Governments and Corporations have as an objective to increase asset value to benefit stakeholders working to nurture and create future value and performance. The U.S. Constitution with Amendments set forth that the value to the country is its free citizens. The document identifies managing principles of citizens’ freedoms, rights, and protections. This recognition created the foundational understanding for the Separation of Church and State, Civil Rights, public education, Medicare/Medicaid, and now Healthcare. It also provided the way for infrastructure investment beneficial to all without regard to means. The importance of Separation of Church and State is evident in the current financial crisis as explained by the founders: Religious freedom to practice and prevention of corruption of the Church; and protection against discriminatory influences on the State. Current public furor would be directed at the Church if it was responsible for financial legislation and deregulation of controls that protect savings and retirement funds at the expense of executive bonuses.
This original structure has come to provide a base level of subsistence for American life and a high level of economic productivity, as measured by GDP, with comparatively broader levels of earnings distribution. However, what still exists are the varying levels of importance and priority placed upon input capital and resources (assets) that are deterministic of individual economic outcomes. The emphasis upon “tribes” and fraternal affiliations (social and religious) establishes informal groupthink criterion of morality and loyalty tests in order to access capitalistic factors of enterprise. In reality, native tribes were more integrated than presently credited. These exclusionary practices not only limit economic production for competitive protective purposes, but they are also destructive to social values increasing the burden on the state to provide benefits for the maintenance of a harmonious society (limiting crime, unemployment, and human exploitation). Moreover, the practices directly contradict the individual - conservative “boot-strap” ideology and substitute control through “social” organizations. As a youth in Alabama from Massachusetts, the systematic separation was apparent even after the days of George C. Wallace’s political grandstanding. Violations [interracial or non-traditional relationships] meant limited access with exceptions only to the extent of religious affiliation. The order was maintained by both Black and White racial groups further revealed in conversational dialogue of the Black American community regarding an unofficial “oppression grading” by skin tone to psychologically justify success through “family” (race) commitment [unconstitutional Southern moral code violating civil rights]. Moral liability (real or fabricated) has been historically used for leverage to maintain systemic order and control of capital at a high social cost (inequality) for progressive economic advancement of a UNITED humanity, society, and Country.
The individual – conservative identification is an observational label personally used to create an understanding of the Religion and Preferences for Social Insurance graphic presentation in my Social Spending and GDP blog post. To better understand and interpret the graphic data, I applied quadrants to the Least Squared Sum regression describing the relationship by country between Social Spending in % GDP and the average reported importance of God in a person’s life. The quadrants were identified by a personal definition of two distinguishing factors of varying adaptability: (1) governing philosophy related to rights and benefits of its citizens [Social or Individual]. Social meaning a shared responsibility of community to ensure care for the human condition; and, (2) the religious perspective of the society and its belief of impact on daily life [Conservative or Liberal]. The countries were further listed by quadrant and respective economic performance compared. It is important to note that the countries of comparison are primarily of Europe and European origin (includes U.S., Australia, & Canada) plus Japan.
Comparing the Per Capita GDP of the countries without the benefit of statistical testing to measure and control the factors of country size (geographic and population), natural resources, and location, the United States is a leader in economic production and greatly influences results. Luxembourg and Norway have greater per capita GDPs, but are too small in size and population to have much influence. It is only because of the United States that the Individual-conservative governing ideology leads in productivity. When the U.S. is excluded, not much difference is reflected in the productivity of the personally defined governing ideologies. But, the Social and Liberal economies are slightly better performing. I want to reiterate that this is not a scientific study with rigorous testing. It is based upon observation and personal ordering to provide some understanding of the information and graphic presented in the Religion and Preferences for Social Insurance paper referenced in my Social Spending and GDP blog post.
The performance of the United States is reflective of the corporate focus, size advantage, and effective employment of resources. However, comparing the GDP to Per Capita Earnings reveals another aspect of U.S. capital management. Traditional factors of production include land, labor, and capital goods. Updates have added ecosystems with land, human capital (education & skills), and financial capital (money, equity). The income data reflects the beneficial impact of ownership (equity) in the corporate structure and disguises (at least until the financial crisis and high unemployment rates) the downside of placing a priority on maximizing one or two factors of production (return on capital and return on equity). Corporations have been focused like laser beams to reduce cost, improve profitability, and grow earnings. Social impacts are not included in any of these objectives and become an issue for the state and federal governments. Reducing taxes further increases the problem by limiting the ability of government to assist its citizens. A quick summary of the systemic problem provides the following: Corporations focused performance improvement on stockholders at the expense of all other stakeholders (employees, suppliers, communities, & government). To improve return to stockholders, costs throughout the supply chain have to be reduced. Labor must be more productive or found cheaper in a less restrictive environment which means layoffs and relocation of assembly operations. Suppliers reduce cost at the expense of profitability lessening their ability to invest in innovation which would also benefit the OEM. In addition to these actions, tax policy is attacked to lower rates which have no other purpose than to lower money provided to government entities and retain earnings within the corporate treasury.
This blog post may provide an opportunity for critique and claims of anti-business sentiments. However, I am a true capitalist that considers the long-term implications and sustainability of such a narrowly focused economic philosophy in light of the high-technology era of competitiveness we are entering. An example of this evolution is evident in the history of the television. The focus on financial capital (return to stockholders) and technical measures employed indicated that the solid state technology was declining in profitability. After all cost reduction attempts, profitability was difficult to maintain. Present Value analysis increased management pressure by indicating the sale of the business to maximize return of capital. Semiconductors, microchip, and nanotechnologies were not foreseen or were factored as risky incorporations too far in the future. Thus, technology is transferred to Asia; improved with chip technology and product expansion into flat screens, computer monitors, automobile GPS, and etc…. The point is that the social costs of business decisions should be incorporated into strategic, financial decision-making at some level within the organization.
Ultimately, the question will come down to if there is a God advantage to economic performance and social spending? I have a perspective, but will reserve the right to hold my opinion and leave the proposition unanswered for now.
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GDP and Social Policy Graphic Analysis
8-29-2013
