Saturday, October 15, 2011

Capitalism, Free Markets & The Shoe Shine Business

As a frequent traveler for more than 30 years, I have observed the economics of the shoe shine business.   Today, it is possible to buy a shoe shine in various locations at airports, major hotels and conventions centers for anywhere from $3 to $10.   However, it is also very clear related to business volume that the market value of a shoe shine, defined as the price a willing buyer most often will pay a willing seller is no more than $4, which probably assumes a tip of $1, so a total of $5.  Any time, the base price is higher than $4, rather than having seats on a shoe shine stand full of customers with people waiting in line, they go empty.  Further, it is very clear that if a shoe shine guy does not earn a piece of the action as an incentive, in keeping with the "greed" that drives human behavior, there is no motivation to implement as many shoe shines per hour as possible to earn more money.  

These facts were confirmed this week once again as this Blogger attended a convention in Denver.   There is a well positioned three seat shoe shine stand at the Hyatt Denver that should be thriving;  yet the seats go empty most of the time.  The price for a shine is $6 for shoes and $7 for boots.   More often than not, the young woman shoe shine girl working the stand was sitting in one of the seats reading a book rather than implementing a shine.  Location of the stand was definitely not an issue since it was along the path to the Convention Center across the street, as well as, not far from the bar area that was always jammed with potential customers.  It was clear that the shoe shine girl was not on any kind of incentive, since she made absolutely no effort to hustle people into her seats for a shine.   The shoe shine girl was probably paid an hourly wage, whether she did a shine or not, so why bother actually working. 

This particular example, the shoe shine business, is a graduate course in Capitalism and Free Markets.  This is a classic example that if prices are driven to high by high taxation or regulation and or if incentives are not in place, it will be a job killer.  While business location is important, if the price is too high volume goes down.   And, if there are no incentives to increase business, whether personal or corporate profit, revenues suffer and so does economic growth and job creation.   To bring it home, if Socialist President Obama decided that is was wise to grow jobs in the Shoe Shine industry, he could propose that the $6 shoe shine be subsidized by the federal government, kind of like green technology that is not economically feasible today without government subsidies.  Clearly, if the cost to the customer for a shine was just $3, with a government subsidy for the other $3, there would be lines at the Hyatt in Denver waiting for a shine and instead of one shoe shine girl working a three seat stand, two more jobs could be created.  

However, in order to subsidize the shoe shine business, Obama would have to raise taxes on otherwise more productive people to fund the $3 subsidy per shine as he is proposing to fund all of his big government Socialist Schemes.  In confiscating more money from the 50% of Americans that pay all the income taxes in the United States, they would have less to spend and invest in their businesses, or other economic activity.   So while Obama could create jobs in the shoe shine business, like in green technology, it would be at the expense of jobs in other more productive industries that could have a greater impact on our economy.   This is the reason Obama's deficit spending, trillion dollar SwindleUS Plans I, II & III failed to restore economic growth, or create new jobs in our country.   These SwindleUS Plans just did not reflect the principles of Economics 101, Capitalism or Free Markets.   And, so now Obama wants to do more of the same with his Jobs Bill, $450 Billion, SwindleUS Plan IV that if ever enacted, will achieve the very same poor result. 

Socialist President Obama has no real life experience either in the private sector or in government.  As such, the best Obama can do is implement Socialist theory that has never worked anywhere in the world it has been tried.  Obama does not understand Economics 101, or the forces of Capitalism and Free Markets.  The reality is that my shoe shine story says it all.   Free Market forces are the only way to create economic growth and real jobs.  Government intervention will never restore real economic growth and job creation in our country.  In fact, government intervention is the problem not the solution.  

As an example, in trying to deal with the sub prime mortgages that led to the financial collapse that occurred because of Socialist government intervention, now the regulations in Dodd Frank and other restrictions impacting banks and mortgage companies are making it very difficult for even credit worthy people to get mortgages.  In a vicious cycle of decline because otherwise qualified buyers cannot get mortgages, real estate values all over the country continue to fall leading to even more foreclosures.

We have to take back our country in 2012 and 2014 by sweeping these Socialists in government, including President Obama, out of office.  As proof, Socialist/Communist Congressman Jesse Jackson Jr. of Illinois, just proposed that the government hire all 15 million unemployed people at a cost of $40,000 per person under some emergency Presidential order, disregarding the Constitution.  The cost would be another $840 billion that would presumably have to be confiscated from current tax payers.  These Socialists are not just wacky, they are dangerous and threaten our freedoms.  

My shoe shine story indicates that government intervention will not work because taking more money from the private sector to fund government Socialist Schemes will not restore economic growth, or create any new real jobs.  Franklin Roosevelt tried this very Scheme during the Great Depression and unemployment from 1931 to 1939 never went below 12% and was as high as 20%.   Only Capitalism and Free Market principles, with all the pain and dislocation they sometimes bring, is the way to restore economic growth and jobs creation again in America.   Government is not the solution.   Government is the problem.

We must take back our country in 2012 and 2014 to restore economic growth and job creation by electing Conservatives at all levels of government that understand Economics 101, Capitalism and Free Markets.    We have to finish the job we began in 2010.   We can do it.   We must do it preserve our freedom, our nation and way of life for the sake of our children and grandchildren.  In the mean time, all you need to know about Economics 101, Capitalism and Free Markets is described in my shoe shine story.   

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