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Stop Corporate Charity

December 29, 2010 2 comments

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There are many reasons to oppose corporate charity. It is deceptive, immoral, and border-line criminal. It hinders economic growth for the wealthy as well as the impoverished, and promotes a culture of ambiguity, pompous grandstanding, and anti-productivity.

Under a strict construction of the ethics of contractual agreements, corporate charity is an act of theft against the corporation’s stockholders and other investors. This is obviously so because a corporation is by definition a for-profit entity, and its investors lend their capital to the corporation ostensibly to receive a return on investment in proportion to the corporation’s profits. Investment carries risk, of course, and if a corporation fails to produce a profit by the honest inadequacies of its executives, that is business. On the other hand, if it fails to produce a profit – or fails to produce as much of a profit – because the executives made a decision to donate some portion of revenue to charity, however small a portion it may be, the investors have been cheated out of returns they were owed under their agreement with the corporation. This is exactly the same crime as occurs when executives defraud investors by embezzling company funds into their personal accounts. It is only treated differently because of differing public attitudes about perceived greed and perceived charity, which, right or wrong, should have no bearing on whether theft is a crime.

An argument can be made that the situation is not so clear-cut because corporate charity has gained widespread acceptance, or at least widespread acknowledgment. Since almost all corporations engage in at least some level of charity, it could be argued that investors understand at the time they decide to purchase stocks that some portion of their funds will be given away rather than used for real investment purposes. That’s not a totally invalid point, but it’s extremely shaky. If a consumer buys a sealed box labeled “a dozen eggs”, but knows at the time it probably only contains ten eggs because a short dozen scam is widespread and typical in his town, the fact that he knew he was most likely getting scammed doesn’t make the scam okay. This is what is happening with corporate charity: investors are being scammed out of a portion of their investment, but they expect they probably will be. That doesn’t justify it.

Furthermore, even if we accept the argument that an expected scam is not truly a scam, that leaves open the question of precisely what is expected. Maybe investors only expect that the corporations in which they choose to invest will donate one percent of their money, but the corporations actually donate two percent! Maybe the investors expect that each corporation will steal whatever the average amount of stealing is, but in fact some corporations by definition must steal more than the average. Clearly there is no way to reason out of the reality that deliberately non-profit actions by an explicitly for-profit institution is a criminal act of theft against investors. This alone should be sufficient to compel any honest person to oppose all corporate charity.

This is nowhere near the end of it, though. As with almost all criminal acts, the damage done by corporate charity really extends far beyond the simple breaking of an abstract principle. The principles of contracts exist for a reason, and the violation of them has severe negative consequences for everyone. When executives steal from investors to donate to charities, they decompartmentalize the economy, blurring the lines between production and consumption, and making it harder for investors as well as consumers to make informed choices. Compartmentalization and specialization are necessary in a productive society, because they allow for the greatest success for the most productive entities and the most immediate failure for the unproductive ones. Both production and charity are made more efficient when they are handled separately.

Consider an entrepreneur who innovates in automobile technology, reducing the costs of high-speed transportation sufficiently that millions of families who were previously too poor to afford it now have access. Good for him. His company will likely make a very large amount of money selling these cheaper automobiles, and it should, because that profit is the incentive that brings about innovation. It’s a reciprocal relationship – the entrepreneur is wealthier precisely because he made poor people wealthier. The more people to whom he is able to provide transportation affordably, the more money he will have. In this way he has done a great service to himself as well as to others around him.

Now suppose this entrepreneur donates huge portions of his money to charity, or worse, steals from the investors in his company and donates their money to charity. No matter what sociology professors may say, this is economically a bad idea. It is known that the entrepreneur is talented in production. There is no reason to believe he is talented in charity. He has an inarguable eye for opportunity in investment. He may very well be no more competent than any other bloke when it comes to giving aid. In reality, it is almost assuredly true that he would do a far greater service to the poor – which is to say, would raise their standard of living by a far higher amount – if he would use this money to reinvest in research and development to continue to make his automobiles more affordable, or to add new safety features, or to market a line of trucks, or whatever else he discerns is a wise productive investment. Remember that, if he sells a million automobiles a year, then for every dollar by which he is able to reduce the price of his automobiles the poorer people save a million dollars. Simultaneously, his sales will increase, so he will become richer, and have more money to reinvest. That’s economics, and it works.

