Category: Business and Society

Blog author: jballor
Tuesday, June 3, 2008
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Is this supposed to be capitalism?

Geoff Colvin writes that a motivating factor in the recent crash in corporate profits, as well as the sharp decline in home values, was the phenomenon that “people began to believe that the more they borrowed, the better off they would be. Their thinking went like this: With the cost of capital so low and asset prices rising steadily, risk was evaporating.”

The precipitating cause of the downturn was that consumers “began to live within their means, shutting down the profit-growth machine.”

Any business or industry profit model that depends on consumers driving themselves deeper and deeper in debt is morally flawed and economically unsustainable. That’s not capitalism, that’s consumerism.

Compare the latter with the former, represented by this statement of a first principle of capitalism, “Thrift the First Duty”:

…thrift is mainly at the bottom of all improvement. Without it no railroads, no canals, no ships, no telegraphs, no churches, no universities, no schools, no newspapers, nothing great or costly could we have. Man must exercise thrift and save before he can produce anything material of great value. There was nothing built, no great progress made, as long as man remained a thriftless savage. The civilized man has no clearer duty than from early life to keep steadily in view the necessity of providing for the future of himself and those dependent on upon him. There are few rules more salutary than that which has been followed by most wise and good men, namely, “that expenses should be less than income.” In other words, one should be a civilized man, saving something, and not a savage, consuming every day all that which he has earned.

You don’t need to agree with Andrew Carnegie about everything to recognize the truth of these statements. Thrift is one of the things that separates civilized capitalism from savage consumerism.

Why yes, yes she did:

Link: sevenload.com

Via Hot Air.

When thinking of southern Italy, Americans probably imagine the Amalfi Coast, Mount Vesuvius, and lemon groves, but to the average Italian the picture is of rotting garbage in the streets of Naples and the Mafia. These realities have been strikingly portrayed in Roberto Saviano’s book Gomorra (ET), which is also the basis of a newly-released motion picture in Italy.

Saviano is a young journalist who clearly describes the dark side of his country. It is probably the most courageous “j’accuse” ever cried out against the Camorra, the Mafia of Naples. In order to write this book, the author disguised himself, took on another identity and infiltrated “The System”, as the Camorra is known in Naples.

Saviano’s reporting has won several awards. His book has been translated in 42 countries and has been a best-seller in Germany, Holland, Spain, France, Sweden and Finland. The New York Times classified it as one of the best books of 2007 and The Economist added it to its list of 100 best books of 2008. In Italy, it is considered the best book of the year and has sold over a million copies.

In chilling passages, the author explains the power of the organization and names the families, alliances, trafficking, corruption and misery surrounding the Camorra’s world. It is a shocking picture, even for those Italians who are well-aware of the criminal organizations infesting Italy. These corrupt networks seem impossible to defeat, a parallel country within the country.

It is incredible to recount the Camorra murders in Naples, nearly 4,000 in the last 30 years, numbers that can be compared to a war. Even more astonishing are the figures concerning the economy of this international organization that, together with the other criminal organizations, accounts 7 per cent of Italy’s gross domestic product, more than $127 billion in a year.

The historic, political and social reasons that have lead to this phenomenon can be summarized in one word: “corruption”. Never in any other European country has there been such a wide scale and longstanding connection between crime and political corruption.

But thanks to this book and civic movements that are starting to rebel against this kind of society, Italians are developing a deeper awareness of the problem. The film version of Gomorra has gotten off to a great start at the box office, with more than €2 million in ticket sales in less than three days.

The movie brilliantly summarizes the book and is courageously filmed in Scampia, the dangerous Neapolitan neighborhood where the story takes place. The movie is also showing at the Cannes Film Festival where the international press applauded Saviano’s courage and the courage of Italians like Saviano (who has been living with constant police protection since October 2006) who courageously face truth and stand up to crime and corruption.

Over the years, Acton commentators have had reason to criticize religious groups that try to influence corporate policy through shareholder resolutions and similar activities. The criticism has revolved around two points. One, Christian shareholder activism has often focused on issues that are matters of prudential application of moral teaching (e.g., environmental practices) rather than non-negotiable moral evils (e.g., abortion). Two, such activism often seems to imply, if not explicitly proclaim, that the normal operation of business is not adequately “good,” and that business must promote a series of programs extrinsic to its enterprise in order to prove its commitment to the common good.

