Economics 101

This entry was posted in Economy, Politics, Stupidity by Cleave on

1_5_and_10_Dollar_cpdIt is simple, if a business does not have customers that business will not make money. It is the simplest of concepts that people seem to have forgotten or they are looking at it all wrong. You have to have customers to be able to make a profit of any kind. The way that you get customers in not just putting up a storefront or doing some fancy advertising, those help but are not what gets you business. What gets money into a business is that of a customer that is able to buy a product or service that the business is providing. It is that stupidly simple, more customers will in turn make a company or business more money.

How does a business get customers or clients? It advertises and seeks out those clients or customers and in a healthy economy that is not hard to do. Right now firms, business and companies are finding that they have less and less customers to buy what they have to sell. It is not that people don’t want to shop it is a matter of them not being able to shop. There are less and less customers able to buy the product. Some would say that the company has to reduce its overhead and charge less so they can make the sale. In some cases this might be a factor but in our current economy many businesses are working on razor thin margins and have already cut as far as they can, even in reducing their staff which just adds to the problem of the economy.

To have a thriving economy you need to have people that are employed. It doesn’t take an economic degree to see that if you don’t have people working you will not have people in a position to buy anything. If people can’t find work, I am not talking about those unwilling to work but those that can’t even find a place that is hiring, then they are not going to be able to even buy the basic things needed to life. They won’t be able to pay for rent, won’t be able to pay property tax, which hurts the area that they live and wont even be able to buy food. If you have an area that is unable to sell a product to people then those businesses will slowly die till they are closed and shut down for good. That in turn creates even more people out of work and continues to make the problem worse. It is a process of economic erosion that is killing our economy.

Economic erosion is at first very slow where a company trying to maximize its profits decides to lay off people. Lets look at this in a small scale, if a company in a community lays off 10% of its workforce because its CEOs and board members want to make more money then there is 10% less money going into the local economy. Some may say, “So what?” but it is a rather big deal indeed. You see that 10% reduction in the economy forces the other business to have to trim as well. Once company might not be able to expand and hire more workers, another might have to cut back hours and others might have to outright lay people off. Those cuts and layoffs would then cause another possible 10% drop in the area’s economy. From there is it rinse and repeat as the big company sees it is losing sales and instead of cutting their own salaries they cut can workers instead and the process starts all over again.

For the past several years we have seen this go on all throughout America which has decimated small communities, some becoming almost ghost towns as factories are leveled and businesses are shut down. Much of this was started by pure greed in trying to get as much as they can without any concern to what was going to happen afterwards. I don’t begrudge them their wealth but to kill off an entire economic system is just pure wrongness. The only way that we are going to see things change in this country is to put people back to work. Not to require ridiculous hurdles to find job that don’t require such specializations. We need to give people hope in being able to fend for themselves. We need businesses that expand because they have the clients and customers to do so.

There have been many articles written that show the value of a dollar spent in a local community and not just through chains or online. Here are some examples:

Excerpt from Why Shop Local from Stay Local

… dollars spent in locally-owned businesses have three times the impact on your community… Locally owned businesses create more jobs locally…

Excerpt from One dollar reaps rewards seven times over from Smoky Mountain News

…Each time that dollar was spent, bouncing from one place to another across the county, it created a positive ripple effect. The impact of a dollar spent locally — versus one that is shipped out of the county never to be seen again…

Excerpt from The Multiplier Effect of Local Independent Business Ownership from AMIBA

…a dollar spent at a local independent store is re-spent in the local area in the form of payroll, goods/services purchased from area businesses, profits spent locally by owners, and donations to area charities. The study found each $100 spent at local independents generated $45 of secondary local spending…

Just from those articles alone you can see just how important it is to have a thriving local economy which in turn will help to drive a national economy. This is the way that it was before and the way that it can be again, we just have to change the way that we look at things. We have to realize that if you don’t have people working then you are not going to see any money flowing into the local economy. Some may say that is what government assistance is for but that too is starting to have a strangle hold put on it as people are driving out of even the safety net programs for unemployment, disability and other programs. We have to get people back to work and it has to be both gainful and life sustaining. With out that happening we are going to see this great nation of our be likened to 3rd world countries. Some are already saying that we are.

Point: if you want things to improve, have people work in a way that they can pay their bills and then buy something extra now and then. If that happens we will have one hell of a road to recovery as long as GREED does not rear its ugly head and start taking advantage of people again.