Go Lean…Caribbean

Go Lean Commentary

1776 was a very good year…

… not just because the 13 original British colonies declared their independence as the United States of America, but also the publication of the landmark book on Economic Principles, An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith, the 18th century Scottish political economics pioneer. The publication is cited as a reference source in the book Go Lean…Caribbean – a roadmap for the introduction and implementation of Caribbean Union Trade Federation (CU) to elevate the economic, security and governing engines of the Caribbean region. A relevant quote from the Go Lean book follows (Page 67):

… usually abbreviated as “The Wealth of Nations“, this book is considered the first modern work of economics, and [Smith] is thusly cited as the “father of modern economics”, even today, and among the most influential thinkers in the field of economics. Through reflection over the economics at the beginning of the Industrial Revolution the book touches upon broad topics as the division of labor, productivity and free markets.

Smith attacked most forms of government interference in the economic process, including tariffs, arguing that these create inefficiency and high prices in the long run. It is believed that this theory, laissez-faire economic philosophy, influenced government legislation in later years.

Smith advocated a government that was active in sectors other than the economy. He advocated public education for poor adults, a judiciary, and a standing army—institutional systems not directly profitable for private industries.

The “Invisible Hand” is a frequently referenced theme from Smith’s book. He refers to “the support of domestic industry” and contrasts that support with the importation of goods. Neoclassical economic theory has expanded the metaphor beyond the domestic/foreign manufacture argument to encompass nearly all aspects of economics. The “invisible hand” of the market is a metaphor now to describe the self-regulating behavior of the marketplace. … 

Adam Smith’s writings qualified many rules of economics, in particular the divisions of income into profit, wage, and rent.^[4] In a previous commentary the concept of rent-seeking was fully explored.; also the global challenges of wage-seeking have been fully detailed in another commentary. Now, this commentary is about profit, and the concepts of governance and public choice theory, allowing for the pursuit of profit. Where there is the pursuit of profit, there is invariably a focus on greed. For the purpose of elevating the Caribbean economy, greed is good! (In this case “greed” is not being defined as excess, but rather the natural desire to possess wealth, goods, or objects of abstract value with the intention to keep it for one’s self. The dreaded excess of “greed”, on the other hand, is a “vice” that must be cautiously monitored and curtailed, i.e. Crony-Capitalism). See VIDEO in the Appendix below.

Actor Michael Douglas as Wall Street Corporate Raider Gordon Gekko in the 1987 film

The Caribbean features mixed economies, wherein greed or profit plays a pivotal motivator. A mixed economy is an economic system that is variously defined as containing a mixture of markets (profit-seeking) and economic planning, in which both the private sector and the State direct the economy; or as a mixture of free markets with economic interventionism.^[1] Most mixed economies can be described as market economies with strong regulatory oversight and governmental provision of public goods. That “public good” is what Adam Smith focused on for the role of government – non-profit-seeking activities – that they should concentrate on the public availability and distribution of the non-excludable and non-rivalrous materials that satisfies human wants (infrastructure, education, judiciary, security, etc.) and are not directly profitable for private industries.

Economies ranging from the United States^[3][4] to Cuba^[5] – in effect all of the Caribbean – have been catalogued as mixed economies. Around the world, the most prosperous countries with the highest average standard of living tend to have mixed economic systems with democratically elected governments. Thusly, this consideration on the Economic Principles of Profit, as follows, is important for the roadmap to elevate Caribbean economies:

Encyclopedia Reference: Profit (Economic)
Source: https://en.wikipedia.org/wiki/Profit_(economics)
In classical economics, profit is the return to an owner of capital goods or natural resources in any productive pursuit involving labor, or a return on bonds and money invested in capital markets.^[3]

Related concepts include profitability and the profit motive, which is the motivation of firms to operate so as to maximize their profits. Mainstream microeconomic theory posits that the ultimate goal of a business is to make money. Stated differently, the reason for a business’s existence is to turn a profit. The profit motive is a key tenet of rational choice theory, or the theory that economic agents (actors or decision makers in some aspect of the economy) tend to pursue what is in their own best interests. Accordingly, businesses seek to benefit themselves and/or their shareholders by maximizing profits. In general the basic premise of rational choice theory is that aggregate social behavior results from the behavior of individual actors, each of whom is making their individual decisions.