But there may be a valid sort of shareholder activism, which does focus on non-negotiable moral evils. This kind of activism, far from obstructing the profitable operation of a beneficial enterprise, challenges businesses to practice trade in ways that promote rather than detract from the building of a healthy moral culture. Companies that provide or promote abortion or pornography, for example, while furnishing legally permissible services to customers, are not satisfying “genuine human needs” (see Robert Kennedy, The Good That Business Does). It is reasonable for Christians to exhort such businesses to shift from the provision of harmful products to the provision of “goods,” in the full sense of the term. That seems to be the motivation behind this recent press release, for example.

From the UK:

I never for a moment thought that a life could be decided by something as arbitrary as one’s address.

The often-maligned US health care system is by no means a free market for health care services; rather, it is more of a hybrid public/private system. It’s imperfect and in need of reform, to be sure. But heaven help us if that reform takes the form of a governmental takeover of the entire system. How such a “reform” would improve our flawed system is beyond me.

Next Monday will be the sixtieth anniversary of Luigi Einaudi’s inauguration as Italian President. Einaudi (1874-1961) was a distinguished economist and defender of classical liberalism. In the immediate period following World War II, he was governor of the Bank of Italy and finance minister. Many credit his policy of low taxes and dismantling tariffs with having laid the foundation for Italy’s “miracolo economico” of the 1950s and 1960s.

However, while his role as president between 1948-55 is still remembered, his legacy of economic freedom as a key to Italian post-war development has largely been forgotten. In a recent article, the Milanese financial newspaper Il Sole 24 Ore lamented that currently there is no political force in the country which feels inspired by Einaudi’s actions and insights.

The center-right led by Silvio Berlusconi which won the recent general elections in April cannot be considered a catalyst for market reforms. Its new economy minister Giulio Tremonti has expressed hostility to free trade and blames most of the world’s economic problems on an ideology he calls “marketism”. At the same time, the Northern League, Berlusconi’s junior coalition partner, is impossible to categorize in terms of its economic policy. It demands decentralization and reducing the role of the Italian state but also advocates protectionism.

Neither can Einaudi’s heirs be found on the Italian center-left. The recently founded Democratic Party (PD) has its origins in communism. One can appreciate its transformation towards more moderate positions and a certain openness to economic liberalization. However, the transition is not complete and cannot be compared to the process initiated by Tony Blair in the UK Labour Party in the 1990s.

It is regrettable that nobody wishes to emulate Einaudi’s achievements. These go beyond the technical mastery and application of market economics. Einaudi’s understanding of freedom also led him to insights of more wide-ranging importance for Italian society. He believed that an excess of state power tends to make citizens more lazy in the way they live their lives and think of their responsibility towards others. This attitude leads them to tolerate the social ills around them. They view the poor state of public services as inevitable and accept corruption and rent-seeking as unchangeable phenomena.

Now, that so many people in Italy worry about the economic situation of the country and feel alienated from the political institutions and their lack of accountability, one might think that the time is ripe to return to Einaudi’s lessons.

The story of the Deutsche Bank building following the NYC 9/11 attacks is a study in bureaucratic incompetence…but more importantly it’s an ongoing experience in human tragedy and loss.

There’s a great deal to sort out. This piece, “The tombstone at Ground Zero,” does a good job introducing the issues.

The article begins with an introduction into the fire at the building site in August of last year:

…Thick black smoke was pouring out of the shell of what used to be the Deutsche Bank building. The structure had been badly damaged in the terrorist attack when portions of the collapsing south tower dug a 15-story gash and propelled toxic dust into it. Six years later the bank building was finally being taken down.

The fire quickly spread to 13 floors. The 100 firefighters inside the building couldn’t douse the flames because, as would become clear later, the basement standpipe that should have supplied water to the floors above had been disconnected. The scene was chaotic. Firefighters couldn’t see through the dense smoke and found their retreat blocked by a mazelike series of plywood walls and polyethylene sheeting that made it nearly impossible to locate exits. Panic was audible in the voices on the firefighters’ radios.

Eventually some 275 firemen used ropes to hoist hoses up the scaffolding on the building and tamed the seven-alarm conflagration around 10:30 that night, seven hours after the blaze began. But the struggle to extinguish the flames had cost two lives. Firefighters Robert Beddia, 53, and Joseph Graffagnino, 33, were found lying on the 14th floor near a hose line and pronounced dead at a local hospital. The cause: smoke inhalation.

Here’s a picture of the building when it was on fire:

Photo provided by Rev. Benjamin Spalink of City Fellowship Church.