Month: September 2018

Posted on by rachel_craft Uncategorized

An Entrepreneurial Government

While Reading “Is the Government More Entrepreneurial Than You Think?”, this article initially reminded me of how my parents would likely think about the government and business. My parents are both conservatives from the South and they would likely argue that the government needs to get out of business and leave the free market alone. I began reading this article with skepticism, considering the rhetoric I had raised hearing and possibility that it was not true. I was very intrigued about the idea that the government could have a positive role in business and that capitalism feeds off of the government’s initial investments. The logic behind this makes total sense and knowing the reality of the government’s involvement is enlightening.

My critique of the government in this role, however, is that they do not say anything about their contributions, much less the size and extent of those contributions. Like Mariana Mazzucato likes to remind people, “Plato said that storytellers rule the world.” My frustration comes out of the lack of storytelling about this coming from the government. She was right to criticize the companies on the receiving end of the investments, benefitting from the technology and research, for not giving credit where credit is due (literally). She raises many interesting points and ideas about how to change the rhetoric and the policies that are becoming problematic and putting the government at a disadvantage. She also, towards the end, mentions that she is a thorn in both the government and the capitalists’ sides which makes me think of her work more seriously. To be disliked by both sides gives her some legitimacy that I did not previously see in her work.

I especially appreciated her inclusion of the problem with pharmaceutical companies as someone who deals with medications frequently. She is very right about the idea that someone would do anything to get their medications and that the companies are basically playing a game with patients. Large companies raise prices for seemingly no reason, formerly justifying it by saying it was to cover their own expenses, but this is not the case. I’ve noticed in my own experience when a medication will become more or less expensive, seemingly randomly. I am grateful to have insurance, because some medications can cost hundreds of dollars even when a similar medication may cost much less. I have a few medications that I’ve been on for a while and pay for them with insurance assistance. One has a much higher price that sometimes increases, while one medication has stayed the same price regardless of how much I’m taking, and another medication is very inexpensive and has fluctuated in price slightly but occasionally decreases. The idea that these medications actually cost hundreds of dollars to produce and that I would then need to pay for this every month is ridiculous considering that most medications are generic and therefore not under a patent. If anyone could make something, it seems a little suspicious that several companies are all charging a lot of money for the same thing. Mazzucato has a lot of very interesting thoughts and ideas about this industry and I sincerely hope that at least some of them will be implemented.

This article was fascinating because it presented a different side of the business-government relationship that I had not previously known about. I am not business-minded so some of the terms and concepts went over my head, but I really want to do more research into some of these ideas because they fascinate me and have piqued my interest in the government-business relationship. Personally, I think the government should be more entrepreneurial.

1 Comment Posted on by preston_taylor1 Uncategorized

What Happens When the Government Says Cheese

Preston Taylor

In an episode of the popular podcast “Planet Money,” Kenny Malone and Karen Duffin investigate the effects of Jimmy Carter’s plan for the government to buy dairy products during his presidential term.  Entitled “Big Government Cheese,”  this explains the downside of a specific government subsidy and the impacts it may have down the road.

Image result for government cheese

(Image from Twitter)

I was interested in this particular podcast because I love observing the impact when government interferes in the economy.  It seems to me that often enough, the end result is worse off than before the original meddling.  With this in mind, this topic immediately seems to follow the business, state, and society Big Idea that we have been focusing on.  According to the podcast, this whole idea started as a far-fetched campaign promise to increase income for dairy farmers.  In truth this is a fairly common occurrence as government subsidies are given to those who grow corn and many other agricultural products to increase production of certain goods.  The problem with this particular subsidy is milk products cannot easily be stored in a silo for long periods of time as corn can.  The solution was to turn it into cheese, which can be kept for a longer time than regular milk.  So the government began buying large quantities of cheese which they stored in underground caves that served as natural refrigerators.  They then processed the cheese into two and five pound blocks, wrapped in simple brown paper, and redistributed them to schools, the military, and food banks at no cost to consumers.

