Posts tagged with: Business/Finance

starbucksWhen most people think of Starbucks they think of overpriced coffee, free wifi, and omnipresence. Starbucks are everywhere. The company was founded in 1971 and since 1987 they’ve opened an average of two new stores every day. In the U.S. alone there are 12,973 locations.

When most people think of “big business”, though, they don’t often think of the Seattle-based coffee company. But they should. Starbucks has 151,000 fulltime employees, $15 billion in annual revenues, and three times as many locations as Walmart. Starbucks is one of the biggest of big businesses. And, not surprisingly, a big proponent of cronyist policies.

Cronyism occurs when an individual or organization colludes with government officials to create legislation or regulations that give them forced benefits they could not have otherwise obtained voluntarily. Those benefits come at the expense of consumers, taxpayers, and everyone working hard to compete in the marketplace. A prime example is minimum wage laws. Almost without fail, big businesses tend to support higher minimum wages.

Since they could just choose to pay higher wages, why would they support federal mandated wage floors? One reason is because it helps to eliminate the competition from small business who don’t have the size and scale to absorb higher-than-market wage increases.

In a recent interview with CNN, Starbucks CEO Howard Schultz said he supports an increase to federal minimum wage even though he admits the $15 wage in Seattle could have “traumatic effects” on small business owners and employees.
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briberyThere’s an old saying that corruption is authority plus monopoly minus transparency. That combination makes state-level governments especially prone to the temptations of corruption.

A new study in Public Administration Review, “The Impact of Public Officials’ Corruption on the Size and Allocation of U.S. State Spending,” looks at the impact of government corruption on states’ expenditures. Defining corruption as the “misuse of public office for private gain,” the authors of the paper note that public and private corruption can have a range of negative effects, including lower-quality work, reduced economic productivity, and increased poverty.

According to Leighton Walter Kille, the researchers explored two possible theories: First, higher levels of corruption should cause states’ spending levels to be higher than they would be otherwise. Second, corruption would distort states’ spending priorities in ways that favor bribes from private firms and others. Some of the findings include:
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Well, how did I get here?

Well, how did I get here?

File under allegory: An Austin, Texas, resident whose property tax bill has her “at the breaking point.” As noted by Katherine Mary Ham at HotAir, the resident in question, Gretchen Gardner, deems the $8,500 bill for which she’s on the hook a wee tad cumbersome. “It’s not because I don’t like paying taxes,” she said. “I have voted for every park, every library, all the school improvements, for light rail, for anything that will make this city better. But now I can’t afford to live here anymore. I’ll protest my appraisal notice, but that’s not enough. Someone needs to step in and address the big picture.”

According to Ham, Ms. Gardner purchased a 1930s bungalow more than 20 years ago, and the artist apparently can’t understand why her tax bill is so high. In this regard, Ms. Gardner resembles the Nuns on the Bus and other religious shareholder activists who submit proxy shareholder resolutions on a plethora of feel-good (but, in reality, harmful) agenda items through investment groups As You Sow and the Interfaith Center on Corporate Responsibility.

Similarly, voters in Acton’s Grand Rapids, Mich., front yard have approved a $10 million income tax increase, seemingly unaware of how this additional burden will impact the city and its residents negatively. Oh wait, did I forget to mention the $30 million parks millage approved by voters last year? While we’re at it, let’s toss in the 2011 mass transit millage approval, which will top out at $15.6 million annually. One day, however, Grand Rapids taxpayers may wake up like some allegorical David Byrne character, tapping their arm and asking, “Well, how did I get here?” as they ponder how much less money they take home, save or have available for philanthropic activities. (more…)

MoneyRoll

Note: This is the latest entry in the Acton blog series, “What Christians Should Know About Economics.” For other entries in the series see this post.

The Term: Money

What it Means: In economics, money is a broad term that refers to any financial instrument that can fulfill the functions of money (more on that in a moment).

There are three basic ways to exchange goods and services: gifting (e.g., I give you a banana, expecting nothing in return); barter (e.g., I give you a banana, in exchange you give me an apple); by using money (e.g., I give you a banana, in exchange you give me $1). Money was invented (and reinvented in every culture) because it makes exchanges easier than the barter system.

What Money Is: Money is a shared belief system used to simplify exchanges of goods and services. To be used as money people have to share a belief that the item —whether paper, gold, rocks, etc. — can perform three main functions: be a store of value, be used as a unit of account, and serve as a medium of exchange.

In the next section we’ll examine these functions. For now, here are two examples of how money serves as a shared belief system:
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Did ‘Social Business’ Sink the Cardboard Bike?

Did ‘Social Business’ Sink the Cardboard Bike?

Jonathan Witt, research fellow at Acton, recently wrote a piece at The Federalist about “social business.” He argues that it might do more good to own and operate an ethical business that follows through on its contracts and “respects the dignity of employees and customers,” rather than trying to have a “social business.” Witt begins by talking about a cardboard bike. In 2012, Izhar Gafni became relatively famous by creating a sturdy cardboard bike that could be sold to the poorest around the world for $20. After two years and unsuccessful Indiegogo campaign, this potentially revolutionary project has failed to go anywhere. Witt argues that “social business” is to blame:

After talking up the virtues of a “social business model,” the start-up behind the bike, Cardboard Technologies, expended considerable energy trying to raising capital from Indiegogo donors uninterested in profit. The lack of a profit motive may have played a role. It also didn’t help that the price of the bike kept shifting—from $20 to $290 to $95 plus $40 shipping. Would-be investors had to wonder: Was the bike going to have a revolutionary everyman price, or wasn’t it?

