By Marilyn Barnewall
Editor's note: Business Reform Magazine provides real biblical answers for real business issues. To visit us, click here.
Government is a concept. In Europe, the concept that dominated until the signing of the Mayflower Compact in 1620 was that of monarchy. An elite class ran things and those who were not royals served. In Africa and some Native American societies, tribal chieftains ran things. In some areas of Africa, they still do.
Concepts and the policies that support governing philosophies must be compatible with all human endeavors. This is true whether the concept or policy applies to business, government, or personal lifestyle choices. If IBM decides its business concept is computers but implements policies designed to support restaurants, IBM will fail. A movie's script (the concept) must be compatible with the scenery, roles and actors (the supporting policies). Otherwise, you have Hansel and Gretl starring in Psycho.
A fairy tale helps me illustrate why socialism and capitalism do not mix. It's a story about Jack and Jenny.
Once upon a time, a young couple fell in love and got married. Their names were Jack and Jenny… and soon Jeffrey and Jane were names added to the household. Jack worked hard at a small business he had started while Jenny stayed home to care for the children.
One day, while Jenny was planting tulip bulbs, some grains of wheat appeared. Jack and Jenny did not have a very big back yard and so she called her neighbors and suggested that they plant the wheat in all of their yards to make bread and other treats.
"Who will help me plant it?" Jenny asked.
"Not me," said the neighbor to the North.
"Not me," said the neighbor to the South.
"Not me, either," said the neighbor to the East.
"I can't," said the neighbor to the West.
And that is how Jenny and Jack decided to buy a small plot of land nearby to plant their own garden of wheat. The wheat grew tall and golden and beautiful. When it was time to harvest the crop, Jenny once again asked for help.
"Who will help me reap my harvest?" she asked.
"Not in my job description," said the neighbor to the North.
"I've got a date at the track," said the neighbor to the South.
"I'd lose my seniority," said the neighbor to the East.
"I'd lose my unemployment benefits," said the neighbor to the West.
Jenny and Jack complained a bit, but decided they could harvest the wheat by themselves. For Jack, it meant working almost two full-time jobs.
Soon, it was soon time to bake the bread and cakes from the harvested wheat. Jack and Jenny once again asked for help.
"Who will help me bake the bread and cakes?" she asked.
The neighbor to the North had an overtime problem. The neighbor to the South said she'd lose her welfare benefits if she worked at a job. The neighbor to the South had dropped out of school and never learned to bake. The neighbor to the West rightly noted that if he was the only worker, it would be discrimination.
And that is how Jenny ended up working long, hard hours in a hot kitchen. Jack helped after putting in a long day at his shop, but Jenny did most of the work. She got fifty loaves of bread and a dozen small cakes from her harvest. Jack and Jenny proudly showed their bounty to their neighbors.
All four demanded a share of her bread and cakes. Jack and Jenny thought of all their hard work and the risks taken with their investment into the small plot of land and were insulted. They refused.
"Excess profits!" came the cry from the North.
"Capitalist pig!" was the shout from the South.
From the East came an offended look for Jack and Jenny’s hate speech accompanied by a word like "Hummmph!"
"You're violating my civil rights," shouted the neighbor to the West.
Jack’s and Jenny's neighbors painted protest signs and marched around their home, shouting insults. It did not take long for a government agent and the media to arrive.
"You must not be so greedy," chastised the government agent.
Jack and Jenny protested that they had earned the right to the profits from their bread and cakes. No one listened. After all, if one person had cakes and bread, everyone should have them.
"Of course you did the work," said the agent. "But out of consideration for the under-employed and the unemployed, productive workers must divide the fruits of their labor with their neighbors."
Seeing the lay of the land, Jack and Jenny thought about it for a long time. They finally expressed their gratitude for the lesson in social responsibility.
Their neighbors, however, were very disappointed. Jack and Jenny never grew a crop and harvested it or baked bread and cakes again. They joined the "neighborhood party" and got their bread free.
And that is why socialist policies do not work in capitalist economies.
Capitalism functions by giving all people equal opportunity. Socialism functions by trying to make all people equal, regardless of risks taken or the contributions of each.
Capitalism says, "what you earn you keep." Socialism says, "those who have must give to those who do not have."
Charity is one thing. Stupidity is something totally different.
There are corporate abuses like obscene pay packages and golden handcuff deals received by corporate executives. When a major portion of executive compensation is tied to stock options, executives will do what they can to drive up their stock price. We end up with Enron and Global Crossing and a lot of lost jobs and investor abuses.
Stock option abuses could be stopped very quickly. Current law allows stock options to be carried on a company's books as assets. Stock is a legitimate asset. Once the stock is optioned, however, it becomes a liability?a debt?but companies still carry it as an asset.
If companies were forced by law to carry exercised stock options as liabilities rather than assets, a large number of shares issued to executives would quickly damage the balance sheet and, thus, stock value. The practice would stop. Those who run the government understand this concept. They count on the fact that you do not.
There are a lot of things we could do... if we were all reading from the same capitalist playbook.
Marilyn Barnewall, in 1978, was the first female to be named vice president in charge of a major loan and deposit portfolio at Denver’s largest bank. She started the nation’s first private bank, resigned to start her own firm and consulted for banks of all sizes in America and other countries. In June 1992, Forbes dubbed Barnewall “the dean of American private banking.” Author of several banking texts, she has written extensively for the American Banker, Bank Marketing Magazine, and was U.S. consulting editor for Private Banker International (Lafferty Publications, London/Dublin). Article originally appeared in the Grand Junction Free Press. Marilyn can be reached at [email protected].