Capitalism

Let the Games Begin

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The ancient Greeks gave us “democracy,” a set of rules for candidates to compete for the right to rule. They also gave us the Olympics, a set of rules for individuals, teams and ultimately countries to compete in athletic events. The Olympics outlawed certain drugs, standardized the technology and separated males from females (historically) due to genetic differences, but otherwise there is no favoritism due to race, ethnicity, family history, country of origin, etc. Medals are awarded only to the top performers, gold/silver/bronze (all formerly used for money). Capitalism is a comparable set of rules for competition among individuals, teams and countries. Technology and management differences are allowed, even encouraged, as all contestants share in it over time. Similarly, capitalist competition is the source of virtually all human improvement for winners and losers alike. The US Constitution uniquely established rules for a competitive democracy and competitive market economy, historically the source of US economic growth.

 

The Olympics is a big business, with a history of scandals relating to kickbacks to judges, host country officials or Olympic Committee Members that corrupts the competition. Similarly, politicians who make the rules for a market economy that show favoritism to particular industries, firms or people, i.e., crony capitalism, is the corrupt antithesis of competitive market capitalism.

 

Competing with Olympic coverage in France, ironically under the French banner of “equality,” is the current political competition for the US presidency, which both sides agree is “pivotal” for democracy’s future, but the democracy spectrum runs from a limited government representative republic on the right to a majoritarian “peoples democracy” on the left. Each campaign accuses the other of hate, fear mongering, political pandering and the usual lies and misinformation (political spin). So far it has been an entertaining tag team mud wrestling match (even these have rules and limits).

 

But for over a century the fundamental economic choice has been between competitive market capitalism and egalitarian socialism, growth versus stagnation. The divide has never been more clear, although the Democratic Party eschews the socialist label. In 2020, when openly socialist Democratic candidate Bernie Sanders appeared a certain victor, the Party pulled the candidate, but adopted his “democratic socialism” platform. Current candidate Harris, similarly anointed, has either agreed with or been to the left of that platform on every issue, recent flip/flops notwithstanding. Their radical distributional “democratic socialism” goes beyond “to each according to his needs” to require “to each equally.” Their production ideology, eschewing state ownership, calls for a fair degree of state control.

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“A Disease of the Public Mind”

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That is the title of a book about the first US Civil War that resulted in the assassination of President Lincoln. The soldiers in the South hated those in the North and vice versa. Northern soldiers have since been credited with undeserved virtue while Southern rebels were labeled racist enemies of the state, a moniker that still survives in the present day. But neither side was fighting over the abolition of slavery.

 

Trump’s opponents claim he will re-institute Jim Crow oppression, put black people back in chains, end democracy and put people in Hitler’s concentration camps. The continuous character assassinations, legal persecutions, numerous impeachments, unfounded accusations and insinuation caused what has been called Trump Derangement Syndrome (TDS), a disease of the public mind resulting in a recent assassination attempt.

 

Follow the Money
The Constitution the North and South agreed upon in 1788 enshrined the economic principles of Adam Smith’s Wealth of Nations, fostering equality under the law, individual sovereignty and limited government. Slavery was still too contentious an issue to settle. Starting in the next century the British led a moral crusade to eliminate slavery globally. While politically virtuous, Britain could afford to pay off slave owners and generally didn’t face the the vexing question for US plantation owners of whether freed slaves could support themselves and, if not, whether this would lead to murderous riots as had happened elsewhere. Abolition was a contentious issue everywhere slavery was practiced, typically with long drawn out steps to complete. But the long simmering political dispute that came to a head in 1860 wasn’t about abolition, but money. The federal government relied almost exclusively on tariffs raised in Southern ports – most of which went to northern states – on imports financed with the fruits of slavery, cotton exports.

 

Since the Civil War, limited government has given way to big government. The Democratic Party has created many dependent constituencies whose continued prosperity depends upon continuing Democratic power and largess: the bureaucracy, the government at all levels, teachers, labor leaders, academic educators and administrators, trial lawyers, government contractors, social security recipients and what are still euphemistically called journalists, among many others. The current Civil War is also about money. Trump has been in both political parties, fits in neither. But ”you are fired” represents an existential threat to Party members.

 

For contemporary Democratic politicians, almost all trained as lawyers, money beyond what is available by taxing the rich exists in banks, especially the Federal Reserve Banks, to be distributed according to the spoils system. For Republican politicians (but not RINOs), mostly former businessmen, prosperity comes from productive work and from savings productively invested. For those businesses and workers who are not on the receiving end of the spoils system, whose taxes pay for political largess, limited government is the only solution. There is very little middle ground.

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Another Brand Bites the Dust?

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So Dove, a venerable brand of bar soap (owned by Lever Brothers, AKA Unilever, which has an enormous stable of household brands) looks to have trod heavily on its metaphorical private parts in falling for the supposed magic of an internet celebrity “influencer”, a woman who bears a notable resemblance to the Venus of Willendorf and is a malicious racist besides. I swear, I wonder if someone has spiked the coffee urns or the water coolers at whoever is the most currently popular advertising agency with hallucinogenic compounds, or if the advert creators and the approving corporate C-suite executives have all just drunk too deeply of the magical diversity madness. There is a place for edgy and it’s not with mainstream commodities with a long history of appealing to a wide segment of consumers. On recent examination, I deduce that they are not teaching this in marketing classes lately.

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Experience Is A Dear School…

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… but fools will learn in no other, as the old saying has it and ‘dear’ in this sense means ‘expensive’. From all reports concerning the marketing debacle over Bud Light beer, the marketing executive responsible, one Alissa Gordon Heinerscheid is about to learn one of those very dear lessons. When someone sits down to write a history of bad marketing decisions in modern times, this is going to be one of the more spectacular chapters. Amazing that someone so expensively educated in the marketing trade could fall so spectacularly flat-footed. Somewhere back in the mists of time, someone must have imparted the wisdom that alienating the old core market for your product before appealing to the new core market was a bad move. A very bad move.

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“How Twitter Pushed Stakeholders under the (Musk) Bus”

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Here.

Abstract:

This paper provides a case study of the acquisition of Twitter by Elon Musk. Our analysis indicates that when negotiating the sale of their company to Musk, Twitter’s leaders chose to disregard the interests of the company’s stakeholders and to focus exclusively on the interests of shareholders and the corporate leaders themselves. In particular, Twitter’s corporate leaders elected to push under the bus the interests of company employees, as well as the mission statements and core values to which Twitter had pledged allegiance for years.
 
Our analysis supports the view that the stakeholder rhetoric of corporate leaders, including in corporate mission and purpose statements, is mostly for show and is not matched by their actual decisions and conduct (Bebchuk and Tallarita (2020)). Our findings also suggest that corporate leaders selling their company should not be relied upon to safeguard the interests of stakeholders, contrary to the predictions of the implicit promises and team production theories of Coffee (1986), Shleifer-Summers (1988) and Blair-Stout (1999).

There is tension between the interests of owners and those of other “stakeholders”, which is why the interests of non-owner stakeholders require justification as in the linked article. The authors beg the question — they assume stakeholder interests are comparable to owner interests — then find a problem because Musk values his ownership interest in Twitter above the interests of the people he bought out and of the company’s non-owner employees. So what should Musk get in exchange for the $billions he spent? Arguments for more stakeholder rights are arguments for less property rights.