Capitalism

1 Comment Posted on by trevor_rogers1 20th century, Uncategorized

Is The Government More Entrepreneurial Than You Think?

Image result for tesla government subsidies political cartoon

image from wattsupwiththat.com 

 

When most American’s picture the relationship between government and capitalism, they see a stark divide. On one side, there is the government, creating roads, funding the military, bettering education, in general putting money into sectors for basic needs. On the other, there is capitalism, Titans of Industry creating inventions like the iPhone, Facebook, or even the Tesla Model S. Mariana Mazzucato is a professor of Economics of Innovation and Public Value at University College London, and she seeks to show how government and capitalism are much more connected than we think.

The glaringly obvious Big Idea that Mazzucato uses is capitalism, and this is how she defines it;

[The] Defining feature of capitalism is how it “has really broken down all sorts of walls, that it’s constantly changing how industries operate; how production, distribution, and consumption work”

She begins her argument by pointing at her definition of capitalism. She argues that the government puts in significant resources into funding early-stage research, largely contributing to the success of technology, pharmaceuticals, and energy. By funding this research, Mazzucato believes that the government is changing how “production, distribution, and consumption work” and are therefore active participants in the capitalist system. Mazzucato points to several government agencies, specifically NASA, DARPA, and the National Institute of Health and how they contributed to inventions such as the internet, GPS, and HD displays. She believes that without these innovations, companies like Google would have no internet to run on and Tesla would have no GPS to lead its cars.

Mazzucato continues on by affirming that not only is government investing billions upon billions of dollars into research, but they aren’t getting credit for it, and they’re not getting much of a return. She illustrates this belief with two companies; Tesla and Solyndra. The government investing 1 billion combined in both companies. Solyndra failed and the government lost its investment and the American people were upset that the government was attempting to act as venture capitalists. Tesla on the other hand succeeded tremendously, and the government got no recognition for it, and no return on investment. Mazzucato suggested that the government should have required tesla to give them 3 million shares and after the significant boost in Tesla’s stock over the years, the government would have to been able to make its money back from the loss on Solyndra. She affirms that if the government is going to spend this money investing in companies, that it should also get a pay-out from them.

Mazzucato also delves into the market on pharmaceuticals. She states that most research during the beginning stages isn’t funded by private institutions, but by the government. She continues by saying that most large pharmaceutical companies don’t speed that much money on research and development, but instead on stock buy backs and dividends. Mazzucato believes that since the government funds so much of the development on these drugs they should be able to influence the price, specifically, by putting a price cap on drugs.

Overall, Mazzucato believes that the government is already an active participant in capitalism. She wants the government to be a co-shaper, and co-creator, not just a worried parent who sits on the sidelines waiting with band-aids for something to go wrong.

1 Comment Posted on by katie_shore1 Uncategorized

Silverware and Sharing Spouses

Katie Shore

(Image of Julliard Flatware from Oneida)

The silverware pictured above is the exact set of silverware my parents received as a wedding gift nearly twenty years ago, and it is sitting in a drawer in my kitchen. Before listening to an episode of NPR’s “Planet Money” podcast, I had no idea what Oneida was, let alone that my family’s silverware was manufactured by the company.

Oneida silverware has an interesting and complex history. Before Oneida became a successful flatware company, it was just a “free love” commune. How did a group of people in a spouse-swapping commune become owners of a multimillion dollar company?

During the Industrial Revolution and the Second Great Awakening in the 1840s, a man named John Humphrey Noyes decided that he and some of his companions were going to start a commune in upstate New York. This community was composed of Christian Perfectionists. Perfectionists sought to perfect themselves by eliminating fear, sin, and other impure things from their lives.

Initially, the commune began producing animal traps since fur was in high demand. They mechanized this process and built nearly 200,000 fur traps per year. The commune also worked in other industries to see which would bring them the most income, and this eventually led them to the flatware industry.

Clearly, the Perfectionists had capitalist tendencies. Ellen Wayland-Smith, the great-great-great-grandniece of Noyes, describes his views about capitalism and Perfectionism in the podcast: “He thought capitalism was going to be a way of uniting humans into one sort of global market and that this can only bring good.” Contrastingly, the author of Major Problems in American Business History, Philip B. Scranton, defines capitalism as “a relentless drive for improvement, expansion, and control, defined and channeled through economic institutions (usually firms) and their interactions, and involving technological change” (9). The Oneida commune was a fusion of both of these ideas: the commune desired expansion and was innovative for the sake of profits, but capitalism also united the people to work together for the success of the company.

Despite his capitalist views, Noyes also avidly supported “Bible communism,” meaning that the business’s profits were shared, and everything was owned by everyone. Essentially, it was a form of religious socialism. This idea of “Bible commune-ism” was implemented because Perfectionists had to be unselfish; sharing was caring. Members of the commune even shared spouses!

The idea of “free love” made people uncomfortable. The podcast discusses America becoming more religiously conservative around this time too. In the late 1800s, the government became more suspicious of so-called unconventional religious groups, including the Mormons and Perfectionists. Rumors also got out that Noyes was having sex with and raping underage girls. Before any charges could be brought against him, he fled to Canada in 1879.

Without their fearless leader, the Perfectionists decided to close the commune and stop sharing spouses beginning in 1880. Since everyone owned part of the business, they decided to establish a joint stock company called Oneida Company Limited in which the adult members had stock.

Not only did these men and women have to adjust to a new way of life, but this new company had to succeed as many changes took place in the United States economy because of the Gilded Age. Luckily, Noyes’s son Pierrepont emerged and decided that Oneida needed to specialize. With the growth of the middle class, he thought that producing silver-plated flatware was the best option; it looked nicer than steel utensils and wasn’t as expensive as those made of sterling silver. Additionally, he engraved many of the pieces to increase their perceived value. Pierrepont also heavily emphasized marketing and advertising, selling his flatware using innovative new ads that included artwork and images.

A silverware advertisement from Oneida, New York. (Photo/The Oneida Community House)

(Image of a 1924 Oneida Advertisement from The Oneida Community House)

As time went on, Oneida struggled as tastes altered and cheaper imports began to emerge. The company even went public in the 1960s, despite its history of being family-operated. About ten years ago, Oneida filed for bankruptcy, but today, you can still buy Oneida silverware. The brand now exists within a group known as The Oneida Group.

Throughout Oneida’s history, we can see the interactions between business, state, and society. Oneida went from being just a spiritual-based commune to forming a very lucrative business within this community. The state and society significantly affected Oneida’s behavior from causing them to abandon their practices of “free love” due to governmental suspicions to causing the company to respond and adapt to consumer demand. In particular, Oneida Company Limited’s success came from understanding society’s desire – especially the middle class’s desire – for attractive, yet affordable, silverware and their ability to market their products to the masses.

It’s fascinating to think that one man’s desire for spiritual perfection led to the creation of a socialist commune and a brand of flatware. The next time I eat using our Oneida silverware, you can bet I’ll be thinking about Oneida’s intriguing past…

 

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.