Confronting Economic Unworthiness

February 20, 2021 (807 words)

Those who scoff at the term “social justice” cannot all be dismissed as callous and crusty. The disdain is not always a sign of hard-heartedness. Deep down these skeptics frequently agree with the rest of us, and think society should strive to be just and equitable for all.

But in their mind, those most in need of assistance are too often guilty of not doing enough to better their own circumstances. Why knock ourselves out giving stuff to folks who are content to sit back and not really try? This is a common refrain in certain circles.

The dissenters have a point. There are plenty of otherwise healthy, able-bodied people who can’t seem to muster the energy needed to acquire the bare necessities of life, let alone take advantage of the opportunities available to them – meager though they may be – to get ahead in any measurable way.

“Sloth,” in case you were wondering, is the avoidance of physical (or spiritual) work, and there’s a reason it has made the list of the seven most debilitating psychological diseases (i.e. “sins”) that can befall a person. Heck, sloth is right up there with “greed.”

(The rest of the list, for those who go in for this sort of thing, consists of “pride,” “wrath,” “envy,” “lust”, and “gluttony” – in no particular order.)

However as a general rule, the virtuous individual should not be in the business of evaluating another’s relative worthiness before choosing to do the right thing him or herself. In other words, while we cannot alter another’s propensity for sloth, we can certainly limit our own temptation towards greed.

And make no mistake, squirrelling away an inordinate amount of life’s bounty for oneself (or one’s family) makes for a less just and equitable society, and this constitutes a form of greed. Not sharing with those who have less is a form of greed. No amount of pragmatic rationalization can justify such theft-by-omission.

But my how we do love to rationalize our preferences and peccadillos. We who have succeeded, or who at the very least have lifted ourselves out of a lower-class hell, tend to think we did it by the sweat of our own brow, through our own resourcefulness and industriousness. This, by the way, is where so many of us fall prey to one of those other deadly psychological diseases: pride.

*

The fact is, no one gets anywhere in this world without the help of others, or being at the right place at the right time, or getting an unexpected break that seems to come out of nowhere. Sometimes whatever modest success is achieved can be chalked up to a fortuitous combination of all three.

In hindsight it’s hard to know what our own demeanor would have turned out to be if we were not the beneficiary of that timely help or that lucky break. We, too, may have ended up lacking all initiative, and found ourselves bereft of any enthusiasm for the daily grind.

Casually judging others to be unworthy of economic assistance is thus a dangerous trap. It comes from an indignant sense that “if I can do it, well then so can he.” This self-congratulatory attitude too easily shades into a brazen conceit, leading one to deny an obvious truth.

Each of us has been endowed with different gifts. Some of those gifts require more nurturing than others, and sadly not everyone receives the appropriate level of nurturing that allows their unique gift to flourish. By establishing an “obstacle free” pursuit of material advancement as our one-size-fits-all default cultural setting, we as a society have favored a certain type of personality possessed of a certain type of gift, and put another type at a distinct disadvantage.

This has prompted a willful disregard of inherent dignity, when the person in question appears to lack ambition. A form of arrogance has set in among the elect, as we blithely ignore another obvious truth: all good gifts come from above.

Those who succeed through native intelligence and dogged persistence are to be commended for responsibly using the gifts they have been given. But they are only doing what they were born to do – no more, and no less. Instead of strutting around at times like an obstinate peacock, we’d all be better off if such people could manage to keep things in perspective, and maintain more of a “poor in spirit” demeanor.

Like so many things, the positive ramifications of this humble approach have gone out of style over the last sixty years. Rediscovering its merits would enable us to dial back that outsized pride in our own accomplishments that can well up and have a blinding effect.

This, in turn, would help us avoid dismissing out of hand those we take at first glance to be unworthy of our economic consideration.

Robert J. Cavanaugh, Jr
February 20, 2021

Play It Forward

February 14, 2021 (37 words)

After being together almost forty years a thought just occurred to me. My commitment to the woman I married has turned out to be a lot like the commitment my father had to the woman he married.

Robert J. Cavanaugh, Jr
February 14, 2021

Rethinking Return on Investment

February 8, 2021 (1,274 words)

Any home-grown small business person knows how to stay in the game over the long haul. It starts with a hardy constitution impervious to minor ailments. It usually involves a steady-running ‘motor’ that can cruise through even the longest hours. Then there is that heightened attention to detail. And a willingness to own up to mistakes and quickly learn from them.

As for financing, these ambitious penny-pinchers know how to make a little go a long way. They are old hands at delaying discretionary spending indefinitely. And they boldly risk what they do have in ways others would find daunting. Such as using their home as collateral for a business loan or a commercial line of credit, a move which can be found on page one of their playbook.

They’ve been known to draw on retirement savings when the need arises, or tap into the kids’ college fund in case of emergency. Getting creative to meet payroll and fund payables when times are tough is second nature.

All of the above also applies to those who swim with the sharks in the world of big business, except the financing part. When one is looking to ‘scale’ a business and be a ’market disrupter,’ the odd loan of ten or twenty grand from an old college roommate will only take one so far.

