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Real business is hard work

Monday, December 29, 2008, 10:13 PM

Here's a very interesting observation put out by the great writer and very observant economic and social commentator Charles Hughes Smith.

Productive and Unproductive Capital
Honestly, it's much easier to sit at a desk at home and gather long-term capital gains (which may or may not be productively invested) or tax-free earnings than put up with the guff of real business. And if this is the case, then who's going to risk everything to hire people and "get America working again"?

This is why I predict 30 million formal jobs will be lost in this Depression; it's no longer worth it in terms of risk/return to start businesses when everyone is sucking real businesses dry and leaving rentier capital lightly taxed and lightly regulated.

The above is the summary of an essay which points out that over time we've structured our economy and society such that non-productive capital (passive bond and financial investments) are treated with kid gloves by our rules sets and tax codes while using the same capital to run a real business exposes one to all sorts of headaches and additional taxes that do not apply to "rentier capital".

So why bother?

I can tell you from my experience, this rings true.  The amount of paperwork and forms and rules and taxes that my state of Massachusetts applies to my simple business are extraordinary compared to squaring up my investment and trading accounts at the end of the year.

Some of the rules are baffling and maddening as if designed to be cruel and arbitrary.

But they merely reflect the fact that over the past few decades we have made the decision to lighten up the rules and taxes on invested capital and piled on new incremental rules and taxes each year to working capital.

And this is why I think the Big Three dropped the ball when they went to DC recently.  I know they were in begging mode, but if I were them I would have been sorely tempted, in response to some mean-spirited probing by Barney Frank, to have taken off my shoe and banged on the table while shouting "Stop! Enough!"

Then I would have proceeded to let the rule makers know that it is not my workers that are uncompetitive, it is the nightmarish combination of US rule sets and free trade that have killed the country.

You can have one or the other but not both.

An example would be the Americans with Disabilities Act (ADA).  It's most recent incarnation released earlier this year is over 1,000 pages of tightly packed rules.  I am making no claim as to whether this is a good law or a bad law, but pointing out that it represents a thousand pages out of tens of thousands that US corporations have to follow for which many other countries have no equivalent set of regulations.

As a society we've decided that such rules are important to us and, again, I am making no statement about whether this is a good thing or bad thing.  For now, let's just agree that they are a fact of life.

But how does one compete with countries that do not have such rules in place?

Imagine that you are a home builder and you have to follow the Massachusetts state code books which run several thousand pages and you have to obey all the labor laws.  Now imagine that the builder on the next lot over doesn't have to follow any of those rules and that the two of you are competing on price.  Now imagine that a Massachusetts state representative publicly scolds you for being uncompetitive.

So the opportunity lost by the Big Three was their chance to turn the tables and say, "Mr. Frank, and other distinguished individuals, when you say my workers and my business are uncompetitive what you are really saying is that our regulatory structure is 40% too large.  Since you hold this view I demand to know your immediate plans for reducing the size of government to a point where we can again compete on the world stage.  My laid off workers will wait in your home district for your answer."

It's pretty simple, do we want free trade or do we want tens of thousands of pages of applicable business laws?  That's the choice.  We can't have both.

So if you have been wondering why the credit bubble burst and why US wages have been stagnant and why US industry has been declining, look no further than our goofy insistence on playing on a tilted field. The once great and productive middle class has been hollowed out by an ill-considered globalization fad that has made us worse off, not better off.

The solution is simple. 

Either apply import duties that square up imported goods against the costs US businesses face for complying with our laws, or begin dismantling laws.

If we do neither, then we'll merely slide down the same slope we are already on and more and more businesses will come to conclusion that it's just not worth the effort, the risk, or the time.

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47 Comments

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: Real business is hard work

>>"As a society we've decided that such rules are important to us and,
again, I am making no statement about whether this is a good thing or
bad thing.  For now, let's just agree that they are a fact of life."

Chris,

While I am sympathetic in the main to the points you raise, let me give you a couple of examples of how we got here:

1. Many years ago I worked for a guy who started his own business and delighted in having few rules and regulations for his employees. By the time I joined his company, he had begun to create a company manual of rules/regs because previous employees had taken advantage of his relaxed approach. Had all of his employees been honest, hardworking, non-abusive of his kindness, I have no doubt he would never have had to create the rules/regs. He was very dismayed that he had to do so, but it was the only way he could protect himself.

2. I've also worked for companies where the employer is the bad guy (as I'm sure have many in this community) and rules/regs have had to be imposed by government entities to crack down on employer abuses. Conversely, I've also worked for companies where the union has taken advantage in a negative way.

Bottom line, there will always be a need for rules/regs that companies have to follow. Without them, too many companies would run rampant and would be untrustworthy and unreliable. Sometimes citizens will not find out until something awful happens - the school collapses in the China earthquake earlier this year is a prime example. I bet they built those schools on the cheap because government rules/regs were relaxed or virtually non-existent. Now the Chinese government is going to impose stricter rules/regs making the job more expensive for the companies involved. If the companies that built the schools that collapsed (killing thousands of innocent children) had done an honest, decent job in the first place, the rules/regs soon to be imposed would not be necessary.

So, you see, the government is not always the bad guy as implied in your post. Sad, but true.  Frown

Sam....

[Additional Thoughts]

Many of the rules/regs imposed by government authority ensure that our food supply is safe, that our houses are properly built, and that the medicine you buy works as promised. Being in the medical device industry and having to ensure companies follow FDA rules gives me an insiders appreciation of the need for such rules and regulations.

People have died because companies didn't follow the FDA guidelines which state that, at a minimum, products must be safe and effective to obtain FDA approval. Would you want to gamble with Becca's life by purchasing non-FDA approved medications? Would you want a doctor to used non-FDA approved medical devices to treat her if it became necessary? Of course not.

Although rules/regs can be burdensome, I'd rather have them than not because I've seen what can happen without them.

Sam....

 

 

cybernytrix's picture
cybernytrix
Status: Member (Offline)
Joined: Sep 10 2008
Posts: 18
Re: Real business is hard work

You cannot take the auto industry as representative. Look at Intel,
Apple, Microsoft etc. They are all well run and very competitive - the
rules are a minor hindrance. The US auto industry is simply not
competitive and they need to go the way of the dinosaur! If you abolish
too many of these rules, you might risk something like the finance
meltdown or China's milk scandal.

My immediate reaction to the write up was to treat capital gains and bond income as ordinary income.

 

Ruhh's picture
Ruhh
Status: Gold Member (Offline)
Joined: Nov 12 2008
Posts: 259
Re: Real business is hard work

This is a great post on an important topic. Like so many of the subjects that come up here it all brings me back to my angst filled college era days of early 2000s. Back to my old Adbusters subscriptions, back to the anti-globalization movement, back to Quebec City breathing in tear gas in protest of the Free Trade Agreement of the Americas (FTAA). And once again it all comes back to Full Cost Accounting.

A major part of the demise of capitalism is free trade / globalization. Not free trade/globalization per say but the way free trade was completely geared to benefit only the multinational corporations that lead the whole thing in the first place.

Quote:

It's pretty simple, do we want free trade or do we want tens of
thousands of pages of applicable business laws?  That's the choice.  We
can't have both.

So if you have been wondering why the credit bubble burst and why US
wages have been stagnant and why US industry has been declining, look
no further than our goofy insistence on playing on a tilted field. The
once great and productive middle class has been hollowed out by an
ill-considered globalization fad that has made us worse off, not better
off.

The solution is simple. 

Either apply import duties that square up imported goods against the
costs US businesses face for complying with our laws, or begin
dismantling laws.

Very well put but I would have to disagree and say that I think we can have (could have had) both but it would involve a few other simple dimensions to the simple solution.

I would never want to give up all the rules and regulations, as complicated as they can be, that have protected social and environmental rights. If anything that is the product that should be exported first and foremost.

I would add that in order to do free trade, foreign companies must adhere to the same rules and standards that host countries companies do in order for that host country to be able to compete. If they can't compete with the standards we've worked so hard to acheive then they have to pay the price to do business here (in the form of duty). This should have been a matter of national pride.