DUFFIN: This is a basic supply-and-demand problem. The government was demanding an unnatural amount of milk and so farmers were supplying an unnatural amount of milk.

Any time you have a greater production of a good than the popular demand for that good, as occurs with government subsidies, there are multiple problems that arise.  A surplus of cheese was created, essentially meaning that there was more cheese available than people were willing to buy.  If the government attempted to sell the cheese to ordinary consumers the price would drop below profitable rates for the farmers who were supposed to benefit from the subsidy in the first place.  Thus the government gave the cheese away to a consumer group that would not have the resources to buy cheese in the first place:  the homeless and impoverished in many urban centers.

The government now needed to wean the production of dairy down back to its normal rate, so instead of simply purchasing cheese, they implemented a policy of direct subsidization where the government directly paid dairy farmers to NOT produce milk.  They also created ad campaigns like the famous “Got Milk?” to try and increase consumer demand, and slowly return the supply and demand curve to its normal, equilibrium state.

This is just one example of government subsidies creating conflict in the free market.  The creation of surpluses rarely ends in a societal benefit and this article about fossil fuels serves as another instance where government interference in business creates problems for the average consumer.  When it comes to topics of business, state, and society, it is my opinion that the market works best when left to fluctuate according to its natural processes.  And the idea of making cheese purchases to bolster the economy is as far fetched as it truly sounds.

2 Comments Posted on by haley_beard2 20th century

Big Government Cheese

When reading about President Trump’s promise to the farmers, the article kept mentioning how it will bring back the “government cheese” event from Jimmy Carter’s campaign. Prior to reading this article, I had not even heard of the term “government cheese”. To hear about more on the subject, I listened to the Planet Money podcast on Big Government Cheese.

Within this podcast, I was informed about how in 1976, Jimmy Carter was running for president and proposed to give farmers an equal break. He planned to do this by raising milk prices by 6 cents per gallon every 6 months. Carter followed through on his promise to the farmers and tried to figure out a way the government can step into the market to make it happen. They figured out they can either make demand greater or lower supply. USDA decided to go down supply the chain one step to find milk products that could store well. They came to the conclusion of cheese, specifically cheddar cheese. The government sent out sheet of paper to farmers that states they will buy as much butter, cheese or nonfat dry milk they are willing to sell at certain prices. By the government buying more cheese, cheesemakers buy more milk which in turn drives milk prices up.

Consequently, the government had an issue with storing cheese and had to store cheese in caves in Kansas because they had no other place to store the cheese. By early 1980s, the dairy support plan for cheese was costing tax payers around 2 billion and the government was buying 1 in every 4 pounds of the country’s cheddar cheese. This dilemma reached the point where the Agricultural Secretary held up hunk of cheese in a press conference and talked about the mold deteriorating cheese and how there wasn’t a market for it. A new program was created to give cheese away through food banks so that the market for cheese wouldn’t take a huge hit.

Government cheese became a symbol of crappy government handout as well as a parable in how government intervention in markets can have a butterfly effect, Jimmy Carter makes an innocuous announcement to help farmers and then the government ends up spending billions of dollars filling caves with cheese they couldn’t get rid of fast enough. The most prominent “Big Idea” for this course that is brought to our attention within this podcast is unintended consequences. Failing to acknowledge what might happen to the markets or the fact there will eventually be a large surplus for cheese came come back to bite the government. After finding the solution of food banks, the caves slowly emptied and the price for milk automatically froze every 6 months. The government did not foresee that price controls would be hard to unwind once they are started. Because of this, the government pondered how to get out of cheese business without harming the farmers too much. They ended up paying money to the farmers to encourage them to stop producing milk.

