We live in an age in which many otherwise thoughtful people seem to ignore, or not understand, the long-term effects of an action which they or someone else might take. The concept of cause and effect appears to be lost upon them. This outlook has become more common in all walks of life. It is found everywhere – among those who are educated, uneducated, socially polished, unpolished, young, old, minority, non-minority. We can debate how we got here, but more importantly, this problem needs to be recognized and solutions found now.
Politicians and bureaucrats can impose regulations which may benefit one business, but unexpectedly damage another. One western legislature, for example, passed a requirement that dairies give unrealistically low milk prices to cheese producers in their state. Unfortunately, some dairies, faced with rising costs which they could not pass on, were forced out of business, limiting milk availability. That wasnt the way it was supposed to be. No one thought that one through.
A newly elected private-club president campaigned to get rid of his longtime general manager, to whom he did not easily relate, and his wish was granted by the board. Unfortunately, the clubs highly qualified chef could not get along with the new manager, and he also left. At the annual meeting, a somewhat chagrined president referred to the law of unintended consequences, but it was too late.
A national pizza chain announced that rising medical costs might force it to increase prices as much as 14 cents per pizza. Twitter went berserk with messages vowing to never patronize that business again. Compounding the problem, many journalists covering the story had no understanding of what it takes to make a dollar. To both groups, the effect of increased costs on bottom-line profitability was a concept which only greedy business people considered.
An executive tried to explain to a plant worker why their lubricant company could not afford to give a holiday turkey the following week to each of its 500 employees scattered over a broad area of the country. A discussion of thin margins and difficult logistics was met with glazed eyes and a repeat of the same question, plus the addition of a request for a general wage boost. That executive, then and there, decided to promote rudimentary business economics knowledge through Junior Achievement in the local schools.
A federal law required employers of larger companies to provide expensive new benefits to full-time employees. Some executives reacted by deciding to convert full-time employees to 28-hour part-time workers, breaking up or shrinking the size of the company, or even paying a fine. In many cases, full compliance meant increased costs which could not be absorbed. Unfortunately, few politicians who passed that law had business knowledge.
Could more education in business economics for future politicians, bureaucrats and journalists be an answer? Could the point be made that private enterprise must make a profit to exist, and that government runs out of taxable resources if there is no private enterprise? What are your thoughts?