7.2 Business and Economics                                                             Version 1.1 March 2012

 

 

 

Management of the environment is important enough to be considered separately.

Competition between suppliers encourages innovation, more efficient production, cheaper prices to consumers and with appropriate regulation, less impact on the environment.  Capital markets – share markets – provide ways for entrepreneurs to raise capital, making use of investors’ savings, and allowing business risks to be continually assessed.  Centrally controlled economies have been tried under Communism and found wanting, leading to tyranny and corruption.  State control of business enterprises, under socialism, leads to timid and inefficient management by government bureaucrats whose political leaders wish to avoid confrontations that could affect their electability.

On the other hand uncontrolled capitalism has been show to lead to legalized theft, gross exploitation, destruction of the environment, and abuse by cartels and monopolies. 

Capitalism must be controlled so that society, investors, employees, suppliers, customers and neighbors are not exploited:

·         Anti-trust and competition laws are required to prevent the growth of monopolies and cartels which allow suppliers to artificially raise prices and reduce innovation;

·         Continuous disclosure and management of risk so that investors are informed;

·         Reasonable and safe working conditions and a livable wage for employees, adequate workers compensation for work related injuries, and appropriate job security;

·         Responsibility for the supply chain, to minimize inappropriate exploitation;

·         Consumer protection is required balance the power of large corporations;

·         Truth in advertizing, product disclosure, warranties and liability for defective products and misleading practices;

·         Care for the impact of business premises and activities on the neighborhood;

·         Product life cycle management – designed to consider the disposal of goods;

 

We cannot trust business leaders to manage in their own long term interests, they are driven by optimism, greed and short term gain.  Middle and lower level managers cannot be expected to stand up against their bosses.  We cannot trust union leaders to always negotiate in workers best interests.

To this end:

·         Essential services – water, sewerage, waste disposal, power – must also be under strict regulatory control and risk managed by area governments;

·         Banks, insurance companies and similar organizations must be strictly regulated to appropriately minimize risk to their clients and the financial system;

·         The financial system must be managed so that any institution that is “too big to fail” is subject to strict regulatory control and continuous scrutiny.

·         Private enterprise losses must be born by private enterprise: we must cease privatizing the profits and socializing the losses;

·         Where management has the potential to gain from profits they should also suffer when there are losses;

 

We must acknowledge the effectiveness of “pump priming” the economy in times of recession, and find ways to enforce reducing the subsequent debts in boom times.  We must continually investigate better means to manage the economy to avoid the scourges of unemployment and poverty and runaway inflation.

 

We must resist the tendency for leaders in government and business, and even some union leaders, to see the world only from their perspective and to promote regulations that favour the rich at the expense of the poor:

·         Differential rates of taxation on different forms of income should be minimized: capital gains and investment income must not be concessionally taxed compared to income;

·         Interest payments on home loans should not be tax deductible: household rent isn’t;

·         The “user pays” principle must apply to transport, environmental impact, industry assistance;

·         Protectionism must be resisted, as it increases costs and subsidizes inefficient industry, and treats compatriots as more significant than foreigners.