#NoApologyBookClub – The Economy Thrives on Creative Destruction

 (This is the fourth #NoApologyBoockClub post. The third post is here.)

Romney really knows how the economy works, and if you read chapter 5 of No Apology you will feel like understand it too.

Productivity, innovation, role of government

The economy depends on workforce productivity – which is a measure of the value of the goods and services produced by a worker. Romney gives this example (paraphrasing): imagine a tiny nation with 200 workers – 100 raise food and 100 build houses. One day someone invents a plow that can be hitched to a draft animal. From then on only 50 workers are needed to raise food. Is this good or bad? 50 people are out of work – if a meeting of workers is called, you can count on 50 votes against the plow. But what is certain is that someone will discover new things for those 50 unemployed workers to produce – tools, clothing, entertainment, etc. Some of the  new jobs will pay more than farming, some will pay less – so some of the 50 will be better off, some will be worse off. But overall the nation will be much better off because more is being produced per person. The overall productivity rose and with it did average personal wealth – all because someone invented a plow.

Innovation comes in two types: improving the old, inventing the new. The first type may result in reduced unemployment while the second one usually adds employment. Innovation of either type requires more than a good idea – the conditions must be right for the idea to be adopted and implemented. That is where government comes in. Too frequently, government creates the wrong conditions – it puts hurdles in front of innovation through red tape and taxes, and in misguided attempts to protect those who would lose jobs because of it.

Romney view the loss of a job on an individual level as a traumatic and painful event. It can ruin lives. It is imperative that we, as a nation, do everything possible to support people who have lost employment and to help them find new, more productive, employment. But he makes very clear that government policies that aim to prevent loss of jobs – by either preventing creative destruction or by preventing competition that leads to innovation – is self-defeating and ultimately leads to the collapse of entire industries. (As we have seen these past four years – we get massive unemployment with no new jobs at all.) He points out instances where some unions have successfully lobbied government to prevent productivity improvements and thereby crippled an industry’s competitiveness. There are some very rare occasions that government should intervene temporarily when an American industry is threatened by a foreign competitor, and he lists them in the chapter.
Government should therefore mainly stand out of the way of innovation. However, Romney does believe that government’s role does not stop there: it should promote education (innovation comes mainly from educated minds), it should fund science and basic research, and it should properly regulate the financial system – he calls this last one dynamic regulation. He discusses the 2008 financial meltdown, what went wrong (there is even a chart), and how Secretary Paulson’s TARP was different from Secretary Geithner’s TARP.

Romney sums up his economic  agenda thusly:

To strengthen America’s economy, we must minimize those things that retard economic growth and promote those things that accelerate  it. A growth agenda favors low taxes, dynamic regulation, educational achievement, investment in research, robust competition, free trade, energy security, and purposeful immigration. And it seeks to eliminate government waste, excessive regulation, unsustainable entitlement liabilities, runaway healthcare costs, and dependence on foreign oil. This, in a nutshell, ought to be the economic agenda for America.

In an election that hinges on a sick economy, Romney presents as the ideal candidate to rehabilitate it.

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64 Responses to #NoApologyBookClub – The Economy Thrives on Creative Destruction

  1. Sadly, I have not had a chance to read the book- our library does not have it yet. I would like to chime in on productivity though.
    This is entirely just from MY experience as a restaurant manager mind you. Years ago, we had enough people on the shifts to do the work. Now “productivity” has become the watchword for cutting labor costs. Where once we might have had three cooks on a shift, now there is one- and when that cook has to go on break- a waitress or dishwasher (if there IS a dishwasher) must cover their own station and that of the worker on break. In the name of productivity, most average chain restaurants (think the big box buffet style joints) no longer have a dishwasher during the late morning, mid afternoon or early evening times. The waitstaff is doing the dishes. And cleaning the restrooms. And cleaning walls, floors, etc. All that cleaning used to be done by the dish/utility people. But it is way cheaper to have the waitstaff do it at sub minimum wage. And it is perfectly legal to require them to do so.
    Guests per “man” hour. Productivity. Not kind to the poor folks who work so hard in restaurants.
    I always advise people NEVER to eat out in the off times for exactly those reasons. It is not possible for a server to give great service if he/she is off doing dishes or cleaning the restrooms. And I for one do not want someone handling my food who has just been run ragged cleaning the filthiest areas of the restaurant and may, perhaps, still have those germs and bacteria clinging to them to be transferred to my food. Productivity be damned lol.
    The restaurant owners did not invent a better way. Their cost of doing business went up- especially when there are now fuel surcharges tacked on to deliveries due to the ever rising costs of diesel and gas. Utilities going up. Property taxes, etc. And now they have to figure out a work around for Obamacare. I would bet there will be fewer full timers- so they can get out of that mandate. Instead of a better way, they found a better exploit. And they wonder why there are no more career waitstaff? The day of being able to make a living as a restaurant worker are over- all in the name of productivity.

