Monday, July 4, 2011

“Something to Consider ...”

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Tonight, in the midst of crackling fireworks celebrating this great Nation’s birthday and in its birthplace Philadelphia, I give over this essay as a gift to the Nation and by extension to the world. For me tonight carries additional significance as many of my coreligionists mark the anniversary of the passing of a very saintly Rabbi, who was to my knowledge the only Rabbinical figure awarded the congressional medal of honor, Rabbi Menachem Mendel Schneerson, may his memory be for blessing. May what I write help of the people who form both the larger and immediate context of which I am a part of. Accordingly, there is no copyright on this essay. Please freely share it and publish it in hopes that the right people who are in the position to do something about this suggestion will receive it and will have the opportunity to consider its message.

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As the divide grows between success on Wall Street and on the American Main Street, the world economy has suffered from tremendous setbacks over the past few years. Wall Street can prosper, while Main Street suffers. The clear financial pathways which for years had marked the trickle down from Wall Street investment to Main Street employment is fading. Today, laborsaving technologies have ensured that fewer jobs are opened by Wall Street investments and those which are often end up in foreign countries where labor is cheaper. As a result, one of the most difficult developments during our times is the loss of available jobs. 

Prior to this recession, capitalistic economies largely relied on standard market forces, which were considered reliable pillars of economic growth, to fuel job growth. This wisdom was culled from Adam Smith’s classic, “The Wealth of Nations”, where he used the term "invisible hand" as a catch-all phrase for intangible market forces, whose effects he was keenly aware of.

Truthfully, even Adam Smith's admitted that his "invisible hand" had at least one very visible driving force, namely, the "profit motive". However, what was largely glossed over in both the recent and distant past was the reliability of this “profit motive” to provide the whole Nation with the jobs and services leading to even the basics of a quality life, which include amenities such as food, shelter, health care, education, protection, sanitation, transportation, etc.

The past few years have proven that the profit motive is a fickle ally at best in the enterprise of providing jobs and was ("surprisingly") discovered to be "only in it for the money"! I once heard a story that might only be anecdotal. However, it carries valuable insight as a symbol of the realities we are facing today. 

President Obama met with some business leaders and appealed to them to produce jobs. They responded, "Mr. President that's not the way it works. You are placing the cart before the horse, you got it backwards. First come along the financial incentive to seduce businesses into growth and development. Then as a final step the jobs follow."

Finding Americans jobs is President Obama's number one challenge. Its might be easier to win his wars overseas than to win jobs for Americans. With answers like what he heard at that meeting, it sounds like the average American's basic quality of life has to wait, in shackles, for the enough greed (uhmmm...I mean "profit motive") to finally do its work.  Does it seem fair to have hundreds of millions of people, who are willing to work, suffer because the economy is powered by an unreliable fuel source?

Upon examining this economic "fuel source" which dignified circles call the "profit motive" and other circles more to the point label "greed", it basically comes down to "selfishness". It sounds humorously ridiculous to have expected a whole nation all this time to be cared for by selfishness. Imagine expecting a thoroughly selfish person to perform reliably in a nurturing role, like be a mother. Somehow, the two images of "thoroughly selfish" and "nurturing mother" don't superimpose on each other too smoothly. They seem to resist each other like two magnets brought together at the wrong ends. So how were we silly enough all this time to expect this unlikely combination of caring for a nation while placing it in the care of the selfish to work?

Well, rather than answering this rhetorical question and ruminating uselessly over the past, I'd rather focus on an idea which might make a difference in the future. I admit that I am not an economist or a business expert and actually this idea dawned on me in what some would consider a deeply religious moment. However, I would feel remiss if I did not at least put it out there and shared it in a way that the experts can access it in order to assess whether it has true value and possibly run with it to bring back some jobs to Main Street. The idea I have in mind is what I would call, "hybrid businesses".

