TOPSY-TURVY CAPITALISM

By

Karl H. Puechl

May 23,1993

I'd like to start this off with one of my favorite quotations, since it is ideally suited to the talk that I will present today. "Truly speaking, it is not instruction but provocation that I can receive from another. What he announces, I must find true in me, or reject,---be he who he may, I can accept nothing,---" From Ralph Waldo Emerson's address to the Harvard Divinity School.

I am giving this talk, today, for a number of reasons. First, after my last talk on Cozy (Adversarial) Relationships, Jean said: "Why don't you go back and give one of the simpler talks that you've given in the past; like the one on Topsy-Turvy Capitalism?". Then, recently, when Dutch Fink gave his talk on a National sales tax, I thought that my talk on topsy-turvy capitalism might be an appropriate response. What finally made me decide to give this talk was the comment Rosemary Chilson made after Dutch's talk when she said something like "but we'll never be able to make it happen". Then after making this decision, the appropriateness of the topic was reinforced by a postcard that I received inserted into an issue of Modern Maturity, the AARP monthly publication. The postcard was stapled into the magazine exactly like we all routinely find postcards that are inserted in magazines as a convenience to entice the reader to subscribe. I brought this postcard along today even though some of you may have received a similar one in your issue of Modern Maturity. What surprised me was that my name was printed on the card, thereby making it very personal and, I suspect, expensive to collate and distribute. I'll read from the card. "This offer is sure to be of special interest to you. Receive two tickets to anywhere in the world Northwest Airlines flies or up to $1500 cash back when you buy any new 1993 Chevrolet Caprice. Karl Puechl, now is a great time for you to take a test drive in the newly designed 1993 Caprice. Make your best deal on a new Caprice and receive two tickets on Northwest Airlines or up to "$1500 cash back.". Now, I ask you to keep this information in mind as I go through my talk.

I first gave this talk in 1964 when we were starting the Unitarian Fellowship in Monroeville, Pennsylvania, and in 1987 I included portions of it in talks having a broader perspective, which talks I gave at HUMCON and at our Fellowship here. I hope that most of this has been forgotten by those of you who've heard it before. I think that my talk today will be most effective if I first simply read the 1964 version, exactly as I gave it. However, to take inflation into account, I'll multiply the dollar values I used then by a factor of ten to fit the talk into our present economic environment. (So here is my 1964 talk.)

"The purpose for presenting the topic entitled 'Topsy- Turvy Capitalism' is to show that apparent stable aspects of our society are really in a precarious state of unstable equilibrium. The lesson to be learned is that things need not remain as they are. No constraining situation need be lived with forever. Even the apparently most stable aspects of life can be altered to our advantage, if we just look hard enough to find the handle. Incidentally, this is the position taken by the existentialists. While society and our place in society are largely predetermined by conditioning, heredity, and environment, the determinism is never absolute, and each of us, individually or collectively, has the power to introduce change.

During the course of this lecture, I will use actual names and places in order to make the topic sound more realistic. What I will say, however, is fantasy for today: for tomorrow, who knows.

Yesterday I received a check for $1000 from the General Motors Corporation. Along with the check, there was the following letter:

Dear Mr. Puechl:

For the past five years through the use of our computers we have kept track of everyone in the U. S. who has purchased new automobiles. We further have looked into the backgrounds of all these individuals, and our computers know reasonably well everyone's financial capabilities, buying habits, and social status. From this information, our computer tells us that you are probably considering the purchase of a new car. The check for $1000 is therefore being sent to you with no strings attached. You may do with it what you like. Of course, we hope that this gift is some inducement for you to consider purchase of a General Motors product.

Very truly yours,

With regard to this matter, I understand that the Wall Street Journal is coming out on Monday with an article describing in detail this novel advertising scheme. In addition to the facts covered in the letter, the Journal article will say that General Motors is cutting out all other forms of advertising and that the money saved therefrom will cover the $1000 checks that have been mailed out to ten million individuals.

General Motors believes that their computers have been fed sufficient facts so that at least 95% of the people who were mailed checks will indeed buy cars during the coming year. With this method of advertising, GM hopes to capture 75% of the new car market rather than the current 50%, and in preparation it has increased its production capacity accordingly.

