The Pope Wants Economic Fairness. Let’s Do It.


SmallIvy

Many are questioning (some are not even questioning) if the Pope is calling for socialism when he talks about economic fairness and granting access to those who have not been able to participate in the economy.    I’m not so sure that he is – just that those who view socialism as the answer to all of society’s  woes take the Pope’s words as affirmation of their views.  Many people get so fixated on a method of achieving a goal that they forget the original goal.

If the goal is to give people access to the economy, socialism is not the solution.  In fact, socialism is exactly the problem that has caused the doors to economic fairness to be closed to many people in many places in the world.  (Other reasons are religious, where only those of a particular faith can participate, or classism, where only those of a particular class or caste have access to the economy.)   The vast majority of places in the world where only a few people have the ability to gain wealth, while many others have no opportunity, are either socialist or monarchies.  When it is the government that is deciding who gets to open a business or run a factory , as well as who can only work in those factories and never become an owner, political influence decides access to the economy.  In some cases, many are not even able to work at all unless they are a “in the party” or otherwise favored people of the government.

In places like America and Taiwan, where there is a free enterprise system open to all, everyone has access to the economic system.  Because so many people are producing in those countries, there is also a lot more wealth to go around.  Sure, those who are most productive end up with a larger share of the wealth, but even those who produce nothing are far better off in free enterprise societies than they are in places where the government controls who gets access to the economic system.  In America, even someone who does not work at all can expect to have a substantial shelter, food, quality medical care, access to education, a cell phone, a television, and transportation.  In Vietnam and North Korea, unless you’re in the favored class or the Party, you’ll have none of these things unless you work very hard for them yourself.  Even then, hard work is often not enough because either your earnings are taken away or things just aren’t available.  It seems odd that, in a country like Vietnam, supposedly based on an economic system where everyone shares equally, nothing is shared at all.

In free enterprise economies, where there are jobs and the ability to create new businesses available to those who seek them, it is just a matter of whether people choose to access the economic system or not.  Access requires one to think beyond oneself, because the way that you do well economically is to do things that other people need.  You do things for others, who in turn do things for you of equal value.  The more people you help, the more wealth you earn.

Another advantage of a free enterprise system is that more wealth is created.  In a place like Cuba where there is no incentive to make more than you need because it will just be taken away, people do the bare minimum needed to survive.  If others are not producing enough to cover what they are consuming, there will not be enough to go around, leading to shortages.  If you get to keep a portion of the excess you produce, there is an incentive to produce more, and also a drive to find ways to make production as efficient as possible.  With a shovel, it would take a year or more to create a swimming pool, making them very expensive and only the things very wealthy people would have.  With the creation of a backhoe by someone wanting to be more productive, a swimming pool can be created in a week or less, making them affordable for anyone with even a moderate income.

Another way to improve the lives of all is to not give charity to those who are able to produce for themselves.  In a system where you need to at least do something to get the food you need to eat, people have an incentive to spend their time doing things other people need, which causes more wealth to be created.  If one person were growing the food for an entire neighborhood, everyone in that neighborhood would be starving because one person would not be able to produce enough.  If everyone were spending the majority of their time growing food, there would be more than enough to go around.  More wealth would be produced, meaning everyone would be wealthier.

So, the way to bring about the Pope’s vision is not to go out and start taking money and possessions away from the wealthy and distributing them in the streets.  That would be like thinking that you could solve hunger by gathering up all of the seed corn in the silos and doling it out.  Instead, access to the economy by all is accomplished by removing the barriers to entry, most of which are put up by government officials and rulers who use their power to control access.  Anyone who wants to start a business should only need to do what is needed to ensure his activities won’t negatively affect others and pay for any harm that is done.  Anyone who wants to work should be free to market himself as desired and agree to wages and benefits with his employer.  It is access to multiple employers brought about by the ease of opening a business that leads to fair wages and benefits, not legislation.

The Pope’s vision is also accomplished by insisting on the best from people, which is exactly what is done under free enterprise.  Encourage people to spend their time doing productive things by not giving hand-outs, even for basic necessities, to people who are mentally and physically able to contribute.  Instead, give opportunities to earn what is needed, either by helping other individuals or by helping society as a whole.