If the dream involves, say, a national roll-out with extensive manufacturing and distribution capabilities that run into the hundreds of millions of dollars to establish, well that sort of thing calls for a serious infusion of cash from people not intimately associated with the launch. The conventional term used to describe these strangers is “investor.”

*

The large scale commercial undertaking will require a correspondingly huge chunk of working capital. More often than not this comes from an outside source. It goes without saying the enterprise accepting such outside capital should be held accountable for how these funds are being spent. The investors’ reasonable demand for a return on investment exerts a much-needed discipline on what can sometimes be cockeyed optimism on the part of entrepreneurial souls given to swinging for the fences.

This aspect of the ‘investor dynamic’ is vitally important. Not even the largest companies with the best reputations deserve a blank check with ‘no strings attached,’ regardless of past success, or how good a new idea might look on paper. The business landscape is littered with colossal failures, even if those flops are quickly forgotten by the general public soon after their unexpected demise.

The phrase “many are called but few are chosen” may have biblical origins, but it applies in this context as well. The resiliency demanded of the small business person in sorting out his or her relatively minor problems pales in comparison to the epic logistical contradictions faced by those who chase business success on a grand scale.

Investment firms and financial institutions offering working capital and other forms of assistance to the business community provide the life-blood these businesses need to grow, while simultaneously establishing a measure of oversight designed to prevent excess and waste. This activity may not fit the traditional definition of altruism, but it certainly qualifies as a much-needed public service.

*

On the other hand, investment firms and financial institutions that sell working capital and other forms of assistance to the business community have already amassed great wealth for themselves, and are now pre-occupied with getting even richer.

This is not necessarily as off-putting as it sounds. It many respects the ongoing accumulation of wealth via capitalism is simply a by-product of being good at one’s job. Shrewd investors are adept at green-lighting the most promising start-ups, expansions, and acquisitions, the ones with a sound business plan and a solid management team place. (And less exposure to competition, I might add.) Proverbial “market forces” take over from there.

The only thing missing from the present arrangement is a sense of proportion. It’s as if the wealthy have all turned into “one trick ponies.” Their only benchmark is ‘profit’ and ‘maximizing return on investment.’ While both are essential to the proper functioning of the system, once success is achieved beyond anyone’s wildest dreams, room should be made for other societal considerations. Chief among those considerations should be promoting the dignity and well-being of the rank-in-file employed by these huge conglomerates. That would start with increasing their compensation, not conducting “team building” exercises and posting “associate of the month” placards.

Our vast and complicated economic engine generates a ton of opportunity, and is a beautiful thing to behold. But those at the top can lose touch with the anonymous masses who report to work each day and put their shoulder to plow. It’s way too easy for the detached observer to evaluate a business solely in terms of its numbers, and forget the multitudes responsible for generating those eye-popping numbers in the first place. Unfortunately our investor class suffers from a bad case of “out of sight, out of mind.” From the perspective of the arm chair quarterback, why not try to maximize return? Why not try and turn that ‘5’ into an ‘8’ – or even into a ’10’?

The financial industry may well have its share of individuals who possess a sense of social responsibility. Unfortunately the pragmatic machinations of the ‘investor dynamic’ mitigate against such empathy ever rearing its ugly head during heated negotiations.

The social detachment that fuels the ‘maximize return on investment’ mentality expresses itself in many ways. One of the most obvious and readily accessible is the current debate over whether to raise the minimum wage.

*

The argument against raising the minimum wage centers on the negative impact such an edict would have on the business community, especially the small business community. We are told raising this “minimum” would result in a net jobs loss for entry level and low-wage workers, since employers who count on this segment of the workforce could not afford to pay the higher rate. Thus raising the minimum wage would actually hurt the very people proponents of the initiative are trying to help.

“Scholars” who earn hundreds of thousands of dollars a year while toiling at prestigious privately-funded “research foundations” routinely produce reams of statistics which they claim prove this point beyond a shadow of a doubt.

But what of our largest conglomerates, earning tens of millions in profit per quarter? It seems to me the management imperative that keeps our most successful corporations from increasing compensation for those on the lower rungs of the pay scale has to do with the potential negative impact such an increase would have on investor demands for the highest return possible.

Yes, I am familiar with how corporate profits help fund the pensions of all manner of not-so-wealthy working people who are invested in the market, and who are counting on their modest retirement accounts to grow in value annually, so as to avoid finding themselves destitute in their old age.

While this is certainly the case, it should also be noted inflation is the reason people of modest means have to fear for their retirement in the first place. Why is there inflation, and who benefits from it?

Since 1% of the population controls 50% of the stock market, there is no dodging the fact most of the ‘excess’ profit generated by keeping the lid on wages is going to those who already have more money than they know what to do with. Our best and brightest (and most financially blessed) should be rethinking their notion of return on investment, and trying to recalibrate this equation in the direction of “justice for all.”