When entrepreneurs reinvest accumulated capital and thereby lower the cost of consumer goods, they have another effect which is even more profound. By raising the ratio of value produced to labor required, investors raise real wages for just about everyone. This means that while people need to pay less money at the store to get the things that they want, they also take home more money from their standard day job. That’s a compelling argument against corporate charity and for corporate investment from the standpoint of the working class people. As for those who are too uneducated, disabled, or disinterested to labor for a living, the argument is – believe it or not – even stronger. That’s because it is an empirically demonstrable fact that donations by ordinary people to private charities actually rise super-linearly with income. This means when people make more money, they give even more of the money they make to charity. Thus, a successful investment in research and development will in the long run raise charitable donations more than if the same amount of money were simply given directly to charities – and yet it will do so without the need for criminal deception and the taking of other people’s money. So why don’t these do-gooder corporate executives who want to help the poor start by helping their employees and stockholders, and let people donate to charity with their own money?

One can speculate further that there is yet another mechanism by which corporate charity ultimately reduces charitable contributions, and that mechanism is uncertainty and lack of information. It is assuredly true that, when people donate to charity, they value knowledge of where their money is going, and want to know that it is being used effectively. They want to know how much of their income they donate, and smoke and mirrors surrounding charity will cause skepticism. It is therefore very likely that corporations which engage in charity using money taken from investors without their direct knowledge or consent really discourage other people from donating explicitly and thus reduce total donations. In much the same way that people tend to avoid taking it upon themselves to help the unemployed and homeless when governments claim to provide protection, so also they probably scale back charitable donations when corporations claim to do it for them. This reduction in charity is perception-based, not results-based. So when governments and corporations fail to provide the benefits they claim, and the downtrodden are left to suffer, nevertheless members of the community do not respond, do not take up the burden of charity themselves, because they are told someone else is taking care of it, so it must be someone else’s fault. A mixture of pathological blaming and self-righteous grandstanding takes the place of real work by individuals to help their fellow men, and everyone is worse off.

Finally, corporate charity is used as a rationalization for bad corporate policy, rent-seeking, interference with public policy and government officials, and generally poor quality of products and services. It tends to be a last-ditch effort by inefficient executives to avoid the progress inherent in a free market. Suppose one company is able to sell a product for ninety dollars, while another sells it for the slightly higher price of one hundred dollars, but has a better reputation due to engaging in more charitable programs in local communities. That sounds nice, but almost certainly the latter company’s contributions really do not constitute ten percent of its revenue. Therefore, consumers would do better to buy the cheaper product from the less charitable company and donate just some of the money they save. Some of them will do this, but others will make the mistake of falling victim to feel-good reputation-building that obscures real market efficiency. A greater good is done for a greater number of people by pursuing the most efficient, not the most heartwarming economic goals.

Thus the executive who commandeers funds entrusted to him by others and uses them for his own purposes – even ostensibly charitable ones – is presented with an incentive structure which rewards grandstanding and hollow self-promotion, while the executive who commits the investors’ funds to their intended purpose is required to produce real benefits for the consumers in order to stay afloat. This leads us to a final and critical point which those of you who know me well may have realized was coming from the beginning: So-called corporate “charity” is not charity at all. It is avaricious crime which damages the people it claims to help and helps the people it claims to damage. Executives who presume to achieve moral superiority by being sacrificial with other people’s money are not generous; they are vicious. The particular charities which they happen to favor are deemed worthy of everyone else’s support. So if an executive happens to feel especially strongly about one kind of cancer because of a death in his family, others who suffer from a different cancer must see a loss in funding because the executive is quite happy to steal from the populace and redirect contributions to his favored cause. As a result, charity organizations focus less on creating real results which they can demonstrate to the average person and more on befriending the higher-ups. So-called corporate “charity” robs the investors who risked their money to support entrepreneurship, raises costs to consumers, lowers employee wages, corrupts charities, empowers executives to an even greater extent, and ultimately does exactly the opposite of its purported goal: getting money to charities to help people in need.


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I will buy a billboard for Ron Paul

August 13, 2010 3 comments

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It’s simple, really. Ron Paul philosophically opposes the expanding American empire because it is killing our troops, wasting our taxpayer money, and destroying our reputation around the world. He knew that Barack Obama lied about wanting to end the war in Iraq and gave America an opportunity for a fundamentally different foreign policy.

Ron Paul knows that the War on Drugs is constitutionally unauthorized, morally obscene, and pragmatically a complete failure, and that is why he completely opposes all drug legislation and has voted against it every time.