Why should a country allow their people to be undersold?

I know that we all know the answers to that...

so we can send manufacturing jobs that were once the lifeblood of North-America to where the near non-existence of labour laws and civil rights can get us dirt cheap labour...
so we can pillage the earth where we won't see or feel or smell the devastation we've laid upon it...

And we all either bought into it so we can rake in the profits (take a deep look at your portfolio) or we bought it under the guise of cheaper products (take a look at where you've been shopping)

...but the price we've paid is now obvious and we are all accountable.

ckessel's picture
ckessel
Status: Martenson Brigade Member (Offline)
Joined: Nov 12 2008
Posts: 465
Re: Real business is hard work

Sam,

A couple of points that ring true for me as regards this post ......

Productive and Unproductive Capital
Honestly, it's much easier to sit at a desk at home and gather
long-term capital gains (which may or may not be productively invested)
or tax-free earnings than put up with the guff of real business. And if
this is the case, then who's going to risk everything to hire people
and "get America working again"?

This is why I predict 30 million formal jobs will be lost
in this Depression; it's no longer worth it in terms of risk/return to
start businesses when everyone is sucking real businesses dry and
leaving rentier capital lightly taxed and lightly regulated.

 As a businessman myself I consider the time and energy that I spend being the policeman for the government as a very unproductive use of capital.

We have to monitor and collect the payroll of each employee and account for all of the employees money that the government collects for disability, unemployment, social security and income taxes and then deposit it with the government via a bank plus we have to contribute our share of matching funds for some of those items as well. This process involves a lot of time doing bookkeeping and managing.

We also maintain mandatory health coverage for each employee as mandated by the state in the form of Workers Compensation Insurance. This also has to be collected, tabulated and deposited on a regular basis.

There are many more fees, bonds, insurances and so on that are also mandated by government and after all of that we also get to take the risk of trying to hire, train, manage and provide for continuous work flow and make sure there is enough cash on hand to make payroll. After that we can spend time actually running a business and focusing on the quantity and quality of the product we are selling. 

Compare all of that with the option of investing the same money and reading a book while checking on the rate of return every few days. The point is that putting up with the guff of real business is not all that attractive thus the resultant problem of getting America working again.

Coop

switters's picture
switters
Status: Platinum Member (Offline)
Joined: Jul 19 2008
Posts: 744
Re: Real business is hard work

What stands out for me about this is the comment about how much easier it is to make money through speculation than it is by working for it.  Seems to me it's been that way for a long, long time, and not just here in the US.  But that is a system that rewards non-productive activity and punishes productive activity. 

That's why today we have almost no manufacturing capacity, no savings, more debt than any other country in the world, and a financial industry that is worth 22% of the economy instead of 4% or 5%.  The Wall Street crooks get bail outs and golden parachutes and the rest of us get to work to support their excess.  

And people are surprised this isn't working?

jrf29's picture
jrf29
Status: Gold Member (Offline)
Joined: Apr 18 2008
Posts: 453
Re: Real business is hard work
srlinder wrote:

Bottom line, there will always be a need for rules/regs that companies
have to follow. Without them, too many companies would run rampant and
would be untrustworthy and unreliable.

I agree completely.  However the manner in which those rules are effectuated has a great effect on how cumbersome they are.

First of all, some rules are simply silly, and are enormously expensive to comply with compared with the relatively small benefit that they provide. 

Second, some rules are commonsense, and should be on the books, but instead of merely being on the books they are attached to complex and unnecessary permitting procedures which make compliance unnecessarily expensive.  Here's an example of how a simple rule could become a ball-and-chain:

Scenario 1:  Fire exits must be kept clear.  Obstructing any fire exit is a crime.  If a business wishes to fit any fire exit with a delayed-unlocking device (i.e., door opens in 30 sec.), it must be safe in the opinion of the fire marshal. (This is how it is now).

Scenario 2:  If you wish to fit a delayed unlocking device to an exit door, you must obtain a Delayed Unlocking Device Permit from the Bureau of Bureaucratic Inefficiency ($500).  You must submit a complete set of blueprints showing the location of each fire exit, and the certified results of a human traffic flow study conducted by a licensed traffic-flow engineer ($5,000).  You must renew your permit annually ($250), and have a re-inspection done once every five years at your expense ($2,000) to insure that conditions in your building have not changed.

The problem is, largely, the existence of specialized regulatory bodies, and private code-making organizations (such as the National Fire Protection Association) whose existence depends on them continuing to think up more regulations.

Take such a thing as fire protection.  Well, the fact is that we've pretty much got it covered.  In general, we have a clear idea of how best to protect a building from fire using current technology.  And a fire protection code which was published in 1985 is probably almost as good as one published today.  But you have an enormous rule-making and safety equipment industry (it's not just government), composed of people whose careers consist of thinking up new regulations.  If they stopped, they would be out of a job.  And so the rules get sillier and sillier.  Here's an excellent example:  If you own a commercial establishment, you must have fire extinguishers.  Now, once per month, most state fire codes say that somebody needs to check to make sure that each fire extinguisher is (a) in place and (b) pressurized.  Makes sense.  Now, common sense will tell you that anybody who is not blind is capable of reading the pressure gauge on a fire extinguisher to see whether it is charged.  However, not too long ago it was decided by the National Fire Protection Association (a private organization which makes suggestions on new fire rules, which are usually followed) that the only people capable of reading the pressure gauge on an extinguisher each month are people who have been trained and certified in testing, assembling and servicing fire extinguishers.  It doesn't matter that you'll never assemble a fire extinguisher as long as you live.  In order to read the little gauges on your fire extinguisher, you need to go through this very expensive training (which of course requires annual recertification).  Or else hire someone who has---at significant expense---to read the little pressure gauge on your fire extinguisher for you.

I could go on all day.  The regulations are chock full of such idiocies as this, which have accumulated over time to make such things as renovation or expansion of a commercial building almost too expensive to contemplate.  This mass of silly rules and permits and fees and hidden regulatory costs gets bigger and bigger, until the amount of capital required to start a new business becomes prohibitive.

 

"Any tax is a discouragement, and therefore a regulation so far as it goes." - Oliver Wendell Holmes, Jr.

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: Real business is hard work
ckessel wrote:

As a businessman myself I consider the time and energy that I spend
being the policeman for the government as a very unproductive use of
capital.

Coop,

I agree it's unproductive use of your capital, but the government needs you to be a policeman to ensure its rules/regs are being adhered to. An alternative would be to have a government agent sitting in your office 24/7 looking over your shoulder and I know you wouldn't want that!

 

ckessel wrote:

We have to monitor and collect the payroll of each employee and account
for all of the employees money that the government collects for
disability, unemployment, social security and income taxes and then
deposit it with the government via a bank plus we have to contribute
our share of matching funds for some of those items as well. This
process involves a lot of time doing bookkeeping and managing.

We also maintain mandatory health coverage for each employee as
mandated by the state in the form of Workers Compensation Insurance.
This also has to be collected, tabulated and deposited on a regular
basis. 

Employees are entitled in our society to "disability, unemployment, social security" and "health coverage for each employee as
mandated by the state in the form of Workers Compensation Insurance". Taxes and fees are needed to pay for all of these benefits. These must be considered part of the cost of doing business.

Otherwise, businesses may revert to the "old way" of doing things which is that employees work under what ever conditions you impose, then you can dispense with them like so much used goods when you've worn them out. Not really fair if you're a hard working employee. Not really good for your business if you can't find employee's because you're known for treating your staff like dirt. Wasn't so long ago that this was reality for the average working stiff - hence the rise of unions.

 

ckessel wrote:

Compare all of that with the option of investing the same money and
reading a book while checking on the rate of return every few days. The
point is that putting up with the guff of real business is not all that
attractive thus the resultant problem of getting America working again.

Strangely enough, in spite of your comment, new businesses are started all the time. It's part of the American dream to start with almost nothing and create a company and become financially secure (hopefully). In fact, having money to invest and reading a book may not be an option until such time as you have first created a successful business. How often have you read about people who start their business using family loans and credit card debt?