Robert J. Cavanaugh, Jr
February 8, 2021

Socialists Should Cheer Up

January 20, 2021 (784 words)

For some reason every critic of capitalism seems like a sourpuss. As if they are never able to get a good night’s sleep, or their sciatica is always acting up.

The cause of social justice is a noble one, and the motivation of its crusaders unassailable. But the constant wagging of the accusatory finger is not a good look. The average citizen is pre-occupied with his or her daily grind, and tends to dismiss those who have forgotten the adage of attracting more flies with honey.

Contrarians determined to save the world from craven capitalists may want to step back from the barricades for a moment, take a deep breath, and count to ten. Capitalism, per se, is not the problem. If it weren’t for the dramatic increase in material well-being capitalism is directly responsible for, there would be no grand economic windfall that needed to be more equitably distributed in the first place.

If one is committed to an all-out assault on movers and shakers for their sometimes pronounced lapses in the realm of empathy, it should always be prefaced by acknowledging the vision and organizational ability these inspired souls bring to the table. In this they have been touched by God. They are the reason we, the great unwashed, have come to enjoy an array of conveniences now considered commonplace.

While things could be better when it comes to social justice and equitable distribution, it wouldn’t hurt to remember things used to be a whole lot worse, and not that long ago, either.

Given the hard-scrabble existence many of our immediate forbearers faced, we have come a long way, baby. One might even say we are more than halfway home, if a just and equitable society is the agreed upon objective.

*

The root cause of social injustice is no big secret: Each of us is fundamentally flawed. What starts out with high hopes and the best of intentions can be easily sabotaged by a flagrant omission or an inadvertent oversight. This goes for quiet followers as well as boisterous leaders.

It’s okay to prosecute the 1% for their crimes against humanity, assuming the trial is conducted from a broadly informed perspective more charitable in its orientation. The juggernauts of modern commerce have an infinite number of moving parts, generating unexpected incongruities that defy easy resolution. If the critics of capitalism were to find themselves at the helm one day, it’s highly unlikely any of them would acquit themselves noticeably better.

Come to think of it, there is really nothing wrong with how capitalism has been practiced for the last couple of centuries that a healthy dose of Christian “do unto others” wouldn’t cure. This seminal fact has so far escaped the notice of the most vociferous critics, which may explain why they always appear so grouchy.

Those seeking to advance the cause of social justice would improve their chances if they could liberate themselves from the problematic label of ‘socialist.’ And they should push back hard when others try to tar them with that brush. It is the silent majority’s outright rejection of anything remotely associated with ‘socialism’ that sidetracks a much-needed re-write of certain portions of our economic playbook.

*

Without getting too technical, let’s flesh out a few broad strokes. Unfettered capitalism has fueled the natural tendency toward avarice on the part of the lucky few who find themselves with leverage. But socialism’s stated goal of abolishing private property in an attempt to end exploitation of the masses actually undermines the dignity of the very people it sets out to protect.

Then again, maintaining and honoring the concept of private property should not automatically extend to allowing ‘the means of production’ to accumulate in private hands. Especially when that develops into monopoly power and eliminates the competition that’s designed to keep the masters of the universe honest.

While it may run counter to our nation’s founding principles, any sober society will make room for calibrated government intervention in the economy. The “when” and the “how much” will always be subject to legitimate debate.

Enthusiastic capitalists must own up to this reality, and admit a measure of outside restraint on their more reckless impulses is warranted. As things stand now, gleefully pointing out the occasional waste and corruption in government’s attempts to balance the scales does not excuse the vagaries of laissez faire capitalism that necessitate balancing those scales to begin with.

This short piece is not aimed at getting successful capitalists to act a little less smug. It’s a pointed suggestion for crusaders of social justice to walk away from the ‘socialist’ moniker, once and for all. Doing so will lift their spirits, and help persuade the general public.

Robert J. Cavanaugh, Jr
January 20, 2021

Philanthropy: The Easy Way Out

January 12, 2021 (1,742 words)

Many of our prominent civic institutions rely on generous donations of private wealth for a vital part of their funding stream. While the term “philanthropy” can apply to the hundred bucks you throw at the local library or volunteer fire company as a year-end tax deduction, it’s more often used to describe the systematic dispersal of vast fortunes to any number of worthy causes.

Charitable giving on this sort of grand scale to enhance the common good is certainly commendable. However without wanting to look a gift horse in the mouth, it wouldn’t hurt to occasionally ask just how this enormous wealth gets accumulated in the first place. The question is not meant to imply behind every great fortune lies a great crime. Such a brazen accusation would be far too cynical for this, our civilized and enlightened age.

On the other hand, let’s remember there have always been two kinds of crime in this world: Those of commission that take place out in the open and are therefore easy for everyone to spot, and the subtler ones of omission that frequently escape public notice.

If a crime is committed in a respectable enough manner, the questionable origin of the resulting fortune is papered over and soon forgotten.

