Tag Archives: Free Market

Commentary

The pilgrims experiment with communism before the second Thanksgiving

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The First Thanksgiving
Less than half the original pilgrims made it to the the first Thanksgiving

Here’s an article from The Stream about the second Thanksgiving, by Dante Witt. I like this article because it tells us so much about the character of the United States of America. Why are we so conservative about economics?

She briefly retells the story of how the pilgrims were helped by Squanto, which I blogged about in a previous Thanksgiving Day post, then she talks about the troubles they had next.

Excerpt:

Although Squanto’s farming techniques worked better than their old ones, the pilgrims still could not produce enough food. Was it bad luck? Bad soil? No. The Mayflower pilgrims were part of a joint stock company which stipulated that the pilgrims would pool their resources, and receive a share of the profit.

The strategy turned out to be deeply misguided, working about as well as various communist economic schemes hundreds of years later. The sad state of the colony after two years of communism, wrote William Bradford, “may well evidence the vanity of that conceit of Plato’s and the other ancients applauded by some of later times; that the taking away of property and the bringing of community into a commonwealth would make them happy and flourishing; as if they were wiser than God” (p. 121).

So the pilgrims amended their contract so that each family was now responsible for its own provision. The difference was stark. Bradford explained:

This had good success, for it made all hands very industrious, so that more corn was planted than could have been by any other means the Governor could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression.

In fact, it’s estimated the colonists planted about six times the crops they would have planted otherwise.

That shows where Americans get their views of economics, but what about the praying and the gratitude?

More:

With new farming techniques and an amended government, the pilgrims did all they humanly could to ward off starvation. But they could not control the weather. A drought settled on the colony and threatened to kill the corn before the harvest. Recognizing with the Psalmist that “except the Lord build the house, they labor in vain that build it,” the colonists turned to God. According to Bradford, they “set apart a solemn day of humiliation to seek the Lord by humble & fervent prayer, in this great distress.” What was the outcome?

And he was pleased to give them a gracious & speedy answer, both to their own & the Indians admiration, that lived amongst them. For all the morning, and greatest part of the day, it was clear weather & very hot, and not a cloud or any sign of rain to be seen, yet toward evening it began to overcast, and shortly after to rain, with such sweet and gentle showers, as gave them cause of rejoicing, & blessing God. It came, without either wind, or thunder, or any violence, and by degrees in that abundance, as that the earth was thoroughly wet and soaked therewith. Which did so apparently revive & quicken the decayed corn & other fruits, as was wonderful to see, and made the Indians astonished to behold. (p. 131)

Seeing the speedy results of the Puritans’ prayers, an Indian named Hobanak said, “Now I see that the Englishman’s God is a good God, for he hath heard you, and sent you rain, and that without storms and tempests and thunder, which usually we have with our rain, which breaks down our corn, but yours stands whole and good still; surely your God is a good God.” (pp. 64-5)

Then William Bradford again proclaimed a day of Thanksgiving to God, the forerunner of the American tradition of Thanksgiving.

So, this story explains why the United States has this character that values the free enterprise system, hard work, individual achievement, prayer, and gratitude. These are the values that make us American, that made us into such a great nation.

News

Education Secretary Betsy Devos scores a victory against public sector union

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Secretary of Education Betsy Devos
Secretary of Education Betsy Devos

Although you would never know it from the mainstream news media, Secretary of Education Betsy Devos is doing her best to advance a taxpayer-friendly agenda in education policy.

Here’s the latest from the American Enterprise Institute, a free-market think tank:

In a noteworthy development, DeVos’s team this month radically revamped the collective-bargaining agreement (CBA) that governs the 3,900 employees at the U.S. Department of Education. The new CBA, between the Department and Council 252 of the American Federation of Government Employees (AFGE), includes big changes from the 2013 agreement negotiated under the Obama administration.

The new agreement doesn’t address compensation or benefits, of course, since those are governed by federal law, but it does include a raft of sensible, taxpayer-friendly changes.

The new CBA eliminates the set-aside of “official time” for union business. Under the old agreement, designated union representatives were free to work on union business during normal, government hours — all on the taxpayers’ dime. The old CBA stipulated that “no fewer than 75” (!) union stewards across the country could work up to 40 hours a year on “official time,” while another three union officers would devote 100 percent of their time to union business. Henceforth, union business will be done on union time, rather than on the taxpayers’.

Under the old agreement, department employees were given only a solitary 48-hour window each year in which they could opt out of union membership; miss that, and they were automatically enrolled. Henceforth, employees who wish to be in the union each year will be free to do so, and they will have an extended period in which to enroll — but they will have to actively choose to join.

