sure, it's a clunky card!  But I was the only kid in the class to print business cards!

That one thing says a lot about me.

Then I needed a lawn mower.  I picked out and bought a Toro, with a side bag.  It was a beast!  And I was so small I could hardly push it!

The business needed more capital.  A gas can was essential.  And tools!  I needed tools!  Having none of that I needed to borrow money from the bank (Mom), which I had to pay back with the other money I was making.

Going to the hardware store, I picked out the sturdiest, high-tech tools I could find.  Everything was done by hand, of course.  The grass edgers had pads on the handles to make them more comfortable!  And we already had a rake for clean up. 

In those days there were no huge, plastic bags, so the homeowner's metal trash cans had to be used for clean up.  But when full it was too heavy to move, so I would position it at the street so the "trash man" could empty it.  Then I raked debris into small piles, carrying each one by one to the trash can.

My business was ready to market!  My tactic was simple.  I went door to door where I knew there were no kids to mow the lawn.  I knew my business had to be different than the other kids who mowed lawns.

This was my door approach.  Ringing the bell (which was mostly a ringing buzz) I put on my best puppy-dog eyes.  My spiel was simple - and always polite.  Handing them my business card I would say something like, "Good morning.  My name is Jay and I have a lawn-care business.  I would like to mow your lawn and take care of your garden and bushes."

The next question was always something like why they should hire me instead of somebody else.  Not realizing my answer was not very savvy, but nonetheless it demonstrated the essence of free enterprise.   I would hold up my hand edgers, smile and say,

"Because I do more stuff."  

Not exactly the smooth operator a more adult individual would be, the little entrepreneur at the door had handed over a business card and set himself apart in the marketplace.  I did more stuff than the other kids would do!

To seal the deal the follow-up would be, "I will bag your grass, clean the yard, clip your bushes, pull the weeds and edge your whole sidewalk.  I have my own tools and I will come whenever you want."  I guess I was savvy after all!

Like the butcher, baker and beer maker providing someone a better-than-average dinner, I WAS ACTING OUT OF SELF INTEREST.

And I mowed half my neighborhood, as much as I could handle.  And along the way I learned a lot about diligence, customer care, promptness, dependability and yard care!

Oh, I charged $5.  The other kids were getting $2 and $3, maybe $4 for a corner yard. 


Tuesday, May 7, 2013

How Does Your State Stack Up As Regards Free Enterprise?

"Nothing better expresses the aspirational ideal than the notion of small enterprise as the primary creator of jobs and innovation.  Historically, small business has accounted for almost two-thirds of all net new job creation, but recent research shows that the rates of new business start ups are at record lows.  Policy makers ignore small business at their own peril and that of the economy.  State governments can do little to directly promote enterprise and small business development, but they can increase the chances that entrepreneurs will thrive.  The vitality of the U.S. economy and hopes of hardworking entrepreneurs seeking the American Dream depend on our ability to engage and compete around the world for customers, capital and resources."

U.S. Chamber of Commerce Foundation Annual Enterprising States Study - April 2013

The very thing that impressed Alexis de Tocqueville about the United States was the calm and considerate industry expressed by its multitudes of small businesses.

Small business, currently defined as an enterprise which employs 500 people or less, certainly leads the economy in job creation and overall employment numbers.

But the study quoted here states, "recent research shows that the rates of new business start ups are at record lows."  And that is a problem!  It further says that "small business may be down, but it is far from out."

As I have said many times, gubment cannot create jobs that add to the wealth of the whole economy.  But it can create an environment conducive to job creation, particularly small job creation.

When asked, entrepreneurs suggest that there are five critical things "that state government can influence to foster small business start ups and expansion."  The Annual Enterprising States Study looks at each state, and ranks the states one to another based on these criteria:
  • Diversity in sources of capital
  • An enabling culture
  • Strong local networks
  • Supportive infrastructure
  • Entrepreneur-friendly government
The report measures each state overall as regards five policy areas conducive to growth and economic prosperity:  exports and international trade, entrepreneurship and innovation, business climate, talent pipeline and infrastructure.

The five states coming out on top this year are, in order:  North Dakota, Texas, Utah, Wyoming and Virginia.

You can click on your own state HERE to see how your state stacks up.  There are subcategories of each of the five above, and each state is ranked based on 30 criteria overall.

The entire PDF of this huge study can be viewed by clicking HERE.

What do we conclude?  When people are free to establish themselves in their various specialties and interact voluntarily with each other in a free market, the overall economy thrives.  It is this interaction of small business that has historically been essential to job growth and innovation, PARTICULARLY AFTER RECESSIONS.

If our leaders really wanted to goose the economy they would do everything possible to encourage an environment friendly toward small business (and business in general).  Period.



Think carefully...