There is now an understanding that such prickly analysis belongs to a bygone era of overt “sweatshop” exploitation. Some of the oldest and best-known foundations still dispensing their never-ending bounty have a decidedly checkered past. They are the legacy of Robber Barons who outdid each other in their callous treatment of the working classes.

By way of contrast, our most generous contemporary benefactors don’t have that sort of awkward cultural baggage in their portfolios. Today’s philanthropic heroes are not thought of as having climbed over anybody on their way to the top. The general perception is these folks merely built a better mouse trap, and had the world beat a path to their door.

*

This reassuring narrative explains why reasonable people invoke the “no harm, no foul” rule when confronted by the newly rich. For the most part we are not given to probe too deeply into how the current generation of self-made billionaires came by their cash.

In fact, asking too many questions is frowned upon and considered bad form. It leads to the onerous charge of ‘class envy.’ For it is only mediocre people that always seem to ‘find a reason not to be successful’ who end up outwardly jealous of another’s success.

So determined are we to avoid being tarred with the ‘jealousy’ brush that polite society often errs in the opposite direction, by not exhibiting a healthy dose of circumspection when it is warranted.

This can be chalked up to the pride we feel in getting ahead, and the sense we share about the pursuit and accumulation of wealth being an inherently virtuous activity. It follows that those who make it are to be commended, not criticized.

As to the ways and means of modern wealth-creation, we take comfort in knowing the bad old days when an ogre would inflict unspeakable demands on a subservient workforce are long gone. Then again, it’s not as if today’s wage earners live in the land of milk and honey, without a care in the world.

Yesterday’s ogre has merely been replaced by today’s emotionless bureaucrat, who executes the will of the absentee corporate overseer. These bloodless people are far removed from the legion of workers who must conform to a ream of often counter-productive edicts.

It’s not that the bureaucrats and overseers set out to be bad or mean. (Though it’s not outside the realm of possibility that some of them do.) From a logistical standpoint it’s just real hard for a huge organization to maintain a “feel” for the rank-and-file, or to demonstrate a genuine respect for the dignity of all those in its employ.

There are many ways to show respect and honor human dignity, but among the most important is to pay a living wage to those without a leadership role or an ownership stake.

*

Our national character is an interesting blend of practicality and restlessness. The free-wheeling slogan “all’s fair in love and war” suits our spirit well, even though the claim is patently false on both counts. Neither it is remotely true that all is fair when trying to make a buck, by the way. Yet that is the modus operandi we have come to adopt. A brief look at the world of retail, which we all have extensive first-hand experience with, will prove my point.

As one travels around this great country, it’s easy to identify the pockets of prosperity by the plethora of high-end shopping centers that cluster together in our most fertile valleys. Each center is populated by a variety of upscale retailers with nationwide brand recognition and the cache that comes with it.

These beautifully appointed emporiums may not resemble the sweatshops of old, but almost without exception they are staffed by people who have trouble getting forty hours each week, are often forced to work irregular shifts from one week to the next, receive little or no benefits, and are given a wage that makes it difficult to pay the rent, let alone buy a house.

Home Depot does not necessarily qualify as a beautifully appointed emporium, but it is the largest home improvement retailer in the United States, selling tools and construction products. It’s also one of the few stores I happen to frequent. The story of its founding is an inspirational one, as are so many of these stories. Ken Langone (1935-), one of five original partners, was the Wall Street investment banker who helped arrange the financing that launched the franchise. What started modestly in 1979 with two stores in Atlanta has grown to over 2,200 locations in three countries, employing upwards of 400,000 people.

Along the way Mr. Langone has become a philanthropist of the highest order, with his specialty being the Medical Center affiliated with NYU that displays his name.

*

In August 2018 New York University announced the coup de grace: Free tuition for every current and future student at its medical school. Funding these scholarships is projected to require $600 million, and Langone got the ball rolling by kicking in a $100 million donation. This is a magnificent gesture, and sets a fine example for his fellow billionaires to follow.

But Mr. Langone’s generous nature does not make him an expert on what constitutes “equitable distribution” in a free-market economy.

Since the May 2018 publication of his autobiography Ken has made the rounds, and many of those interviews are easy to find on YouTube. He is regarded as something of iconoclastic entrepreneur, because he is still a salt-of-the earth kind of guy, despite his incredible success. I guess being the son of a plumber and working a series of odd jobs to put oneself through school helps keep a person grounded.

His book is enthusiastically titled I Love Capitalism: An American Story, and conveys a classic tale of rags-to-riches that never fails to bring a tear. Though we should point out Mr. Langone’s outsized affection for capitalism is not unique. Literally everyone who achieves a measure of financial security – to say nothing of enormous wealth – will tell you the very same thing.

The real question is, what about those hundreds of thousands of peons trying to grind out a living as a “sales associate” at the local Home Depot. What do they think of capitalism?

*

Contrary to Langone’s entertaining rendition of conventional wisdom, free enterprise as currently practiced is not the key to giving every single one of us a “leg up.” Simply because not everyone is a hungry kid with big dreams, like he was.

