Worth a read: How CircleUp Is Filling The Void Left By Banks That Won’t Lend To Small Business

Worth a read: How CircleUp Is Filling The Void Left By Banks That Won’t Lend To Small Business

I ran across this article today – don’t you love seeing people solving problems, creating new models and causing upheaval?  Kiva.org, Indigogo, Grameen America… These are some of the ones that come to my mind. (And all of these are individual people, groups, getting together voluntarily, whether they are non-profits, for profits. Government solutions would take years and would be bureaucratic before they even started. It’s the voluntary sector, the ‘freer’ market that allow problems to be solved ultimately. More pressure to replace what no longer works!)

Here’s a quote from the Forbes piece: 

“No banks want to give a company like mine a loan – we’ve got great growth rates but profitability’s not there yet,” he says. “They have a box and we don’t fit into it.”

In fact, big banks approved less than a fifth of all requests for small-business loans they received in January. Small banks approved about half of applicants, according to a survey by Biz2Credit, an online platform that matches businesses and lenders.

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What a cool, cool non-profit – teaching to fish, long lasting change

What a cool, cool non-profit – teaching to fish, long lasting change (World Mag article about Beltline Bike Shop)

what a great grassroots non profit

what a great grassroots non profit

The link above will take you to a story about the Beltline Bike Shop in Atlanta, GA, a non-profit where kids can go to fix up bikes and earn their way to a new bike.

Here’s a summary from Beltline’s website:

A kid hears about the shop.  He comes to the shop because he’s been told he can learn how to fix bikes.  As he learns how to fix bikes he also learns how to work hard along side other people while earning a bike of his own.  Through the shop, he realizes that hard work pays off.  This leads to him seeing opportunities in his neighborhood where he is able to leverage his skills to earn money.   As his skills grow, he gains confidence and improves his ability to shape his future.

It started with one couple helping one neighbor child fix his bike, and grew from there.  Isn’t this a fantastic story about two people over time building something that makes a lasting difference in the lives of kids nearby. Love the idea that the kids have to earn their bikes – so simple, but there is so much pride in earning something. Once you have that feeling that your actions led to something good, it sort of sticks with you

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Compassion and Minimum Wage – a silver lining?

Compassion and Minimum Wage

I ran across this column by Thomas Sowell today – pointing out that it isn’t true compassion to raise the minimum wage.  Those who are lucky enough to keep their jobs will get paid more yes, but jobs will disappear overall.  There will be a reduction in jobs available, increased unemployment as marginally valuable jobs are cut. It will put people out of work, and we should care about these people, too.

(A business owner, whether he runs a restaurant, a non-profit, a laundromat, an accountant’s office, a corporation has to respond if costs change. Increasing the hourly wage = increase in expenses. People responsible for their organization have to either bring in more money to keep the same people employed, but that’s not always possible.  They’ll need to find a way to get expenses below income so they don’t go out of business.  We know that many will cut out jobs to make up for the higher costs.) The biggest groups affected are of course the poorest and the youngest.

Unemployed young people lose not only the pay they could have earned but, at least equally important, the work experience that would enable them to earn higher rates of pay later on.

When I was growing up and in high school, you could get a job and earn pocket money with a paper route, part time service job, lawn mowing… I see very few options for my own children to earn money outside of us or their grandmother creating jobs for them to do around the house. I tell them there are 3 ways to earn money: 1. labor, 2. producing a product/service someone is willing to buy, or 3. selling/exchanging their assets (toys, bike, etc.)

New kind of role model: Nick D’Aloisio built an app when he was 15 and sold his startup to Yahoo at 17.

Since working for someone else (1.) is no longer an option and since (3.) is usually a dead end, my kids are looking at (2) and seeing examples of young people (like Nick D’Aloisio) who created an app or set up a YouTube channel and made their fortune or at least their future.  We’re cultivating them as entrepreneurs.  This is a good thing! Innovation can help counter the economic malaise, can challenge the crony capitalists…

I’m hoping that the lack of jobs and employment for our youth has a silver lining and will cause more folks to take charge of their own economic lives, and create new opportunities.

