Editor's Note

In Part I (which if you haven't read, we recommend doing so), we made seven distinct – but interrelated – points, namely:

1. America can fully expect a galloping inflation (perhaps the highest ever experienced in America) – if many of today's economic and political policies continue.
   
   
2. Inflation will erode middle-class purchasing power, especially people on fixed incomes, primarily supported by Social Security and other entitlements – because prices will continue their upward spiral.
   
   
3. Many government policies are focused on creating/maintaining government dependencies (e.g., expanding welfare, housing allowances, extending rent forgiveness, encouraging illegal immigration, the largest ever-permanent increase in our food stamp program) – to ensure a voting block to keep in power politicians who support these programs rather than policies creating individual independence, competency, responsibility and the like.
   
   
4. Government policies encouraging the competence of the poor, that is, in promoting their capacity to develop themselves (i.e., making the poor productive) is clearly in the self-interest of any country that wants to continuously create greater societal wealth – which is the only true way to significantly narrow the inequality gap and lift people out of poverty.
   
   
5. Raising corporate and individual taxes to unthinkable levels and continuously printing more money in order to pay for all the ever-increasing entitlements and dependency programs is absurd economics – and a near-certain path to a much-weakened America leading to unimaginable consequences.
   
   
6. Two major American innovations – scientific farming and scientific task management – as described by Peter F. Drucker – had an enormous impact in changing America and other societies for the better… making possible the enormous growth of an affluent middle-class workforce… and decisively disproving the assumptions underlying Karl Marx's Scientific Marxism/Socialism.
   
   
7. The Scientific farming and scientific task management Revolutions catapulted the ability of America and other countries to achieve continuous, giant increases in the productivity of workers and all other wealth-producing assets – but an overlooked lesson/consequence of these innovations is most people could be skilled, up-skilled, re-skilled via the usage of systematic learning/training programs that compressed years of meaningful knowledge and skill development into a relatively short period of time – something that was never done before in human history.

More on Coming Threats and Hyperinflation…

To a large extent, Americans of all political stripes are now beginning to realize much of the mumbo-jumbo or pure quackery with which we are being bombarded within multiple areas – on a daily basis has created an extremely dangerous environment and situation for America and its citizens.

Underperforming Is No Longer an Option

No nation has infinite resources. Unfortunately, many Americans will soon learn this lesson – the hard way.

Effective leadership requires making the right decisions about the right things.

Leadership also requires acquired core competencies and relevant experiences. People who know what works, what doesn't and why.

Simply put, competency in problem-solving… decision-making involving identifying strategic trade-offs & avoiding the wrong compromises… knowing the difference between a decision and an action – and most importantly internalizing Winston Churchill's long-ago wisdom "A person who cannot change his mind, can't change anything…"

The time for "baby talk" is now over. America's priorities must change.

Failure to abandon existing plans of all kinds when the situation changes drastically is and always has been a failure of management: management has not seen or understood the facts that face it, and it has not faced them with prompt and decisive action.

To paraphrase the late Israeli commander Moshe Dayan: "A problem is something with a solution… If there is no solution, there is no problem… Abandonment {of what no longer is relevant} is a solution, however inconvenient…"

The Objective of Part II

This article laterally extends many of the points made in Part I. At the conclusion of this five-part series, we hope readers will be more fully informed about what's happened, what's happening and what's apt to happen.

We make no claim to originality. Many of the insights we will discuss derive from the writings of Peter F. Drucker.

But we've also done extensive research in other areas such as protecting the electric grid, the strategic implications/future threats of the Afghanistan withdrawal if it proceeds as now planned and a host of other topics that we believe have not been adequately covered (e.g., the need to immediately focus resources on protecting the electric grid) by many in the media.

The Power To Tax Is the Power To Destroy

Many powerful business/chief executive officer groups are beginning to pay much attention to protecting businesses from confiscatory taxation and the resulting devastating societal impacts that could occur.