Due to the argument that our country has to be able to produce its own food because if our farmers go out of business, then we become reliant on other countries for food which is a security risk. It’s one thing for the government to provide stability and it is another to step into the market in a big way and possibly the wrong time because playing with price controls is like playing with fire.

 

(image on the left from twitter and image on the right from the podcast)

1 Comment Posted on by jeff_kirwin business, state, and society, unacknowledged assumptions Link

Trash, The Decline in the Recycling Business

Usually an afterthought for most, trash is big business in the United States. According to NPR’s “Planet Money” the recycling business in the U.S. is a one hundred billion dollar industry annually.When scrolling through the different podcast topics, I saw the one on trash and instantly became interested. I had this interest because my grandfather previously had a business in recycling and I can remember him navigating through many of the same problems that recycling businesses face today. Although the industry is often up and down, lately many recycling companies face shrinking profit margins as the value of different materials fall.

(Picture of the sign at my grandfather’s recycling facility)

The recycling business is failing for several reasons. One of them being the big idea of business, state, and society. China usually accounts for fifty percent of the worlds paper and plastic recycling, but recently that number is going down. This is due to the National Sword Policy implemented by the Chinese government that prohibits importing papers and plastics. Most recycling companies used to ship their materials to China, but they are now forced to find a new market. The new markets are in places like Southeast Asia and domestically, but they pay far less for recycled materials. This has caused paper to have a negative value. It is cheaper for businesses to pay someone to take their paper from them rather than dump it in a landfill.

The national policy created by China aligns with another big idea. The bid idea of unacknowledged assumptions. China has few natural resources to support its large population, so many companies believed they would likely always have a need for international materials. Unfortunately China is attempting to develop its own recycling capacity which means businesses have to find a new place to send their materials. The combination of state intervention causing an unacknowledged assumption has created a large hole in the market that used to be profitable.

The fluctuating price of oil is another unacknowledged assumption.One may not think about oil prices affecting plastic recycling, but it has a large affect on the market. This is true because plastic is made from petroleum. At the time of the podcast the price of oil had been declining. This makes it cheaper to manufacture plastic bags than complete the difficult process of recycling them. The drop in oil has caused several companies, including the trash giant Waste Management, to give up on recycling plastic bags. Recycling plastic bags also incorporates one attribute of capitalism. Currently, the technology involved in the process is slow and difficult, so some businesses are trying to come up with new technological ways to solve the problem.

Values of currency is another unacknowledged assumption made by some companies. When the dollar was weak, recycling was much more profitable. This is true among many industries that have business internationally. Other countries are looking to buy at the lowest price possible, so when the dollar is stronger compared to other currencies, the buyer will buy will choose the lesser currency. China used to buy most of recycled paper and and plastic from the U.S., but since the Euro has dropped there has been a shift towards buying from European countries. Now businesses are struggling to find places that will buy their product, and those that are buying are far less.

While the business continues to decline, companies must find new buyers that will purchase the materials at at decent rate.

Link to podcast: https://www.npr.org/sections/money/2018/08/15/638929347/episode-613-trash

1 Comment Posted on by luke_jones1 Uncategorized

The Rise, Fall, and Rebirth of Vinyl Records

While thinking of what sort of businesses within American business history are the most fun to study, I realized that the most interesting markets are those that have totally and completely failed, only to find an unlikely way to rebound (although with today’s average consumer intelligence level, this has become much more common). Inferior products now have a fighting chance because of a generation of economic incompetents. 

In realizing this, I remembered a certain conversation that I had with a high school (and economically handicapped) friend a year or so ago. There’s no reason to go through the whole conversation, but in basic shorthand, she first told me the approximate sum of money that she had spent on vinyl over the years, I then thought for a second about the abundance of free music on sites such as Spotify and YouTube, and, lastly, I promptly called her an idiot. 

In remembering that story, I decided that I would show her why vinyl died in the first place (Hannah, this is for you): it was an inferior product beat out by unforeseen technological innovation. This inferiority, mixed with a consumer base with an eye for objectively better products, cause the downfall of vinyl and its subsequent replacement with alternative products, such as the cassette, the CD, and the MP3 player. 

