ECONOMICS LESSON

SMART PEOPLE DISPLAYED NO MORE COMMON SENSE IN THE 'OLD DAYS' THAN THEY DO TODAY. NOR DOES WISDOM INEVITABLY COME WITH AGE. FOR EXAMPLE, IN THE PAST DEBTORS WERE IMPRISONED IN DEBTORS' PRISON UNTIL THEY PAID THEIR DEBTS. HOW COULD THEY REPAY DEBTS IF THEY WERE IMPRISONED? OF COURSE. THE RICH AND IMPORTANT TRADITIONALLY MANAGE TO MAINTAIN THEIR CREDIT AND LIFESTYLE INSPITE OF UNPLEASANT JAILTIME. THE MODERN MISUNDERSTANDING OF MARKET ECONOMICS IS SIMILARLY BASED UPON MISGUIDED THOUGHT. WHETHER ONE IS YOUNG AND 20, 30 OR 40 SOMETHING, A 50'S BABY BOOMER, A SENIOR CITIZEN OR JUST AGED, MOST AMERICANS DON'T UNDERSTAND THAT CRITICIZING THE PROFITS OF COMPANIES AND SIMULTANEOUSLY DEMANDING THAT COMPANIES BE PROFITABLE IS AN OBVIOUS CONTRADICTION. HOW LONG HAVE TOBACCO COMPANIES BEEN BEATEN UP FOR THEIR PROFITABILITY YET THEIR PROFITABILITY AND THE PENALTIES RELATED TO IT, ARE ANTICIPATED AND RELIED UPON TO FILL LOCAL AND STATE COFFERS.

SHAREHOLDERS WHO INVEST IN AN OIL COMPANY, FOR EXAMPLE, WANT IT TO MAKE MONEY. IT MAKES NO SENSE FOR THE PROFITABLE OIL COMPANY TO THEN REDUCE PRICES, PAY EXTRA TAXES TO THE GOVERNMENT OR DISTRIBUTE ITS PROFITS TO AN AUTO COMPANY THAT IS LOSING MONEY. BY THE WAY, STATISTICALLY, BANKS, PHARMACEUTICALS, REAL ESTATE, HEALTH CARE AND SOFTWARE COMPANIES' PROFITS (BANKS WITH A RATIO OF 3 TO 1 !) EXCEED OIL AND GAS COMPANIES. OIL AND AUTO COMPANIES ALIKE DEPEND ON THE FREE MARKET TO MAKE OR BREAK THEIR BOTTOM LINE WITH A PROFIT OR LOSS. WITH THE OIL COMPANY THE PRICE OF OIL IS DETERMINED BY THE GLOBAL MARKET, AT PRESENT DOMINATED BY CHINA AND INDIA GOBBLING UP HUGE QUANTITIES OF OIL. ADDITIONALLY, THE PRICE OF GAS AT THE PUMP IS INFLATED BY FEDERAL AND STATE TAXES. THE SUCCESS OR FAILURE OF THE OIL COMPANY ALSO DEPENDS TO A LARGE EXTENT UPON PROPER MANAGEMENT, THAT IS, UNCORRUPTED. THE AUTO COMPANY, LIKEWISE, DEPENDS UPON CUSTOMERS DRIVING THE GLOBAL MARKET FOR CARS BECAUSE THE CUSTOMER, WE KNOW, IS ALWAYS RIGHT. THE PROFITABILITY OF THE AUTO COMPANY IS ALSO DEPENDENT UPON INTELLIGENT MANAGEMENT, THAT IS, UNCORRUPTED.

TWO EXAMPLES MAY NOW BE INTERJECTED. THE FIRST RELATES TO ENRON. ENRON'S CULTURE OF GREED WHICH CAUSED THE DOWNFALL OF ENRON NOT ONLY FOSTERED CRIMINAL BEHAVIOR, BUT BETRAYED ITS STOCKHOLDERS AS WELL AS THE GENERAL PUBLIC. THE SECOND EXAMPLE RELATES TO EASTMAN KODAK, A COMPANY HEMORRHAGING WITH FINANCIAL LOSES FOR YEARS. SHOULD A SUCCESSFUL COMPANY LIKE NOKIA TAKE MONEY FROM THEIR SHAREHOLDERS TO SAVE A FAILING COMPANY LIKE KODAK (AND ITS EMPLOYEES' JOBS) BECAUSE IT CONTINUES TO MANUFACTURE PRODUCTS THAT DON'T SELL? ENRON'S FAILURE, KODAK'S FAILURE, THE AUTO COMPANY'S FAILURE - ANY FAILURE DOES NOT RELATE TO OR NECESSITATE PENALIZING A SUCCESSFUL COMPANY.

IF THE CORRUPTED AND SHORT-SIGHTED AUTO COMPANY COULD NOT SUSTAIN ITS PROFITABILITY BECAUSE OF AN OVERLY GENEROUS UNION-SPONSORED, MEDICAL BENEFIT AND RETIREMENT PACKAGE, IT SHOULD HAVE CHANGED COURSE. THE BOTTOM LINE IS THAT IF AN INVESTOR DOES NOT HOPE TO MAKE MONEY WITH AN INVESTMENT, WHY WOULD HE OR SHE INVEST? KARL MARX OVER A CENTURY AGO DOOMED CAPITALISM, BUT THE SYSTEM LIVES ON. EXTRACTION FROM ONE VEIN AND INFUSION INTO ANOTHER ONLY WORKS WITH GENUINE BLOOD. DRAINING PROFITS FROM A HEALTHY COMPANY AND INFUSING THEM INTO A DYING ONE WILL RESULT IN TWO ANEMIC PATIENTS. WITHOUT INVESTMENTS, SHAREHOLDERS, RISK-TAKERS AND ENTREPRENEURS PARTICIPATING IN A GLOBAL MARKET ECONOMY, WHERE WOULD AMERICA BE TODAY? IN DEBTORS' PRISON WITHOUT A PRAYER?