Let us now attempt to predict the consequences of this action.

(I will give you a minute to think about it by yourselves.)

The General Motors management was indeed correct. The $1000 checks proved to be much more effective than conventional advertising. Within a month, it became apparent that GM might capture 90% of the new car market. The other automobile corporations had, via the grapevine, received some indication of the intent of GM, hence they were not caught completely unawares. Within two months, Chrysler Corporation also mailed out $1000 checks and discontinued other forms of advertising. The other automobile manufacturers followed suit shortly thereafter. Madison Avenue took on all the aspects of Wall Street at the time of the 1929 crash!

Within 3 months after GM's action, H. J. Heinz Company mailed $100 checks to all women who had babies within the previous month. It is to be noted that for this mailing Heinz did not even require computers --- they simply contacted all hospitals.

Within one year, the appliance manufacturers got into the act by sending out checks to the less affluent members of our society and newly-weds, as inducements to buy washing machines and refrigerators.

The American Tobacco Company jointly with the American Cemetary Association also sent $250 to all people over 45 who were smoking more than two packs of cigarettes per day. Sort of cooperative advertising asking that you continue smoking and also reserve your plot.

The computer manufacturers were going wild, for the entire American industry was ordering computers to determine who was in the market for what.

Within 18 months after the initial announcement, every area of purchasing was affected by this new method of advertising. Every individual in the country was having his income supplemented by approximately 5% through check mailings from the various corporations. A revolution was obviously taking place, and no one could as yet predict where it would lead. Everyone was getting supplementary income from food processors and clothing manufacturers; the poor were getting supplementary income for other near-necessities; the more affluent families, in addition, were receiving checks from mink farmers, ornamental glass factories, etc., and even some art dealers. Industrial organizations were also getting checks from potential suppliers.

The steam-roller started moving in full force when the United Steelworkers announced that they had reached agreement with Big Steel. Since the workers' income had in effect already been supplemented, they agreed to a 10% salary cut, provided that the money saved by the corporations be used to mail checks to potential product users, especially to those users who could use aluminum as a substitute material.

Other unions soon followed suit as it became apparent that the supplementary income was mounting at a fantastic rate.

Within 5 years, repeated wage negotiations downward and continued increase in payments to potential customers resulted in such low wages that a man's earnings through work were no longer considered to be significant. People who did not like their jobs began to stay home. They could now live quite well from the income received through the mails. Production, therefore, began to tumble. With their employees quitting in droves, the factories could not keep up with the demand for new goods. It soon became apparent that some drastic action had to be taken to preserve the economy.

The President sent to Congress a bill forbidding companies to send checks to anyone who was not gainfully employed. This created a furor, the likes of which have never been seen in Washington, and luckily before the wave reached a crescendo it became apparent that other events would not make it necessary to pass this legislation.

Many of the people who had quit their jobs were becoming bored without a daily routine and without a better defined objective to life. They soon found out that this was not like being wealthy; the supplementary income was, by the computers, pegged to allow them to live only in the manner that they were accustomed to. As boredom set in, more-and-more people returned to work. Those that had been reasonably pleased with their old jobs took up where they had left off. Those that thought they had greater potential went job hunting and in most instances found something more suitable. After all, there was a severe labor shortage. Production was again on the upswing before Congress could act, and the proposed legislation died a natural death.

Since every manufacturer and dealer in services was now sending out these monetary inducements to the very limit of his financial capabilities, the checks were not inducement to buy a particular product, but rather were the vehicles that put the needed purchasing power in the consumers' pockets. Conventional advertising was again beginning to show signs of life and would soon be sanguine as more-and-more producers began to push their specific products.

Central consumer research groups were also being formed. These organizations with massive computers determined the purchasing whims of all people over a broad spectrum of products and services. Sears Roebuck was the first to announce such a service, which was natural for them since they required this type of service for themselves to continue marketing their numerous catalog items. Companies were funding these organizations directly, and the consumers, instead of getting many, many small checks, were now receiving on the average only three checks each month from the three largest consumer institutes. It soon became obvious that only one such institute would endure and that this one would be under Government auspices. After all, one organization that, in effect, controlled the entire economy could not be left unregulated.