See the source image

In her article “Chronology: Technology and the Music Industry” on the PBS Website (https://www.pbs.org/wgbh/pages/frontline/shows/music/inside/cron.html), Callie Taintor describes the evolution of music technology leading to and following vinyl. Thomas Edison created the first ever voice recording in 1877 on what he named the phonograph (literally translated from Greek, it means ‘sound writing’), and competitiveness in the market only improved upon his idea. With lookalikes of his work being created, Edison made the first improvement upon his idea by replacing his original hand crank with an electrical motor to create better sound quality and an easier listening experience, common goals that would be the driving force for future innovation. This innovation of changing the old device into something much better allowed Edison to remain ahead of the game, at least for a while.  

Several “Big Ideas” appear throughout time in this piece:

The first “Big Idea” that we see is the idea of capitalism through expansion, innovation, and competition. In 1888, the cylindrical recording device of the phonograph was first replaced with a disk recording device in a new contraption dubbed the gramophone. This would be the first circular precursor to the vinyl we know and (don’t) love today. Improvements continued with materials and production techniques, eventually spurred on even more by competitors in the radio market. After a plethora of production types and a long list of materials were used to create the perfect sound quality, in 1943, polyvinyl chloride (also known as PVC or, as its popularly known, vinyl) was discovered to best fit the bill. The quiescent vinyl was born from the forge of capitalist growth, creativity, and business rivalry.

The second “Big Idea” revealed is that of unintended consequences and unacknowledged assumptions. The entirety of the professional music production industry was built on the belief that music created by a company would always be distributed by that company, and thus the revenue would always flow to that company as well. However, with the introduction of cassette tapes, made popular by the Sony Walkman in 1979, the issue of illegal music copying (AKA piracy) became a serious problem that would continuously plague the music production industry for years. Opportunity cost of producing the same amount of music at a certain quality and price fell. All it took was a new technology shattering the assumption of monopolized retail to make music prices to rise and quantity/quality to fall.

The third “Big Idea” shown is the idea of complexity. Music Consumers have turned out to be extremely fluid in their demand expectations. Where consumers previously fought for cheaper, better sounding, and more readily available music, the tide turned with the modern-day vinyl resurgence movement. With the vastly improved music available on the world-wide web today, music producers have found niche music consumers really care much more about appearance than music quality itself, which is the real reason vinyl has reappeared in such a massive way. 

See the source image

2 Comments Posted on by noah_roberts1 20th century, business, state, and society

Lobbyists: Their Opinion Means More Than Yours, Or At Least To Congress

Noah Roberts

Junior year, after we had completed the AP government and politics exam, my class watched the movie, “Thank You for Smoking” starring Aaron Eckhart and Cameron Bright. The movie focuses on a slick lobbyist, Nick Naylor, who works for the Big Tobacco Corporation. Throughout the movie, Naylor is often spinning the reported negative effects of smoking and trying to work out deals with the government on how to brand and warn society about the effects of smoking. The twisted agenda of Naylor and the Big Tobacco corporation was to market cigarettes in the most appealing way possible. They didn’t care that they were deceiving the public into buying goods that were damaging to their health; they were focused on maximizing their sales and profits. Although this movie satirized to show the extremes of lobbying, it holds some truth in the relationship between businesses and government.

To learn more about the state of lobbying within our government, I read,”How Corporate Lobbyists Conquered American Democracy” written by Lee Drutman from The Atlantic. Drutman brought to light the continual growth of lobbying in our government. Lobbyists reportedly spend $2.6 billion a year, which is more than the $2 billion that is provided to fund the House of Representatives and Senate combined. Compared to the 1950s and 60s, where special interest groups and labor unions had much more impact in the government, business lobbying has become the strongest force in government influence. The relationship between government and business has completely flipped in the last 50 years, from corporations shifting their focus from avoiding government involvement in their business, to focusing on how they can be business partners with the government. This has resulted in more lobbyists being more politically active and proposing and supporting more laws and legislation.