Thus, in spite of the onerous burden created by governments, starting and running a business is still the dream of many. If the government burden was that severe, no one would start a business in the first place!

Sam....

 

 

 

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: Real business is hard work
jrf29 wrote:
srlinder wrote:

Bottom line, there will always be a need for rules/regs that companies
have to follow. Without them, too many companies would run rampant and
would be untrustworthy and unreliable.

I agree completely.  However the manner in which those rules are effectuated has a great effect on how cumbersome they are.

First of all, some rules are simply silly, and are enormously expensive to comply with compared with the relatively small benefit that they provide. 

Second, some rules are commonsense, and should be on the books, but instead of merely being on the books they are attached to complex and unnecessary permitting procedures which make compliance unnecessarily expensive.  Here's an example of how a simple rule could become a ball-and-chain:

Scenario 1:  Fire exits must be kept clear.  Obstructing any fire exit is a crime.  If a business wishes to fit any fire exit with a delayed-unlocking device (i.e., door opens in 30 sec.), it must be safe in the opinion of the fire marshal. (This is how it is now).

Scenario 2:  If you wish to fit a delayed unlocking device to an exit door, you must obtain a Delayed Unlocking Device Permit from the Bureau of Bureaucratic Inefficiency ($500).  You must submit a complete set of blueprints showing the location of each fire exit, and the certified results of a human traffic flow study conducted by a licensed traffic-flow engineer ($5,000).  You must renew your permit annually ($250), and have a re-inspection done once every five years at your expense ($2,000) to insure that conditions in your building have not changed.

. . .

I could go on all day.  The regulations are chock full of such idiocies as this, which have accumulated over time to make such things as renovation or expansion of a commercial building almost too expensive to contemplate.  This mass of silly rules and permits and fees and hidden regulatory costs gets bigger and bigger, until the amount of capital required to start a new business becomes prohibitive.

jrf29,

I had to laugh when I read your post because you are so right on!  Laughing

Idiotic regulations that exceed the bounds of common sense are the bane of all societies - certainly we have too many here in the U.S.

Unfortunately, we have a system that is often devoid of common sense. What starts out as a reasonable requirement soon becomes an unreasonable burdensome one. Sometimes I think that government employees are lobotomized, when they reach a certain grade level, to ensure that their common sense genes are removed.

One of my favorite things to do when I hear someone make eminent sense about something is to say, "Careful, you're in danger of being logical!"  Surprised

 

And so, jrf29, I have just said it to you!

 

Sam....

GDon's picture
GDon
Status: Bronze Member (Offline)
Joined: Apr 2 2008
Posts: 86
Re: Real business is hard work

From the above comments, itseems painfully obvious that any attempt to revive an America which will soon be "on the mat" from decades of consumerism, bureaucracy and government growth, particularly in a storm of economic recession/depression, to a course of true productivity, is dead in the water.

Over the last 300 years, (Europe, and over the last 150, America) much of western society, has become used to living with the "fat on the hog" of business bureaucracy - by virtue of the combination of early and extended colonialism, with the deceptive practices of fractional-reserve banking and finance. 

England had perfected this scheme, to the point where nearly 1/2 of all employees in the "City" of London are finance-based (or were.....).   Little surprise that the engine of productivity and ingenuity which was the same Britian of the 18th and 19th centuries, has become but a socialist and government-dependent shell of former self.

This has allowed for a mindless tolerance of a  parasitic regulatory segment of our economies, all of which are supported only by virtue (!?) of income confiscation through taxes. 

Interestingly, in America, the original Federal Register was born from the Federal Register Act, in 1937, during the depression-era Roosevelt regime, in an effort to document the extreme growth of federal regulatory agencies, with the employees of those agencies hired in-part, as a "make work" program.

It sure did sink in!

It's first edition, at around 16 pages, has now grown to over 80,000!!!  This includes agencies to monitor important business activities, like the one which monitors the growth marketing programs for avocado growwers in Florida (!)   Other are required to consider the proper plastic wrap on commemorative coins.  

Surely this is money well taken, and part of a very necessary regulatory environment, "to keep us safe".

For instance, 18 U.S.C. 1821, insures a more risk-free America, by regulating and possibly penalizing persons for up to one year in prison, for taking their grandmother's false teeth to another state without the authorization of a local dentist.

Likewise, under Title 7 of the U.S. Code, Section 953, any "warehouseman, broker, cleaner, sheller, dealer, growers' cooperative association, salter, crusher, or manufaturer of peanut products" who refuses to file reports "on the quantity of peanuts and peanut oil received, processed, shipped, and owned by him" can be hit with a year in jail!

So why engage in the risks of actual business, with all of the attendend costs and burdens of "regulatory compliance".   Why not just convince the rest of the world, to engage in productive effort (like China), and allow the western nations to live off the usury, so we can afford a safety-bubble of planetary proportions.

Through our pyramiding of fractional-reserve finance, we can always keep our endless armies of regulatory agents employed in "policeing" of actual productive enterprises here at home. 

In the coming depression, it is clear that the only work available, will be "make-work".

This is part and parcel of the serfdom which we have come to accept under the corporate fascism which is taking strong root in America.

The President-elect has proposed a program whereby ALL Americans of entry-work age, could best serve the bureaucracy, government and corporate masters, through a program of compulsory and conscriptive "serf-labor", surely not by engaging in the risk of enterprise, but rather, to be embedded in a Soviet-style army of regulatory bureaucracy.

This is not by accident of course, it is a result of a culture which no longer can accept business risk of any type, and one which finds the majority of it's populus unable to envision a productive life.

Thanks should be given to the union of bankers and politicians, between the Federal Reserve, and our Congress and Executive branch.

Are we not doomed? 

Can America be productive, or do we need to impose a swath of tarrifs and penalties of the products of other nations?

fombie's picture
fombie
Status: Member (Offline)
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Posts: 16
Big business like big laws

 

If it weren't for the 1000-pages laws the big three carmakers would have gone out of business long time ago!

Imagine that you were to start your own car business: building the cars is the easiest part. Getting all the approvals to be allowed to sell them and use them on the road is what kills your business. The small onces can not afford it, but the big ones can dedicate a whole department to all that bureaucracy.  For them it is a small cost compared to the benefit of avoidig new competitors.

This is a constant pattern in many sectors: where I live a lot of small farmers had to stop or sell out to large corporations, not because they where not productive enough, but because they could not keep up with all the investments and paperwork required by environmental laws. The result: in the end those laws did little to protect the environment, but they where a big help for the large agricultural corporations who lobbied hard to extend the law with hundreds of extra rules and exceptions. 

 

 

DavidLachman's picture
DavidLachman
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Posts: 153
Re: Real business is hard work

I was thinking about this topic lately as some friends of mine who started a business this year expect that they will go out of business next year solely because of a new Federal Law.  The proposed regulations are out now and they will have some serious consequences for every small business that makes or sells toys or items that children might be attractedt to.  On the surface it may seem like a good idea after all the problems with "Chinese" toys.

The new law requires "certification of
compliance based on mandatory testing."  Now, if you want to make simple wooden toys in your home workshop you will have to spend thousands of dollars on safety testing for each toy design.  It will simply not be economically worth it for any small producers to comply or anyone (like some of the 5 million newly unemployed Americans) contemplating starting a small traditional toy manufacture business to even begin.  The new law also applies to any alteration of an existing product.  So if you buy childrens' clothes from a large manufacturer who has gotten the mandatory testing done and want to put a design on them you are out of luck unless you are going to pay for retesting.  This law applies to any children's products whether for sale or for free.  The new regs go into effect in May.  At that time you can't sell or give away anything that has not passed the new safety tests.  So if you are planning on knitting hats for your grandchildren do it soon.  

On the positive side, there will soon be jobs for toy safety testers. 

My friends' business specializes in items from small producers and high quality European traditional toy makers.  They have already been told by some of the European suppliers that they are going to stop distributing to the US because they can't afford to follow this law given the small runs of items they make.  Imagine having to spend $2,000-$4,000 dollars on testing each toy design and having to dedicate the time to making sure the paperwork is filed in all the right places.  Needless to say my friends expect that their business model is over, and therefore their business.