    • votermom says:

      I figure a lot of people haven;t been able to read the book so I’ve been trying to summarize the content. This chapter I really did not do a good job – too much real life intruding for me to work on it. So I definitely lost a lot of teh argumet on productivity that Romney put forward.

      Now “productivity” has become the watchword for cutting labor costs.

      Yup, productivity has pretty much become a dirty word because companies use it to justify laying off people so that their stocks go up. Where productivity is a ratio of value produced divided by workforce – they focus on making that denominator lower rather than increasing the numerator.*
      This is a LOT like what the BLS did with the unemployment rate – they removed the number of people counted as workers to make it look like the unemployment rate is down.
      From experience, I know that people who buy stocks know better than to be fooled by this* – they look at the gross number of sales to see if the company is actually bringing money in and not just cutting costs.

      Edit – btw the way, GREAT comment from real life experience, PMM, that’s just the kind of discussion I hoped we’d get. Thanks for starting it off! 🙂

    • myiq2xu says:

      Here’s my retail version of that story:

      I used to work for a big-box retailer. One of the famous discount stores. Two major competitors had just opened new stores nearby and our sales were down.

      Based on our decreased sales we had to cut hours on all the part-timers (basically everyone except management) Shifts were fewer and shorter.

      That meant longer lines and poorer service. We would hear comments from people that they didn’t like our store because it looked dirtier (nobody to clean except the janitors at night) the shelves empty (nobody to restock during the day) and you couldn’t find a shopping cart (because there was nobody to do a cart round-up). God forbid you needed a price check or help carrying something heavy.

      So we lost more sales, which meant our hours were cut even more. I was the loss control manager but I would do cart round-ups and customer service, but only when I was there (40 hours a week) and I still had my own job to do. They let my part-time agents go too. That meant there was rarely any security working the floor and hardly any employees in some sections, making it easy for shoplifters. That meant theft went up and my district boss wanted to know why.

      After a year I gave up and took a simpler job.

      • votermom says:

        Isn’t that another shining example of typical corporate stupidity?

        That reminds me – in the book (I don’t remember if it’s in this chapter), Mitt also talks about how a lot of the problems with upper mgt (CEOs) come with their compensation being out of line with the long term goals of the company. Yup, here it is, when he talks about R&D.
        “I’m convinced that the short-term personal financial incentives of executives are part of the problem.” page 125
        Then he talks about how when he was still at Bain, part of turning around a company was hiring a CEO who would be compensated on the long-term value of the company, like they would.

        Personal experience here – remember six sigma – one of those productivity improvement fads? One of the best critiques of it I’ve seen is that 100% efficiency is a BAD thing. When you are at full capacity you have no slack which means no way to deal with the unexpected – whether that is new business or sudden failures or malfunctions.

        • “I’m convinced that the short-term personal financial incentives of executives are part of the problem.”

          There’s old moderate Mitt. I agree, of course, and so do many Americans. It’s actually a real free market ideal.

    • That’s an interesting point to make, and I agree it is problematic, but I would also point that Romney’s discussion of this in this chapter is mostly in reference to goods, not services.

      He does, however, use the example of cross-training positions in hotels, for example, so there is some discussion of service industry employment. But I doubt he would be on board with cross training wait-staff to clean bathrooms. There is an obvious problem with health code violations.

    • 49erDweet says:

      Here’s another service industry version. Years ago went from management to highly paid contract driver for a national firm in CenCal to get them out of non-compliance trouble with their city/customer. Worked 5 nites per week, midnite to 8am. Straightened things out in 2 weeks.

      New management came aboard in 5 months and terminated contract, unilaterally changed route to daytime, and changed service frequency days to comply with union contract so they could cover contract with just two regular drivers.

      Daytime traffic volumes completely altered route timing conditions, causing delays. Work piled up. City customers became unhappy after firm stonewalled for two months – almost costing them the contract. The firm ended up with two new contract drivers and another expensive service vehicle at even higher cost to run my old hours and route. Hee hee. I had moved on to shuttle management job in Yosemite. Hee hee hee. Few years later firm no longer exists. Hee hee hee hee.

  2. votermom says:

    Might as well put the Benghazi emails link in here – even though it is OT, it is definitely ought to be the topic of the day, imo

    http://www.reuters.com/article/2012/10/24/us-usa-benghazi-emails-idUSBRE89N02C20121024

    (Reuters) – Officials at the White House and State Department were advised two hours after attackers assaulted the U.S. diplomatic mission in Benghazi, Libya, on September 11 that an Islamic militant group had claimed credit for the attack, official emails show.