Where are the truly compassionate solutions for helping others.

I’m reading Marvin Olasky’s book called The Tragedy of American Compassion, which Steve Forbes’ and Elizabeth Ames’ new book referenced! I’d never heard of it, since in 1992 I was graduating from university and busy with so many things. I’ve been asking and asking (everyone who’ll listen) my ‘compassion and the free market’ questions, but never heard about it. And here’s a book that’s exactly what I wanted to find!

So my next few posts will be related to what I’m learning and reading.

The first idea I see in the introduction:

“Americans in urban areas a century ago faced many of the problems we faced today, and they came up with truly compassionate solutions. We may not realize this, because only two kinds of books on the overall history of poverty-fighting in America are now available (emphasis added).  A few of the books argue that the free market itself solves all problems of poverty. The more conventional approach stresses government intervention to restructure economic relations. But neither kind emphasizes the crucial role of truly compassionate individuals and groups in the long fight against poverty.”

Aha! Already getting somewhere…

This is what I’ve been asking anyone who’ll listen to my spiel!  Why do we have this unspoken assumption nowadays that government is the place for compassion and helping others when it does it so badly and wastes an unbelievable amount of resources running a bad system? Why do we do this when we know codifying welfare kills innovation, other solutions, and inevitably the system will not be able to adapt an change as society and technology advances?

And why do the free-marketers not lay claim to all the voluntary compassionate activities and showcase them as alternatives to the welfare state? Why do they dismiss individual and voluntary groups working to help others – these are activities happening in the FREE market, whether for profit, non profit. Tom’s Shoes? The Salvation Army? United Way? Santa Barbara FoodBank? Jodi House? Millions of others? They certainly are not mandated, coerced governmental activities.  They are freely done and are organizations and people coming together to assist others. Yes, they’re being choked and starved out as government takes over, but clearly there is compassion and the will to help others showing in communities, still.

I went to FreedomFest this year (which was fantastic) and asked as many people as I could why Free Marketers don’t ever address the voluntary ways people and communities help one another and talk about the free market as providing better solutions to ending poverty. Well the answer: they ignore it as the best way to cure poverty is free markets where people can voluntarily exchange – this creates  value and more prosperity by far than other other system, and far more value than wealth transfers and charity…

Yes, true…I agree! But this doesn’t matter when you’re looking at suffering in the face. We need to talk about how one person who sees homeless people sleeping on the streets should/could help them. Saying ‘more prosperity and freer markets will cure this’, is not going to work. (I’m thinking of Arthur Brooks here – read his bit about how reason and the theoretical will never win an emotional argument).

So it’s time for someone to look a bit harder at to whether the possibilities that exist in the free market might work better than the centrally planned, blanket, non-compassionate, well-intentioned-but-with-massive-unintended-consequences, easily abused programs we have now…

Compassion and the Private Sector

Compassion & the Free Market

Proposal for creating/sparking a non-profit grassroots organization promoting the private sector as the best arena for solving social problems.

Goal:

 

Create and grow a new branch of the free-market movement that explores, showcases and celebrates private sector ideas and solutions for social problems and the ways in which people and organizations voluntarily demonstrate compassion, create community, and help others constantly.  Change perspectives on compassion and the free market – to be measured by counting participants, followers, and people who respond to outreach efforts (measure likes, audience, reach, shares, donations, press, interviews). Aim for 50,000 year one.

 

Background:

 

Government is widely and mistakenly seen as a benevolent provider of compassion and also as the only means in which to help those in need. The paradigm that “government is good and the free market is bad” is widespread and damaging.