 

Bush signs toy safety regulations into law

By Staff -- Playthings, 8/14/2008 9:53:00 AM

NEW YORK—The Toy Industry Association today applauded the signing
into law of The Consumer Products Safety Improvement Act of 2008 by
President George W. Bush.

Described as the “most sweeping toy safety legislation in decades,” the Act
is expected to significantly strengthen and make uniform the safety
standards for toys and other children’s products sold in the United
States. It also increases consumer product safety oversight by the U.S.
Consumer Product Safety Commission.

According to TIA, U.S. toy manufacturers and major retailers are already
moving to conform to the new standards, which require certification of
compliance based on mandatory testing. As part of that effort, TIA is
developing a “comprehensive” Toy Safety Certification Program in
conjunction with the American National Standards Institute to help toy
companies meet the requirements.

Here is the link for the rest of the story.

http://www.playthings.com/article/CA6587519.html

 

fujisan's picture
fujisan
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Posts: 296
Re: Real business is hard work
Chris Kresser wrote:

What stands out for me about this is the comment about how much easier it is to make money through speculation than it is by working for it.  Seems to me it's been that way for a long, long time, and not just here in the US.  But that is a system that rewards non-productive activity and punishes productive activity. 

Surely not just in the US. In the European Union and Belgium, where I live, it's problably even worse!

http://workforall.net/index.html

The system also rewards big companies and punishes small companies because the cost of all that buraucracy is proprotionally higher for small companies. The very same for subsidies, only a big companies can afford to waste the time to fill so complex forms.

But IMO fiscal competition is as important if not more. Why the hell do we still allow fake trade with offshore companies, and bank account in fiscal paradizes? To get more Enron scandals?

MarkM's picture
MarkM
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Joined: Jul 22 2008
Posts: 837
Re: Real business is hard work
srlinder wrote:

Strangely enough, in spite of your comment, new businesses are started all the time. It's part of the American dream to start with almost nothing and create a company and become financially secure (hopefully). In fact, having money to invest and reading a book may not be an option until such time as you have first created a successful business. How often have you read about people who start their business using family loans and credit card debt?

Thus, in spite of the onerous burden created by governments, starting and running a business is still the dream of many. If the government burden was that severe, no one would start a business in the first place!

Sam....

 

 

 

Research small business faiure rates and you will see that most fail.  It appears that many small businesses fail because the owners are delusional about what it takes to run a business.

As a small business owner I couldn't agree more that government regs are burdensome, and more on small business than large.  I don't have the option of pushing things off to "legal" or "HR" or "accounting",  I do them myself when I am not doing the productive portion of my business.  I am with Chris, you can't have it both ways.  Unless, of course, you are a government agency with their unlimited source of printed and borrowed (never to be repaid) money.

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Re: Real business is hard work

I have a simple remedy for what has become an onerous and unworkable regulatory burden.  Every regulation should have a "sunset" provision of no more than 2-3 years, after which it expires unless renewed.  No regulation can be renewed under an omnibus act covering a multitude of regulations.  Every single one of them must be: a) justified for renewal based on an objective and published cost/benefit analysis after receiving input from all concerned parties; and b) individually and explicitly approved for renewal after such analysis, else it expires.  Alongside every regulation, the names of every responsible government representative who voted for/against must be published.  This will give all the bureaucrats something to do besides just creating new regulations, will provide some accountability for the costs of existing ones, and over time will winnow the number of regulations down to those that serve some useful purpose.

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Re: Real business is hard work
GDon wrote:

For instance, 18 U.S.C. 1821, insures a more risk-free America, by regulating and possibly penalizing persons for up to one year in prison, for taking their grandmother's false teeth to another state without the authorization of a local dentist.

I actually looked up this law.  My intent is not to unduly criticize, but to show how things like this can be misconstrued and turned into urban legend.  Here's the link for anyone who wishes to check my reasoning:

http://uscode.house.gov/uscode-cgi/fastweb.exe?getdoc+uscview+t17t20+873+50++%2818%20U.S.C.%201821%29%20%20%20%20%20%20%20%20%20%20

The point of the law is to make illegal, under the interstate commerce clause, the interstate transportation of dentures and other dental devices that are made, under the laws of individual states, by someone other than a licensed dentist or other person under the supervision of a licensed dentist.  In other words, taking an illegally manufactured device to another state does not make the device legal.  BTW, the one year limitation makes it a misdemeanor, so you won't have to spend time in the big house with the real bad guys.  Besides, if your grandmother's false teeth are legally made, you can transport them anywhere you wish, although she may have some objection. ;^)

More generally, if everyone were motivated to do the right thing because it's the right thing to do, our legal framework would be minimal.  Unfortunately there are plenty of bad actors out there.  I heard of a rule of thumb taught in business schools (those of you who have actually gone to  business school can correct me if I'm wrong) that 20% of business owners do the right thing, even if it costs them some profit.  The other 80% will generally do the minimum necessary to meet the law or will intentionally try to get around the law to maximize profits.  Does this sometimes lead to absurd results?  Of course.  Common sense is sometimes the victim. 

Having spent part of my career as an enforcer of gov't regulations, I am aware that well intentioned regulations can be misapplied.  But, it was my experience that an experienced qualified regulator, working with a willing individual or business person, can almost always come to a reasonable solution for everyone involved.  Only the real scoff laws get hammered.

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Re: Real business is hard work

Yet another reason why we are in for a long struggle...

Coop, Mark, I couldn't agree more. A significant reason why I am a former business owner is all the arduous reporting, filing, collecting that various gov't tax authority's and regulatory agencies require. Most small businesses cannot afford a full-time accountant to keep up with all that crap. It then falls to the owner who spends too much time doing gov't paperwork (because it's their butt that's at risk) instead of running the business... incidentally, it is my opinion that this is why most small businesses fail; not because the entrepreneur is not a good "mechanic" at what he does. It's because he unknowingly jumps into an ever increasing bureaucratic paper-shuffling vortex that, with time, defeats his best efforts.

Running a successful business is very, very hard work.

For me, it wasn't worth the aggravation. I have found it much easier to just manage my investments.

 

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Re: Real business is hard work

Do we regulate or don't we regulate?  Who gets to regulate?

Show me in the US Constitution where the Federal Government was given the authority to decide on these regulations.  And don't show me the Interstate Commerce Clause in which Congress finally found a loop-hole in the Constitution (I believe in the early 1900's) that they have used to regulate the bat-snot out of our lives.

Yes, there is a moral dilemma in America in which unscrupulous people take advantage of others, but that's the price we pay in a FREE society.  James Madison (I think) said that our Constitution was good only for a moral people.  Our Founders knew that immoral people could take advantage of others, but that is the price of Freedom.  Use yours to speak out against immoral people who take advantage of others.  Regulation by the Federal government is unconstitutional and against the Natural Laws of Freedom that our Country was founded upon.

Richard

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Re: Real business is hard work

Chris,

Let me start by saying I really enjoy your site and the CC was brilliant.  You have been a beacon in an otherwise foggy period in the worlds history and I have considered you a visionary.  However I must say I was disheartened by your blasting of free trade.  I hope your were lashing out at globalization not trade?  Trade is fine as long as for the most part the parties involved in the trading of goods and services all share the same beliefs with regards to employee rights, the environment and social responsibility (read the war for wealth by Gabor Stiengart). 

As an outsider looking in (Canadian) it seems that every time the US loses a competitive edge in an industry it cries foul and tries to impose trade barriers i.e. steel, softwood lumber non GM food (demanding that Europe force its populace to eat it even though they do not want it for the most part) come to mind recently.  Don't get me wrong I am a proud supporter of the US but over the last 10 years I have seen a trend I do not like culminating in the invasion of Iraq do to a potential lessening of its grip on the world wide oil industry (read Richard Heinberg "the party's over").

