by | BLOG, BUSINESS, ECONOMY, POLITICS
Stakeholder capitalism is all the rage these days, with Elizabeth Warren and Bernie Sanders at the forefront of the movement. Their participation is just another example of their economic ignorance.
The concept of stakeholder capitalism is itself a contradiction in terms; it would be more correct to call it “stakeholderism.” Just like crony capitalism (it is really just “cronyism”) isn’t real, as the terms are opposites of one another, the same with stakeholder capitalism. You cannot have both. It’s like saying libertarian statists. You can put the words together but they lose their meaning.
Stakeholder capitalism is a concept that suggests corporations should balance the needs of all the “stakeholders” who comprise the business, from shareholders to executives to employees to customers to suppliers and even to more nebulous stakeholders such as the environment or community. This is in contrast to traditional capitalism, which earns profit for the company owners and investors, the ones who put forth the risk capital to get and keep the company going. It earns this profit by providing products and/or services that their customers voluntarily pay for.
Stakeholder capitalism sounds good and looks altruistic but in fact are composed of different competing interests and goals. These various factors ultimately take away from the most singular purpose of a business: create a product or service for which another person or company sees value in that product or service and exchanges money (or goods or services) for it. If the finished product is good and has value, it will be consumed by another person or business for amounts in excess of the cost of resources to create the goods (profit). If the finished product is not good, then the cost of resources exceeds the perceived value and there will be a loss. It is only by focusing on this single-minded purpose that one can tell if the product/service has merit and should be continued. A company must be able to return a profit to its investors to induce them to invest more money for the company to increase its production of other valuable products and services.
Stakeholder capitalism seeks to undermine the traditional measure of profit and loss by insisting that various interests all mutually derive benefit. But this is not why a company exists nor should it. It misallocates resources and value and creates competing outside interests (that will not agree on how important each one is), all in the name of being socially beneficial. No company can sustain itself with that end result in mind, which ultimately hurts the very society stakeholder that capitalism would otherwise help.
by | BLOG, BUSINESS, CONSTITUTION, COVID, ECONOMY, GOVERNMENT, POLITICS
It is undeniable that people are hurting from COVID. It is also untenable that one of the continued solutions is an ongoing moratorium on evictions. Such a policy would seem to be blatantly unconstitutional.
A national moratorium on evictions picks winners and losers by government fiat by preferring one population (renters) over another population (landlords). The moratorium continues to allow people to live in their spaces without paying what they are contractually obligated to pay, putting the landlord at a loss. Would the same people championing this policy support the government letting people take food from a grocery store without paying for the food? How about taking clothing from a store without paying for it? It is the same thing. Those who argue that there is a moral right to housing would be hard pressed not to agree that this is also a moral right to food and clothing as well. Put it another way, the moratorium allows renters to consume their rental space for free that they would otherwise be purchasing through the payment of rent. What gives the government the right, therefore, to tell people they are allowed to consume their product — be it food, clothes, or rental property — without just compensation?
Originally, the moratorium was declared as a hedge against a perceived health hazard, namely that if people are evicted, they could contribute to the spread of COVID, and from this line of thinking was the flimsiest constitutional justification for the policy. If therefore, the government wants to assume the responsibility for avoiding an even bigger health emergency, it is only just that the government should cover the cost of the loss or rent to the landlord or guarantee that the rent is paid. You can’t have it both ways. The current policy is utterly ludicrous and puts many landlords at financial risk and ruin.
by | BLOG, BUSINESS, ECONOMY
A company will try to use its available funds to best improve its business, such as by expanding its operations, hiring additional workers, opening new factories and offices, research & development including creating new products, paying down debt, or acquiring new companies. But when it decides that it has more money than it could put to good use in its business, it can use the money in various ways. It could pay dividends. But another option is to buy back some of its shares on the open market. But progressives somehow believe that they know better about a company than the company itself and want to dictate what a company can choose to do with its own cash, especially with regard to buybacks.
What seems like a rather mundane topic for the average person is actually very important, particularly because several progressive Democrats such as Chuck Schumer and Bernie Sanders are threatening to prevent buybacks and will soon be in a strong position to influence policy. Unfortunately, because they are so economically ignorant, their policies could have a negative impact on the broader economy.
In a widely-publicized NYTimes Op-Ed last year, Schumer and Sanders penned a missive against buybacks, calling them “corporate self-indulgence.” Their solution is a bill to forbid buybacks unless and until companies first do things such as “paying all workers at least $15 an hour, providing seven days of paid sick leave, and offering decent pensions and more reliable health benefits.” In other words, Schumer and Sanders openly demand these preconditions to be met before a company can even engage in a buyback program. They have decided that they know better about a company’s needs more than the companies themselves. The hubris here is astounding.
A company has a duty to use its money in the most responsible and productive way possible. Getting the most out of available resources creates the best possible outcome for the economy, the company, and its workers. For instance, if the best use of money is to expand and increase R&D in its industry or build more shops or hire more workers, they will do it. But if this option is not worthwhile, that is, will not produce an adequate return on investment – for reasons such as a lack of growth in the industry or excessive government regulation – then the best option may be to buyback shares or pay dividends. In doing so, they are taking cash out of the company to give to the shareholders who will look for better opportunities. Sometimes this option is absolutely necessary in order to make the company stay both relevant and solvent for the sake of the company and its workers.
Freedom is at stake here, both philosophically and economically. Not only should a company have the freedom to do what it wants with its own money, but it won’t have the freedom to grow if the government is interfering, rather than allowing the free market figure out where to go. This is the worst of both worlds. Buybacks are an important tool despite those who wish to restrict buybacks under some progessive bloviations not rooted in economic reality.
by | BLOG, COVID, ECONOMY, GOVERNMENT, POLITICS
The current national moratorium on evictions (which is likely to be extended yet again) is problematic for several reasons. The CDC (of all agencies) issued its rule without any particular act of Congress granting it the power to do so under the auspices of a generic “public health and safety” threat. What’s more, the federal eviction ban essentially overtakes any and all existing laws between tenants and landlords at the state level.
Because of the moratorium, landlords are now unable to follow any due process it has with regard to removing a tenant who has not kept up his or her end of their housing contract. Furthermore, landlords have no recourse to replace or remove a tenant by legal means until the end of the moratorium, a date which keeps changing. If a landlord violates the moratorium, he faces fines and/or possible jail time.
But perhaps the most egregious aspect of the eviction moratorium is that landlords are still responsible for maintaining payments to their banks and mortgage lenders on their rental properties. In fact, in some parts of the country, lenders have the ability to foreclose on them because they are not owner-occupied residences. What if the government told grocery store owners they had to provide their food for free as a means to alleviate hunger? Or tell a doctor he has to treat people for free as a means to provide universal access to medical services. How is it that the government is allowed to tell one set of citizens that you cannot enforce your own contracts and must provide services for free, while simultaneously not providing any sort of restitution for the hardship?
This moratorium has created intense and immediate deprivation for property owners who now bear the burden of property ownership without means to carry out or modify existing rental contracts. Essentially, the government is engaging in a massive, unconstitutional wealth transfer from one constituent to another. The eviction moratorium is a blatantly unconstitutional abuse of power.