Your investing questions are wanted. Please send to vtsioriginal@yahoo.com or leave in a comment.

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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.

What Are Small-Cap Stocks?


dolphinCapitalization refers to the value of a company. To find the capitalization, simply take the price of the stock and multiply it by the number of shares. In general stocks are divided up into three classes: small-caps, mid-caps and large-caps. While I’m sure there are probably specific dividing lines that someone has created to separate small, from mid, from large caps, those lines are really arbitrary and will obviously change over time due to inflation and due to companies getting much bigger. The important thing to know is just that small- caps are relatively new companies with a lot of room to grow, while large-caps are well established companies with many product lines. Mid-caps fall somewhere in between. There are even micro-caps, which are really small companies, perhaps being run out of someone’s garage.

Small-cap stocks are by nature growth stocks since they are just finding out what works and growing their product lines. They are also more risky than large-caps because they do not have a cash reserve to fall back on or the ability to sell off assets should they make a misstep. They can also be put out-of-business by a downturn in the economy even if they are doing everything right because they don’t have the ability to wait for things to turn around.

Still, because they are small, small-caps have the ability to grow their earnings much more rapidly than a large-cap. A company that does a billion dollars in sales and sells to pretty much everyone would have a hard time doubling their sales. A small company with four restaurants can double their sales simply by adding another four restaurants. Because stock price follows earnings, there is the potential to make a lot more money over long periods of time by investing in small caps than you will if you stick to the blue chip companies.

To find small-cap stocks, look for companies that are in limited regions of the country. These may very well be companies of which you have never heard. You may therefore need to go through a stock research publication, such as the Value Line Investment Survey to find them. You might also find a business you really like while traveling, or read about a company with a new product that sounds good in a magazine or newspaper. Be careful, however, since just because a company has a good product doesn’t mean they’ll be successful at running a business to sell it.

Hey, I sure don’t know it all.  Help make this site better by leaving a comment!

Got an investing question? Please send it to vtsioriginal@yahoo.com or leave in a comment.   

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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.

Why are So Many Children in the US Hungry?


SmallIvy

I’m always perplexed when I read statistics like 15.3 million children under the age of 18 do not have adequate access to enough food in their homes.  I do not understand why, with all of the government programs that provide welfare, coupled with the private charities, children are not getting enough food.   What are the reasons?  Things I would ask include:

Are welfare payments simply too small to cover food?  If so, are the parents also going hungry?  Do too many people assume government programs are adequate and therefore not give enough?

Do a lot of people not know where to get assistance?  Or is the system too difficult for people who really need it to get through because of all the fraud?

Do the parents get enough money, but simply choose to do other things besides feed their children with the money?

Do the parents work and their salaries are just too low to provide food, or are there that many parents who are disabled?  Or are they unable to work because of lack of child care?

I’m sure that the answers are varied and very situation dependent, but in general, it appears that what we’re doing doesn’t seem to work.  It is also frightening if the answer is that the amount money supplied is enough to feed the children, but the parents simply choose not to feed their children.  If parents aren’t even willing to do the minimum of providing adequate food for their children, are they providing supervision, ensuring they have an education, and teaching them the morals and values they need to contribute to society?  Probably not.

Perhaps we need to do something different.  If the issue is that the amount of money given isn’t enough, maybe more needs to be given and more work needs to be done to help people provide for themselves (because everyone is better off when more people are working).

If the issue is not enough jobs, maybe we need to look at ways to grow the economy or teach people to provide more for themselves directly (such as growing a garden).

If the issue is that welfare money is being wasted, maybe we need to change how it is distributed and maybe provide goods like food instead of cash.  Maybe we also need to control the money better because perhaps those who tend to stay on welfare for long periods of time aren’t very good at handling money.

Maybe the issue is that people are living in places that are very high cost, but they don’t have a job (or have a job that pays enough).  In that case, it might make sense to encourage people to move to lower cost areas to make welfare dollars stretch.

So who knows the answers to these questions?  Is there anyone on welfare who can say if the amount received is enough to cover everything if you use it wisely?  What could be done to improve the situation?  Does anyone work with welfare families who could provide some insight?  I’d love to get your input.

Follow on Twitter to get news about new articles. @SmallIvy_SI

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.