Economics and Religion

I saw heard a discussion the other day about how religion affects our lives.  How even atheists and agnostics still hold a moral code based on religious teachings.  This hit home to me, and perhaps it even affects our economy. 

Religion, most if not all, feature at their very core a code of morals that the faithful subscribe to, whether consciously or subconsciously.  This code is how their parents discipline them, so even if a particular person denies any religious underpinnings, it just isn't so.  The United States was founded by primarily Christians, so our laws tend to follow the teachings found in the Bible.  Murder laws, theft laws, and even littering laws draw from the Christian "love thy neighbor" doctrine.

But it extends much deeper than that.  These morals are embedded even in our economic system.  Businesses that are moral would tend to succeed more often than immoral businesses.  This success is judged by how long they last, and how big they grow.  Consider the mafia for example, yes they have been around for a long time, but the individual players do not last long.  There will always be those who are lawless.  Now consider a company, no need to name one, but one that is listed on a stock exchange.  They have built their company through offering their neighbors a product or service.  They would have had to have cared, at least at one time for the outcome that product or service had on their customers, in other words, being a good neighbor.  Because of the intrinsic nature of our morals, people will talk and recommend companies that live by good moral standards.

And yes, good companies can go bad.  When that happens, they tend to wane and disappear from the scene.  Some might say they lost their sense of purpose.  And so our economic system is tied to religious morals.  But in the US we have separation of church and state, you say.  And you would be partly right.  The actual wording says that the state can not endorse a single religion, as did the British by making the Church of England the church of the land. 

What about the fact that there are many different religions and churches represented in America.  It seems if you study major religions, most have figured out that the same things, on the whole, are moral and one way or another have included them in their Holy Teachings.  While Buddhists may not have the Ten Commandments, they do have a code that encourages people to love one another in a similar fashion.

Is this good for society, or should we strive to throw off religion?  Karl Marx called religion the opiate of the masses, and Marxism is basically an Atheistic system.  In the former Soviet Union, gangs are common, the black market is thriving, and intellectual theft is rampant.  In the west, where religion was not thrown off, we enforce laws that keep all those in check as much as possible.  Why invent something, if someone will steal it and undersell you?  Why write a book or music, if someone else steals it and doesn't care if you are paid for your efforts?

We need Priests, Preachers, Rabbis, and all other religious leaders so they can continue to promote a moral society.  A moral society can then produce products and services that fairly help all in that society.  So yes, we need religion!

Maybe I'm Old Fashioned, BUT...

Joseph Stiglitz is an Economic Professor at Columbia University.  He has a new book out, and is promoting it.  That's all fine, but I want to disagree with him on the key premise in the book.

He claims the "American Dream" is a myth.  I disagree.  Now is the American Dream easy?  Nope, not in any way imaginable, in fact it is hard.  And the lower you are in economic position when you start, the harder it is.  Why is that?  Frankly it's because of our parents, and not in a bad way.  We learn a lot from our parents.  We learn from watching them interact with friends, neighbors, relatives, and even coworkers.  Often times they don't even realize what they are teaching us.  So first, the American Dream is a reeducation, those who study successful people and their interactions are much more likely to succeed themselves.  The professor looked at successful people and their parents, and of course those from successful parents have an easier time achieving success, but that is not the American Dream.  That is class envy.

He seems to think that only those who are from successful parents can be successful, but by what measure?  My grandfather was born in 1903, in about 1911 he left school to help support the family, his father had died.  For those who didn't do the math, he never finished grade school.  He started working in a shoe factory at a nickle an hour.  A few weeks later, some of his coworkers told him what a great job he was doing, ask the boss for a raise.  When he did, he was laid off, seems there were people applying that would be quite happy with a nickle an hour.  He immediately found another shoe factory job.  Into the 1920's, he joined a union, the American Boot and Shoe Workers Union.  Eventually becoming an organizer.  He was driven, and when he saw union leadership screwing the workers ran for president of that union.  He knew if he lost he would not have a job, that is the very definition of risk.  He lost.  Within a month, a rival shoe union offered him a job, he retired from that job in the late 1960's.  He was friendly with Shoe company CEO's and floor shoe factory workers.  Was he a success?  YES!  A boy, with out even a high school diploma was able through trials and determination provide for his family and perform his job.  And he looked to the future, my father finished high school, and went to a trade school.  Much more education.  Because it was important to his parents.  He was a printer his entire life.  He provided for his family, and the family's standard of living did improve.

Then there was my generation.  My sister is a teacher, thanks to the education our parents expected her to avail herself of.  Me, I have spent my life primarily in retail management, now our family owns a store.  The point is in our family, going back to my grandfather, each generation was expected to do better; and the lessons we learned were that of constantly moving forward.  I had classmates who sons of politicians, police officers, and even business people.  Never once did I ever run my life by what I could get from the government.  It's an attitude of success.  At one time, in the poor days, someone told us we probably qualified for Food Stamps, but that wasn't an option, it would violate the attitude of success.