In the coming crisis I think the US will need its friends; Canada, Australia and the Europeans.  We will all need to stick together and trade together to get through this period of transition.  If we stop trading, heaven help us all.

 

So please tell me I took it all out of context!

 

E

 

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Re: Real business is hard work

Richard,

Thanks for throwing in the Constitutional aspect.  That is always on my mind and many tend to ignore it or be uneducated about it.  It really is the regulator of all regulators.

The group in charge of the regulating is the one most in need of being regulated.  There is more fraud, corruption, deceit and damage to others done by the Federal government than any other industry.  The examples are innumerable in local government as well.

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Re: Real business is hard work

What most of you forgot is a business's Reputation, it is not in a business persons interest to mistreat employees or cheat it's customers if you want to remain in business.
Happy employees give much better results than unhappy employees, happy customers remain customers.
There will always be some employers who mistreat employees and cheat customers but they usually won't stay in business.
The Reputation of a honest business is the best regulator there is and the most important thing to have.
I have run my own business (CNC machine shop) for ten years but I refuse to have employees because of all the regulations we have in California. I make enough to pay the bills and pursue my interests and that's all I really need.
CNC machines are very much like having employees in the sense that one person can run many of them at the same time.

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Re: Real business is hard work
rmurfster wrote:

Do we regulate or don't we regulate?  Who gets to regulate?

Show me in the US Constitution where the Federal Government was given the authority to decide on these regulations.  And don't show me the Interstate Commerce Clause in which Congress finally found a loop-hole in the Constitution (I believe in the early 1900's) that they have used to regulate the bat-snot out of our lives.

Yes, there is a moral dilemma in America in which unscrupulous people take advantage of others, but that's the price we pay in a FREE society.  James Madison (I think) said that our Constitution was good only for a moral people.  Our Founders knew that immoral people could take advantage of others, but that is the price of Freedom.  Use yours to speak out against immoral people who take advantage of others.  Regulation by the Federal government is unconstitutional and against the Natural Laws of Freedom that our Country was founded upon.

Richard

 rmurfster,

Well said. Gov't preys on peoples fear of being taken advantage of and then regulates as a form of protectionism. Problem is that no one accounts for the cost of that "service". When the service is added to the actual cost of the product I estimate that we increase somewhere around 250%. (that is purely off the cuff. I am going to post some hard facts here soon as regards my own business)

The same thing happens with regard to national security. Look at the freedoms we gave up after 9/11so the gov't could protect us better with the new  "Homeland Security" service. I feel sooooo relieved now that they are there!!!!

As you so stated so well :  " Use yours to speak out against immoral people who take advantage of others."

There is no substitute for constant vigilance. Where we have failed at that we now have the FED and all the rest of the issues that in hindsight will become "self evident" as to the things we as citizens should not have let happen.

Coop

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Re: Real business is hard work

...The once great and productive middle class has been hollowed out by
an ill-considered globalization fad that has made us worse off, not
better off.

The solution is simple. 

Either apply import duties that square up imported goods against the
costs US businesses face for complying with our laws, or begin
dismantling laws.

Globalization is the price we are paying for our consumption-based growth economy.  Our economy requires continual growth.  This leads to all manner of obnoxious problems, one of which is globalization.   Continually growing American consumption requires combinations of debt and available cheap goods.  Expensive, well-made products that last a long time do not promote consumption.  As regulations required by socially "rising" middle class society increased manufacturing costs, it became necessary to offset those costs.  Some of that can be done by preferential tax treatment of businesses or sectors, but not enough.  Obviously, many other factors were also involved.  However, the net result was that in the name of economic specialization, efficiency and growth, off we go to find the cheapest labor and resource rates we can find.   The result was what appeared to be a never-ending line of products, manufactured in China, bought by the US with money lent to us by the Chinese.  We, the American consumer, bought into this wholesale.  We were able to ignore (and probably encouraged) flat to falling real wages by shopping at Wal*Mart for our constant stream of new toys.  When we couldn't ignore stagnant wages any longer, we leveraged our assets through the roof and kept right on spending.  Nirvana?  Doesn't look so great right now.

Regulation isn't inherently bad.   In fact, one can make a strong case that proper regulation is necessary for an advanced society.   However, over-regulation and poor regulation are definitely a problem.  Still, as pointed out above, there have been plenty of players (businesses, unions, employees, governments, etc.) that have shown that some level of regulation is necessary.  Society and markets cannot be left entirely to their own devices.

So, what to do?  Well, clearly some regulation could, and should, be reduced or eliminated.  But that will not change the basic equation of a consumption driven growth economy.   The only way, I think, to correct the problem is to return to a society that actually builds and sells the actual "things" that it needs.  That cannot happen within the context of the current form of globalization.  Fortunately (although probably painfully) peak oil and general resource depletion are going to render today's globalization a footnote in history, a sorry experiment that simply greased the skids of our travel along an unsustainable path.  The age of the just-in-time supply line of consumer products extending from China to Wal*Mart is coming to an end.  High prices, price volatility and the havoc they will wreak on consumer economies will eventually kill the model.

We must move to replace that model with real businesses that build the things people need.  Such a new economy will be, by necessity, more local than global in nature.   We need to create an economy that is not dependent upon consumption-based growth, an economy that is designed to further the well-being of its participants rather than simply pursue the holy grail of "sustainable growth" of monetary wealth (since this goal is, in the long run, both impossible and destructive).

 

Brian

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Re: Real business is hard work
TimesAwasting wrote:

Yet another reason why we are in for a long struggle...

Coop, Mark, I couldn't agree more. A significant reason why I am a former business owner is all the arduous reporting, filing, collecting that various gov't tax authority's and regulatory agencies require. Most small businesses cannot afford a full-time accountant to keep up with all that crap. It then falls to the owner who spends too much time doing gov't paperwork (because it's their butt that's at risk) instead of running the business... incidentally, it is my opinion that this is why most small businesses fail; not because the entrepreneur is not a good "mechanic" at what he does. It's because he unknowingly jumps into an ever increasing bureaucratic paper-shuffling vortex that, with time, defeats his best efforts.

Running a successful business is very, very hard work.

For me, it wasn't worth the aggravation. I have found it much easier to just manage my investments.

 

TimesAwasting,

I think you have made a good choice !!!!  My wife and I run our "mom & pop" business. There have been many a night and weekend when we have looked at each other and said "wouldn't it be nice to go home at 5:00pm and not talk or worry about keeping the business afloat and running smoothly". In your dreams !!!

A while ago my wife came home at about 2:00AM after a long day at the office and was very toasted. Seems she had to get the workers comp audit & paperwork together since they apply a flat rate to your payroll unless you specifically itemize what each person was doing. Turns out she saved a significant amount of money which helped to keep us profitable but as she said "I'm really not interested in doing this except what would our employees do if we closed down".  In reality I think that most employees may not choose to stay in a businees either if they had to work the same hours and deal with the policing actions required by the gov't.

My wife and I are not the highest paid people in our business if you add the total hours spent. That is very often not even on the radar screen of staff nor should it be. Just sometimes adds to the difficulty of keeping your chin up and being willing to enthusiastically pursue that americam dream of exponential expansion! 

Coop

 

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Re: Real business is hard work
bsm20 wrote:

...

Regulation isn't inherently bad.   In fact, one can make a strong case that proper regulation is necessary for an advanced society.   However, over-regulation and poor regulation are definitely a problem.  Still, as pointed out above, there have been plenty of players (businesses, unions, employees, governments, etc.) that have shown that some level of regulation is necessary.  Society and markets cannot be left entirely to their own devices.

So, what to do?  Well, clearly some regulation could, and should, be reduced or eliminated.

...

Brian

Well put, Brian. The problem our society and, for that matter all societies, has with regulations is finding a balance. It seems the pendelum always swings too far in one direction or the other.

In a simpler time, reputation and honor kept things in check minimizing the need for regulations. Once our villages and towns morphed into large cities, we ceased to know our neighbors and unscrupulous people soon realized that they could create shoddy products without fear of consequence. Remember the days of the "snake oil" salesmen? They're still around only now they are selling tainted milk, lead-filled toys, and cars that don't work as claimed (I quit buying American made cars years ago because the quality was so bad).

