The past few months have been among the most divisive in our Nation's History. And that's saying a lot for a nation that actually went to war with each other, back in the mid-1800s.
We live with two sides of the political spectrum which increasingly seem unable to agree on just about anything. And each side seems to be increasingly hostile toward one another.
I believe there are some fundamental economic reasons that underlie these differences. And by exploring them, perhaps we can come closer to understanding what each side of this political debate feels.
So for today's discussion, I'd like you to think in terms of two very different companies. Companies that operate providing different products and services.
Now the first company we'll call free enterprise. This company operates by providing goods and services to its customers in the free market. In order to make a profit, and ultimately pay their employees they must compete in the marketplace and provide a product or services that consumers will buy.
2020 has not been a good year for free enterprise companies. Sales have been declining. And their profits over the last 2 quarters saw a drop of 26% and 14% respectively. The result has been that Free Enterprise has had to layoff workers, about 14% of all employees last April, resulting in over 20 million of their workers using their jobs.
Now half of those have been hired back. But no one knows for how long, a lot will depend on the current holiday sales period.
Oh, and just for the record the average compensation for those who work for Free Enterprise is less than 30,000 per year, and may or may not include benefits.
On the other hand, we have a number of people, upwards of 21 million when all is counted, who work for the second company: Big Government.
Now Big Government isn't having a great year, but it's nowhere near as bad as Free Enterprise. Remember about 22 million workers for Free Enterprise lost their jobs in April, and about half of those are back to work.
In contrast fewer than a million workers for Big Government have lost their jobs this year. That represents about 4% of Big Government's workers.
And compensation is pretty darn good over at Big Government. Zip Recruiter estimates that last week the average Big Government employee compensation was $109K or about 3 times the Free Enterprise level.
And remember that Big Government does not participate in the Free Market. The products and services offered by Big Government are, to use the economists term: “inelastic.” There is always a demand, and that will never end.
Take the IRS for instance, as long as people have income, the “service” of the IRS will always be needed. (Pardon Me.)Where this really gets interesting is in the political ramifications of all this. It is becoming increasingly clear that the two political parties are aligning themselves with these two “Companies” if you will.
On the one hand, the “R”s have more and more promoted those policies that are designed to aid the Free Market. Policies like lower taxes, fewer regulations. All designed to help independent businesses.
But those policies are the polar opposite of the goals of the Big Government People. Taxes, after all, are the income of Big Government. And regulations are the Big Government services. Fewer of either would be less business for Big Government.
So here we have the two sides of the growing divide in this country. On the one hand Free Enterprise, relatively poorer, and less secure. And on the other Big Government, with employees who are relatively richer, and certainly more secure.
Unfortunately as this Recession continues, I am afraid that this divide will only get deeper.