If only our captains of industry would come to the realization that even those without big dreams or incredible drive still deserve just compensation for the talents and work ethic they do contribute. Everyone’s dignity should be respected, even if they’re not a go-getter or a lead dog.

Having started at the bottom and scaled the highest summit, Ken Langone has concluded all is right with the world as it is, and philanthropy is the best way for a free society to redistribute the vast wealth movers and shakers create. Pardon me for saying so, Mr. Langone, but that philosophy strikes me as being more than a little self-serving.

Surely we can do a better job distributing free market capitalism’s remarkable winnings to those on the ground floor of our economy, without having to wait for the benevolence of the high and mighty to trickle a few drops down from above.

Look, this “equitable distribution” thing is a tough nut to crack, no doubt about it. The business model of every success story is based on paying the rank-and-file the “going rate,” and nothing more. Messing with that formula in any meaningful way might jeopardize the success of a fledgling enterprise. I get it.

Then again, citing the challenges to potential success should not be allowed to serve as “cover” for perpetuating a stingy compensation policy once success is achieved, and everything is coming up roses. Publicly traded companies that register millions in profit per quarter could certainly afford to raise the wage rates of line workers. Beyond that, let’s see some creativity.

Let’s ask our entrepreneurial class – so proud of their ability to overcome obstacles and pivot when needed – to apply their dazzling business acumen to this subject. Some form of profit-sharing, perhaps? Some measure of employee stock ownership? And while we’re at it, whatever happened to the once standard practice of providing company-paid medical coverage and a pension?

Whatever is done, it needs to make a real impact in the lives of the recipients. It can’t just be another token gesture for PR purposes. The fact that people continue to apply in droves for these crummy jobs is not a sign they agree to the terms of employment. It’s only a measure of their desperation. Successful employers would be making a real contribution to society if they would stop mistaking those two things.

Many of us admire Ken Langone for the street smarts he brought to his high-profile career on Wall Street, and the outsize generosity he has bestowed on his alma mater. But from a big-picture perspective, Mr. Langone’s legacy is just another example of philanthropy being the easy way out.

Robert J. Cavanaugh, Jr
January 12, 2021

Philanthropy: The Easy Way Out

January 12, 2021 (1,742 words)

Many of our prominent civic institutions rely on generous donations of private wealth for a vital part of their funding stream. While the term “philanthropy” can apply to the hundred bucks you throw at the local library or volunteer fire company as a year-end tax deduction, it’s more often used to describe the systematic dispersal of vast fortunes to any number of worthy causes.

Charitable giving on this sort of grand scale to enhance the common good is certainly commendable. However without wanting to look a gift horse in the mouth, it wouldn’t hurt to occasionally ask just how this enormous wealth gets accumulated in the first place. The question is not meant to imply behind every great fortune lies a great crime. Such a brazen accusation would be far too cynical for this, our civilized and enlightened age.

On the other hand, let’s remember there have always been two kinds of crime in this world: Those of commission that take place out in the open and are therefore easy for everyone to spot, and the subtler ones of omission that frequently escape public notice.

If a crime is committed in a respectable enough manner, the questionable origin of the resulting fortune is papered over and soon forgotten.

There is now an understanding that such prickly analysis belongs to a bygone era of overt “sweatshop” exploitation. Some of the oldest and best-known foundations still dispensing their never-ending bounty have a decidedly checkered past. They are the legacy of Robber Barons who outdid each other in their callous treatment of the working classes.

By way of contrast, our most generous contemporary benefactors don’t have that sort of awkward cultural baggage in their portfolios. Today’s philanthropic heroes are not thought of as having climbed over anybody on their way to the top. The general perception is these folks merely built a better mouse trap, and had the world beat a path to their door.

*

This reassuring narrative explains why reasonable people invoke the “no harm, no foul” rule when confronted by the newly rich. For the most part we are not given to probe too deeply into how the current generation of self-made billionaires came by their cash.

In fact, asking too many questions is frowned upon and considered bad form. It leads to the onerous charge of ‘class envy.’ For it is only mediocre people that always seem to ‘find a reason not to be successful’ who end up outwardly jealous of another’s success.

So determined are we to avoid being tarred with the ‘jealousy’ brush that polite society often errs in the opposite direction, by not exhibiting a healthy dose of circumspection when it is warranted.

This can be chalked up to the pride we feel in getting ahead, and the sense we share about the pursuit and accumulation of wealth being an inherently virtuous activity. It follows that those who make it are to be commended, not criticized.

As to the ways and means of modern wealth-creation, we take comfort in knowing the bad old days when an ogre would inflict unspeakable demands on a subservient workforce are long gone. Then again, it’s not as if today’s wage earners live in the land of milk and honey, without a care in the world.

Yesterday’s ogre has merely been replaced by today’s emotionless bureaucrat, who executes the will of the absentee corporate overseer. These bloodless people are far removed from the legion of workers who must conform to a ream of often counter-productive edicts.