Kinda makes you long for a return to a simpler time, doesn't it?

Sam....

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Re: Real business is hard work

E,

I'm in absolutely no position to speak for Chris, but i'll offer up my interpretation of his post there that I think will answer to your concern.

The Free Trade that I think he's referring to doesn't mean trade with places like Canada and Australia, IMO. I see it as meaning places like China, Mexico, etc...: countries who are willing to do the work people in America once did, and will do it without all the regulatory employee protection statutes that America holds. I think his argument is something like this:

IF America has laws prohibiting Child Labor, because we find it morally abhorrent,

and IF China allows Child Labor (for whatever reason),

THEN, even in the name of Free Trade, we ought not to trade with them. 

I think he's saying we should just stop outsourcing our "dirty work". Employees in many countries overseas don't have the same benefits that we're required to give our employees here. So, Chris says, if they don't follow/adopt our regulations, we shouldn't trade with them. And that makes a lot of sense. It's always going to hurt our workers if we a) impose regulations on their industry that other countries don't have, and then b) allow, and even encourage, trade with foreign nations producing those very same products without such laws/regulations. This means the domestic product will always be more expensive, and won't be bought in the home country (much less exported overseas). Free trade is good for America so long as the other country is playing by our rules, too. The way it stands now, Free Trade awards only the biggest multinational corporations - instead of paying a lot more money to value various codes&regulations, to pay employee benefits, these corporations just move to places like China, Mexico, India, etc..., hire the local populace in ways that would never be allowed in America, and then sell those cheaper goods back to us, taking our money and jobs. To me, Chris's underlying point is that what's immoral for us to do in America ought not to be encouraged by us Americans overseas. It would be like having a Nation that rids itself of capital punishment, but then exports its criminals to another Nation to impose the death penalty regardless. Clearly it's just as immoral - just becuase it is a different Nation's people carrying it out, doesn't change what's happening.

 

Hope this helps clarify things! 

-Christopher

 

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Re: Real business is hard work
cmartenson wrote:

But how does one compete with countries that do not have such rules in place?

Easy...WE DON"T and SHOULDN'T!  We were sold the fallacy of the inevitability of globalization and the resulting competition.  It is the constant churning and searching of speculative capital which has forced this globally competitive paradigm....IT IS FALSE.  We produced this paradigm of global competition by lowering tariffs and allowing large corporate entities to rig the system for their own well-being.  Kick out these bums that only line their pockets with the supposed savings from producing overseas.  Interesting that the originator of "free marketism" specifically addressed this.  Adam Smith's Wealth of Nations (which has been perverted by neoliberals) suggests only capitalizing on real geographic comparative advantages; poverty, wealth disparities, and the resulting low wage cost does not qualify.  Something which is also interesting, Smith advocates for governmental regulation, taxation, and social intervention (welfare services).

Further, most of our "trade" comes through specific corporate networks, not real trade between separate entities/countries.  Multi-national corporations need to be reigned in and made to support our economy not destroy it by producing here and paying good wages.  Adding value by production 10% of the cost to produce an auto in this country is labor wages.  You could double the pay of all workers and only raise the final price by this 10%, BUT there would be a whole hell of a lot of people with much more money to buy these autos and spend in the economy.  WAGES drive the real economy.  We have let the tail of speculative investment wag this dog for way too long.

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Re: Real business is hard work
rmurfster wrote:

Our Founders knew that immoral people could take advantage of others, but that is the price of Freedom.  Use yours to speak out against immoral people who take advantage of others.  Regulation by the Federal government is unconstitutional and against the Natural Laws of Freedom that our Country was founded upon.

Wow...over reaching statement.  IF Our Founders knew this and established this, then why were they regulating society from the get go?  Did you know that sleeping on one's stomach is unconstitutional?!  Well...it is not specifically addressed in the constitution so it must be.

Part of this misunderstanding may also be people's view of regulation...many only see the regulation that does not follow their personal ideology of society as problematic and unconstitutional.  Many of these pseudo constitutionalist need to stop reenvisioning the intent of the founders and the constitution.

I also find it intereting that we should somehow accept that the price of Freedom is that some "immoral" people will take advantage of others.  This is an idiotic concept...and to apply this broadly rediculous statement to all the Founders is even more idiotic.  This would mean that we accept a society that allows people to get ahead from immoral and unethical means, becuase in your example, this is not necessarily illegal due to lack of "regulation."  So only the crooks who are not afraid to act in immoral and unethical (which is completely subjective) manner will dominate society.  How fun.

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Re: Real business is hard work

Well said Oh Captain my Captain!

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Re: Real business is hard work

...Intel, Microsoft, Google, etc... they don't have to deal with the UAW.  I think unions had their purpose and still do to a point.  However, their job is to ensure a safe workplace.  They now lobby for higher wages (beyond the market rate), health care, and other perks for the workers that really hurts the competitiveness of the auto industry.    

I'm playing devils advocate, but take a programmer for MS.  They have a certain skill set that takes time to achieve.  Now, take an assemply line working doing the same task day in and day out.  How long does it take to learn that task and be proficient?  I'm going to say not very long.  Therefore if the assembly line worker is making $70k a year, and the programmer is making $70k a year there seems to be a major imbalance between the two pay levels if they are to be related to skill level.

 Now, the unions are only part of the problem and I'd agree with Chris that our laws, codes, regulations, and taxes are overly complex and very difficult to follow.  I'm just trying to deal with personal taxes and it isn't straightforward.  How much time, effort, and expense is wasted due to unnecessary government regulations?  

 

my2cents,

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Re: Real business is hard work

And the band marches on...

It's funny... The Toy Industry Association applauded...  they are happy to meet the new standards because it will enable large corporations to legally eliminate the little guys.  Personally, I'm a big fan of the unique toys produced by smaller companies.  All this will do is continue the homogenization of the world. 

Do I blame the those with deep pockets?  No, they are doing what is in their best interest.  Hey, if I can have laws passed that will help me of course I'm going to try to get them passed.  Congratulation for them!!!  

However, I do blame the politicians and lawmakers who decided to pass these laws that benefit one group at the expense of another.  With every law and regulation there are unintended and unforeseen consequences.  Sure there will now be jobs for toy testers, but how many jobs were lost due to this regulation?  While the policy makers tout job creation they fail to mention the concurrent job destruction.

-G

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Re: Real business is hard work
ajparrillo wrote:

Wow...over reaching statement.  IF Our Founders knew this and established this, then why were they regulating society from the get go?  Did you know that sleeping on one's stomach is unconstitutional?!  Well...it is not specifically addressed in the constitution so it must be.

Part of this misunderstanding may also be people's view of regulation...many only see the regulation that does not follow their personal ideology of society as problematic and unconstitutional.  Many of these pseudo constitutionalist need to stop reenvisioning the intent of the founders and the constitution.

I also find it intereting that we should somehow accept that the price of Freedom is that some "immoral" people will take advantage of others.  This is an idiotic concept...and to apply this broadly rediculous statement to all the Founders is even more idiotic.  This would mean that we accept a society that allows people to get ahead from immoral and unethical means, becuase in your example, this is not necessarily illegal due to lack of "regulation."  So only the crooks who are not afraid to act in immoral and unethical (which is completely subjective) manner will dominate society.  How fun.

Ajparillo, I think that you are misinterpreting what rmurfster has said.  He said that regulation by the federal government is unconstitutional, not that the regulations in themselves were bad.  And there may be some truth in this.  The federal constitution theoretically strictly limits the types of power that the federal government may exercise, and expressly states that the rest is left to the States, where power is much closer to the people.  The federal government has largely overstepped the bounds that the constitution originally set for it. 

The fact is that when a single federal senator represents millions of people, unless you have lots of money in your pocket you can't even get an appointment to see them.  Your state senator, on the other hand, you can most likely call on the telephone.  Large corporations prefer dealing with a strong central government because they are able to effectively direct their lobbying efforts in one place, and more effectively control policy.  It is far more difficult for a corporation to attempt to influence policy in 50 separate states.  When power is removed to the central government level, it is far more difficult for the people to be involved, and the initiative falls to the corporate interests who are able to send a strong and consistent message at the federal level.