Ron Paul also understands that the Federal Reserve has caused the boom and bust cycle and must be stopped so that the market can heal before the middle class is wiped out entirely. He stood staunchly against the Obamacare bill and was one of the few Congressmen who demonstrated philosophical justification for his belief that the market, not the government, could provide people with healthcare most effectively. He knows that Barack Obama is allied with corporations just as Bush was, and fears that government interference in trade inherently favors monopolies and corporate bullying instead of fair competition and prosperity.

At a time when even the allegedly anti-war Democrats were screaming for more government control, Ron Paul knew that the Department of Homeland Security was dangerous and evil at its outset, not years later when it was exposed for the damage that it has caused. In fact, Ron Paul was one of the very few Congressmen who attacked the PATRIOT Act upon its inception.

Ron Paul knows that the United States Constitution is the best defense of freedom that has ever been implemented in recorded history. He has always performed his Congressional duties with absolute respect for the Constitution and is one of the last remaining Congressmen who still believe that the Constitution was meant to radically limit the power of government to interfere in people’s lives.

Ron Paul predicted and understood the financial collapse years before it occurred and tried his best to prevent it, but was overwhelmed by a huge majority in Congress who favored more government control and blindness to economic realities over freedom and sensible policies. For many years he has been telling this country that the federal banks and their lobbying potential are dangerous and destructive to the economy and the freedoms of the American people. He stands alone as a stalwart voice of reason and liberty in a sea of Orwellian anti-humanism on Capitol Hill.

It is for this reason that I am proud to announce my personal commitment.

If Ron Paul runs in 2012, I will buy a billboard out of pocket.

I am, of course, willing to accept help. If you are interested in making a donation when the time comes, subscribe to my blog by clicking on the button in the upper right, or reply below. If you plan to donate or, even better, if you plan to buy your own billboard, feel free to save this image and upload it as your profile picture on Facebook. The more visibility this image gets, the more hope we have for America.


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Wake County Public School System takes a stand for freedom, ignores fraudulent claims of racism.

July 20, 2010 8 comments

“Segregation.”

It’s a powerful word because it evokes powerful feelings. Hearing the word “segregation” instills in our minds images of violence, exclusion, and a bitter hatred of innocent men for no reason beyond the color of their skin. We remember a time when little boys and girls couldn’t ride the bus together or sit at the same lunch table for fear of being shouted down, bullied, or even arrested. We know it represents a dark, evil, and unforgivable period in American history.

Or do we? Perhaps not, if we listen to local NAACP leader and spokesman Rev. William Barber, who was arrested today on charges of trespassing while screaming and pleading with fellow activists to rebel against the Wake County public schools’ recent decision to resegregate. This would be a compelling tale of a brave man resisting police state oppression, if he were correct that the schools are resegregating at all. Unfortunately for the good reverend’s cause, they are not.

Actually, the Wake County School Board is relaxing government controls that previously forced students to attend schools far away from their homes based only on their parents’ socioeconomic status. The bizarre and somewhat authoritarian policy of redistributing thousands of students to new schools every year, which encumbered students’ social development and caused abnormally long bus rides, was created with the intention of improving school performance through increased racial diversity. It is unclear whether there was any reason at the time to believe that racial diversity would cause students or teachers to become smarter. However, it is abundantly clear now that the plan has not worked. In 2007-2008, an abysmal 18% of Wake County public schools met the already lax standards of adequate yearly progress under No Child Left Behind. That is not the mark of a successful government program.

Now the School Board has voted to eliminate much of the harsh policies that forced redistributing students across great distances, instead focusing its efforts on neighborhood schools to avoid long bus rides. The obvious benefits of this are multi-faceted and substantial. Consumption of gasoline will decline, providing schools with a small but precious way to save money in a time of across-the-board budget cuts. Carbon emissions will be slashed, as well. Most importantly, parents will have greater choice in where to send their children to school, and children will enjoy shorter bus rides and a more stable base of friends as they can attend the same school year after year, if, of course, that is what they want.

The School Board’s decision is an invaluable step forward in the movement to put parents back in charge of how their children are raised. The emotional issue of racial segregation is a fraud, a scapegoat set up to distract debate away from the real issue of school choice and throw advocates of freedom into an un-winnable game while busy-body school assignment officials try to retain some semblance of usefulness. Concerned parents cannot defend themselves against the accusation of being racist because the accusation is made without evidence, and therefore cannot be refuted with evidence. What they can do – and what we all must do – is stand our ground and never waiver in asserting our right to choice and freedom, not long bus rides and bureaucratic control.

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