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Capitalism is Still Superior
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Our friend Jorge, in his new article in this issue (see “The View from Europe”), roundly scolds U.S. and European leaders for their reaction this fall to the worldwide financial crisis. He is absolutely dead on in his assessment.

In financial crises of the last century it has been very popular to invoke the ideas of Marxism or Keynesian economics as a fix for all times. In the 1970s, for instance, President Richard M. Nixon famously said, “We are all Keynesians now.” Yet, in my lifetime, I have not seen either of these systems work for the long term, in any country, any industry, or any economy.

In our own industry, attempts to make false markets for obsolete manufacturing facilities have all failed. Obsolescence can be cause by obsolete (less than current productivity levels) equipment or obsolete markets, such as newsprint. I have spoken time and again about the folly of throwing new investment money (primarily in the form of only operating capital) into these old facilities just for the sake of creating jobs. In almost all cases this has failed.

Another publication in our industry recently devoted much of a current month’s issue to some of these follies, highlighting them in a positive way. It’s important to catch these stories at the right time, while the money is still flowing from external sources and before the facility has to make it on its own. It will be interesting to look at those facilities in five years and see if they are in business without the help of outside money. If history is any indicator, their chances of continued, stand-alone viability are very, very slim.

It is not without feeling that I say such facilities, in our industry or others, should be allowed to die. The solution, however, is not to continue to prop up the dead. The solution is to offer some limited aid (training, relocation) to help affected workers so they can move on to an industry or service that has hope of a future in a capitalistic society. For only where markets are nearly free (some regulation of safety or other matters seems imperative these days) can one pin the hopes of a career. A paycheck from a business that is on the dole is the same thing as just a check straight from the government—if nothing else, it is subject to the whims of politicians for it to continue.

So, since everyone is an expert these days, I will offer my five rules for assessing whether you are working for a business that has a future:

1. It makes something needed, and slightly more of that something will be needed tomorrow than today.
2. Your business is efficient and highly productive as compared to its competitors. This is taking into account raw material, energy, labor, and transportation costs. It does not have to be the most competitive, but it had better be pretty good.
3. It takes less human labor hours this year to make a unit of your product than it did last year. This is productivity improvement, and will not result in a reduction in employment if you are in a growing market.
4. Your employer does not exist to employ people or consume raw materials. It certainly does these things, but they are not the reason for its existence.
5. Your employer makes enough money that reinvestment in the business can at least equal depreciation.

If you work in a business that is not meeting these five criteria, I suggest you start looking for another career. You may not be in a rush, but you do need to awaken to the idea that your current career may not see you through to retirement.



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