Without a doubt, government leaders are now planning to significantly increase both individual and corporate taxes. This article focuses on the potential societal impact of confiscatory business taxation.

We will discuss the role of profits – from several viewpoints – to provide readers with a more in-depth view than typically presented.

Government, Present and Future Pensioners Benefit From Successful Ongoing Businesses…

Governments cannot be effectively run without tax receipts from businesses and individuals working in those businesses.

That's what generates the bulk of government monies to pay for a long list of government entitlements and everything else most Americans now take for granted.

With all the talk/speeches today – from those with little knowledge in economics, management and function of profit – about raising corporate taxes to 70% or more boils down to the equivalent of “biting the hand that feeds us."

If "socialism" is still defined as "ownership of the means of production by the workers" – and this is (or at least was when we last checked) the standard definition, then it logically follows through pension funds, 401(k)s, investment trusts, and the like, employees of American businesses, public service institutions, retirees, own a very large percentage of the equity capital of American business – probably in the neighborhood of 60% or more.

Peter F. Drucker called this "pension fund socialism." America's workforce owns a significant percentage of the means of production. It's that simple.

But whatever you choose to call it, it boils down to many people are dependent on their current and/or future income on their investments in American (and foreign) businesses.

Take for example the American Association of Retired People (AARP), whose approximately 38 million members represent through their pension fund holdings one of the largest blocks of ownership in America's industries.

Our point? Anything that negatively impacts American businesses could impact future retirement incomes among other negative outcomes.

The Myth of Profit Maximization

Those without real organizational experience paint a picture of greedy capitalists doing everything possible to maximize profits which includes the exploitation of the worker.

But truth be known, Nobel-winning economists have shown that the name of the game is not profit maximization but opportunity maximization–and that's what keeps the U. S. economy humming. The term “profit maximization” should be replaced by the term “profit optimization.”

The Need for Continuous and Purposeful Innovation

Continuous and purposeful innovation – doing the new and different – are must-do requirements.

Whether innovations relate to processes, business models, technologies, products, services, distribution channels, pricing, organizational structures, and the like, constant investments must be made to be future-ready.

This is the way most businesses operate – small and big. That's the way most successful executives think.

Take-home message: To thrive and survive in a world of ever-changing domestic and global competition, companies need adequate profits to fund purposeful innovation and have enough funds to withstand the sharpest possible setback an organization's past experiences could lead us to expect.

The key question is: What's the minimum necessary profit to survive such a setback? How much of today's profits will be needed to survive tomorrow's unexpected crisis, fund needed innovations, and the like?

Today's profitable business could easily become highly unprofitable if today's after-tax profits are not sufficient to survive the worst possible setback.

Confiscatory corporate taxation rates in order to pay for an ever-expanding welfare state and misallocated government resources – that is, resources put on projects and activities with no results will destroy many, many businesses.

Debunking Slogans Relating to Profits as Employee Exploitation: An Important Digression

Those without real organizational experience for a variety of reasons are increasingly portraying business managements as greedy capitalists doing everything possible to maximize profits which includes the exploitation of the worker.

Make no mistake: This is a very Marxist viewpoint. And as we will soon show, the world of Karl Marx is entirely different than the world we now live in.

More on Knowledge Workers & Pension/401(K) Income

Drucker coined the term "knowledge worker" more than 65 years ago. At that time, very few people understood the importance of Drucker's observation relating to the economic and societal impact of knowledge work in its various forms.

Knowledge workers – by some estimates – comprise over 48% of America's workforce. Knowledge workers from digital marketers to neurosurgeons are now the chief asset of most organizations.

Knowledge workers apply knowledge (and experience) to their daily tasks. Drucker pointed out that a very large number of knowledge workers do both knowledge work and skilled manual work (they work with their hands).

A neurosurgeon requires specialized knowledge of the highest order but the surgery itself can be classified as manual work. Similarly, a person repairing jumbo jets works with his/her hands but is applying knowledge rather than just skill can be classified as a technologist.

