This is a business blog. The concept is to present ideas that would help business people improve both their businesses and themselves. Over the past few weeks I have been bombarded with social issues that just scream for comment. The underlying dismay voiced by most of these self proclaimed pundits is that the United States has serious problems and someone needs to step up and solve them. That someone typically isn’t the writer. What are some of the issues?
- The United States Ranks 96th out of 140 countries on the Global Peace Index according annual survey commissioned by Britain’s Economic intelligence Unit. (Great Britain is 49th ). Two of the major factors are the highest number of homicides per 100,000 citizens and the fact that we have the highest incarceration rate of all the countries surveyed.
- Gas prices are at an all time high at almost $4.00 per gallon. Gas is $8.35 in Great Britain and more than $6.50 in most of Europe, according to AA Motoring Trust, when our gas prices were still at $2.87. Whereas we consume 1.6 gallons per day per person as opposed to most of Europe at .5 gallons per day per person (Economist View )
- The U.S. economy is on everyones agenda. The unemployment rate has hovered between 4.5% and 5.2% since 2005 according to the US Department of Labor. The Consumer Price Index, less food, has been constant since prior to 2004. With the increase in gas prices and the fact that most food is transportation sensitive the CPI including food has risen significantly. A Gallup Poll suggests that 85% of the population thinks economic conditions are getting worse.
- The Dow Jones Index has risen from a low of 8235 in September of 2001 to 12823 today. That’s a 55% increase in six plus years. A dollar invested in 2001 would be worth $1.55 today. Real average earning during that same period grew from $497.35 per month to $607.49. That’s a growth of 22%. Factoring for inflation the earnings growth was only 2.3% from 2001. So the stock market is outracing real earnings.
- Household debt is 133.7% of household disposable income in 4th quarter 2007. Households spent 14.3% of disposable income to service debt in 2007 compared to 13.0% in 2001.
What’s the underlying business concept to all of this? It’s responsibility. The problems we are facing are problems we can deal with on an individual basis. If, and it’s an incredibly big IF in an entitlement culture, we all take responsibility for our part of the problem, it solves itself.
Number one on the list is dismal. Twice as many citizens were killed in the state of California during the duration of the Iraq war then were killed in that war. Several points scream out to me…
- This is just one state in our union. The needless death toll in our own back yard is staggering.
- These people neither volunteered, were skillfully trained, nor took an oath to die, they just got up in the morning thinking they would make it through another day and didn’t.
- There is no outrage from the public like there is for the war. We have come to believe this is acceptable.
I visit prisons every year. We can’t afford to continue to build prisons at the rate we are currently building them. Something has to change. I suspect the real reason is that we don’t expose this like the war, is we might feel somehow responsible for not doing our part. Because it happens all around us, we might be asked to actually take action to prevent it. The war is a long ways away and we can’t possible impact the outcome, so we vent and rage for someone else to take action.
The problem with rising gas prices is not a matter of the government reducing taxes, but modification in our social norms. Not an easy task to accomplish. We are Americans and the constitution says we can have and do anything we like as long as it doesn’t impinge of the freedom of others. So I want to drive a big car anytime and anywhere I want and the government is responsible for assuring I can continue to do this. Capitalism is great as long as I get what I want at the price I want. If not, the government needs to step in and mandate my happiness. This is just self-center goofy thinking. Only desperate times will change this. It’s an unfortunate aspect of human nature. We have lived the high life so long we expect it to last forever without our sacrifice. As China and India continue to grow their economies, this problem will continue to grow. It’s not a matter of our government solving this. Free enterprise and right thinking by the general public will solve it, if we choose. If not we will be doomed to second class status in the world economy.
The last starts with the very basic premise of spending less, investing more. If we take control of our spending and invest the difference two things happen. First we capture back 14% of our disposable income used for servicing debt. Second our investments grow faster than real earnings. As individuals we have more. More importantly we invest in businesses that provide jobs and stimulate the economy. Unemployment goes down, employee demand goes up, wages rise, we invest more and the cycle continues.
It's all about individual responsibility. Something we have total control over.