The revamped accord also removes the requirements for “pre-decisional consultation.” Under the previous CBA, the department was required to consult the union before every agency-wide decision that could be construed as affecting the work of employees (such as transferring employees from one office to another, or even shifting employees from one project to another within the same office). Now, the department needs only notify the union of such decisions.

Under the new CBA, the union will be charged “fair-market rent” for the use of government office space and federally furnished equipment to conduct union business. Under the Obama-era accord, taxpayers were required to provide space and equipment to the union free of charge.

More generally, the new agreement removes a number of provisions that added burdensome procedural directives above and beyond statutory requirements when it came to things such as telework and grievance procedures.

If there is one thing I expected from Betsy Devos, it’s taxpayer-friendly education policy.

Unfortunately, the Republican party didn’t help her very much in that massive $1.3 Billion spending bill that they passed, with Democrat support. Betsy wants to cut federal spending on education, and return control of education policy to the states and municipalities. But the GOP just gave the Department of Education a bigger budget. We really need to switch out some of these big government Republicans for authentic conservatives.

News

How much does the average American corporation make in profit?

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How much profit does the average American corporation make?
How much profit does the average American corporation make?

A while back, there was a story about how Americans vastly overestimate how many people in the USA are homosexual. According to Gallup polls in 2011, Americans estimated that 25% of the people in America were homosexual. In 2015, it was 23%. The actual number is about 3%. So it’s very clear that Americans can have wildly inaccurate perceptions about reality. Why are Americans so wrong? I think it’s because they see a lot of gay people in high profile areas, particularly in the entertainment industry.

I thought about this failure to perceive reality when I saw a story about how much profit Americans think that corporations make. My guess was that the average corporation makes about 5-10% profit margin. I know this because I used to buy and sell stocks regularly and that’s one of the numbers I would look at. Most Americans own stocks, so I thought they most Americans would know the number as well. But it turns out that American perceptions of corporate profits are wildly off the mark.

Check out this article from the prestigious American Enterprise Institute:

When a random sample of American adults were asked the question “Just a rough guess, what percent profit on each dollar of sales do you think the average company makes after taxes?” for the Reason-Rupe poll in May 2013, the average response was 36%! That response was very close to historical results from the polling organization ORC International polls for a slightly different, but related question: What percent profit on each dollar of sales do you think the average manufacturer makes after taxes? Responses to that question in 9 different polls between 1971 and 1987 ranged from 28% to 37% and averaged 31.6%.

How do the public’s estimates of corporate profit margins compare to reality? Not surprisingly they are off by a huge margin. According to this NYU Stern database for more than 7,000 US companies (updated in January 2018) in many different industries, the average profit margin is 7.9% for all companies and 6.9% for more than 6,000 companies excluding financials (see chart above).

[…]“Big Oil” companies make a lot of profits, right? Well, that industry (Integrated Oil/Gas) had a below-average profit margin of 5.6% in the most recent period analyzed, and separately, the Production and Exploration Oil/Gas industry is losing money, reflected in a -6.6% profit margin. For the general retail sector, the average profit margin is only 2.3% and for the grocery and food retail industry, it’s even lower at only 1.6%. And evil Walmart only made a 2.1% profit margin in 2017 (first three quarters) which is less than the industry average for general retail, possibly because grocery sales now make up more than half of Walmart’s revenue and profit margins are lower on food than general retail.

Sometimes, the government makes MORE from the sale of goods or services than the company that does ALL the work:

Interestingly, Walmart’s profit margin of 2.1% is actually less than one-third of the 6.5% the average state/local government takes of each dollar of Walmart’s retail sales for sales taxes. Think about it – for every $100 in sales for Walmart, the state/local governments get an average of $6.50 in sales taxes (and as much as $10.12 in Louisiana and $9.45 in Tennessee, see data here), while Walmart gets only $2.10 in after-tax profits!

I think that Americans are getting their false anti-corporation views from listening to the mainstream media. The mainstream media is overwhelmingly leftist according to recent studies of their political donations. I think that the anti-corporate views of the average American comes from their uncritical consumption of mainstream media propaganda. They think they are getting objective news reporting, but what they’re really getting is socialist propaganda.

Here is a short little video that explains more about profit margins, and what would happen if a socialist like Bernie Sanders were put in charge of a corporation:

If you’d like to help with this problem of anti-business economic illiteracy, please watch the video and share it, or share the AEI article, which contains the video. America will be a better country when Americans have accurate, informed beliefs about important issues.