Governments are called to steer business enterprises toward oikonomia, away from chrematistike

I have recently been trying to express how our lawmakers and, especially, we, as citizens, must view the interaction between the government and business enterprises, especially the role of the government in regulating the economy. Bob Goudzwaard nails it:

In classical antiquity two distinct words were used to describe human economic activity: oikonomia and chrematistike. Oikonomia (the origin of our word economics) designated the behavior of the steward whose task it was to manage the estate entrusted to him in such a way that it would continue to bear fruit and thus provide a living for everyone who lived and worked on it.  Central to this concept, therefore, was the maintenance of productive possessions on behalf of everyone involved. Chrematistike, however, meant something quite different. The word expressed the pursuit of self-enrichment, for ever greater monetary possessions, if need be at the expense of others. It is remarkable to observe that in western civilization the meaning of the word economics has  increasingly become synonimous with chrematistike, while progressively it lost the meaning of oikonomia, the careful maintenance as steward on behalf of others of all that is entrusted to man.

A business is not run economically if it is efficient merely in a monetary sense. It is economically responsible only if it possesses the ability to render a net economic fruit.In terms of a normative-economic-cost-benefit analysis, many financially viable businesses may be called economic fiascos, whereas the opposite might be true of a number of businesses which are losing money. As an example of the first we might cite producers of goods which can actually be only marketed by means of intensive advertising campaigns, but which pollute the environment (either during production or consumption), are energy intensive, and use up the world’s supply of non-renewable resources.  Another example would be would those firms which damage the health of their laborers during the process of production  (health, too, is an economic good!), fail to use their workers’ mental capacities, or even brutalize them by over-doses of mechanization and deadening drudgery.  Corporations can also fail economically — despite great apparent success from a financial point of view — in their operations in developing countries. . .

Business enterprises, in other words, should be genuinely economic organizations, that is, institutions of stewardship. That is the key norm by which they should be judged, without neglect of market forces . . .

In listening to each GOP presidential debate so far,  I have been increasingly disappointed to hear all of the candidates, many of whom I believe to be Christians, fail to advocate a vision anywhere near what is stated above.  I do not think I have heard the words justice, morality, fairness, or common good mentioned at all, much less in relation to the economy or any business practices. All too often, these candidates have adopted and baptized a partisan view of political economy, a mongrel offspring of libertarianism and corporatism. There is certainly a misconception today that the goal of good politics should be to try to get away with as little as possible on the wrongful belief that the best government is the least government. We must recover the full-orbed view of government that it has the important duty to be the champion of public justice and equity.

 

Federal Reserve study: Immigration actually increases US-born income

Despite the best wishes of Mo Brooks and Scott Beason, HB56, the Alabama Anti-immigration bill is terrible for the economy. A recent study by the San Francisco Federal Reserve debunks and contradicts the “economic” contentions of the Alabama GOP. The economist-authors summarized their findings:

The effects of immigration on the total output and income of the U.S. economy can be studied by comparing output per worker and employment in states that have had large immigrant inflows with data from states that have few new foreign-born workers. Statistical analysis of state-level data shows that immigrants expand the economy’s productive capacity by stimulating investment and promoting specialization. This produces efficiency gains and boosts income per worker. At the same time, evidence is scant that immigrants diminish the employment opportunities of U.S.-born workers.

Sorry, Congressman Mo.; you are wrong. Immigrants do not take “American’s” jobs.

First, there is no evidence that immigrants crowd out U.S.-born workers in either the short or long run. Data on U.S.-born worker employment imply small effects, with estimates never statistically different from zero. The impact on hours per worker is similar. We observe insignificant effects in the short run and a small but significant positive effect in the long run. At the same time, immigration reduces somewhat the skill intensity of workers in the short and long run because immigrants have a slightly lower average education level than U.S.-born workers.

Because of immigrant labor, US-born worker’s income actually rise.

Second, the positive long-run effect on income per U.S.-born worker accrues over some time. In the short run, small insignificant effects are observed. Over the long run, however, a net inflow of immigrants equal to 1% of employment increases income per worker by 0.6% to 0.9%. This implies that total immigration to the United States from 1990 to 2007 was associated with a 6.6% to 9.9% increase in real income per worker. That equals an increase of about $5,100 in the yearly income of the average U.S. worker in constant 2005 dollars. Such a gain equals 20% to 25% of the total real increase in average yearly income per worker registered in the United States between 1990 and 2007.

Because of immigrant labor, productivity and efficiency actually increase.

The third result is that the long-run increase in income per worker associated with immigrants is mainly due to increases in the efficiency and productivity of state economies. This effect becomes apparent in the medium to long run. Such a gradual response of productivity is accompanied by a gradual response of capital intensity. While in the short run, physical capital per unit of output is decreased by net immigration, in the medium to long run, businesses expand their equipment and physical plant proportionally to their increase in production.

 

Extreme individualism has become dominant, and talk of commonweal is sidelined

Micheal O’Loughlin sees what I hope more come to recognize:

One of the more interesting aspects of the recent GOP presidential debates has been the astounding exhortation of extreme individualism, the notion that every person is in it for him or herself, and that government should not provide any sort of safety net or assistance to those in need (there is another debate tonight in Florida sponsored by Fox News and Google) . From Social Security to healthcare to workers’ rights to taxes, most of the Republican field eschews any affirmation of policies and programs that benefit public welfare. Anything the government does that may assist individuals is deemed socialist and un-American.

As the economy continues to stutter, the narrative of extreme individualism has become dominant, and talk of commonweal is sidelined. Jonathan Cohn at The New Republic notes that even Democrats try to frame their debate around raising taxes not in terms of something good for the whole, but as a mathematical equation:
These days, when you hear Democrats defend proposals to raise taxes on the wealthy, usually they argue about the numbers. We need more revenue in order to maintain vital government services, those who can afford to pay more should pay more, etc. And that’s fine as far as it goes.

This idea that every person is in it for him or herself should offend, or at least concern, Catholic sensibilities. The history of Catholic social teaching offers an abundance of resources about the need to develop societies that care for the least among us. While the church does not necessarily endorse any one way of doing this over another, its teaching is clear: we are all in this together.

 

Local food enterprises will be catalyst to resilience in our Local Economies

I have often argued the importance of redeveloping local food supply chains (see here, here, here, here, here, here, and here) If we think it is bad being dependent on foreign oil, think about being dependent on foreign food. Our dependence on foreign supplies of food is a critical weakness of our local economies, maybe the issue creating the most fragility.

A new study commissioned by Bill and Melinda Gates, ”Community Food Enterprise: Local Success in a Global Marketplace,”  evidences the importance of local food economies for economic development. “Food is a catalytic place to begin.” As discussed in this Bloomburg Business week article,

The 190-page report, funded by the Bill & Melinda Gates Foundation and the W.K. Kellogg Foundation, highlights the role local food businesses play in economic development—creating jobs and bringing money into a community. Michael Shuman, an economist at the Business Alliance for Local Living Economies and co-author of the report, sees economic development intertwined with developing local food systems.

What were some of the findings of the study of local food enterprises on their communities:

• Greater income for farmers, workers, and suppliers.
• Concerted efforts at workforce training
• Scrupulous environmental conservation and stewardship
• These local food enterprises “pump up their community economies by hiring locally, buying local inputs, and engaging in and contracting for local value-added production.”
• and enhanced empowerment of minorities.