This month begins a new series from BANR founder Ted Wachtel, addressing the Enterprise facet of A New Reality.
by Ted Wachtel
Free Market Capitalism
I grew up believing in free market capitalism. It wasn’t a decision that I had to make. I simply spent my youth amidst entrepreneurs.
My dad manufactured and sold furniture. Some of our closest neighbors and family members manufactured women’s clothing, men’s ties and hats and cardboard boxes; or had retail stores selling children’s clothing, women’s handbags, carpeting, appliances and jewelry. I loved to hear the many dinner conversations with guests who, at times, shared stories about the challenges of their businesses and how they dealt with them.
I was six when I came to understand the concept of profit, a hard lesson which my dad taught me—by taking back the cost of the can of frozen lemonade concentrate from the money I had collected selling lemonade that day at my little sidewalk stand. I was shocked by the diminished number of coins I now held in my hand, but I was forever wiser about how the world works.
No, my dad didn’t charge me for the cups, ice, pitcher and table, but he had strong feelings about what I needed to learn. For example, the first job he gave me in his furniture factory, when I was in my early teens, was cleaning the toilets. He thought it was important for me to recognize that “none of us is too good to clean up other people’s shit.”
I worked with my dad Saturdays and summers for several years. I advanced from cleaning jobs to typing invoices and letters and cutting fabric, installing springs and making deliveries.
My dad didn’t go to business school, but he worked his way up through the New York City upholstery trades. He was, in his twenties, the highest paid worker in the upholster’s union, and a shop steward. Returning from the war in the South Pacific in 1945, he started manufacturing upholstered furniture in Brooklyn, along with several partners. He ultimately established two furniture stores and his own upholstery factory in Pennsylvania.
While I was inspired by my father’s achievements as a capitalist, I also got a glimpse of capitalism’s dark side—from a kid’s perspective. When I was 11 years old, Walter O’Malley—the owner of the Brooklyn Dodgers—moved the team to California, because New York wouldn’t help him build a new stadium and Los Angeles would. I was devastated by the heartless decision-making of free market capitalism, although a government buying a new stadium for a private baseball team is not really free market capitalism.
Walter O’Malley moved his team because he felt it was to his financial benefit to do so. That’s what capitalists are supposed to do. The disappointed fans have no say…unless they are shareholders of the Green Bay Packers football team, the only professional sports team in America owned by its fans.
On August 18,1923, the Hungry Five—so named because they were always begging for money to keep the Packers alive—persuaded the football league to make an exception to the rule that a team must be owned by an individual or a small group of owners. Today, over 360,000 shareholders own more than five million shares of non-profit corporate stock.
However, during the last stock offering in 2012, a Wall Street Journal headline asked, “Are the Green Bay Packers the Worst Stock in America?” Despite the fact that a share cost $250, “pays no dividends, benefits from no earnings, isn’t tradeable and has no securities-law protection…buyers can’t get enough.” A purchase of stock doesn’t even allow stockholders a discount on team T-shirts or move them up the 137,000-strong waiting list for tickets. A tax expert on Wall Street remarked, “I’ve never seen a stock offering where people pay so much and get so little.”
While non-profit corporations must be just as businesslike as their profit-making counterparts, they have different motives and behaviors than for-profit corporations.
- The Packers are the only American major league sports franchise to release its financial balance sheet every year.
- The board of directors, except for the elected CEO, all serve without pay.
- If the team dissolves, all profits and assets go to community programs and charities.
- Non-profits are not obligated by law to maximize profits for the benefit of shareholders.
I have helped start and run non-profit corporations (also called NGOs or non-governmental organizations) in several countries, for example:
- to conserve and protect open land
- provide services for delinquent and at-risk youth
- teach public schools how to reduce violence
- and to offer master’s degrees in “restorative practices,” a new social science.
An investment group inquired about buying the non-profit graduate school I had founded, but quickly backed off when the investors realized that we had spent eleven years getting approved and accredited, and were still building student enrollment to cover all our costs.
That’s what non-profit corporations accomplish: They do things that people want done, but that profit-making corporations would not likely undertake nor sustain. Non-profits are not a replacement for profit-making corporations, but they provide a good example of a way to run a business that is accountable to the local community. And that is why the Packers are still playing in Green Bay, Wisconsin—a city of only a hundred thousand—while Brooklyn, with a couple million people, no longer is home to the Dodgers.