Tuesday, December 30, 2014

Free Enterprise Produces The Want For Consumption

"What a country wants to make it richer is never consumption, but production.  Where there is the latter, we may be sure that there is no want of the former."

John Stuart Mill (1806 - 1873)

Isn't that interesting?  This sounds suspiciously like supply-side economics.

As we know that consumption makes up the better part of Gross Domestic Product (what a country produces in a year), and some say it's over 60%, how does that consumption come about unless there is something to consume?

So the question is, what is the best means of getting something to consume?

What kind of economies do it better?  Controlled economies or free-market economies?  It's the new/old debate all over again - socialism or capitalist free enterprise?

Look at history.  Look around the world.  How are the countries controlled by dictators and bureaucrat planners doing?  How has the U.S. been doing these past few years while sinking deeper and deeper into socialist planning? 

What does the future hold for growth, and investment?  What has made up a larger and larger portion of the GDP in the past few years?  Production (and therefore consumption) or gubment spending?

Even though productivity has been redefined by the gubment planners, and GDP has been redefined by the gubment planners, and unemployment has been redefined by the gubment planners, ad nauseum.

Why all the changes?  To rewrite history!  If history can be rewritten (and by history we mean back to 1929) then the current condition can be redefined!  It's simple!

GDP was never intended to measure the economy's well being, but since WWII that is pretty much how it has been used.  And the contents that go into it's measurement are a bit like a soup recipe.  But the soup recipe had not changed until the last couple of years!  Now new ingredients are being put into the soup!  But these are not substantial new things.  "They" want it to appear like real "investment."  But instead, it's a bit like adding smoke.  Better put - it's a bit like adding smoke and mirrors.  And to add to the fun, pay no attention to the man behind the curtain...

What's new in the GDP soup pot?  Such important criteria as adding Hollywood royalties, and revenues from scientific R&D.  Real investment, don'tchano!  You want to pump up GDP, how about a sugar high?  But the sugar high has to be redefined way back.  If not adding it now doesn't look right.  The economic GPS is being force to, um, recalculate.

But why the sugar?  To cover up the severe unemployment circumstance that is still anemic even though IT  has been redefined!  To paraphrase one economist, whose name sounds a bit like Shrugman, we are creating a permanent class of jobless Americans.  How can they consume if they are jobless?  Easy - what they consume is magically provided!  They are entitled to it, after all.  And the rest of us can only shrug.

But again, why the sugar?  Because if the GDP looks sweet the cattle in the pen won't take so much notice.  Gee, doesn't that sound a little like how the wondrous health care system was foisted upon us?  Truth can't be a part of the mix or the agenda won't get passed?  Boy, that "revelation" got quickly swept under the rug!

But will adding the smoke and mirrors to the soup pot, the so-called sugar high, spur production?  Think carefully.  With so many jobless or underemployed (notice all the part-time jobs "created" that are counted to sound like full-time jobs?) how much money will there be for the cattle in the pen to spend on, well, on production?  Think carefully.  Will those having to pay abnormally huge premiums and deductibles for their new and wondrous health care plans (mostly to fund those who will be "subsidized") have discretionary incomes to be buying and buying all the new production?  Think carefully

So, Mr. Mill has it right.  How would it be said today?  Let's see - how about, "If you like your slow economy, you can keep it!"

How about a clever twist on the quote above?

Free enterprise produces 
the want for consumption! 

Tuesday, December 23, 2014

Free Enterprise And Self Expression Go Hand In Hand.

"A virtue of the free enterprise system is that it offers every individual the greater opportunity for self expression."

Lawrence Fertig (1898 - 1986)

Notice the key word there - greater.

There is greater opportunity for self expression in a free enterprise condition.  And he says that is "a" virtue, meaning one of many, "a virtue of the free enterprise system."

If history's best and brightest have shined in free enterprise economies, it is because there they were left free to express themselves.

If history's best and brightest inventions and innovations shined in free enterprise economies, it is because there they were left free to be expressed!

The idea in a free enterprise system is to put yourself out there.  Take a risk, find a way to introduce an idea (in the form of good or service) and express it!  See if others have the same reaction to receiving it as the purveyor of the idea thought they would! 

Sometimes it wins and sometimes it loses.  But at least, AT LEAST, in a free enterprise economy there is the environment in which to try.  If a bureaucrat or agency decides what will be offered, there is little room for invention or innovation.  There is a "lesser opportunity for self expression," to paraphrase Fertig's quote above.

History has shown us consistently that this is the case.

