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Free Market Economy, Monopolies, or Both?

by John Brian Shannon | May 13, 2016

Should developed nations favour a free market economy? Monopolies?
Or a
regulatory framework that strengthens the macro economy?

  1. The entrepreneur in me likes Perfect Competition in a free market economy.
  2. The businessman in me likes Monopoly because of the opportunities afforded by economies of scale.

Monopolistic economies of scale allow corporations to:
[a] provide more services or products for the same cost,
[b] provide the same services or products for less cost,
[c] provide decreasing services or products to improve the corporate bottom line.

Unfortunately, monopolies are becoming the norm in America these days and one of the reasons for this is due to the emergence of the activist shareholder who demands higher dividends — no matter the burden this places on the corporation.

Eventually it ruins the corporation as higher profits (gained by cost-cutting and lowering standards in the rush to keep shareholders happy) are directed up and out of the corporation, and sometimes out of the country.

In simple terms, today’s activist and powerful shareholders are taking huge corporate fortunes and creating small fortunes out of them — in exchange for higher personal returns.

When they bleed one corporation dry they simply migrate to the next corporation. That’s not the way to build a strong country.

How to Strengthen the Macro Economy via new Corporate Ownership Regulations

The regulation we need is that no more than 50% of any corporation’s total value should be available to shareholders.

By law, the other 50% would always remain founder-owned or corporation-owned shares.

This would prevent the most egregious profit-taking damage to corporations — and C-suite executives could then lead the corporation according to what works best to gain higher customer approval ratings and improved market share — instead of what works best to meet shareholder demands.

By keeping 50% of the value of the corporation within any combination of the corporation or its founder(s) it helps to prevent excessive profit-syphoning to shareholders and it allows for rock-solid collateral when (re)capitalizing the corporation during expansion, for example.

One immediate bonus would be a much larger investment pool available to corporations that are looking to offer up to 50% of their value to shareholders.

I’d expect a NASDAQ boom if such a regulation were passed. A small and mid-cap renaissance would finance a new bull market from one profound regulatory change.

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Lack of Leadership Leads to Societal Ills in North America

by John Brian Shannon | October 30, 2014

Putting the ‘cart before the horse’ leads to societal ills

Truism: Whenever and wherever the unemployment rate is low anywhere in the world, drug abuse, crime, and homelessness drops. Jobs prevent the depression that leads to drug abuse, crime, and eventually homelessness.

Because corporations in North America prefer a high-ish unemployment rate (to guarantee they get the choicest and hungriest applicants, and to ensure a large pool of seasonal labour, and as a device that works to continuously dampen calls for a higher minimum wage) we have the follow-on problems of depression, leading to drug abuse in some cases, which eventually leads to crime and later, homelessness for many of the working poor.

Which results in higher costs to society and it’s the taxpayers who must cover those costs, one way or another

To solve this utterly predictable set of problems, all levels of government should be working with corporations to ensure that corporate needs are met — but without destroying the lives of many people who would frankly, rather be working!

When everyone matters, society works better.

When everyone matters, society works better. Image courtesy of Dr. Paul Farmer

Nordic countries ask; What societal problems?

Sweden has mandatory job-sharing in those industries that can’t employ all of their workers. Except for retired people, students, those with chronic illness, or the very wealthy, everyone in the country works for *at least* 6 months of the year. Which neatly prevents such societal ills.

If you’ve ever visited Sweden, you’ll notice that nobody lives in dumpsters

Some industries in Sweden can’t use all of their available workers, so if you’re a worker in that particular industry it simply means that you’re ‘on work’ for 6 months and you’re ‘off work’ for 6 months of the year. The ‘alternate person’ steps in and does ‘your job’ for 6 months while you’re on mandatory time off. Both people get UI from Day 1 of their respective layoff dates.

It’s not like layoffs in North America. It’s more like, “Your scheduled time ‘off work’ is coming up, Anders. So have you arranged the dates for your temporary replacement? You have? Thank you.”

In Sweden, you ‘own’ your job, you’re responsible for it, and you want to perform well for the company that has given you the responsibility for making sure that ‘your job’ is done properly

Also, even though you’re ‘off work’ for 6 months, you’re still expected to be available to fill that position whenever the alternate worker is ill, or can’t make it to work for any other reason. You like that a lot, because their UI system doesn’t penalize you for kindly making yourself available to the company AND you get to keep the wages you earned that day.

If you’re ‘on work’ for your 6 months and suddenly want a day ‘off work’ to go buy a house, propose to your partner, or whatever, you just arrange it with the ‘alternate’ who shares your job — and you’re covered. They come in and do your work for you. You inform the company merely out of courtesy that this will be happening. It’s ‘your job’ after all — not the company’s job.

So, let’s say that you’re off work for 6 months and ‘Sven’ (the person doing your job) has a skiing accident and needs 10 days off work to recover, you not only get your regular UI payment, you also get the normal wages for each day that you replaced Sven.

In this hypothetical scenario, between ‘Anders’ and ‘Sven’ the job they share is totally covered, no matter what, 365 days of the year. Overtime wages? Unknown in Sweden. With one phone call the company simply adds another already trained worker to the project, until project completion. Then they send them back home, until called in to work (for temporary replacement purposes) or the company again calls him to help with additional workload, or timely project completion.

Everyone has a job, or is on UI for part of the year. Consequently, depression, drug abuse, crime, and homelessness are almost unknown in Sweden

Everyone has a job. Whether you are ‘off work’ for a time, or ‘on work’ for a time — you have a job, you have a place in society, you belong to a community. You may work 100 days per year, you may work 200 days per year, or any number of days between 100 to 365 days per year in Sweden. It depends how busy your particular industry is, that particular year.

The takeaway point is; If you live in Sweden — you’re a worker, you’re a valued person, you’re part of Sweden’s ongoing success, you belong.

When everyone matters — corporations work better, society works better, and the UN scores your country highly on the UN Happiness Index

Corporations like this employment policy, because more employees than they can afford to keep employed year ’round ‘own’ their particular position and over the course of a year, both workers communicate often, to make certain that every single working day of the year is ‘covered’ for the company.

The company doesn’t care which of the two workers are onsite on any given day, because both are eminently qualified and both feel that they ‘own the job’ and are responsible for it. Which is much better for the corporation when compared to only one person owning that job.

What happens in a Swedish company when an employee has time off due to illness, mandatory maternity leave, vacation times, or car trouble?

Nothing. The alternate worker is likely already on the premises doing the job. Utter, boring, Swedish efficiency!

The company knows that every work day of the year, each position in the company will be filled by the regular worker or the alternate worker — no matter what!

The inequality in North America is stunning. And there’s no good excuse for it. It’s merely a lack of leadership. Governments are kowtowing to uninspired, faceless, and unaccountable corporations that only care about the bottom line.

But hey, don’t blame the corporations! They’re in business to make a buck — not to solve social problems — that’s the government’s job.

But when the corporations are the ones causing the social problems via their policy of keeping workers hungry for work through a policy of high unemployment, union-busting, threats to export jobs to Asia, downsizing threats and more — that’s when we need to look at a better model.

And in the case of Sweden and other Nordic countries a much better model already exists — not just for society, but for corporations as well.