Therefore I think the point rmurfster may have been trying to make (at least the one I would make) is that though regulation is not necessarily bad, it can be when it derives from the wrong places.  The federal government does not have the same type of democratic safeguards built into it as do the state governments (i.e., the president is the single person in the federal executive branch who is elected -- utterly unheard of at the state level.) and was originally designed to deal only with matters between the states, or affecting more than one state simultaneously. 

Therefore while regulation itself may not be bad, the fact that it seems so invincible and unresponsive to the will of the peoplemay have something to do with where it is emanating from:  a level of government which was not originally designed to do it, and is as a result now out of control.

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Re: Real business is hard work

 cybernytrix wrote: "You cannot take the auto industry as representative.

I don't know about that.  What about those stupid rules (introduced by Reagan?) which allowed SUVs to be taxed at a lower rate than cars if they were built on truck chassis......  Wasn't THAT responsible for the cranking up of the era of the SUV?

Mike 

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Re: Real business is hard work

NIcely put jrf.  The Feds have overstepped their bounds in large measure and there appears to be no relief in sight.

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Re: Real business is hard work

I don't think that anyone would disagree that people advocating new regulation or government intervention into the market are well intentioned.  I'm sure that most are.  But I do believe that the path to hell is paved by good intentions.  The fact of the matter is the free market is so awash with laws and regulations and distortions by the government that it is not a free market anymore and it hasn't been for a long time.  It is disheartening to see the vicious cycle of government interference perpetuate itself so overtly and gain speed in the process.  I echo the sentiments by a few previous posters that from the looks of many of the comments here that the hill now seems much steeper than I had previously envisaged.  For the love of my country and the idea of individual liberty that the US was founded upon, I implore anyone who will listen to look into Austrian economics. Head over to http://fee.org/  or  http://mises.org/  to find a priceless mountain of information.  

On the specific topic at hand, here is a relevant and eloquently concise article written a few months ago:

http://www.csmonitor.com/2008/1022/p09s01-coop.html

 

Thanks Chris for an amazing website.

-Tim

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Re: Real business is hard work

I think that Chris is optimistic.  In a sustainable society we are not going to be able to even have a thorough set of government rules to say nothing of free trade, because free trade implies the liberal use of energy to exchange physical goods over long distances.  Both ideas will become dinosaurs when the sustainable economy becomes an inescapable necessity.  It already is a necessity we are just acting as if it were not!

So I suggest that we look again at the Crash Course and hone it for real application.

 In 1995 I went to a logger's OSHA class and gave the instructor, Paul Cyr, the "Death of Common Sense" by Philip Howard and told him that he was the epidemy of the book.  He had just fired my crew because it was not safe for me as an employer to have any employees in a marginal but sustainable activity.  (I'm sure that there will or should be questions about how logging can be a sustainable activity, but in fact it is one of the most sustainable parts of our society if it is done right, and fortunately in the NE USA we have a lot of latitiude in what is done with and in forests as long as the land remains undeveloped and still have it remain forest that will replace itself.

MA State Building Inspectors have been instructed to sign the inspection certificates for release of amusement rides after looking at the machinery without test equipment for 15 minutes.  So it is clear that the regulations which our govt. puts in place have ways of being circumvented.  All it takes is funds or connections.

My guidance to those who want to work with me is that there is no requirement for them to work in unsafe conditions.  I expect them to understand that when they are uncomfortable with something about their job, they either need to tell me, remove themselves from the situation, or request those who are making them uncomfortable to stop what they are doing.  In essence they must use their commonsense or they will not be around me. 

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Real business is hard work

I stopped working way back in ~ 1994.  I was 42.  I owned one of the most successful Photographic Studios in my town, and then moved into an even bigger one with another photographer.  Between us, we had the best outfit in a city of ~ 1 million, we could shoot trucks if necessary.  Then in 1990, we had a recession.  ALL my best clients hit the wall, and closed down, some owing me a lot of money I never recovered.

In the end I was doing three times as much 'other stuff' as photography, and making nothing....  in fact going broke.  None of this was MY doing, it 'just happened', just like the current downturn.

The amount of paperwork I had to do, chase debtors, market the business (and I had to do this personally, because in the final analysis the business WAS me, and I had to sell myself) just took all the fun out of being a photographer.  It just all became too complicated, too hard.  Then of course I read "the Limits to Growth", and that was that, I became a professional greenie...Cool  I had been a photographer for over twenty years.

No way would I recommend anyone start a business.  Remember when Chris says in the CC "if you feel as though your life is accelerating out of control, that's because it is.."?

I finally think I have my life under control.  KISS.  Keep It Simple Stupid.

All you people chasing money, gold, whatever, have got it all wrong.....  suckered in by the Matrix.  Been there done that.

The best thing that could ever happen is if America didn't get working again....  followed by the rest of the world.  Why work for money if you already have everything?  Or are we just playing Monopoly and using the Planet as a game board?

Looking forward to 2009....

Mike 

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DavidC
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Posts: 243
Re: Real business is hard work

A fascinating and interesting input Mike.

Robert Fripp (he of King Crimson) in the 1980s pursued a personal musical journey that he described as a 'small, independent mobile unit' (and which produced some very good music!) - surely an apposite paradigm for the moment?

David

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ckessel
Status: Martenson Brigade Member (Offline)
Joined: Nov 12 2008
Posts: 465
Re: Real business is hard work
Damnthematrix wrote:

I stopped working way back in ~ 1994.

<snip>

The best thing that could ever happen is if America didn't get working again....  followed by the rest of the world.  Why work for money if you already have everything?  Or are we just playing Monopoly and using the Planet as a game board?

Looking forward to 2009....

Mike 

I agree. I quit !!!!!!

I'm goint to build my greenhouse now and kick back and enjoy some real work.

Coop

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agapilot
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Posts: 11
Re: Real business is hard work

If the average"joe employee" was responsible for making sure their social security tax and FICA and insurance and all that the employer deals with for each emloyee, there would either be a revolt or some would cheat (already do of course) and others just give up and wait for a government handout. I have worked as an employee, a contract worker (I am responsible for those taxes) and a previous business owner. I am considering a self employed business again, but no employees due to the onerous tasks that i either have to farm out and pay more for or spend too much time doing it myself and no time for actual work. Any help I hire will have to be contract workers who will be responsible for much of the tasks at tax time. I personaly have no issue handling some of this myself as a contract worker, but I know many folks its too complicated and are not as disciplined as need to be to accomplish it.

I like tradeing globaly and otherwise. I would like to see us trading with those who hold to similar standards as us, but as long as the "blind majority" of middle class and otherwise want cheap things the lobbying for trade with less than stellar human rights countries/business' will always be around. I notice a small trend recently but still a minority group looking for long lasting products. Again hard to keep growing and selling new stuff if the old doesn't wear out. The people in general have grown up and gotten used to having cheap throw away goods and its gonna hurt to have to suck it up delay gratification and sometimes do without, but I think we have to start someday, can only delay it for so long. The people may also have to go back to common sense and realize we cant always regulate to the point of no danger or such. Risk is part of life otherwise wouldn't even get out of bed.

Unions once were a great idea to control those business owners who were less than scrupulous standards towards their employees. A group effort will accomplish what a indviduals cannot, but nowdays often the individuals is lost within the unions also. I worked for a company that was mostly union and it was almsot a forced joining of the union. The money/dues would be taken out of my check and if I didn't join the union that money would be then donated by the union to a charity, or join the union. I saw representives vieing for the new hires so they could get money from the unions for signing up new members. I also saw union take due out of paychecks prior to the 90 day probabtion completed and then a newbie get let go during that time and the union did not pay the money back nor represented the person. I see retired members of unions having more voting power than the actual workers. WTF!

The only good changes will occur when society becomes enlightened as whole which is why this site and others are around trying to do just that.

