Sunday, March 8, 2009

My Unsolicited Advice for the US Economy

There are a number of ideas that have been packed away in my mind’s attic over the years, and from time to time I dust them off and reexamine them. Often after a while, an idea that appeared brilliant to me when I first thought of it will come to seem silly or unworkable.
But sometimes, events transpire that make a certain idea seem even more relevant and on-the-mark than before. Such is the case with the ongoing economic crisis and my idea for a wide array of non-for-profit corporations. This idea, of course, is not exactly something that I was the first person ever to think of. Girl Scout cookies, the New Jersey Audubon Society bookstores, various hospital management companies, and Newman’s Own food products are just a few of the many examples of goods and services being sold for non-profit ends.
Still, I’d hazard a guess and say that with the exception of government spending, the vast majority of the United States (and world) economy runs on a for-profit basis. Meanwhile, many companies that function on a non-profit basis run this way because they have been nationalized- which is all too often an invitation for mismanagement, lack of competition, and unproductive employees.
However, what if we could combine the vigorous competition of the business world with a non-profit end, meaning that after covering for expenses and salaries, any money earned would either be turned over to charity or reinvested with the hope then of bringing in even higher profits in the years to come? Newman’s Own has been run along these lines for years and has been able to give tens of millions to charities in the process. But what about banks, insurance companies, really, just about any company that serves consumers?
Companies like this could still pay their employees every bit as much as other companies in the field, and thus attract top talent. Meanwhile, they would also probably have on average more luck recruiting top people, as their employees would get more job satisfaction (and be more productive) working for a company that was improving the world with each penny earned.
Next, assuming everything else is equal, customers would in most cases prefer to buy from a company that was contributing its profits back to society, rather than making management and shareholders richer. Obviously, shareholders aren’t usually bad people, but they tend to usually be pretty well-off to begin with, or if they are financial institutions, have proven themselves to be rather adept at wrecking the global economy and the livelihoods of millions. Think about it: wouldn’t you rather buy gas (which you still need to do, even if you drive a Prius) from an oil company that reinvested all its profits in research into cleaner energy or some other cause than the likes of ExxonMobil, Shell, BP or any one of the other oil majors who lobby against sorely need global warming legislation and whose stock was largely held by investment banks and hedge fund managers?
Furthermore, while I am anything but an expert on the matter, I would assume that some tax advantages would accrue to a company operating on a non-for-profit model. This would be particularly advantageous if a company that operates this way wouldn’t have to pay taxes on money reinvested in expanding its business. All that the law would have to require would be a proviso saying something like 50% of the profits would have to be given to charity each year, much like foundations currently work.
Eventually, this could allow for non-for-profit companies to gain advantages over their for-profit rivals, which would be for the overall benefit of society. Meanwhile, they would still be vulnerable to competition from other non-for-profit and well run for-profit corporations, and would be subject to the same sort of anti-trust legislation that regulates all companies. This would ensure that prices would not go up for consumers and that the efficiency of a for-profit enterprise would still be there.
How could this come about? Well, perhaps some angel investor like a Bill Gates or a George Soros could come along and invest a couple hundred million this way. Over time, there could be a proviso saying that a portion of the company’s earnings would go to pay off its initial investors, but I think consumers would understand this and realize that it is an inevitable price to pay for the model.
My thoughts on this topic are much more extensive, but this is the basic gist of my idea. All I can say is that I will continue to ponder the idea in the future, and one day, try and get an audience with the sort of people who could make this a reality. But for now, with bankers and the wealthy captains of industry being more unpopular than any time since at least the Great Depression, and concerns over the skewed distribution of wealth in the USA multiplying, this is one idea that could help consumers, the economy, and the charities that would receive the money earned alike. Thoughts anyone?

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