Viable solutions and tangible results are overlooked, and often wither and die despite being valuable to society. There is a lack of awareness that the private sector encompasses individuals, non-profits, for-profits, and social enterprises, all of which regularly contribute resources towards solving and reducing social problems. This lack of understanding results in many people endangering the innovation, freedom and creativity needed to address social problems. Codification in a government function dooms us to a slow rate of change, de-humanization of charity, waste, and the same types of failure that existing in the free market, only longer lasting and more damaging. (cite Mark Pennington)

To date, ”pro-market” organizations and people have battled to communicate the message that the free market provides more well-being to everyone and is the best structure to ensure all citizens prosper. Many organizations are advocating a reduction in the functions handled by government and its growing presence in all aspects of life.

However, their standard arguments do not penetrate most people’s minds, as they fail to get past the  belief that somehow government is the only conduit for ‘good intentions.’ Benevolent intent behind new bills and pieces of legislation trumps reason every time, (cite Arthur Brooks). They tend to focus on government’s inefficiency, its coercive nature, discussing whether a particular bill will actually do what it is intended to do, etc. Alternatively, they will approve of people’s freedom to shape their own destinies on an individual level and leave it at that. They rarely showcase or promote free market alternatives to a particular issue in question, but instead reject government as a solution and leave the alternative at ‘the free market will sort it out.’

 

“Economic freedom produces unimaginable material prosperity, but it’s also the only economic form that encourages individuals to freely pursue their destinies, develop the character of self-responsibility, and strengthen communities.”

— Congressman Paul Ryan

“Only free enterprise encourages and allows each of us to define our destiny and earn our success.  Only free enterprise encourages true fairness based on merit and opportunity. And free enterprise is the only system that can lift up the vulnerable and those who have fallen on hard times by the millions—by rewarding entrepreneurship and encouraging charity.”

 

—  Arthur Brooks

I believe that most of us who live beyond survival mode, those with enough resources for food, shelter, and basic security, are compassionate by nature to others. Both Paul Ryan and Arthur Brooks above mention community and helping others, but don’t go so far as to contrast what is seen in the voluntary part of society to that which is legislated or run by government.

 

I believe human beings have a moral and instinctive desire to help our fellow man. Fellow man may mean family, colleagues, peers, the local community, people in other countries. But in any case, evidence is widespread that human beings who prosper at some level voluntarily do contribute to their wider community. Very few of us are true individualists, able and willing to live entirely for our own benefit. These examples, existing all around us are the area that requires study, encouragement, publicity, and attribution to individuals acting freely, ergo as part of what we call the free market.

 

Supporting community, charity, compassion and helping others is something that lives and breathes and thrives in the free market in millions of ways every day. The free market means the part of our society where individuals voluntarily create and exchange.

 

Examples of Free Market solutions to explore, showcase and celebrate as part of private sector:

–       Toms Shoes – social enterprise that has embedded into its for profit company a core goal of helping poor children around the world in a practical way – providing shoes. Voluntary exchange, voluntarily created organization. Buying a pair of their shoes is also a contribution.

–       Beito – From Mutual Aid to the Welfare State – historical analysis of how some current social need functions of government (i.e. unemployment benefits) were handled successfully by the private sector.

–       Churches, Synagogues, Elks, Kiwanis, Rotary, Girl Scouts, soup kitchens, homeless shelters, corporations (Starbucks gave $250,000 to Oklahoma tornado relief last month), religious organizations…

–       Non-profits such as Care International, Oxfam, Catholic Relief Services –offering  microloans through village savings groups (Mutual Aid societies of modern day? ) that create sustainable cycle and fund more loans (social enterprise)

 

ACTIVITIES:

  1. Spark conversation, dialogue, and discussion on the ways individuals and groups of individuals (through non-profits, social enterprise, for profits) are helping to address social problems and have alternatives to government codified programs.
  2. Create and disseminate materials and a structure for others interested in this topic to use to start discussion groups, meet ups, grassroots organizations, pages.
  3. Create a way for people to contribute content, stories and examples of free market compassion that can be shared and explored as examples of innovation and results.
  4. Create and expand this premise into a body of work that can be published on this topic – Compassion and the Free Market
  5. Tap into grassroots for engaging, innovative content – video, audio, humor – crowdsource effectively messages that will resonate with people.