    The emails, obtained by Reuters from government sources not connected with U.S. spy agencies or the State Department and who requested anonymity, specifically mention that the Libyan group called Ansar al-Sharia had asserted responsibility for the attacks.

  3. myiq2xu says:

    Ahem:

    votermom, on October 23, 2012 at 4:33 pm said: Edit Comment

    OT The much delayed next No Apology Book Club post – on the economy – is skedulated for tomorrow at 7am pacific time.

    It is now about 5:49am pacific time. We are three hours behind you yankees.

  4. votermom says:

    Cllint Eastwood narrates new Romney ad

  5. votermom says:

    I don’t care what people say, I love The Donald 😀

  6. angienc says:

    OT — that Allred bullshit — it’s a 25 year old divorce case where Romney testified to the estimated value of Staples stock & Time’s Halperin is reporting that Romney has no objection to people seeing his testimony.
    The ex-wife (who is living in a $5k a MONTH place in Boston, so it isn’t like she’s out on the street) seems to keep trying to re-litigate the settlement to demand more. She also has an account at HuffPo with more than 2000 comments *all* about how “scary” Romney & Mormonism and how snobby “Queen Ann” is. She’s kind of what I’d say is biased and, therefore, not very credible (and that’s *before* she got involved with Allred).

    • angienc says:

      Oops, link to Time article:

      http://thepage.time.com/2012/10/24/always-at-the-end/

      Money quote:

      The full details of the case and the nature of the hearing could not be learned, but Robert Jones, an attorney at the Boston law firm of Ropes & Gray, who is representing Romney in this matter told TIME in a statement, “This is a decades-old divorce case in which Mitt Romney provided testimony as to the value of a company. He has no objection to letting the public see that testimony.”

      • votermom says:

        Lordy, lordy, that’s even more pathetic than any of us predicted. I foresee a giant backfire at Allred.

        • angienc says:

          Yep. Even I who predicted that it was merely Romney giving testimony in someone else’s case thought it would be along the lines of why so-and-so was an unfit parent (something like — “I’ve seen her at home drunk in the middle of the day alone with the kids, etc) to have some kind of #WaronWomen bullshit attached to it even though it really had *nothing* to do with Romney himself. But Staples stock evaluation? *yawn*

          And look, I understand to a certain extent the ex-wife’s bitterness toward her ex-husband — he seems like an ass (he had a baby with wife #2 7 months after his divorce to her was final — he’s currently on wife #3) but (1) it *was* 25 fucking years ago and (2) WTF with the bitterness towards Romney too (and if you read her posts at HuffPo there is bitterness towards him too) — he wasn’t the one who cheated on her & left her. It gives me the sense that it’s all became an obsession for her, which is a shame — in 25 years she could have a completely different (and happy) life if she had let go of it all.

          My understanding of the case so far is that they divorced, she received 500,000 shares of Staples & sold half of them (250,000) BEFORE the company went public. Once the company went public, the stock greatly increased in value & she feels like she didn’t get her “fair share” (how, I’m not 100% sure — no on forced her to sell those 250,000 shares. And she’s still plenty rich by any standards — more than $60k a year on rent? Come on — that’s more than most families make in a year.

        • ME says:

          HA! Try again Gloria.

        • I suspect they’re trying to rile up the divorcee faction of women. I was wondering when that would hit. There’s been all this talk all year of single versus married women, but there’s a big faction of divorced-never-remarrieds, too. And some of those women are extremely bitter, some rightly so. Others, like Maureen here, not so much. Just petty and vindictive.

    • She’s still bitter that she got 500,000 shares of Staples in the divorce–and sold most of it before the company went public. You can’t re-litigate stupid, Maureen.

  7. yttik says:

    PMM mentioned restaurants, I was once a career server and loved my job. I made fairly good money. LOL, I was also in great shape! Along came our state which decided we had to raise minimum wage. Then the Feds decided to to tax tips based on your sales.Then we needed alcohol server permits and continuing education credits. Then we got regulations against working sick and mandatory sick pay. The restaurant had to hire accountants just to calculate all our tips,taxes, and compliance with permits.Then my employers had to hire efficiency experts and start rationing portions and cutting labor costs. All the employees had to become part time. Quality went down, service declined, and they eventually closed, so I lost my job.

    Before the various branches of Gov stepped in to “help,” I cost my employers almost nothing. I wasn’t a liability or an expense. In fact, I made them money. If I brought in a lot of customers, I made a lot of tips and they made a lot of profits.

    This is how the Gov can kill off jobs. Our law against working sick by the way, hasn’t prevented people from going to work sick, it simply means if you get sick and don’t work, you lose your job. You’re no longer an asset, now you’re a liability.

    • votermom says:

      In section where Mitt talks about dynamic regulation, he talks about how the huge amount of red tape and regulation, which is irritating to big corporations, can be insurmountable to small businesses.