The most obvious “Big Idea” to me, is the relationship between business, state, and society. The actions of business and government are not so separate, and actually go hand in hand. The businesses and government are proposing new laws that can benefit both of them. For example, the article states how in 2000, the industry lobbyists were able to get Medicare Part D passed, which would benefit them by $205 billion in the span of a decade. The lobbyists were able to use the government as a vehicle to a major profit, while Congress was able to get legislation passed. So, if both sides are getting what they want, it makes sense the lobbying relationships have grown so rapidly. This relationship, however, ultimately effects the everyday people in society. For example, when a deal with Medicare Part D was made between the government and corporations, it resulted in different Medicare options offered to the people. Or when a cigarette company like the one portrayed in the movie actually does lobby for less regulation on their products, more people will be attracted to consuming more of their product.

Lobbying in the government doesn’t always result with a harmful outcome for the people in our society. What it does do, though, is take away the voice of the people. Everyday workers who are a part of labor unions or special interest groups now have less of an impact with what legislation is passed. Congress is listening to the people with the money, and not the people who have to deal with the outcome of whatever is passed. The article mentions that for every dollar spent by a special interest group, lobbyists are spending $34 and that each corporation has about 100 lobbyists. With no way to compare to these resources, the interests of the common man are being drowned out.

In his 1961 Inaugural Address, John F. Kennedy stated one of the most famous quotes, “Ask not what your country can do for you; ask what you can do for your country.” I think that corporate lobbyists should reflect on this quote, as it seems to me they are trying to see what our government can do for them.

2 Comments Posted on by matt_pouchain1 Uncategorized

Narconomics: Corporations VS Cartels

The book Freakonomics wrote by the economists Steven Levitt and Stephen J. Dubner, has a definition as “A Rogue Economist Explores the Hidden Side of Everything”. Such definition coincided with an in-class discussion which a student questioned: “if a smuggler would classify as a businessman and/or entrepreneur”. Based on that inquiry,  I recollected the chapter three of Freakonomics in which the authors compare a street gang organization with corporate monopolies. Thus, it was a direct match with my in-class discussions.

narcos-season-3.jpg (960×640)

(Picture from Netflix “Narcos”)

In short, the book describes the organization of the Black Disciples street gang mirrored the structure of most corporate monopolies. To further my understanding, I read Susan Chandler’s article, Gangs Built on Corporate Mentality from the Chicago Tribune. Both sources agree when comparing the structural organization of the Black Disciple to Mcdonals and Walmart. Their system was incredibly efficient, and the gang was adept at putting the right people in the right jobs, including identifying legitimate business opportunities to launder cash. A lot of these people could have been business leaders if they had chosen to run a legitimate firm instead of a drug cartel. Nevertheless, the similarities go beyond this point. As Tom Wainwright claims, one theory behind the similarities is that the cartels in the area have what economists call a “monopsony.” A monopsony is a monopoly on buying in the area and is often associated with Walmart. In addition, like many large franchises, including McDonald’s, Starbucks, and Walmart itself, the gang members pay fees and “taxes” for the right to sell drugs and for “protection”, while the employee to boss hierarchy in the gang resembles a pyramid. 

