Category: Business and Society

Last night in Dublin I was having a conversation with a 65-year-old man who was ranting about the high unemployment rate in the European Union, which in the 17-nation currency area rose to 12.2 percent in April. The current unemployment rate is a new record since the data series began in 1995. My new friend was very open about being an outright socialist and said that Europe’s problem is that people are not being treated fairly.

Capitalism, he explained, promotes a culture where people do not share their resources because it encourages inequality. To solve the European unemployment crisis, my friend suggested that Europe “needs a dictator” to come in and simply tell everyone what to do so that there will be true equality. The problem, however, my Irish friend confessed, is that when someone gets in a power “they get carried away with it,” and people end up being taken advantage of. He did not seem able to connect the dots that countries that have tried socialism and dictatorships are countries where the poor are worse off in the long-run. Therefore, his proposal will not work.

The conversation raised several questions for me. To start, I wondered why this 65-year-old man drinking a Smithwick’s beer, sitting next to me drinking a pint of Guinness, did not see that we were both experiencing equality thanks to the free market, property rights, and the rule of law. I also wondered why he thinks that something like socialism would be the best way forward given the fact that a form of it is currently not working in the European Union.
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The Washington Post has an interesting story on young people who feel their vocation is “earning to give”—making as much money as possible in order to give away as much as possible to worthy causes. An example is Jason Trigg, an MIT computer science graduate who works as a programmer for a high-frequency trading firm:
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MonksInkWhat do markets have to do with monasticism? Quite a lot to the Benedictine monks of St. Andrew’s Abbey in Southern California, according to a recent press release. Their prior Fr. Joseph Brennan describes MonksInk, the monks’ business selling ink and toner cartridges:

Every monastery has something unique about them. For example, a monastery in Louisiana makes soap. Some make jellies and jams. The Camaldolese make amazing fruitcake. But we never developed anything like that. Until now, we only produced ceramics, and even these were designed by a brother monk in Belgium. We really needed to do something different. MonksInk was a good fit.

The article goes on to detail their offerings:

Product selection meets or exceeds what one could find at any big box office supply store — including ink and toner options for every make and model of printer, fax and copy machine, from HP and Epson to Xerox, and every brand in between. Buyers also have their choice of original manufacturer products, alternative cost-saving brands, or re-manufactured items. And, the monks are quick to point out, anyone can always add a prayer request or two as well! (more…)

trip_hurdles_400_clrOne of the most basic concepts in economics and business is marginal or incremental cost, the additional cost needed to produce or purchase one more unit of a good or service. For example, if a business can produce 100 widgets at a total cost of $5,000 and 101 widgets for $5,500, the marginal cost of the 151st unit is $500. At that rate, the company has a disincentive to produce more than 100 widgets since the cost rises sharply (an average additional cost of $4.45 per widget).

The same principle applies to the cost of labor. Imagine a worker who makes $16 an hour for 29 hours per week but whose incremental cost for the 30th hour of work each week rises to $112.15. For the 29 hours of labor, the cost is $464 while for 30 the cost is $576.15. That sharp increase would prevent many employers from hiring workers for more than 29 hours per week.

According to Jed Graham at Investor’s Business Daily, that is exactly what effect Obamacare will have on wages.
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Acton’s Director of Research, Samuel Gregg, has a column in the latest issue of Legatus magazine. In it, he recognizes the accomplishments and Catholic faith of one of America’s Founding Fathers, Charles Carroll. Carroll, the only Catholic signer charles carrollof the Declaration of Independence, was an established businessman, and signing the Declaration was a risky move. It literally put his entire fortune at risk.

Carroll’s commercial interests extended far beyond those of the typical Marylander of his time. They ranged from grain products to livestock, small cloth factories, building crafts, cattle, mills, orchards, land speculation, and iron production. As well as investing in domestic and European markets, Carroll was in the business of making loans, charging market interest rates. He even authored a document defending the legality and morality of compound interest. And, it should be said, a portion of Carroll’s assets consisted of slaves.

Carroll’s commercial success did not mean, however, that what he often called the “habit of business” became suffocating for him. He would have thoroughly agreed with Calvin Coolidge that “the accumulation of wealth cannot be justified as the chief end of existence.”

Gregg also points out that Carroll had a sense that “the life of business was itself one full of potential nobility and purpose…” Carroll believed that order and discipline, in business and in life, made one’s life fruitful.

Read “Catholic Founder, Catholic businessman” at Legatus Magazine.