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Septimus
Status: Silver Member (Offline)
Joined: Aug 19 2008
Posts: 200
Re: Real business is hard work

The discussion about rules and regulaitons, efficiency, etcbrought this to mind:

From Wikipedia:

(Jerry) Pournelle has popularized a "law", which he calls Pournelle's Iron Law of Bureaucracy:

In any bureaucracy, the people devoted to the benefit of the
bureaucracy itself always get in control and those dedicated to the
goals the bureaucracy is supposed to accomplish have less and less
influence, and sometimes are eliminated entirely.

Also stated as:

...in any bureaucratic organization there will be two kinds of
people: those who work to further the actual goals of the organization,
and those who work for the organization itself. Examples in education
would be teachers who work and sacrifice to teach children, vs. union
representative who work to protect any teacher including the most
incompetent. The Iron Law
states that in all cases, the second type of person will always gain
control of the organization, and will always write the rules under
which the organization functions.

 JerryPournelle.com is a valuable compliment to this site.

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Doug
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 3124
Re: Real business is hard work
Septimus wrote:

The discussion about rules and regulaitons, efficiency, etcbrought this to mind:

From Wikipedia:

(Jerry) Pournelle has popularized a "law", which he calls Pournelle's Iron Law of Bureaucracy:

In any bureaucracy, the people devoted to the benefit of the bureaucracy itself always get in control and those dedicated to the goals the bureaucracy is supposed to accomplish have less and less influence, and sometimes are eliminated entirely.

Also stated as:

...in any bureaucratic organization there will be two kinds of people: those who work to further the actual goals of the organization, and those who work for the organization itself. Examples in education would be teachers who work and sacrifice to teach children, vs. union representative who work to protect any teacher including the most incompetent. The Iron Law states that in all cases, the second type of person will always gain control of the organization, and will always write the rules under which the organization functions.

 JerryPournelle.com is a valuable compliment to this site.

Since I actually have a career in a bureaucracy, I have to take issue with these assertions.  The notion that a union rep could take control of a bureacracy is ludricous on its face.  Unions have far less power in gov't agencies than in private companies.  There is no right to strike and even collective bargaining is severely restricted because the good of the agency always comes first.  Remember the air traffic controllers?

That being said, of course there are inefficiencies and abuses of power in bureaucracies, just as there are in any large organization.  But, as far as responsiveness to citizens, the citizens have a powerful ally in their Congressional Representatives.  The Representatives routinely forward any complaint they get from a constituent to the appropriate agency.  Those letters take precedence over almost any other work.  That doesn't mean that it always winds up as a win for the consituent, but it at least ensures that things are being done by the book.  If you don't like the book, elect different Representatives.

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ajparrillo
Status: Bronze Member (Offline)
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Posts: 72
Re: Real business is hard work
t71645 wrote:

For the love of my country and the idea of individual liberty that the US was founded upon, I implore anyone who will listen to look into Austrian economics. Head over to http://fee.org/  or  http://mises.org/  to find a priceless mountain of information.  

You mean worthless mountain of information.  The entrie notion of a free market is a fallacy.  Markets are not natural and any system that produces wealth disparity will not be "free" even without government (or should I say democratic) intervention.  Wealth begets power, which begets control.  A caveat, I do not throw out the baby with the bath water...the anti-treasury/central bank movement grows partly out of the Austrian School of Economics along with other interesting issues to debate.

I am not even going to get into some of the specific problematic ideological underpinnings of the Austrian School of Economics (social objectivism, subjective value of commodities, etc.); but I will say that the adherents that formulated the early academic movement of Neoliberalism that was based upon the ASE, were basically fascists.  They believed in a governmental system where civic involvement was only for "responsible men."  The political outgrowth of the ASE runs counter to every ideal of POLITICAL freedom that this country was founded upon.  Free market ideology is for those who are politically lazy and close their eyes and wish for some magical system to take care of all the problems.  Hogwash.

BTW, this is by no way an argument that our current governmental apparatus is applaudable or that it has not strayed from its course; nor do I argue the false duality of either free markets or regulation.  However, the liberty of the united states has the explicit foundation of a constitutional democracy (don't give me the red herring that its a republic not a democracy...it is still a democracy no matter the structure).  The economy is second to this.  Saying that the political/social system should bow down to the economic priciples of the phantom free market absolutely makes the democracy null and void. 

Septimus's picture
Septimus
Status: Silver Member (Offline)
Joined: Aug 19 2008
Posts: 200
Re: Real business is hard work

Hi Doug,

Thanks for your thoughts. I was replying in general about the nature of organizations with Dr. Pournelle's observations on the same, not on unions in specific. As a generalization for tendencies in large organizations, I find Pournelle's observations to be quite valid.

In my decent amount of work experience in large organizations (23 years across several organizations after several years in small business), both private for profit companies and semi-governmental organizations (universities), this has generally rang true with my experience. I too work in a bureaucracy and, in fact, am one of the (horrors!) policy, standard and procedure makers for a one aspect of the organization! I find that I, and many of my colleagues do have the best intentions of the organization, constituents and customers in mind and, in fact, seek the input of these groups and try to balance these things with the ever increasing burden of federal and state regulations we, as an organization, must legally comply with. Even with this mind set, it is easy for me to see how divergence of people who want to truly do the organization's mission, and people who set up their own private silos, fiefdoms, you name it, are, at least in effect, at divergent interests. For better or worse, I am constantly challenged to find productive ways for dealing with the obstacles to efficiency and common sense that seem so prevalent. I have found tone from the top combined with genuine leadership behind the tone (walking the walk and setting an example) do wonders to help break down these barriers and do tend to mitigate, somewhat, the observations embodied in Pournelle's Iron Law.

By the way, I am glad your experience has been different! I look forward to other comments.

Thanks and Excelsior!

 

Septimus's picture
Septimus
Status: Silver Member (Offline)
Joined: Aug 19 2008
Posts: 200
Re: Real business is hard work

I should add that I mean bureaucracies in the common meaning of the administrative overhead of personnel that tend to take root in organizations as they get larger and as the organizations age. I did not mean the more pure and less used sense of the administrative personnel within only a government bureau.

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t71645
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Joined: Oct 4 2008
Posts: 3
Re: Real business is hard work

ajparrillo

Despite your putting words in my mouth, the insults and the obfuscations I'll refrain from getting into a pissing contest with you and merely say that I disagree with your harsh opinions on Austrian economics. 

Rather than going on a political rant here, I will just ask that folks check out the sites and make up their own mind.  Just because one might not agree with everything that Austrian economics has brought forth, doesn't mean that you should, as ajparrillo says, "throw the baby out with the bathwater".  The ideas that the Austrian school discusses such as time preference, resource allocation, the fed and sound money are very interesting and should certainly not be discounted.

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MarkM
Status: Platinum Member (Offline)
Joined: Jul 22 2008
Posts: 837
Re: Real business is hard work

I have to say that finding and learning about the Austrian school is what opened my eyes to the huge Ponzi scheme our Federal government and  runs, as well as the financial community.  It would be in evreyone's best interest to learn about Austrian economics.  Is it without fault?  Nothing is.  However, it makes a lot more sense than the crap we are fed on a daiy basis.

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ajparrillo
Status: Bronze Member (Offline)
Joined: Sep 7 2008
Posts: 72
Re: Real business is hard work

t71645,

Pissing contest...no.  Insults...I reread my post and as I thought, did not attack you personally.  Putting words in your mouth...again, no...I provided my perspective on the Austrian School just as you did.  There is a whole host of people that hold the Austrian School up as some beacon of light for how society would work.  It is just a model of human behavior that while has many important and interesting insights (as I attempted to indicate), it is predicated on a fairly specific sociopolitical ideology.  That was my point, which I think was clear.  I agree that people should go read for themselves, but also need to explore the critiques and counter arguments to much of what is propogated by that ideology.  Frankly, everytime I see a post where someone blanketly claims (which you did not) the ASE as some inherent truth or point people in that direction, I will continue to push some type of debate...even if there is valuable insight within the ASE.

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