Reflections on the Occupy Wall Street Movement

After many days of trying, those in the Occupy Wall Street (OWS) group are starting to finally make it to the news – at least the back pages.  They have done what most Left-leaning groups do well, which is anger those who are just trying to go about their daily lives by making traffic worse than usual.  The numbers of college students supporting their rallies also seems to indicate though that they may have inspired some of the younger generation to skip the classes that their parents and government loans are paying for to hit the streets, if for no other reason than to meet girls.

Their rallying cries at first appear to have merit.  Why should these few rich people have all of this wealth?  Why shouldn’t everyone have a right to a good paying job that doesn’t require too much work?  Shouldn’t everyone have a place to live, food to eat, a vehicle to drive, a computer to blog from, and free medicine and birth control?  There are some fundamental flaws in their concepts, however, which hopefully the useful idiots who are joining their rallies will come to appreciate before they succeed in destroying their own future.

The first thing to look at is the success of the Socialist/Marxist economy they are promoting, compared to that of a Capitalist one.  There are many examples of Capitalist societies in which the citizens have prospered.  The United States, Hong Kong, Taiwan, Ireland, and more recently, even China (at least economically) come to mind.  In contrast there are no examples of Marxist economies that have done well, at least at the scale of a nation.  The reasons are:

1) Marxist economies give little reason to work and produce things of value since doing so does not lead to personal gain.

2) Strong government control leads to corruption and favoritism.  Just look at the current funding to friends of and donors to the Obama administration that have gone to dubious (Solyndra) ideas.

3) Marxism rewards poor work effort – in fact, one feels one is winning and getting “something for nothing” by not working hard.

4) Centralized control does not work because no matter how benevolent the leaders, it is impossible for a small group to make decisions that work for everyone in their varied situations.

So what about not going to a full Marxist society, but having “living wages,” generous benefits and the likes?  When looking at such proposals, one must look at where wages come from and their limitations.  If an employer hires a group of employees, the value that they produce as a group must exceed the amount they are paid in wages and benefits.  There may be star employees who produce way more than they take in – justifying increased wages.  There may also be some poor employees who do not quite earn their pay.

As a group, however, the employees must provide more in value than they take in.  If they provide less value than they produce, the company will eventually run out of cash and go bankrupt.  If they just make enough for the company to pay their salaries, there is little incentive for the owner to put in the hours needed to run the company or for investors to buy shares of stock.

One can set wages artificially to a point.  At first it is likely that the management will layoff workers and cut jobs, or simply hire fewer workers.  If they are unable to layoff workers, or if wages and benefits are held to too high a level, the company will eventually close its doors.  Witness as an example General Motors, which could not lay anyone off, had huge obligations to retired employees, and then saw a slowdown in business.  Because it could not cut costs, the entire business went under.  Had it not been for the Government propping the company up, there would be no GM today.  It is unlikely that there will be one five years from now.

So, before you get behind someone with a three-day old beard in a black beret talking about economic justice and fair wages, look at what capitalism has done for everyone, including the working class.  While it is not easy, anyone who is willing to work hard can make their way up the ladder and make a good living in the US or other Capitalist economies.  Those that are willing to take risks, and especially those who are innovative, can become very rich under the system.  For example, despite the expressed woes of the current generation, look at Larry Page, Eric Schmidt, and Mark Zuckerberg and the fortunes they have been able to amass.   They were not just lucky – they had an idea, put in long hours working on it, and controlled their own destiny.  They didn’t sit in their parent’s homes and whine about the lack of good jobs – they made their own jobs.

Look then at what Socialism and Marxism have wrought.   In general it leads to a rich dictator and a lot of people in bread lines.  In a perfect scenario, which has never yet happened because corruption has always taken control, it may make everyone equal, but the total share they are dividing is less than it would be under Capitalism.  Everyone is equally poor.  Marxism is for the lazy.  If you are willing to work hard, or even if you want to work less hard but want better middle and lower class jobs, Capitalism is the better system every time.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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