Government intervention
Often, governments will try to intervene in uncompetitive markets to make them more competitive. Antitrust or competition laws were created to prevent powerful firms from using their economic power to artificially create the barriers to entry they need to protect their economic profits.^[7][8][9] This includes the use of predatory pricing toward smaller competitors.^[6][9][10] With lower barriers, new firms can enter the market, making the long run equilibrium much more like that of a competitive industry, with no economic profit for firms.

(This consideration aligns with alternate Economic Principles regarding sources of income; other commentaries detailed the concepts of rent-seeking and wage-seeking).

This historic information regarding Economist Adam Smith is important in understanding the “Lessons in Economic Principles”. These lessons matter in assessing today’s Caribbean status and fate, as there is the need for the optimal balance of “free market” versus “interventionism”. The Go Lean book explains the significance of Economic Principles with this excerpt (Page 21):

While money is not the most important factor in society, the lack of money and the struggle to acquire money creates challenges that cannot be ignored. The primary reason why the Caribbean has suffered so much human flight in the recent decades is the performance of the Caribbean economy. Though this book is not a study in economics, it recommends, applies and embraces these 6 core economic principles as sound and relevant to this roadmap:

1. People Choose: We always want more than we can get and productive resources (human, natural, capital, etc.) are always limited. Therefore, because of this major economic problem of scarcity, we usually choose the alternative that provides the most benefits with the least cost.
2. All Choices Involve Costs: The opportunity cost is the next best alternative you give up when you make a choice. When we choose one thing, we refuse something else at the same time.
3. People Respond to Incentives in Predictable   Ways: Incentives are actions, awards, or rewards that determine the choices people make. Incentives can be positive or negative. When incentives change, people change their behaviors in predictable ways.
4. Economic Systems Influence Individual Choices and Incentives: People cooperate and govern their actions through both written and unwritten rules that determine methods of allocating scarce resources. These rules determine what is produced, how it is produced, and for whom it is produced. As the rules change, so do individual choices, incentives, and behavior.
5. Voluntary Trade Creates Wealth: People specialize in the production of certain goods and services because they expect to gain from it. People trade what they produce with other people when they think they can gain something from the exchange. Some benefits of voluntary trade include higher standards of living and broader choices of goods and services.
6. The Consequences of Choices Lie in the Future: Economists believe that the cost and benefits of decision making appear in the future, since it is only the future that we can influence. Sometimes our choices can lead to unintended consequences.
   Source: Handy Dandy Guide (HDC) by the National Council on Economic Education (2000)

The Go Lean book presents a roadmap on how to better benefit from these economic principles – and how to increase profit-seeking opportunities in the Caribbean member-states and for the region as a whole. While “rent-seeking” – seeking to increase one’s share of existing wealth without creating new wealth – is a negative ethos, “profit-seeking” – the end product of investing in new opportunities – can be positive. The absence of profit-seeking is an absence of prosperity. Every Caribbean community suffers from an acute problem of societal abandonment. Those most capable of creating opportunities of prosperity, the educated classes, have mostly fled these lands, despite being labeled “the best address on the planet”. Why?

When people love their homelands yet begrudgingly leave, the defects – deficient economic opportunities – must be addressed. Caribbean member-states have tried, strenuously, over the decades, to diversify their economies; yet the preponderance of evidence point to adoption of “rent-seeking” in the region rather than the required profit-seeking. The requisite investment of the resources (time, talent, treasuries) for the goal of economic optimization may be too big for any one Caribbean member-state to conduct alone. Rather there is the need for a regional technocratic solution.

The Caribbean needs the evolutionary spirit (for one generation to do better than the previous one) of “profit-seeking” or “greed”. As portrayed in the VIDEO:

“Greed, for the lack of a better word, is good!” [Thus says the fictitious character in below VIDEO]. “Greed clarifies, cuts through and captures the essence of the evolutionary spirit. Greed in all of its forms – greed for life, greed for money, greed for love, knowledge has marked the upward surge of mankind; and greed will not only save [this company] but the other malfunctioning corporation called the USA”.

Posted commentary by Screen Name “fh downtheline”on the below VIDEO:

There is a better word than “greed” for this application. It may be “hunger”. Hunger is more present [in the Caribbean] and thusly more important than greed. Hunger keeps people hunting for progress. While greed ends up destroying the value of that progress. “Hunger” would refer to more than just food or economic dimension, but rather there is a hunger for knowledge, hunger for scientific thought. While “greed” says “I want” this, “Hunger” says “I need” this!