Simply put, Drucker distinguished between knowledge workers (e.g., lawyers and accountants) doing just knowledge work and knowledge workers who apply knowledge of the highest order simultaneously using the skill of their hands.

Drucker called the second group of knowledge workers "technologists." Technologists also contain large numbers of people in whose work knowledge is relatively subordinate – though essential to successful outcome performance (e.g., x-ray technicians).

To Reiterate Drucker's Powerful Insight

"According to Marx, said Drucker: Society was dominated by two distinct social classes: the capitalists, who owned and controlled the means of production, and the workers, – Karl Marx's 'proletarians [i.e., factory workers who left the farm to join the Industrial Revolution in order to make a living wage.]’”

Another Reason Why Karl Marx’s Prediction of a Worker Revolution Fizzled

Marx predicted capitalism was doomed because the productivity of workers employed by businesses was destined for diminishing returns – especially, worker productivity.

Indeed, Marx's core thesis was essentially: "the only way to produce more was to work more and work harder.

Frederick Winslow Taylor (1856–1915) completely destroyed Marx's key assumption relating to increasing output. Taylor believed the key to producing more was to "work smarter."

And as we fully discuss in Part I of this article, Taylor invented scientific task management or just scientific management.

This invention led to a worldwide productivity improvement revolution that increased the output of manual work to a level never thought possible until Taylor's concept of working smarter not harder came about.

By increasing the productivity of the worker, higher wages inevitably followed. This, alone, ended the need for a worker revolution.

Giving Karl Marx His Due

However, back in the day when Marx was predicting (as it turns out incorrectly) an inevitable conflict between capitalists and proletarians, it seemed plausible.

Why would there be a conflict? Inevitably, thought Marx, the proletariat would continually be forced to work longer and harder by yesterday's capitalists to maintain adequate profitability.

This would cause the capitalists to be overthrown by proletarians who "had nothing to lose but their chains." In reality, this never happened.

Marx's hypothesized when the predicted overthrow took place, greedy capitalists seeking profits at the expense of the proletariat could be taken out of the equation and the government could provide "salvation by society."

Salvation by society promised an earthly paradise in an everlasting society that achieves both social perfection and individual perfection – taking care of the individual's needs from cradle-to-grave needs.

The fact that this is never worked is irrelevant. It's still being peddled to the naïve and historically illiterate because it's such a seductive theme or promise.

Clarifying Another Historically Inaccurate Claim

In Karl Marx's view and other intellectuals at the time, the proletariat was being exploited or treated very badly by their employers. And were in a far worse position than when working in the agricultural sector.

In Conclusion

Recent surveys indicate the majority of Americans understand – in a more practical way what we might label the Drucker perspective.

In the world of Karl Marx (1818-1883), terms such as "profit as exploitation" might have had more justification.

But we are now living in a different world – a world that emphasizes knowledge work, provides retirement income sources of all kinds, undreamed of entitlements, and relies on corporate spending and investing to meet the vast unsatisfied needs of billions of people on the planet.

Much of these benefits – either directly or indirectly – derives from corporate profitability.

If there is no continuous, purposeful innovations, businesses stagnate. Profits will dwindle. Any government policies that tax beyond a reasonable level, will have an impact on future innovations and business survival.

Many politicians think in a vacuum. Few are adequately trained in the process of decision-making, let alone model building, that renders explicit the interrelationships between and among a set of factors.

Rest assured, an orchestrated and ill-advised war on profits will inevitably impact what many of us now take for granted including political freedom and a functioning civil society.

In a spot-on article in the Wall Street Journal, Daniel Henninger expressed what many are rapidly concluding, "The long-term effect of enacting {massive new} entitlements—atop Social Security and Medicare, already under fiscal pressure from the cohort of baby boomers—could not be more clear: U.S. spending on defense and national security will go flat or fall indefinitely."

We leave it to our readers to reach their own conclusions about "a potential American future that has already happened–unless government actions are taken to counteract today's trend toward mediocrity and replace inertia and its momentum by new energy and new direction."