At the bottom of the pyramid are the basic jobs; cashiers, burger flippers, and in the case of the Black Disciples, foot soldiers or those who actually sell crack on street corners. Then there is the second base tier. These people are the department managers, who manage specialized jobs. In a corporation, they make sure all the shelves are stocked, and storage rooms organized. They put all the cash from the registers into a safe at night. In the case of the Black Disciples, those employees are known as officers. A officers duty is to make sure that the drug supply and money are delivered to the appropriate people at the appropriate location. They keep the ledgers and books up to date, and they make sure lower level employees stay in line. At the third level of the pyramid is the manager himself or the gang leader. However, even store managers and drug gang leaders have to report to a higher authority. This is the top tier of the pyramid: The directors- or as the Black Disciples call them, the board of directors. These are the ‘hot shots” that truly receive the capital return. Their duty is to run and assist all branches of their franchise and make sure everyone is pulling their own weight and delivering money into the board’s pockets. 

The two “Big Ideas” for this course that emerges through this controversial comparison are complexity and capitalism. The Black Disciples’ operations plan is extremely compound including a pyramid structure for control and even a starting of a genuine business to launder the money. Their pyramid structure has a lot of “do and don’ts” and can be seen everywhere in the business world, as it resembles the organization of governments, schools, big businesses, and drug gangs. When exploring their system to the extreme, Jonathan King said: “I’ve always believed they were run the way IBM should have been run…”  What he said was that their(the gang’s) system would have been beneficial for a multimillion dollar company that had numerous skilled educated professionals working with an experienced board of directors. Why does it work? I understand that it works because it operates on the power of incentivized opportunity and hope. We as citizens or people trying to make the best possible living, see these board members, as the standard goal for how we would like to live. We see their achievements and wealth as our personal end goal. We also have been taught that to get there, you have to start from the bottom.  As children, we are told stories of poor, unfortunate heroes going on quests up in the social ladder until they become princess and kings. How did they get there? Hard, relentless work. A theme that is even echoed in the infamous American dream. The possibility of one day reaching that top tier of the economic pyramid makes us take low paying, 9-5 jobs in the hope that one day, we too will sit on that board of directors.  If you were working at the cashier at Walmart or selling crack on a street corner, your ultimate goal is still the same. It wouldn’t be outrageous to affirm that drug gangs and corporations have great synergy and a high correlation- there was even an annual company picnic for the gang members. In the end, we are just hoping for economic success and a life of comfort.

1 Comment Posted on by jacob_gochis1 Uncategorized

5G: The Gateway to the Office and International Economic Dominance

I recently found myself re-watching the office for the seventh time in an attempt to escape having to write this very blog post. I got to the episode in which Michael is stressing over an article he read in a magazine about the rising dominance of China and the fear that the U.S. will no longer be number one. This has been a subject of interest for many around the world as the Chinese economy is poised to overtake the United States’ in the coming years. However, I feel that size of an economy means very little compared to the innovation an economy exhibits regarding technology and new developments.

One of the current “battles” of this competition is the race to see which country can more rapidly develop a 5G network. A Wall Street Journal article examines this race and the consequences it could have in the near future. Not only would the technology allow for a much faster transmission of data to local college students watching the Office instead of working, but this technology is also essential for the coming development of “smart cities” of the future with features such as self driving vehicles and implementation of technologies such as VR or AR. In addition to this, the prize for winning this race could be the potential billions of dollars in royalties to be enjoyed by the first entity that establishes the technology and frameworks for its use and a head start in the development of newer technologies such as 6G in the future. The authors make the advantages of 5G well known in the article:

While the economics of 5G are still being worked out, boosters say the potential payoffs are immense. Companies that own patents stand to make billions of dollars in royalties. Countries with the largest and most reliable networks will have a head start in developing the technologies enabled by faster speeds. The dominant equipment suppliers could give national intelligence agencies and militaries an advantage in spying on or disrupting rival countries’ networks.

“As we face the future, we know deep down that the birth of 5G standards represents a new beginning,” Huawei’s chairman, Eric Xu, told the audience at the company event.

Hans Vestberg, Verizon’s chief executive officer, speaks of the technology in equally dramatic terms. “We are strong believers that 5G [will have] a very transformative effect on many things in our society,” he said. “Consumer, media, entertainment…whole industries.”