It’s not that the bureaucrats and overseers set out to be bad or mean. (Though it’s not outside the realm of possibility that some of them do.) From a logistical standpoint it’s just real hard for a huge organization to maintain a “feel” for the rank-and-file, or to demonstrate a genuine respect for the dignity of all those in its employ.

There are many ways to show respect and honor human dignity, but among the most important is to pay a living wage to those without a leadership role or an ownership stake.

*

Our national character is an interesting blend of practicality and restlessness. The free-wheeling slogan “all’s fair in love and war” suits our spirit well, even though the claim is patently false on both counts. Neither it is remotely true that all is fair when trying to make a buck, by the way. Yet that is the modus operandi we have come to adopt. A brief look at the world of retail, which we all have extensive first-hand experience with, will prove my point.

As one travels around this great country, it’s easy to identify the pockets of prosperity by the plethora of high-end shopping centers that cluster together in our most fertile valleys. Each center is populated by a variety of upscale retailers with nationwide brand recognition and the cache that comes with it.

These beautifully appointed emporiums may not resemble the sweatshops of old, but almost without exception they are staffed by people who have trouble getting forty hours each week, are often forced to work irregular shifts from one week to the next, receive little or no benefits, and are given a wage that makes it difficult to pay the rent, let alone buy a house.

Home Depot does not necessarily qualify as a beautifully appointed emporium, but it is the largest home improvement retailer in the United States, selling tools and construction products. It’s also one of the few stores I happen to frequent. The story of its founding is an inspirational one, as are so many of these stories. Ken Langone (1935-), one of five original partners, was the Wall Street investment banker who helped arrange the financing that launched the franchise. What started modestly in 1979 with two stores in Atlanta has grown to over 2,200 locations in three countries, employing upwards of 400,000 people.

Along the way Mr. Langone has become a philanthropist of the highest order, with his specialty being the Medical Center affiliated with NYU that displays his name.

*

In August 2018 New York University announced the coup de grace: Free tuition for every current and future student at its medical school. Funding these scholarships is projected to require $600 million, and Langone got the ball rolling by kicking in a $100 million donation. This is a magnificent gesture, and sets a fine example for his fellow billionaires to follow.

But Mr. Langone’s generous nature does not make him an expert on what constitutes “equitable distribution” in a free-market economy.

Since the May 2018 publication of his autobiography Ken has made the rounds, and many of those interviews are easy to find on YouTube. He is regarded as something of iconoclastic entrepreneur, because he is still a salt-of-the earth kind of guy, despite his incredible success. I guess being the son of a plumber and working a series of odd jobs to put oneself through school helps keep a person grounded.

His book is enthusiastically titled I Love Capitalism: An American Story, and conveys a classic tale of rags-to-riches that never fails to bring a tear. Though we should point out Mr. Langone’s outsized affection for capitalism is not unique. Literally everyone who achieves a measure of financial security – to say nothing of enormous wealth – will tell you the very same thing.

The real question is, what about those hundreds of thousands of peons trying to grind out a living as a “sales associate” at the local Home Depot. What do they think of capitalism?

*

Contrary to Langone’s entertaining rendition of conventional wisdom, free enterprise as currently practiced is not the key to giving every single one of us a “leg up.” Simply because not everyone is a hungry kid with big dreams, like he was.

If only our captains of industry would come to the realization that even those without big dreams or incredible drive still deserve just compensation for the talents and work ethic they do contribute. Everyone’s dignity should be respected, even if they’re not a go-getter or a lead dog.

Having started at the bottom and scaled the highest summit, Ken Langone has concluded all is right with the world as it is, and philanthropy is the best way for a free society to redistribute the vast wealth movers and shakers create. Pardon me for saying so, Mr. Langone, but that philosophy strikes me as being more than a little self-serving.

Surely we can do a better job distributing free market capitalism’s remarkable winnings to those on the ground floor of our economy, without having to wait for the benevolence of the high and mighty to trickle a few drops down from above.

Look, this “equitable distribution” thing is a tough nut to crack, no doubt about it. The business model of every success story is based on paying the rank-and-file the “going rate,” and nothing more. Messing with that formula in any meaningful way might jeopardize the success of a fledgling enterprise. I get it.

Then again, citing the challenges to potential success should not be allowed to serve as “cover” for perpetuating a stingy compensation policy once success is achieved, and everything is coming up roses. Publicly traded companies that register millions in profit per quarter could certainly afford to raise the wage rates of line workers. Beyond that, let’s see some creativity.

Let’s ask our entrepreneurial class – so proud of their ability to overcome obstacles and pivot when needed – to apply their dazzling business acumen to this subject. Some form of profit-sharing, perhaps? Some measure of employee stock ownership? And while we’re at it, whatever happened to the once standard practice of providing company-paid medical coverage and a pension?

Whatever is done, it needs to make a real impact in the lives of the recipients. It can’t just be another token gesture for PR purposes. The fact that people continue to apply in droves for these crummy jobs is not a sign they agree to the terms of employment. It’s only a measure of their desperation. Successful employers would be making a real contribution to society if they would stop mistaking those two things.

