Business Economics

Earlier this week, the Salt Lake Tribune published a story featuring a memorandum that David Siegel sent to all his employees, including those in Utah.  In that letter/memorandum, Siegel declared that, if income taxes and corporate taxes were raised by those elected to the Presidency and the Congress in the forthcoming election, he would be laying off employees.  Siegel is the owner of a number of resort oriented businesses in Utah, as well as the founder and chief executive of Westgate Resorts, the largest privately owned time-share company in the world.  He and his wife are also building the largest home in the United States, a 90,000 square foot edifice called Versailles.

In follow-up interviews, Siegel declared that his letters were not a threat, but a fact based on the economics of business.  Of course, speaking as someone who’s had a little training and experience in economics, politics, and business, the economics of business aren’t exactly that clear-cut. Some business owners might consider other factors besides having enough profit to build and operate the largest private home in America.  Warren Buffet, for example, one of the wealthiest men in the world, still lives in a very modest two-story house.  Bill Gates’ generosity with stock and stock options for his employees made those who worked for him in the beginning very well off.  And there are many other founders of businesses who don’t glory in saying, “You’re fired!”

Obviously, any business that loses money over a period of time [unless it’s subsidized in some fashion, either in the way in which Amazon subsidized its predatory ebook pricing or some other fashion] will eventually have to close, but as any honest accountant can tell you, there are innumerable ways to make a profitable business look unprofitable, as those in the movie industry well know. It’s one thing to claim that increased taxes will have a harmful effect on very small businesses – those, for example, with ten or fewer employees. But in a business with thousands of employees and millions, if not more, in profits?

Like it or not, all too many businesses treat employees solely as a necessary cost, rather than as a source of revenue and more business.  The Darden restaurant group, for example, is “experimenting” with requiring more employees to be part-time so that it won’t have to provide health benefits.  If this “experiment” is successful, other restaurant chains will follow in order to keep their profit levels up, but no one seems to ask what the overall economic cost will be.  When people have to spend more money on health care out of pocket or get sick or have the government and hospitals pick up the tab through unpaid emergency room visits, all this does is shift costs from the restaurants to everyone else.  It may be good “business economics,” but it’s lousy societal and national economics.

What all these “sharp” business economists are talking about, whether it’s complaining about environmental regulations restricting their pollution, being required to provide healthcare insurance, or paying corporate taxes, is essentially an effort to shift costs from their operations to everyone else in order to increase their bottom line… and what bothers me is that so many Americans seem ready to buy it.

In the end, everything costs.  The only question is who pays and how.  In a “truly” fair system, everyone would pay their share.  The problem is that those who are poor often cannot, and that means that, if they are to eat and have health care, for example, someone else must help.  In addition, many lower-paid employees don’t make enough to afford health insurance if it’s not provided in some fashion through their employer.  How such burdens are distributed, assuming the poor are not to be left to suffer and die, requires government intervention, since human history clearly indicates that not enough individuals will do so, or can do so, on their own initiative.  I don’t have a problem with that, provided the distribution of that burden has some semblance of thought and fairness.  What I do have a problem with is businesses and corporations who have negative impacts — financially, environmentally, and in other ways – citing “economics” as a justification for not even carrying their own weight, especially in cases where it’s clear that their founders and CEOs are living the extraordinarily high life.  Like David Siegel.


5 thoughts on “Business Economics”

  1. Thomas R. says:

    They are that way because they do not believe anything before them is important, and who cares about after them?Charity and compassion are just words to them. They sound good when you say them, even if you do not mean them.

  2. Joe says:

    Threatening employees with termination should a candidate win is bullying and should quite simply be illegal in a democracy. To quote professor Whaler of the Ecolitan Institute, either you believe in democracy or you don’t.

    1. Joe says:

      Interesting. I did not know that this is legal because of Citizens United.

  3. Wine Guy says:

    His words are disingenuous at best, outright lies at worst. I personally would be looking for a different job if I worked for the man, which I do not – thankfully.

    What the fight is about, though, is the human condition: we want to be comfortable and not worried about things. If that means denying masses of faceless others that same state, well, most humans are ok with that.

  4. Murf says:

    Well said Mister Modesitt! The Green parties in Europe have long pointed out that this type of ‘economics’ is nonsense. These kind of companies want their employees to come to work on roads paid for by taxes, to be kept in good health by hospitals paid for by taxes, to have their pollution cleaned up by tax payers and to pay as little tax as possible. Obviously a private company wants to make a profit but there are more responsible models, like the ones you pointed out.

Leave a Reply

Your email address will not be published. Required fields are marked *