 

For me the article seems to showcase prominently Big Idea category, Business, State, and Society. This is shown in the competition between a country such as the United States where government is largely removed from business decisions, and China where the state plays a large role in investing in businesses that serve the state’s interest. This dynamic between the two makes the competition interesting as it seems to also be a competition between the two forms of government the countries employ in see which can further promote innovation within their borders. The U.S. government has even given some ground in this regard as it seems the FCC might encourage the development of 5G networks by overriding local rules, and tax dollars are being spent to fund academic research on 5G.

This competition is additionally important because not only the rewards of the developing the technology first are on the line, but also the risks of losing the race. Operating with another countries information technology always leaves open the possibility of espionage and potential interference from the country with the upper-hand. If China were to successfully develop 5G technology before the U.S., this could force the U.S. to operate with Chinese technology that could be interfered with by the Chinese state for political reasons.

New technologies have always been a key part of business history and they shape the way we live our lives and the benefits are immense to those who first invent and incorporate them into their societies. Whether we use 5G to procrastinate more efficiently by watching Netflix or utilize it to make our society more interconnected and advanced, fortune has always favored those who innovate, and I think we will find it the same with 5G.

1 Comment Posted on by trevor_rogers1 20th century, unacknowledged assumptions

The Transformation of Corporate Lobbying

Trevor Rogers

When one envisions corporate lobbyists one might picture a man in an expensive suit and a too white grin wining and dining a shady congressman. This is the image that comes to mind when we think of what a lobbyist truly does. However, lobbying is a relatively recent phenomenon, taking Washington by storm in only the last few decades. In the article, “How Corporate Lobbyists Conquered American Democracy” Lee Drutman details the history of lobbying and how the practice transformed over time into its current iteration.

The “Big Idea” that is most prevalent within lobbying is its complexity, especially its transformation over time. So let’s go through the history of lobbying and discover how it has transformed. Starting off in the Gilded Age we had a time of extreme influence by business in the government, pushing for certain legislation. This relationship was disrupted by a Great Depression and two World Wars. Now skipping ahead to the 1960’s we had a system where labor unions had significant influence in legislation, not the corporations. At this time it seemed futile for corporations to spend money lobbying for legislation, with one prominent corporate lawyer even commenting about how useless it was to try to influence legislation.

As every business executive knows, few elements of American society today have as little influence in government as the American businessman, the corporation, or even the millions of corporate stockholders. If one doubts this, let him undertake the role of ‘lobbyist’ for the business point of view before Congressional committees.”

     As we can see the attitude of businessmen towards influencing the government was essentially, “Well, we can’t get anything done, so why even try?” That was the case until 1972 when the Business Roundtable was founded by several prominent businessmen. John Harper, CEO of Alcoa, remarked ” I think we all recognize that the time has come when we must stop talking about it, and get busy and do something about it.” His comment reflects the frustration felt by businessmen at their inability to influence the legislation that so directly effected their lives. After a few corporations sent lobbyists to Washington and started actually influencing bills, such as a major labor law reform and lowering corporate taxes, they began seeing just how successful lobbying could be. There was a major shift that occurred during the late 80’s that is perfectly captured by this quotation by a lobbyist, “Twenty-five years ago…it was ‘just keep the government out of our business, we want to do what we want to do,’ and gradually that’s changed to ‘how can we make the government our partners?’ It’s gone from ‘leave us alone’ to ‘let’s work on this together.'”

  With the current state of lobbying we must now focus on another “Big Idea”, and that is the unintended consequences that came with allowing corporations and lawmakers to become such tight partners. We now are faced with a modern lobbying scene with more than the $2 billion spent to fund the House ($1.18 billion) and Senate ($860 million). For every dollar spent on lobbying for labor unions, large corporations spend 34, totally flipping the status quo from the 60’s and 70’s. Corporations are now able to play both offense and defense against government policies, getting some passed and others blocked, whichever ones they deem to have the most benefit to themselves. So how to we get back the balance? How can we reverse this pattern of corporate control? Well, Drutman has a few ideas. First, we must invest more into the Government, especially Congress. This would allow the leading policymakers to have the resources that are necessary so that they can hire and retain experienced staff, so they will not have to rely so much of lobbyists. Second, organizations that advocate for policies that are less well-funded need more financial support.