In fact, in a command and control economy, and name your label - socialist, communist, fascist, and the innocuous "managed" - self expression cannot be tolerated.  The gig is that everyone be the same!  Well, except for a certain few.  The certain few are the elect, the chosen, the put above and the wondrously smart.  To describe this condition, one author conceived of an Animal Farm  and barnyard and called those self chosen the "two legs." 

At first the Two Legs were really four legs, like the other animals, and criticized the humans controlling them - the humans who walked on two legs.  But then some of the four legs who decided that they were indeed elect, chose, put above and wondrously smart needed to find a way to set themselves apart and they did so by walking on two legs. 


And walking on four legs was said to be not so good.  At least not any longer.  And those four legs all needed to conform, and be the same.  There was to be no self expression among them.

There COULD be no self expression among them!  That was not a part of the formula!  They were not free.  And self expression was not a virtue the four legs enjoyed.  Their ability to express themselves, in the form of songs and chants, was controlled by the Two Legs.  Everything was Two Leg Approved!

The brilliance of the simple quote at the start is in its simplicity.  Virtues abound when there is free enterprise.  Such a concept, and therefore the virtues, extends far beyond the economic aspects.  It extends into the very fabric of the society.  Everyone is made free and can enjoy freedom's gift.

Free enterprise and self expression go hand in hand.

Monday, December 15, 2014

Free Enterprise Encourages The Proliferation Of The Extraordinary

"One machine can do the work of fifty ordinary men.  No machine can do the work of one extraordinary man."

Elbert Hubbard (1856-1915)

While describing himself politically as an "anarchist and socialist," Hubbard apparently understood that free enterprise is the way to go in business!

Going into business with John D. Larkin, he helped to found The Larkin Soap Company in 1875.  The company was innovative in many way, including being one of the pioneers in the mail-order business.  This method of sales soon became known as "the Larkin method."

The Larkin method involved two things - door-to-door sales and mail-order sales, both of which had "premiums" attached.

A premium consisted of soap which came in its own box.  They produced three soaps - a so-called "Sweet Home" yellow laundry soap and a bathroom soap, called Oatmeal Creme.  A color picture of the company's logo came in every box, and a certificate for a free gift.

The premiums soon became an important part of the business.  Hubbard proposed making the mail orders smaller, offering only three cakes of soap.  The premium that came with the next  order of bath soap was a handkerchief, towels with the laundry soap or one-cent coins.  The soap packages were sold for 10 cents, so this amounted to a 10% premium.  The idea took off.

Soon the Larkin Company became one of the first large-scale manufacturers to eliminate their wholesalers, retailers, salesmen, and brokers.  This was quite innovative!

Hubbard then introduced a "combination pack" and a $10 box of soaps.  It contained enough laundry and bath soap to last a family about a year.  The $10 was roughly the equivalent of one week's pay.  So the  premium included with the purchase amounted to $10, and could be redeemed for any of the then hundreds of products in the Larkin catalog.  The Larkin idea crystallized into a company motto:   "From Factory-to-Family: Save All Cost Which Adds No Value."  Selling the products directly to the consumer like this the savings could be passed on to the consumer, so purchasers felt like the products were "free."

Further, the Larkin Company introduced cooperative buying clubs, and consumers felt a part of the family.  Called "The Larkin Club," soon it allowed consumers to purchase products on an installment plan, with interest attached, and you can see the development of what is so common in today's business environment.  Small Larkin Clubs developed in towns and neighborhoods where 10 families could each contribute a dollar to join their own little club and enjoy club savings and their own special club product savings and premiums.

Catalog offerings expanded to include "pure" foods, glassware, leather goods, pottery and furniture.  This became a huge part of the marketing plan and helped the company survive the economic downturn of 1893.

The company peaked in sales in 1920, to an eventual low in 1939, and done in by the depression it ceased operations in the 1940s.  Among the corporate changes it introduced to its employees, and American business, included paid vacations, a thrift plan, life insurance, medical benefits for illnesses, tuition for attending night school, free coffee, lunch, and an annual summer picnic.  It even created its own chapter of the YWCA in 1905.  Quite innovative!

No anarchy or socialism here!  The success of mail order as a marketing idea was soon picked up by many other companies.  Its other ideas are rife in our modern marketing and sales companies.  Elbert Hubbards' ideas and innovations extraordinarily changed the business climate nationwide.  His statement above rings true today, for people and machinery.

Free enterprise encourages the proliferation
 of the extraordinary.