Browsing the blog archives for May, 2016.

Business-Government Partnerships

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Earlier this week Hillary Clinton was touting her ability to create jobs and revitalize the economy through “partnerships” between government and business. Everyone “working together” to solve problems might sound like a good idea. Sometimes entities from the private and public sectors must work as partners, but the less this happens the better.

There are two problems with government-business partnerships. First, government is not an equal partner with any other institution. Government has a monopoly on force and will always be the senior partner in any arrangement. Put another way, when government and business “work together,” it’s usually government telling business what to do. This bleeds into fascism.

Second, government and business have distinct goals and responsibilities. Just as business shouldn’t be strapped with determining what is in society’s best interest, government shouldn’t be picking winners and losers in commerce. The differences between the two are obvious. Government obtains revenue by force from individuals who may not benefit—at least not fully—from the confiscation. If you don’t like your government, you can’t easily switch to another one unless you are willing to leave your state or nation. On the other hand, business obtains revenue voluntarily from individuals who benefit from the transaction. If you don’t like a business, you don’t have to make the transaction. Government is ill-equipped to compete, and business is ill-equipped to address social policy.

Herein lies both the problem and the irony. Government and business serve different functions, but in a corrupt way, each has something to trade the other. Businesses prefer not to deal with pesky competitors, and government can stifle new entry to a market through various forms of regulation. Government prefers to circumvent an irate public when attempting to control an economy, and business can help by lending its support through markets. Partnerships usually morph into such trade-offs and ultimately cronyism. Promoting partnerships while decrying cronyism is like suggesting that zoos eliminate cages and complaining when the lions attack the patrons.

Some do not see the connection between partnerships and cronyism, but others do. Many in government and business see these alliances as security blankets that allow them to evade their responsibilities. I believe most business and government leaders fully understand the ensuing cronyism when they tout government-business partnerships. Indeed, most of the problems they purport to solve with partnerships would be solved more effectively if business would stick to honest competition and government to protecting individual liberty.

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The HB2 Hypocrisy

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My last post addressed Target’s social agenda and the boycott over its bathroom policy, as well as Charlotte’s related ordinance and NC’s HB2 response. The DOJ has since attempted to coerce NC by threatening to withhold education, transportation, and other funds. NC responded by filing suit, so it looks like this will end up in court. Kudos to Governor McCrory for navigating this storm calmly and rationally.

Unfortunately, most news reports are advancing two narratives here, but overlooking two larger points. The first narrative is the notion that HB2 violates the civil rights of members of the LGBT community. However, gender identity is not a protected class for a number of reasons, not the least of which is the fact that it’s subject to interpretation. AG Loretta Lynch’s attempt to equate HB2 with Jim Crow is beyond a stretch. Enough said for the time being.

The second narrative is that Governor McCrory’s move is costing NC jobs. Tell that to the city of Austin, where a December ordinance required fingerprints and background checks for Uber and Lyft drivers. The companies backed Proposition 1 to overturn the measure and spent over $8 million to persuade voters, but it failed last weekend. Uber and Lyft halted operations on Monday. Is the city of Austin thwarting economic activity? Perhaps so, but this back-and-forth is part of the process. I don’t hear a public outcry over Austin.

But two bigger issues are NOT getting much attention. The first is AG Lynch’s hypocrisy when it comes to HB2. Sanctuary cities represent an obvious rejection of federal immigration law. According to the Center for Immigration Studies, there are over 300 cities, counties and states that shelter illegal immigrants and ignore federal law. Their existence costs taxpayers billions every year and represents a threat to national security. Even if Lynch is correct with regard to HB2—which she is not—her silence on sanctuary cities is deafening and demonstrates her selective outrage.

The second issue is the hypocrisy of businesses and performers threatening to boycott the state. Consider a few examples. Paypal does business in Iran, Saudi Arabia, and Sudan, but apparently finds the climate in NC to be too abusive for its operations. Bryan Adams is refusing to perform in NC, but has done so in Syria, Qatar and the UAE. Bruce Springsteen is refusing to perform in NC as well, but does so in Italy, where same-sex marriage is not recognized. I guess it’s okay to require a bakery to bake a cake for a same-sex couple, but Hollywood types are free to transact business—or not—when and where they please.

It’s time we have a debate about hypocrisy. If federal law trumps state law, then why not when sanctuary cities are involved? If companies want to “take a stand” on social issues, when why not demand that they apply the stand consistently? If individuals and firms cannot refuse to transact business with others because of personal or religious objections, then why are artists permitted to do so?

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Target’s Social Agenda

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In my last post I noted that corporate America has become more activist in recent years, but on the left, not the right. Although still decried by leftists as evil capitalists, many large firms have taken social positions consistent with their detractors.

There are a number of possible explanations for this. One is that supporting a progressive social agenda can keep a large, visible firm off the boycott list. The problem, of course, is that promoting a leftist agenda can lead to boycotts from the right. Such is the case with Target.

The company posted the following on its website on April 16:

We believe that everyone—every team member, every guest, and every community—deserves to be protected from discrimination, and treated equally. Consistent with this belief, Target supports the federal Equality Act, which provides protections to LGBT individuals, and opposes action that enables discrimination. In our stores, we demonstrate our commitment to an inclusive experience in many ways. Most relevant for the conversations currently underway, we welcome transgender team members and guests to use the restroom or fitting room facility that corresponds with their gender identity.

Target has a right to take a stand on any side of this issue. Likewise, investors or customers who find this objectionable can take their funds elsewhere. Target has likely gained and lost business for its stance, but the ongoing boycott promoted by the American Family Association suggests that it went too far this time, and the response is hurting business.

Most Americans are tolerant of different views and lifestyles as long as theirs are protected as well. Transgender individuals have been entering bathrooms inconsistent with their biological sex for some time without an uproar. But the problem is one of a statute’s unintended consequences. Codifying anyone’s right to enter any restroom at will opens the door far beyond the transgender person who intends no harm. Charlotte’s attempt to enshrine this right is what prompted HB2 in North Carolina. At the corporate level, Target’s progressive directive opens the door to sexual predators and has prompted a boycott.

A boycott is a tool for keeping firms in line with stakeholder expectations, but most aren’t effective and lack staying power unless the numbers are high and the issue at hand is important. I usually give companies the benefit of the doubt on most issues, but I’m not shopping at Target until it takes a more reasonable stance. I see two possible long-term solutions: (1) A third, gender-neutral facility akin to the “family bathrooms” with baby changing facilities available in some locations, or (2) individual private facilities for everyone. Either option would require some remodeling. If Target feels so strongly on this issue, perhaps the company could pony up the modest funds to redesign restrooms in its own stores to accommodate everyone in a way that does not invite trouble.

The ongoing Target case underscores the reality that businesses cannot always escape social issues. Sooner or later they must stand for something, and inviting opposition by actively taking a stand can come at a cost. The conventional wisdom today is that siding with progressives is the wise alternative because it presents the company as “in touch” with a changing society and its demands for a “more caring” approach to business. Besides, those on the left seem more inclined than those on the right to fight back. This assumption is probably correct, but Target is discovering some new economic boundaries with this issue.

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