I run a relatively simple business. I am a middle man, in wholesale distribution of heating, ventilation and air conditioning parts and equipment. We sell exclusively to tradesmen and facilities. It is a very competitive business (aren’t they all?) but I do pretty well all things considered. My vendors expect certain things out of me (market share, paying my bills on time) and I expect certain things out of them (good delivery, good pricing, leads, etc.). It really is a two way street. They need distribution, and I need their goods to mark up and make money on.
Business
Business Fiction
…and no, I’m not talking about pro-forma income statements, but about actual novels.
Howard Davis, writing in Financial Times (8/22) says:
It is often said, with some justification, that there is no current British novelist who shows an interest in, and understanding of business life to match, say, Tom Wolfe. I can think of no fictional representation of the flora and fauna of London’s financial markets to rival The Bonfire of the Vanities
Actually, it seems to me that serious recent novels that deal with business are pretty scarce on both sides of the Atlantic. Right off, I can think of a couple:
Better Greenery Through Tax Minimization
Hardly a month goes by without an IKEA catalog showing up on my door. For those that haven’t been to an IKEA store, they are immense “destination” stores full of low priced furniture and other household items. IKEA is famous for its “green” activities; you can hardly walk without a placard explaining the pristine source of its raw materials and how they are operating in a sustainable fashion. Here is an article from their Seattle store lauding their commitment to the environment. I’d quote from the article but it is the usual “commitment” gibberish and not particularly enlightening.
One of the core elements of the environmental movement is a huge governmental role in the economy; we need to put taxes on activities that are not viewed as beneficial and an army of lawyers and regulators to ensure that “Big Business” doesn’t run roughshod over ma’ nature. In my experience a libertarian philosophy and serious environmentalism have very little in common.
America’s Corporate Tax & Market Distortions
One of the most troubling failures of the Republican led congress (which is no more) is their failure to substantially reform the US corporate tax code. I wrote an article that summarizes how the corporate tax is applied at an overview level and the fact that today the US is among the least competitive corporate tax regimes among developed countries. The Economist recently chimed in, too, with an article titled “Tax Reform – Overhauling The Old Jalopy” which does a decent job of summarizing the situation and stating that an average tax rate of 27% without major deductions would accomplish the same thing as our current tax rate of 34%. Not mentioned by the Economist is how this backfired on us with the Alternative Minimum Tax, when a simplified tax methodology with lower rates and a broadly applied based ended up netting millions of middle Americans, including the middle class.
All of these articles miss a more troubling trend, however – the issue isn’t as much the tax methodology applied to EXISTING companies (who have strong incentives to stay in place) but how the tax impacts NEW companies that are choosing where to set up shop and what sort of structure to utilize for their business. This photo is a cornerstone of the Accenture “Headquarters” in downtown Chicago – Accenture is the surviving consulting firm from the Arthur Andersen debacle (grist for a future post as I am an alumni) that chose to locate their headquarters in Bermuda rather than the United States, primarily to minimize their income tax burden.
Privatizing services inside the European Union
Thanks to the European Union, things like these finally become possible:
Deutsche Post is about to lose its monopoly on the postal service. And after that, customers will be able to choose from new green, red and blue postboxes on the street as well as old yellow.
As part of a European Union move to introduce greater competition in letter delivery services, Germany on Jan. 1, 2008 will abolish Deutsche Post’s exclusive right to deliver letters under 50 grams — the last monopoly left for what used to be the only game in town.
This is a far cry from the times when Deutsche Post wasn’t just delivering the mail, but also had a stranglehold on German telecommunications, and the whole affair was owned by the government and protected by the employees tremendously powerful trade unions. These kinds of entrenched interests could only be overcome on the European level, which is one of the reasons why I maintain that the EU offers net benefits that outstrip the costs as well as the (not inconsiderable) annoyance factor. This also isn’t the first instance something like this is happening, the EU previously made the member states privatize and liberalize their energy and telecommunications sectors, as well as take the first steps towards the privatization of postal services, which is why the delivery of letters below 50 grams (not quite two ounces) is the last monopoly left until now (although some countries are dragging their feet to preserve it for an additional year or so).
All of these steps had been absolutely crucial for economic growth in Europe, without them the EU economy would have been even more stagnant than it was over the last 15 years or so. Just imagine what, for instance, online services would look like if telecommunications still were run and owned by the government; we would have to apply for a dial-up modem and could count ourselves lucky to get one in less than three months – no DSL or cable modems of course, the post office would want to be paid by the minute (just as they used to when the whole affair was still run publicly), and that’s easier to do with dial-up via a telephone line than with more modern alternatives. If you extrapolate this kind of arrogance and shortsighted greed to services in general it becomes easy to see how the traditional interest groups around here could have prevented Europe from evolving beyond the traditional industrial society. It shouldn’t be underestimated just how powerful our various interest groups are, some of which have been around for centuries in one form or another. As I wrote above, you have to move beyond the national level to defeat them them, and the European Union currently is the best venue to do so successfully. Should the various interest groups learn to cooperate to thwart such efforts we’d have a serious problem, but at least for the foreseeable future it looks as if they are too shortsighted and selfish to make common cause. By the time they have learned better, globalization will hopefully have eroded their respective power bases to an extent that it won’t matter anymore.