Overall, we are posed with this simple question. Who do we want creating legislation that affects this country and our own personal lives, our elected representatives or multi-billion dollar corporations?

 

 

1 Comment Posted on by katie_shore1 20th century, business, state, and society

It Ain’t Easy Being Cheesy

Katie Shore

(Image from NPR: “Uncle Cheese”)

Who would have thought that the government cared about cheese? Believe it or not, they did. The government and cheese have interacted in the past and affected our country’s economy and society.

Let’s go back to when it all started: Jimmy Carter’s campaign promise to give farmers what he called “an equal break.” It makes sense that Carter would want to help the farmers because he knew what it was like to be a struggling farmer: in 1954, his farm’s net profits were a mere $187. After winning the election, Carter went to work trying to fulfill his promise. First, he raised the price of a gallon of milk by six cents. The interaction here between business, state, and society is quite remarkable. The government came into the dairy industry and raised prices by using a price floor. I wonder how other businesses felt about this decision by the government. They must have been asking why the dairy industry was getting bailed out; surely, the dairy industry wasn’t the only struggling industry at the time. The state’s involvement in the pricing of dairy clearly shows Carter’s bias towards the farmers. While these dairy farmers and their businesses might have benefited from the government’s help, the rest of society was stuck paying more for their milk.

Let me pull out my notes from my Economics class (thank you, Dr. North). Because of the government-instituted price floor, dairy farmers were ramping up production; at a higher price, producers wanted to make and sell more goods to earn more money. Consumers, however, didn’t want to pay this higher price and demanded less than the producers were producing. This led to a surplus, which led to more government intervention.

The government started buying and trying to store lots of milk, but milk has a short shelf life. The solution then was to turn this milk into products that didn’t expire as quickly, such as powdered milk, butter, and cheese. Next, the government told dairy farmers that it would set a price and purchase as much as the farmers were willing to sell. Unfortunately, farmers took advantage of the situation and tried to sell the government their worst cheese. That’s where cheese graders – not graters – came into play. These people traveled the country evaluating cheese based on specific criteria including its flavor, acidity, fruitiness, and so on. The government bought cheese that met all of the grading requirements and then stored it in caves.

This whole cheese-buying extravaganza was costing billions of dollars, and the government needed to find a way to get rid of its cheese. Rather than flood the market with the cheese, destroy it, or send it overseas, the government decided that it would process the cheese, package it, and then give it away. These blocks of government cheese – pictured below – were given to schools and food banks to try to provide for the hungry.

(Image of a Block of Government Cheese from a magazine titled Rolling Out)

Government cheese often gets a bad rap, primarily because of its unintended consequences. First, the government’s efforts to help the farmers led to very expensive cheese for consumers. Second, the government’s supposedly beneficial price controls were actually harmful and very difficult to undo. Third, the government had to start paying farmers to stop producing milk while simultaneously instituting campaigns to convince people to buy milk. Got milk? Today, instead of directly buying farmers’ products, strategies such as direct subsidies work much better – and don’t require the government to store billions of dollars worth of cheese in caves.

You would think that we had learned our lesson from the past, but it appears the government is going back to its old ways. As of August 31, there are plans to purchase $85 million worth of dairy for schools and food banks. I’ll leave you with a quote by philosopher George Santayana: “Those who do not remember the past are condemned to repeat it.”

If you have time to listen to the NPR episode of “Planet Money” about the history of government cheese, I would recommend that you do so. Who knows? We might have another cheesy situation on our hands very soon…