I got the idea for the name from "hybrid cars", which are cars essentially designed to run on two fuel sources neither of which is ideal on its own. Electricity is cheaper than gasoline, but, until rather recently not powerful enough to allow a car to reach high speeds. However, gasoline also has a weakness. It became very expensive.  By wedding the two fuel sources each visit to the gas pump becomes less expensive while also providing enough power to achieve highway speeds. The vehicle owner enjoys the best of both fuels.

Similarly, the idea of "hybrid businesses" also works on two (economic) fuel sources, each of which carries a weakness, but, taken together they can cover each other’s vulnerabilities. What I am unveiling is a brand new business structure, which partners the United States government and the private sector – be they individuals, partnerships or corporations. The private sector’s profit motive is a weakness, as it selfishly tramples over the larger societal implications of its business decisions. The government has a weakness, as it lacks business visionaries who have true enterprising appetite. However, together they can form a legal business structure which moves with both vision and societal concern.

Federal, State and city governments can all participate in this model. This is different than socialism where the government runs certain select mega-businesses on its own. Here there's private sector participation as well, which encourages visionaries to step to the plate and rewards private participation by retaining some measure of profit motive.

While maintaining the current capitalistic economic structure, which despite the recession still provides some employment, I am proposing the government adds on “hybrid businesses” as another possible way for businesses to legally structure themselves. So, besides having a market swimming with corporations, partnerships, private enterprises, not for profits, government services and independent contractors, we will also have "hybrid businesses" among these market swimmers.

How would a hybrid business work? I am sure that there are many ways of designing and structuring a partnership between government and private entities. However, just for the ease of description here is one many possible examples. A private business seeking help with its growth and development will apply for government partnership. If the business meets certain criteria, the government will agree partner with them. The government can bring to the table a range of resources like expertise, contacts, ability to buy in bulk, cheaper medical insurance for employees, lower taxes, office space, start up capital, cheaper legal services, etc. In return for this vast menu of government “goodies”, the business will required to make certain concessions, such having a certain percentage of its employees United States citizens and/or residents.  Also, submitting any future decision to terminate an employee relationship to the government for review and approval. This way layoffs and firings cannot just happen in the midst of a boss riding upon a whim of greed, but, will require a more protracted objective process, with checks and balances in place. The idea is to extend a safety net over people's livelihoods and spare them from the horrors of uncontrolled job loss - which can literally ruin people's lives in a single swift stroke.

If this approach favoring national or local labor seems unfaithful to the notion of a free market economy, please bear in mind that the government is not dictating how the free market economy of the Nation as a whole should run. Wall Street remains Wall Street. Private enterprise remains private, with it's entire standard package of accepted privileges fully in place. The government is merely dictating the negotiating terms under which it will conduct business - just like any other business does.  So if the government chooses terms that lead to heightened job availablity and security for an intended workforce, it's just behaving in accordance with the freedoms of a free market economy. 

Besides the prospect of heightened job availablity and security for the intended workforce, the hybrid system will also likely offer other benefits as well to all parties involved: employees, government, businesses and society as a whole. Here are some benefits that are easily noticeable.

The entire society benefits as hybrids create new positions within their businesses. Also, the government infrastructure, partnering with the hybrids, will create new positions on their end as well. These new private sector and government jobs will translate into new employment opportunities which haven’t previously existed. More and more people will be able to join the ranks of the Nation’s employed.

Besides solving part of society’s problem of job creation, hybrids can also benefit the government in another way, by creating a new revenue stream. Until now taxes and government bonds were the government’s main sources of revenue. The nation today is asking, “How will we be able to find the funds to climb out of our present state of debt, which has risen with the advent of the government bailouts?”

The answer might be, "By having a brand new revenue stream."

 A new revenue stream can be put to use in a large variety of ways, like towards resurrecting abandoned programs, expanding current programs and creating new programs. All these efforts need funding and a brand new revenue stream flowing into government coffers certainly goes a long way towards unlocking these possibilities – leading to a more robust economy.