Is luck involved?  Certainly being in the right place can be considered by some to be lucky, however, positioning yourself to be in that place is strategic.  That is hard.  And some would rather take weekends off and do as little as they can get by with, that will cause failure in the American Dream.  Every extra penny I have goes toward our business, we live as inexpensively as possible, to build the business.  Why?   Because the American Dream is that, work hard, then pass it down.  I see my car dealer's son friend on TV all the time, it was easier for him, that's OK.  I met the politicians son in a Home Depot, he's a politician, that's great!  This son of a printer is living my own American Dream, and it is hard, but more than worth it.

All Bad News

Unemployment rate for men over 16
from 1978 to 2012 from Bureau of Labor Statistics

Yesterday, as I looked at the news, it seemed, economically speaking, there was a lot of bad news.  Unemployment was up, only 69,000 new jobs were created, they adjusted previous month's rates up, Europe is in crisis, and people seem to be resigned to more bad economic times.

On the graph, you can see just how we have done since 1978.  Why did I choose 1978?  It was when I first entered the job market.  I was graduated from the University of Missouri with a degree in Business.  I remember having friends that graduated a year before me with relatively high GPA's that seemed unable to get a job.  I remember promising myself I would not graduate without a job.  Any job. 

This was just after the Arab oil embargo.  Gas prices, and petroleum in general had spiked.  Detroit was in trouble, both from lack of sales and past poor management (sound familiar?).  Mortgage rates were upward of 12%.  The president was encouraging people to set their thermostats at 68 in the winter and 75 in the summer and be thrifty, drive 50.  And here I was a graduate of a pretty good, but Midwestern school trying to find a job.  Maybe I got lucky, or maybe it was my standards didn't require a dream job, but I was offered and accepted a job with the F.W. Woolworth Co. to be an assistant store manager in their management training program.  It paid $200 per week to start.  After zooming through their program I was offered a store to manage at the rate of $18,000 per year.  But it was a job.  And it turned out to be my life, retail management.

Now study that graph, do you see the trend?  in 1978 fewer that 6 million men were unemployed, at the peek in about 1981 that had jumped to about 12 1/2 million, which is where we are down to in 2012.  So yes it is bad.  However, what can you and I do?

I remember hearing that people could refuse to participate in a recession.  True to a point.  Recessions are great times to buy assets.  Think of housing values, and the stock market.  But what if you have no money?  You can't participate.  I was talking to an old friend the other day.  She had lost the job she had had for over 10 years.  She is 65, so is eligible for Social Security.  Her car broke down, and her mother needs constant care due to dementia.  Social Security pays her about $1000 a month, half of which she needs to pay her mortgage.  I'm sure that wasn't the golden years she anticipated as a younger woman.  She wants a job.  When I talked to her she told me her requirements, her goal right now is to be a receptionist.  She was in sales.  With no assets, she is teetering, ready to fall through the cracks.

Now, let me tell you the secret about economics:  Forget GDP, GNP and the rest of the alphabet, this is what economics is, it is the collective mindset of the masses in the economy.  That is why in Washington, DC which is in the business of Government there is no recession.  People there feel good about the future, so they spend their money accordingly.  Other places in the 'rust belt' people are worried about their future, causing them to hold back on purchases that can be held off on, new cars, appliances and the like, opting to fix their existing assets.  In turn this effects the plants that make those products, causing layoffs, which in turn feeds the feelings of the masses on losing their jobs.  Franklin Roosevelt, I believe understood this mental aspect when he said "We have nothing to fear, except fear itself."  And it is true.  But what if I lose my job?  The terse answer is find another.  Realistically it may not be possible to do what you were doing, or earn the same amount of money.

My wife owns, and I manage a very small retail business.  A few days ago, I had a lady come in looking for a job.  We are still in start up phase, working 7 days a week because we cannot afford employees.  However, I made her this offer.  You can come to work here, anything you sell I will pay you a percentage.  You can set your own schedule and work at your own speed.  Our average sale is around $2000, at 10% that is $200 for each sale.  Three sales a week would make her over $30,000; a sale for every working day of the year would be over $50k.  She politely thanked me and left.  And I understand that not everyone is confident enough in their abilities to work on commission.  One of the reasons we cannot hire is not enough sales.  We would like to open more stores, but lack the money to do so until we get sales.  Solyndra sucked $527 million (that's a half billion) in loans only to go bankrupt.  For 1% of that small companies like ours could expand and hire, three people per store times 5 stores is 15; times the other 99 and that looks like 5000 hires, Solyndra had less than 1200 employees, so which would have been more bang for the buck?  But Solyndra is cool, they are green, they are the future according to the politicos, so we taxpayers lose, not once but multiple times as that money disappears from the economy.

Until Petroleum gets back to a more reasonable level (and don't tell me about Europeans paying $9 a gallon, I don't care), when government realizes they have to live within their means, especially if they want to play the Keynesian game, until our collective feel for things turns positive, the bad news will continue.  Perhaps the President or Mitt Romney will figure it out, like FDR or like Ronald Reagan's "I see America as a shining city on a hill..."  And the graph above starts falling to normal levels.

Spend wisely!