Within ten years after the initial announcement by General Motors, the revolution had apparently run its course and the economy had once again stabilized. People were working as before. However, people were working because they wanted to --- to keep from being bored and to contribute their productive abilities to their own and, therefore, to society's general welfare. Voluntary non-employment was generally frowned upon, but since even the unemployed were recognized as consumers and were therefore paid, social welfare as we know the term had lost its present connotation and significance.

Is this purely a dream, an imaginative Utopia? --- Or is it something that will come about? Cannot all aspects of our present condition be similarly altered, for better or for worse, through the introduction of a slight innovation or imbalance? Is stability a myth? Are the apparent constraints that limit our lives real constraints, or are they excuses to hide our fears and lazy thinking habits?" (End of quote; end of 1964 presentation.)

If I had really received such a mailing yesterday, could the described scenario evolve? How close are we to the described situation? Consider the recent bank write-offs of tens-of-billions of dollars. These monies were originally loaned for specific purposes, but after-the-fact it appears that they were simply payments to induce consumption in the third world. Are not these loans, now probably gifts to under-developed countries, similar to the checks to individuals that I have described? Consider also the much more massive rescue of the savings and loans caused by imprudent financing of, primarily, real-estate developers so that they could build shopping centers and office towers that were not needed. Was this also not simply a method of making payments to the construction industry in order to keep people employed and, thereby, to maintain their capability to consume? Also, is not doling out wages for the manufacture of weapons (which hopefully will never be used) a not-so- subtle method for giving purchasing power to the individual employees? Simply put, do not these examples as well as the fantasy show that man's true current worth is as a consumer; not as a producer? To carry this somewhat further, haven't the rich always been admired because of their extraordinary consumption capability rather than their production capability?

While the described scenario might seem somewhat far-fetched if the events unfolded in 1993, the scenario would probably seem more believable if a similar economic upset occurred 50 years from now. Undoubtedly, by then our factories will be largely mechanized, computerized and robotized. There will be no more need for the blue collar worker. Also, there will have been developed innumerable expert systems, i.e., computer software that will make a computer as intelligent as an expert in a certain field. In medicine, for example, a personal computer that is fed a set of symptoms will either give an accurate diagnosis of the ailment and will prescribe treatment or say that a diagnosis cannot be made without additional information that can be provided by a blood test, urine analysis, x-ray, nuclear-magnetic-resonance scan, or some other procedure. After subsequently receiving the results of the specified test, the computer will be capable of making a diagnosis that is every bit as accurate as one made by a panel consisting of the most expert medical doctors in the country. In short, 50 years from now, it is highly likely that even medical practitioners will be obsolete. The computer will make the diagnosis, prescribe the treatment and, further, if surgery is indicated, it is conceivable that the operation will be performed by a robot without the interference of human hands or minds. If manual laborers become obsolete and if medical doctors, who are currently one of the most educated group of people in our society, also become obsolete, whose productive capability will not also become obsolete? In our fantasy, people who got bored went back to work; what would have happened if their productive capabilities had not been required for society to function? Can society really exist when half of us always travels and the other half sells the travelers trinkets manufactured by robots? Or when all of us always travel and purchase, from robots, trinkets manufactured by robots?

Even if our economic fantasy is completely without foundation, man's evolution to an animal whose productive capabilities are not required is likely to continue at an ever-accelerating rate. If computers and robotics do not bring this about, mankind might decide to create a sub-human race through genetic engineering; let them perform the dirty work! One way or the other, it is reasonable to postulate that fifty or sixty years from now man might find himself to be superfluous, using the current definition of this word. How will he react? Certainly, the transition to a new environment will be difficult and, perhaps, even disastrous unless man finds suitable challenges along the way. The challenges may be technological, such as the colonization of space; or they may be socio-economic, such as peaceful and dignified cohabitation on this planet. There must be challenges; the challenges must be taken seriously; and human energy, even sacrifice, must be appropriately directed. Nevertheless, in spite of all the obstacles, I am basically optimistic. In all likelihood man will succeed as he has in the past; not in any straight-forward fashion, but he will simply muddle through. Can we realistically expect anything more when the basis for the entire universe seems to be, simply put, a monumental crap-shoot?