 

Required

  1. I am looking for people interested in working on a team to develop and expand this premise and also look for and possibly counter objections. Also looking to determine the best for-profit parallel organization to create a sustainable income stream beyond donations
  2. I need a research assistant who can verify sources, examples, stories and ensure our work has integrity and doesn’t become simply another blind belief system.
  3. $200,000 – funds for 12 months for initial research, outreach, organization. 2 people…

 

 

“Doing nothing for others is the undoing of ourselves.”
― Horace Mann

 

“Compassion is not weakness, and concern for the unfortunate is not socialism.”
~Hubert Humphrey

 

“Why are the Agreeable Anti-Market?”  – Bryan Caplan blog post http://econlog.econlib.org/archives/2009/07/why_are_the_agr.html

 

Humans – naturally happier when they help others?

http://www.psychologicalscience.org/index.php/news/were-only-human/real-good-for-free-the-paradox-of-leisure-time.html#comment-7003

 

Helping those in Need – Arthur Brooks

http://arthurbrooks.aei.org/learn/earned-success/

 

Liberals and Markets – Bryan Caplan

http://econlog.econlib.org/archives/2010/03/liberals_and_ma.html

 

“Homeless to Harvard” – a community came together to provide for a high school student, outside of government. Example of human nature and compassion

http://www.cato.org/blog/homeless-harvard

 

Portrait of a Modern Feminist: Amity Shlaes – historical analysis of Calvin Coolidge as president and prosperity from reducing government

http://iwf.org/modern-feminist/2790812/Portrait-of-a-Modern-Feminist:-Amity-Shlaes

 

THE COSTS OF PUBLIC INCOME REDISTRIBUTION

AND PRIVATE CHARITY

http://mises.org/journals/jls/21_2/21_2_1.pdf

Poverty Relief – government programs vs. private

Mark Pennington.  Robust Political Economy

My notes on reading the part on Poverty Relief –

Universal system of poverty relief vs a mosaic combining private mutual aid societies and charity.

Common objections against private sector –

won’t be enough charity and help. People won’t voluntarily help.

Won’t be the right kind of help – community – people fund their local community, not poorest that need most help. people/communities who need help may not be good at getting it (I’m thinking Mountain View PTA here vs. other schools, Malcolm Gladwell’s bit about middle class teaching their kids to get what they want and Oppenheimer example).

People won’t help themselves. People forced to pay social security for example, won’ t have discipline on their own to do it privately (will spend it, not save for old age).

Moving welfare aid back to private sector – Steve DeCanio’s thought:  it’s too late; no savings, no family ties, bad schools, people not used to looking after themselves and won’t be capable of doing it.  A lot of what helped people in the past no longer there.

Is poverty alleviation a collective good? with a small number of causes? Or an individual condition that takes individual action to alleviate? Is a “War on Poverty” a damaging paradigm that de-emphasizes individual effort?

Voluntaristic form of collective action = less susceptible to moral hazard. Gov’t schemes – you get vested interests needing status quo,  and supressing innovation

gov’t vs private anti-poverty schemes.

1. countries with no gov programs do not necessarily have more poverty:

Hong Kong (no gov’t) – same as Sweden (high gov’t relief)

Sweden (high gov’t relief) has less poverty than France (comparable gov’t relief)

“A voluntarist approach combining mutual aid, one-to-one assistance and donations to charitable bodies would enable a plurality of actors, each with specialized knowledge, to tailor their poverty alleviation efforts to specific individual contexts” p 164

universal solutions stifle innovation and macdonaldize the issue. Like healthcare. (Alternatives to status quo very difficult to test and even more difficult to take hold. Would Kahn Academy, Lynda.com, Tom’s Shoes,  ever have been possible through gov’t?)