Many of us admire Ken Lagone for the street smarts he brought to his high-profile career on Wall Street, and the outsize generosity he has bestowed on his alma mater. But from a big-picture perspective, Mr. Langone’s legacy is just another example of philanthropy being the easy way out.

Robert J. Cavanaugh, Jr
January 12, 2021

Wages: Expense or Investment?

December 27, 2020 (2,022 words)

Try to imagine a scenario in which a big, successful, publically-traded company – say a tech giant such as Amazon, for example – might decide on its own to pay its low-wage workers – in this case warehouse “fulfillment” employees – more than the going rate.

“Why would any business do that,” is probably the first response that comes to mind.

There are many factors preventing this pipe dream from becoming a reality. Chief among them is a piece of conventional wisdom we are all familiar with: wages paid to employees with no leadership role or ownership stake are just another expense on the balance sheet, like rent or utilities. Such wages should be managed and minimized wherever possible, to improve the bottom line. This is accepted as an immutable law.

Haggling over a federally-mandated increase in the minimum wage distracts the electorate from a larger, more fundamental issue. Wages paid to the rank-and-file should not be thought of as a typical run-of-the-mill expense, but rather as an investment. And not just an obvious investment in the well-being of the lower-tier employees, but also an important investment in the financial health and future growth potential of those businesses forced to meet the higher payroll. Not to mention the carry-over investment in the communities which are home to both sides of this equation: employees and upper management/ownership.

It won’t be easy to change our shared understanding of what constitutes “right order” when it comes to compensation. Successive generations have wrestled with the question, and so far a permanent solution that is consistently fair to “labor” has proved elusive.

*

The debate over what is appropriate remuneration for those who toil, relative to a return on capital for those who invest, has raged for centuries. You may recognize it by its fancy, academic name: “the labor theory of value.” Many a big-time thinker has weighed in on the subject.

There is Thomas Aquinas (1225-1274), who states “… value can, does, and should increase in relation to the amount of labor which has been expended in the improvement of a commodity.”

Then we find Ibn Khaldun (1332-1406), the Arab scholar of Islam, who has been called the founder of the modern discipline of economics, among his many other accomplishments. Mr. Khaldun describes labor as the source of value necessary for all earning and capital accumulation.

John Locke’s labor theory of property comes along in 1689, which also sees labor as the ultimate source of economic value. Adam Smith (1723-1790) follows, and identifies a flaw in the application of this theory to contemporary capitalism: if “labor embodied” in a product is equal to “labor commanded” (the amount of labor that can be purchased by selling the product), then profit is impossible.

David Ricardo (1772-1823) responds by pointing out Smith is confusing labor with wages. This more or less brings us to our current impasse over the relative value of labor in the modern-day economy.

*

Once the stagflation of the 1970s was swept away by the boom of the 1980s, most everyone now living became a walking, talking disciple of trickle-down economics. That meant allowing the market to determine wages, with supply-and-demand given final say on all decisions related to compensation. There were hardly any complaints, since things were going so well for so much of the workforce. That is to say, the middle-class white population with access to a decent education, and possessed of a modicum of drive, determination, and smarts.

The post-WWII baby-boomers had by now settled into their comfortable, middle class lifestyles. The blue-collar limitations that constrained their parents were but a distant memory. So too were those past affiliations with organized labor, which made their parents’ middle-class existence possible.

Then along came the late-1980s roll-back of anti-trust legislation, and the late-1990s deregulation of the banking industry, both of which altered the employment landscape in ominous ways. Suddenly there was less competition and more monopoly control. Slashing payroll to increase profitability meant fewer options for the skilled workforce. The new private equity firms that leveraged their way to dominance in the retail and service sectors also cut jobs as a matter of principle, and managed to establish something of a hard cap for their remaining low-wage workers, since those people had nowhere else to go.

The great recession of 2008 did not help matters. We all know the financial industry and the stock market have rebounded nicely in the last twelve years. And the new tech giants are also doing quite well, even in the midst of the COVID-19 pandemic. But much of the American workforce is now experiencing what the experts like to call “economic uncertainty.”

Since such uncertainly has been commonplace for a large chunk of our nation’s history, you might wonder why anybody would bother getting overly worked up about it now. I guess the point is everyone who matters has been strutting around for the last sixty years, acting like the equitable distribution problem had been solved, once and for all.

This explains why the current level of stress is catching many commoners by surprise. For that segment of the population things seem to have reverted to a level of day-to-day precariousness not seen since the late 19^th and early 20^th centuries.

*

In hindsight maybe we were a bit too hasty in disowning our family ties to the labor movement. Considering unions were responsible for balancing the scales between the competing interests of workers and owners, if only for what turned out to be a brief shining moment in our history.

In one respect the cold shoulder currently given to organized labor can be chalked up to a subtle sense of superiority, since so many have moved into more highly compensated, white-collar employment. In another respect, it’s a lingering distaste for the “commie” overtones surrounding the union movement that still bother people, overtones that “labor” has never been able to completely shake off.