“Profit-seeking” is also a better word than “greed”; it too conveys the same concept as the definition above.

The consideration of the Go Lean book, as related to this subject is one of governance, the need for technocratic stewardship of the regional Caribbean society. This point was also pronounced in the opening Declaration of Interdependence (Pages 12 – 14) with these acknowledgements and statements:

xi.   Whereas all men are entitled to the benefits of good governance in a free society, “new guards” must be enacted to dissuade the emergence of incompetence, corruption, nepotism and cronyism at the peril of the people’s best interest. The Federation must guarantee the executions of a social contract between government and the governed.

xii. Whereas the legacy in recent times in individual states may be that of ineffectual governance with no redress to higher authority, the accedence of this Federation will ensure accountability and escalation of the human and civil rights of the people for good governance, justice assurances, due process and the rule of law. As such, any threats of a “failed state” status for any member state must enact emergency measures on behalf of the Federation to protect the human, civil and property rights of the citizens, residents, allies, trading partners, and visitors of the affected member state and the Federation as a whole.

xxiv.  Whereas a free market economy can be induced and spurred for continuous progress, the Federation must install the controls to better manage aspects of the economy: jobs, inflation, savings rate, investments and other economic principles. Thereby attracting direct foreign investment because of the stability and vibrancy of our economy.

xxvi.  Whereas the Caribbean region must have new jobs to empower the engines of the economy and create the income sources for prosperity, and encourage the next generation to forge their dreams right at home, the Federation must therefore foster the development of new industries, like that of ship-building, automobile manufacturing, prefabricated housing, frozen foods, pipelines, call centers, and the prison industrial complex. In addition, the Federation must invigorate the enterprises related to existing industries like tourism, fisheries and lotteries – impacting the region with more jobs.

This Go Lean book serves as a roadmap for the introduction and implementation of the technocratic Caribbean Union Trade Federation (CU) to provide better stewardship for the 30 member-states of the Caribbean region. The CU is motivated by positive community ethos, designed to elevate Caribbean society and the economic opportunities there in. In general, the Go Lean roadmap stresses key community ethos, strategies, tactics, implementations and advocacies necessary to transform and turn-around the eco-systems of Caribbean society. These points are detailed in the book as follows:

In considering this economic history, the CU/Go Lean roadmap is motivated to create value for Caribbean communities, to foster good economic habits and principles. In general, the CU/Go Lean roadmap employs better strategies, tactics and implementations to impact its prime directives; identified with the following 3 statements:

• Optimization of the economic engines in order to grow the regional economy to $800 Billion & create 2.2 million new jobs.
• Establishment of a security apparatus to protect the resultant economic engines and mitigate internal and external threats.
• Improvement of Caribbean governance – federal, national, municipal and corporate – to support these engines.

As defined in previous blog/commentaries, the CU/Go Lean roadmap asserts best-practices for proper stewardship for regional, national, municipal, and corporate governance. One strategy advocated is to better grow/control the money supply. The end-product should be the creation of new jobs, wealth, trade networks, plus develop new products and services, and an educated society.

New jobs need not only originate from the big corporate entities; that is the multi-national corporations that are traded on Wall Street or the 9 stock exchanges in the Caribbean region. No, rather small-to-medium enterprises (SME) – and even the self-employment “hustle” – will play a role in the economic optimization process. These points were detailed in these previous commentaries:

Adherence to economic principles/best-practices, such as profit-seeking, would help us make our Caribbean community better to live, work and play. We need to optimize the “invisible hand” of the market to incentivize, retain and repatriate Caribbean “free market” enterprises. Everyone in the region – the people, entrepreneurs, business owners and governmental institutions – are all urged to lean-in to this roadmap to elevate the Caribbean economic engines. 🙂

Download the book Go Lean … Caribbean – now!

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Appendix VIDEO: Gordon Gekko “Greed is Good” – https://youtu.be/PF_iorX_MAw
Uploaded on Dec 9, 2011 – Gordon Gekko, principal character in 1987 movie “Wall Street”, *unknowningly* describes the problems facing today’s private sector, while blasting the bureaucracy responsible for said problems in the first place. A classic speech, both in film and, also, within economic thought.