Employees can benefit greatly as the hybrid system achieves integrated employee information sharing on a national level. This will help employees easily transfer from job to job without needing a huge job search and interview process. Presumably, employees will over time develop a government database profile, which can be more objective than resumes'. This pool of employee records can be matched against a pool of job vacancies, allowing for smoother transitions between jobs. The network easing such transfers will spare people from suffering an exhaustive job search process, typical in today’s private sector. Legitimate reasons for seeking a new job can be varied. Some reasons can include relocation to another locale, desiring a fresh work environment, a hybrid has bankrupted, an employee acquired new skills, etc.

Depending on how the government wants to layout its range of incentives and services in order to lure new businesses into considering a hybrid structure, there will also be significant benefits to the hybrids themselves. These benefits can include tax incentives, access to cheaper wholesale prices (as part of the government's bulk buying), access to special technologies, seasoned business advice, access to capital or low interest loans, cheaper quality medical insurance, low cost or free legal advice and services, and computer services, etc. The government can even create a mega-accounting department and IT department, either low cost or free, to add to its list of hybrid services.

Though there might be a concern about whether a government agencies' performance can keep pace with the private sector, I would suggest that they can. Firstly, it's clear that when the government truly wants to act efficiently it does. Just consider the following: the careful precision planning of military operations, access to technologies beyond private sector reach, the IRS’s abilities to catch tax evaders and how congress functions. None of these scenarios is fraught with the inefficiencies of a state welfare office, which actually at times might be slow, bureaucratically inefficient by unwritten government design in order to discourage people from using such services. By hiring truly qualified individuals and offering them the correct incentive package, it's possible for the government to coax highly efficient work out of its own employees. Secondly, in this case the government is also a business partner and has a vested interest in being businesslike on its own initiative.


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 Author's personal comment: Those who know me know that it's not my style to write about the economy. You can check out my blog http://soullite.blogspot.com/ and you will see that this is not my typical subject matter. This particular idea dawned on me at a very special spiritual moment seemingly out of nowhere. When I reviewed the situation with a leading Rabbinical figure in the Lubavitch community, he advised me to cast the idea into an article in a way that it might come to the attention of the right people. So please spread it around to raise public awareness. This idea probably can be used by almost any government. Let's help our fellow human beings climb out of poverty.

7 comments:

  1. you are right... you can also search jobs opening details online.

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  2. Internet job searching is a nice idea. However, I don't think that internet job searching alone will solve the larger economic problem of high unemployment. There was a higher percentage of employed citizens in Western countries 20 years ago, before internet job searching existed, than there is today.

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  3. you are right... you can also find latest government jobs alerts online.

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  4. True. It's not your style to talk about the economy, (or politics) so I was surprised when I started reading! But you are correct!

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  5. Oh' Dear Angela we have to help whom we can. So many are suffering. I have to be thankful to the Creator that He has given me an opportunity to give charity with ideas.

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  6. Hi Elchonon, very beautifully written. However, I don't share your pessimistic view of the profit motive. It is true that some are motivated by greed, but recent studies have shown that a sense of personal autonomy is just as important, or even more so, than pay for workers. Many entrepeneurs believe in their product and work long hours to keep their businesses going.

    I do like the idea of government partnering with private business in things like the arts, and basic research, though. There are certain things that the market doesn't produce in sufficient quantities/qualities on its own.

    Simcha Lief

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  7. Dear Simcha,

    I appreciate your comment, but I have to place what I'm hearing on NPR News and my own personal experience ahead of economic research which I'm unfamiliar with. Without "greed" the economy would not be in the trouble that it's in. People were being thrown into loans they could not afford, so somebody could make fast money. Working as an accountant in a mortgage company at the time, I had a front row view of this happening. Almost till the end, I naively believed that people's financial situations were being sized up fairly, until I witnessed a very shocking incident.

    As an in-house accountant for many years in a few different industries, I have been privy to the discussions of entrepreneurs. Trust me, increasing the profit margin is in many (maybe, not all) of their eyes sufficient cause for laying off workers. I've been on raw end of that situation before.

    Best Wishes,
    Elchonon

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