Speaking to that last issue, mainstream Americans have always been pretty unanimous in their rejection of Karl Marx (1818-1883). The first part of his detailed critique of capitalism dropped in stages between 1867 and 1883, just as the Robber Barons were getting warmed up. One would think his timing would have made for a slightly more receptive audience on this side of the pond. Instead polite company has written the man off entirely.

History strikes me as a series of unrelated events that challenge our ability to work together on a cooperative basis. We in the present are inclined to assume past controversies were settled at the time. It turns out nothing is ever properly thought through, or brought to a conclusion that satisfies all sides. Momentum always carries society forward into the next generation, loose ends and all. The next group is forced to face another set of new controversies, with ever more unresolved baggage from before.

Karl’s contention that any corporate profit whatsoever represents exploitation of labor overstates the case. As does his well-known desire to abolish all private property, and remove ownership of the means of production from private control.

He deserves to be corrected on a few points. Everyone who “participates” in a commercial enterprise is entitled to a slice of the economic pie, even owners and investors. The old 70-30 distribution formula (labor-to-capital) does not necessarily cover every modern contingency. Private property is a pre-requisite for human dignity, especially for those on the lower tiers of the economic ladder.

On the other hand, allowing the means of production to accumulate in private hands, especially when that ownership turns into monopoly power, is just asking for trouble.

For those principled stalwarts intent on blazing a reliable trail forward, it’s not so much debunking one system of thought in favor of another. There is usually a bit of truth in both sides of most of these arguments. It’s more a matter of teasing out that truth, and not allowing oneself to be put off by the shortcomings of a rival’s position, or blind to the limitations of one’s own.

*

There is no one perfect, fool-proof policy proscription waiting to be plugged in that will magically smooth out the rough edges. What we are doing now is pretty much all there is to do. We just have to fine-tune some of the particulars, and improve our execution.

The free-market strategy so many insist is superior to “government intervention in the economy” has a lot to recommend it. But the secret sauce that’s supposed to keep everyone honest in such an approach is completion. Yet that’s the very thing today’s most successful entrepreneurs (and yesterday’s most successful “industrialists”) are so good at eliminating.

Under the circumstances, then, allowing employees to bargain as a unit for increased leverage in contract negotiations, rather than being left to twist in the wind on their own, would seem to make sense.

Let’s remember how that brief shining moment of a generation’s worth of balance between labor and capital was set in motion by the landmark National Labor Relations Act of 1935, which established workers’ rights to collective bargaining, and attempted to regulate unfair practices on the part of everybody: employers, employees, and unions.

By 1937 Chrysler and General Motors had agreed to negotiate with the union representing their assembly line workers. Ford was dragged kicking and screaming to the bargaining table in 1941. The story goes that Henry Ford (1863-1947) – who was notorious for hating unions with a passion – only relented after years of bitter opposition when his wife, Clara, threatened to leave if he didn’t get with the program.

Once the old man finally came around, the Ford Motor Company gave its workers more generous terms than either GM or Chrysler. In addition to paying back wages to more than 4,000 workers wrongfully discharged for their organizing activities, the company agreed to match the highest wage rates in the industry and to deduct union dues from workers’ pay.

It’s a shame so many of today’s most successful firms shun unions in favor of an “open shop” mentality. In the car industry the non-union compensation package is roughly half, in case you are interested in that minor tidbit. The auto makers tell us they have been forced in this direction out of a dire need to “remain competitive.” But what has changed? Why was everyone able to prosper for a generation under the previous arrangement, when assembly line auto workers – among many other factory workers toiling in a variety of other industries – were paid a living wage?

*

As with everything else in this life, he who has the gold makes the rules. Our wildly successful corporate behemoths, entrepreneurial juggernauts, and private equity king makers must decide of their own volition to address the current adversarial situation, and make improvements. Re-establishing a public forum (collective bargaining) to determine appropriate compensation for line workers would be a good start.

Another step in the right direction would be implementing whatever form of open-book management might be feasible for these huge organizations. The people pulling the strings never like to give out the full story, so expecting them to provide a level of transparency that is uncharacteristic will be a tough ask.

Voluntary compliance is the only way things will ever change. It won’t happen by forcing big shots to the table through some onerous government mandate. Just look at how every attempt at regulation results in yet another clever corporate work-around. The top guns need to find their inspiration in a sustaining vision of long-term and widespread prosperity, instead of short-term executive bonus pay and return on investment.

Along the way these giants might also tap into a sense of simple decency and fair play. Such homespun sentiments may start to resonant with certain people once those with all the leverage stop using “supply and demand” as cover for indulging the all-too-human tendency to avarice.

Even lesser mortals, who spend their entire working lives consigned to the boiler room of our ingenious money-making contraptions, shoveling coal into the furnace so the elaborate apparatus keeps purring along, deserve an equitable share of free-market capitalism’s jaw-dropping largesse.

Robert J. Cavanaugh, Jr
December 27, 2020