      “Taking a weed-whacker to small business regulation should be a regular agenda item for every growth-oriented state, city, or nation.” page 138

      I guess that makes Nanny Bloomberg a weed-planter.

      And I think Mitt is going to be a seriously small-business friendly POTUS.

    • Simofish says:

      Steve Jobs autobiography said it loud and clear to Obama. Too much red tape to build a manufacturing plant in the US. I can build one in 6 months in China. Here in 6 months I’m still waiting for the first permit (paraphrasing last piece). Obama put a “group” together – jobs quit the group after the first meeting – felt it was a waste of time and they were spending too much money on a fancy dinner and not serious about jobs in America.

      • angienc says:

        And yet, Obama blame the non-existent “tax breaks” for companies moving their plants overseas & his idiot supporters believe it!

  8. yttik says:

    LOL, I sound like a Republican, but employees need to take some personal responsibility for their jobs. If you have a bad one with lousy pay, find a better one. When the Gov steps in to improve things for workers, they often make a mess of it and cost us jobs. When there are no jobs, you’re trapped working doing whatever you can get, and putting up with poor conditions because they have you over a barrel. It’s a vicious cycle. A much better system is to have plentiful jobs, so people can genuinely walk away from jobs that suck.

    At the moment I have 3 part time jobs that all suck, LOL. It doesn’t matter that minimum wage in our state is now the highest in the nation or that employers are going to be mandated to provide health insurance, because without plentiful jobs we’re all forced lower our standards and put up with things we normally wouldn’t if we had more options.

    By the way, why did my job become part time? Because of Obamacare mandates. If I work 30 hours or less, they don’t have to provide health insurance.

    • votermom says:

      A much better system is to have plentiful jobs, so people can genuinely walk away from jobs that suck.

      HONK!
      We need so many job openings that employers are competing for workers. Like in the 90s.

    • AMEN! And to your comment above! Used to be if you were skilled at being a server or cook- if the boss or company sucked you could give notice and have a new job before you left the old one. Kept em honest.
      Now with ServSafe, Alcohol service cetifications, HAACP, and on and on and on-
      And as for the health hazards of waitstaff and cooks cleaning bathrooms? Happens every single day. In almost every single restaurant. (Well maybe not in the hoity toity ones where a sald costs 50 bucks) It is now SOP.
      And restaurants are closing just like the retailer in MYIQ’s example above. Cut staff, service deteriorates, more cuts, service goes even further down the drain
      and sooner rather than later-
      ]the business closes.

  9. myiq2xu says:

  10. votermom says:

  11. tommy says:

    Todays Polling data – SurveyUSA has O up by 3 in Ohio. Otherwise, Romney is surging. Rassie has R and O tied in Ohio, and R has reached 50 in NH, and is up by 2.

  12. angienc says:

    BREAKING — Hillary is going to be having a “joint press conference” shortly after her meeting with Brazilian minister.

    I wonder if she’ll take questions on Benghazi — “joint” implies the Brazilian guy will be there too.

    • votermom says:

      • That picture they’re using, serious as it is, always kinda cracks me up. The militant’s stance is almost exactly that of the teenaged girl-bathroom pictures we’ve all come to see and snicker at on FB. All he’s missing is the duckface. He might even be making it. Hard to tell.

    • votermom says:

      Is this true?
      Were we sending Libyan arms to Syrian rebels?

      http://patdollard.com/2012/10/breaking-obama-caught-arming-al-qaeda/

      It now appears that Stevens was there — on a particularly risky day, with no security to speak of and despite now copiously documented concerns about his own safety and that of his subordinates — for another priority mission: sending arms recovered from the former regime’s stocks to the “opposition” in Syria.

      • angienc says:

        Pat Dollard seems like a nutjob/conspiracy theorist IMO.
        I stopped following him on Twitter when he started posting cryptic messages about someone needing to “break” Chief Justice Roberts to get him to retire early after the Obamacare decision (which, of course, he theorizes was a result of blackmail of some sort on Roberts by the Obama White House).

        What he says here could be true, but with him as the source I don’t give it any credence whatsoever.

    • cj says:

      She didn’t say much of anything beyond —> wait for the conclusions of their ongoing investigation. Very disappointing.

  13. Donald Trump a big nothing burger, just like Allred.

  14. HELENK says:

    my daughter works in the optical field. She was with the store the first day it opened. Has gone through several talk overs. Because she lives in a small town, most people know here and when they want glasses they come to her. The latest company that took over the store has shortened her hours, changed the rules so that she does not get a percentage of her sales. now the whole store has to make a certain amount before anyone gets a percentage. Example if she sells 80% of the weekly sales and the rest of the people only sell 10% nobody gets a percentage.
    This has changed her income drastically and she just managed to keep her health care while her husband was dying of cancer

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