According to the 2013 Mackinac Policy Conference, Michigan’s three largest universities (Michigan State, University of Michigan and Wayne State) are producing entrepreneurs at twice the national average. According to Michael Wayland, the report included:

…responses from more than 40,000 of the 1.2 million alumni of the University of Michigan, Michigan State University and Wayne State University. The responses revealed that more than 19 percent of the alumni surveyed have started a company, and some have created more than one.

The study suggests a significant number of alumni are starting their own businesses, and more than 50 percent of those businesses are here in Michigan, contributing to our state’s economic prosperity,” said URC [University Research Corridor] Executive Director Jeff Mason in a statement. “The URC is committed to supplying the tools that can lead to new companies and more jobs.” (more…)

catholic-university-bschoolEarlier this year, the Catholic University of America announced the creation of a School of Business and Economics that will be “distinctively Catholic.” The new school offers a model based on Catholic social doctrine and the natural law that is unlike theories prevalent at most leading business schools. “Business schools focus on teaching commercial skills and rules of ethics, but they neglect the importance of character,” says Andrew Abela, the school’s dean and Acton’s 2009 Novak Award Recipient. “Our distinctive idea is to bring the rich resources of the Catholic intellectual tradition and the natural law to bear upon business and economics.

I recently spoke with Dr. Abela about the new program, what makes a Catholic approach different, and what it means for business and economics to be “people-centered”:

Why is it so rare for Catholic colleges and universities to take a “distinctively Catholic” approach on subjects like business and economics?

I think there are several possible reasons for this. First, the business and economics education at many Catholic universities tends to mirror that of non-religious universities in that it focuses on knowledge, not on will. But this is not enough. We have to cultivate our students in virtue, which needs the formation of both the intellect and the will. It’s not enough for students to know the good, they have to do the good, and even to love the good. Second, as you know much of higher education suffers from political correctness, and faculty are thus reluctant to commit to any one approach to ethics. Students end up being taught several (frequently conflicting) theories of ethics, with the result that they graduate as sophisticated relativists. Finally, faculty are committed to existing business and economics theories, and it is hard to reconcile these theories, which claim to be morally neutral, with the Catholic intellectual tradition, which holds that all human action has a moral dimension.

Why are you creating a new School of Business & Economics now – does the world really need another business school? And why a School of Business and Economics?
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About a decade ago I joined a couple of other semi-clueless entrepreneurs in starting a regional newspaper in East Texas. Although I had always been a praying man, I found a lot more to pray about while starting a business: praying we’d make payroll, praying we’d find advertisers, praying the newspaper industry wouldn’t collapse before our next edition, etc.

Apparently, I wasn’t alone. According to information recently published by the Association of Religion Data Services, U.S. entrepreneurs pray more, meditate more and are more likely to believe in “a God” and attend a religious congregation than non-entrepreneurs:

The ARDA release published last month, draws on data from the 2010 Baylor Religion Survey which shows that people who have started or were starting a new business were more likely to believe in a God who personally cared for them. They also meditated and prayed more frequently than non-entrepreneurs.

“For entrepreneurs, business ventures may provide a ready list of concerns voiced to a God they believe is listening,” Baylor researchers Kevin Dougherty, Mitchell Neubert, and Jenna Griebel and Jerry Park noted.

When times get tough, according to Dougherty, many entrepreneurs may find themselves strengthened by the belief “God is with them and interested in them and attends to their needs.”

Read more . . .

“Retirement as a cultural concept needs to go away.” So says Pascal-Emmanuel Gobry in a thought-provoking piece today over at Forbes.

I agree with the sentiment, in large part because good work never ends.

But as Gobry also illustrates, we need to rethink our conceptions of work as well as retirement, which for many is just another way of talking about the end of work.

As Michael Novak observes in The Spirit of Democratic Capitalism, “A successful corporation is frequently based upon the principle of subsidiarity. According to this principle, concrete decisions must be made on the level closest to the concrete reality. Managers and workers need to trust the skills of their colleagues. A corporate strategy which overlooks this principle–and many do–falls prey to all the vices of a command economy, in which all orders come from above.”

According to a study by Melba J. Duncan in the Harvard Business Review, such delegation makes economic sense: “Generally speaking, work should be delegated to the lowest-cost employee who can do it well.”

A recent BusinessWeek article updates the case for executive assistants. Anyone who has had significant contact with corporate settings knows that the EAs are the ones who really get things done. But for such delegation to be effective and efficient, it must be empowering. As Duncan writes, “The most effective executives think deeply about the pieces of their workload that can be taken on—or restructured to be partially taken on—by the assistant.”

Even the “lowest-cost employee” has a stewardship responsibility.

Of course, delegation can go too far, too.