CEO Nimrod Elmish tried to explain, saying the bicycle’s price will fluctuate depending on where you live, costing more for buyers in wealthy countries and nothing for those in developing countries. “We want to bring a social business model that will make [it] available to all,” Fortune quoted him as saying. “We don’t have a price tag, we have a value tag.”

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AnthazShopIndiaFreedom to practice one’s faith and be a person of faith can be instrumental in enabling the poor to achieve some modicum of social and economic freedom, says Rebecca Shah:

Religion is no panacea, but aspects of religion can activate certain practices and partnerships among its adherents that can motivate and encourage economic development. If modern economics continues to yield an understanding of human development that ignores the role of religion, governments and development institutions will persist in acting as “one-eyed giants” who “analyze, prescribe, and act as if man could live by bread alone, as if human destiny could be stripped to its material dimensions alone” (“Development Experts: The One-Eyed Giants” in World Development). According to human development theorist Denis Goulet, development is more human and fuller when people are called to “be more” rather than simply to “have more.” There can be “authentic development” only when there is a “societal openness to the deepest levels of mystery and transcendence,” and when this yearning for mystery and transcendence is recognized and satisfied.

Read more . . .

bankruptcyThe Bible has a lot to say about the principles behind bankruptcy law, says T. Kyle Bryant. In the Old Testament, God gave Moses various laws concerning the poor, lenders, borrowers, and debt forgiveness.

From these passages, we get a glimpse of how God makes provision for people who cannot pay their debt after a certain number of years. Beside discouraging lenders from making “bad” loans (ones that could not be repaid in seven years), the law prevented overwhelming debt from ruining a person’s life forever. In this way, God’s law provided for a type of bankruptcy protection every seven years (and every 50 years for land).

The United States bankruptcy scheme is complex, but the similarities between it and the biblical system are striking. Both systems served to protect the relatively powerless consumers and give predictability and stability to the creditors. For example, in the Israelite law, debtors could be released from their debts every seven years—no matter the amount of the debt, it was gone. This prevented common debtors from having to sell themselves into slavery in perpetuity to pay for their debts. On the other hand, it gave a stable and predictable risk profile to creditors seeking repayment of those debts. Lenders could temper their desire to make risky loans with the knowledge that any chance of repayment after the seventh year was uncertain.

In a similar way, the Bankruptcy Code allows a person freedom from their debt every eight years. Chapter 7 of the Bankruptcy Code governs (in large part) individual debtors and the discharge of a person’s debt. If someone has received a discharge of their debt under Chapter 7, they must wait eight years before they can file for bankruptcy again. This echoes the biblical pattern of debt being wiped away every seven years. (But whether this tempers creditors’ risky lending practices is another question).

Read more . . .

WalmartOn Friday, June 6, shareholders of Wal-Mart Stores, Inc., will gather at the Bud Walton Auditorium on the University of Arkansas campus in Fayetteville, Ark. Among them will be As You Sow member Zevin Asset Management, which is pushing a resolution demanding the retailer issue annual reports on its policy, lobbying and membership expenditures. All of this, of course, is intended to embarrass Walmart in the same-ol’ name-and-shame game employed so often by shareholder activists advancing a progressive agenda.

What apparently bothers Zevin is Walmart’s exercise of its voice in policy issues directly impacting the company, its shareholders and – most important – its customers. Zevin’s resolution goes even further by requiring Walmart divulge its contributions to such tax-exempt groups as the American Legislative Exchange Council, the U.S. Chamber of Commerce or the Business Roundtable. Why? Well – to Zevin and other shareholders cut from the same sackcloth — it’s unseemly that the world’s largest company engages with a group that writes model legislation. Never mind that the company employs more than 2 million people worldwide and donates more than $1 billion each year to charities, it’s the incorrectly perceived unsavory political nature of anything that drifts right-of-center. (more…)

corporations_are_people_too_by_biotwist-d4hnskt[Note: “Argument Outline” is a new occasional series that provides summaries of religious, economic, and public policy arguments presented in the public square.]

The Religious Freedom Restoration Act (RFRA) states that government shall not substantially burden a person’s exercise of religion even if the burden results from a rule of general applicability, except in certain conflicts with a compelling governmental interest. That seems straightforward enough, but what does this law mean when it refers to a “person”? For instance, can a corporation like Hobby Lobby be a person under this Act?

Even some people who are sympathetic to Hobby Lobby’s fight to avoid being forced to violate their conscience may wonder if it makes sense to give such broad-based religious liberty protections to corporate entities. But in a recent article in the Harvard Law Review, Alan Meese and Nate Oman make the case that the most natural reading of the term ‘person’ in RFRA includes for-profit corporations, and why they should be afforded the same religious freedoms as individuals.

The following is a summary outline of the argument they present in this law review article:
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vietnam-protestsWhat is going on in Vietnam?

For decades, China and Vietnam have clashed over control of parts of South China Sea, which is rich in oil and fish. Earlier this month, China moved an oil drilling rig into waters claimed by Vietnam. The Vietnamese government sent vessels trying to stop Beijing’s deployment. Chinese ships responded by firing water cannons, which sparked protests in Vietnam. Thousands of protestors torched Chinese-owned businesses and factories. On May 18, Vietnamese security forces moved to stop the protests while the Chinese government sent four ships to evacuate Chinese citizens from Vietnam.

Where exactly is Vietnam?

Vietnam is the easternmost country on the Indochina Peninsula in Southeast Asia. The country is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea to the east. Although roughly the size of New Mexico, Vietnam has a population of over 89 million, about the same as California, New York, and Texas combined. It is the world’s 13th-most-populous country, and the eighth-most-populous Asian country.

What type of government and economy is in place in Vietnam?
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