Pretzel logic killed capitalism…and maybe the US economy

26Aug09

I like the concept of capitalism.  Build a better mousetrap, and the world will beat a path to your door. Work harder and provide a better product and service and you win.  Competition will let the cream rise to the top.

Unfortunately, I don’t recognize the idea of capitalism in our current economy.  The simple logic of capitalism has become so twisted, it is hard to recognize it. Since we now live in a global economy, I have a sick feeling that if we don’t get busy and untangle it, we will become a second class economy. We need to have a straighter line between results and success.

Three news stories caught my eye in the past week. They are all from my home state, Michigan, which has become the poster child of a failed economy. All are examples of the failed logic of the new capitalism.

It starts with how we educate our children, the future workforce. Michigan introduced new requirements for high school graduation that includes four years of math and English. The literacy numbers in Michigan are currently quite shocking. Companies that need a workforce that have basic math and reading skills shy away from some of our communities.  So what is the response to the new requirements?  There is legislation being considered to roll them back, because they are too hard for some students.  http://www.mlive.com/news/index.ssf/2008/06/michigans_tougher_graduation_s.html

Bankruptcy used to be considered a failure. Now it has become an accepted business strategy with very little stigma involved.  Most shocking is the bankruptcy courts approving executive bonuses for these failed companies. The argument is that the companies need to retain the expertise to let them work their way out of bankruptcy.  What??  Retain the people that led the company to failure, and them pay them retention bonuses?  Executives, here is a clue.  If you have pay for performance compensation systems in your organization, consider them dead on arrival. You set the standard, and the logic you are using in awarding bonuses is the new logic of work and reward for the work force.  http://detnews.com/article/20090826/AUTO01/908260371/Bankrupt-suppliers-seek-exec-bonuses

Private insurers are rallying against the possibility of a public option in health care because it could put some private insurers out of business.  Yes, it could.  Yes, it should.  I am amazed how even the threat of the public option has these companies suddenly coming up with cost savings and relaxed criteria for coverage. Bring on the competition! Then comes a news story that says the reform bills in Congress set aside $10 billion dollars for the UAW and other major unions health plans.  What?  One UAW member said that he had earned this (after retiring at 55) and deserved to have this in the bill.  No, you didn’t earn it.  When an organization thrives, it is because of the collective effort of its people.  When it fails, it also was a joint effort.  Your companies’ failed. The funds from profits set aside are gone.  You own part of this failure, and must pay part of the cost.  http://www.freep.com/article/20090824/BUSINESS01/908240321/1002/

We have included so much protectionism, given far too many local tax abatements, bailed out the banks and the auto industry with tax dollars, pay farm subsidies to huge corporations, have little league baseball where they don’t keep score, allow student athletes to compete with less than a 1.0 grade average, …  hopefully you get my point.  We are like a struggling swimmer in a rough current.  We can continue to throw life rings at him/her, or we can start teaching people how to swim again.

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