Economics for Politicians Part 5 - Businesses are Greedy - That's Not Necessarily a Bad Thing!

*** Update - Cross Posted at Flopping Aces! ***

Today we'll be covering one of the favorite memes among the left, the notion that business are evil, greedy entities that must be reigned in and controlled by benevolent, uncorruptable government bureaucracy. Links to our previous lessons are at the bottom of the page, with the link to our last lesson on why you don't create jobs being the most relevant. Today we're here not to dispel that businesses are greedy but that in the words of the immortal Gordon Gecko, "Blue Horseshoe loves Teldar Paper." No wait, that's not the quote that I wanted. The phrase I'm looking for is the from a speech best summed up with three simple words - "Greed is Good".

First off, today's lesson is not to excuse irresponsible or immoral corporate behavior. I'm not here to make excuses for companies that create unsafe products, send their workers into unreasonably unsafe conditions (an example of reasonably unsafe is that fire fighters are aware of the conditions they'll need to work in when they sign up for the job and every possible safety precaution is made to protect them) or ones who treat their employees unfairly, whether by discriminating in their hiring practices or underpaying their employees. Very few people will advocate any of these practices, and luckily we have a social and legal framework that deals with each of these issues. But we're not here today to talk about the evils of corporate greed - we're here to talk about the good of corporate greed!

I see the puzzled looks on your faces. Aren't businesses just organizations that are supposed to make contributions to your campaigns so that you can reward them with legislation to hurt their potential competition? For you yes, but for the rest of us they provide us with jobs, and we freely trade with them to obtain the goods and services that we want. Fred Thompson said it so well at the 2008 GOP convention when he addressed the prospect of raising taxes on businesses, "Unless you buy something from a business, like groceries, clothes or gasoline, or unless you get a paycheck from a business.. Don't Worry! It's not going to affect you!" Ah, but why are they sitting on massive amounts of capital and not investing in new equipment and research and development? Why, after the president proved that this administration is business friendly because he said so are businesses reluctant to hire and why does unemployment remain "unexpectedly" high?

To understand why businesses hire employees you need to first start by taking a few steps backward. A better question is "Why do businesses hire any employees?" The answer is simple. When any business is successful, it's bound to expand. As it gains more business, whether selling more cars or pizzas or getting more people to sign up for their advisory services it can only ask its employees to do so much extra work to support the new business before the workers burn out and quit. Therefore as any business grows it hires more people to handle all of its extra business. Pretty simple so far, right?

Now things get trickier. Why do businesses expand and grow in the first place? To take on more market share? To do more business? Yes but... what is the incentive for any business to grow? Why take the risk of producing more products that may not get sold, hiring more people to offer services that customers may want or not want, or branching out into new markets where the customer base may not be interested in your product? For that matter why are businesses in business in the first place? Are they around to serve as health care providers? To act as a societal means to promote diversity initiatives? To find ways to give back to its community? Or maybe serve as some entity that can be relied on to cough up some campaign cash for you every few years or so? Wrong on all counts. The answer is as simple as it is misunderstood. You guessed it - greed!

A business is in business to make money. Anyone who has ever run a business knows this. Over the years I've run a few small business ventures and have known what it's like to be an entrepreneur. While I haven't done anything on a large scale, I have known the fear that goes into sinking a chunk of one's hard earned money into some merchandise, knowing that all of the hard work that went into earning that money could be gone in an instant if the goods don't sell. Then there's that feeling of relief once enough goods are sold to hit the break even point and knowing that at the very worst the only loss that will be incurred is your time, and then that feeling of satisfaction as all of the risk and hard work pays off as the inventory moves and a profit is made. But I've never taken the plunge and put everything on the line, left my career, risked my savings and possibly more and gone into a business for myself with the intention of that business becoming my livelihood. I've never gone through the trials and tribulations that go with starting a serious business in terms of getting all of the proper licensing, basically mortgaging my future, fighting to gain market share, putting in the long hours needed to make it successful, and going through all of the headaches that go into hiring and managing a staff to handle the operations. And at the end of this, the owner can take satisfaction in being able to provide for himself and his family, building a future for them, not to mention rewarding all of those who also toiled to make the business successful. Yes, there are a number of business owners that make good money for their effort, but they take a significant risk and sacrifice a great deal to become successful.

"Ah yes", you are no doubt thinking. "Just like running a campaign!" Sort of, but not exactly. Yes, you both sacrifice long, hard hours and fight adversity for an outcome that is far from assured. But the differences are as glaring as night and day. Business owners are rewarded for contributing to society, in that they provide a product or service that is so vastly superior to every other possible choice that people can make to spend their hard earned money that they willingly part with it to buy that product. Your accomplishment is doing a better job of telling people what they want to hear than your opponents. You might think that running a successful campaign is the equates leadership, but who would be crazy enough to believe that?

Going back to the point of greed being good, the business owner is not the only one who benefits from a successful enterprise. Let's revisit my previous points about the good of a successful business in the other direction. A business that makes its owner(s) happy will be profitable. When it becomes more profitable, it wants to do more business to obtain greater profits. When it does more business additional labor hours are required to perform the work necessary to generate this business. Greater labor hours can only be squeezed out of existing employees to a certain extent, and at some point additional ones need to be hired. Hey! Look at what these horrible, evil, greedy corporations just did - what we who are out in the real world call "job creation!" And look at what else all of this additional business has created - more goods sold and profits that you can tax, taxes on payroll, not to mention more people with jobs means fewer people in need of transfer payments from the government! That's right, greedy businesses not only give you more money to invest in all of the projects that you need to reward the people who elected you, but having fewer people in need of your various forms of welfare leaves even more money for you to dispense favor to the people who you want to vote for you in the next election - everybody wins!

You probably just got so excited over all of the tax dollars flowing your way that you probably overlooked one glaring mistake that was intentionally placed in that last paragraph. The business folk probably spat their coffee and started grinding their teeth s they read it, but you probably skimmed right over it. I even left the word in bold for you to ponder over as we close out for today and you can think about an upcoming lesson in investment. But first our next lesson will be

Lesson Six: - You are Greedy - This is a Bad Thing

Previous Lessons:

Lesson One: It's Not Your Money

Lesson Two: Intro to Microeconomics, or Why Prices Matter

Lesson Three: Intro to Macroeconomics. or So that's Where Government Fits In!

Lesson Four: You Don't Create Jobs - It's Time to Get Over FDR!