As upcoming goals, the United Nations should enact basic sanitation, healthcare and governance in failed or collapsing states not simply because of moral concerns, but because of our own safety concerns.
You would think we would have learned to deal with globalization by now. Goods, services, people, and money, and occasionally, diseases, flow across borders at a staggering pace. Little can stop these flows. Not walls. Not presidents. Not health authorities.
People, however, remain quite rooted in their local communities. So rooted that when a global health scare comes along, we only react when somebody we know, in our country, or somewhere we know well, is affected. Most people’s identity is local, not global, and not even international. Perhaps we should be glad. It gives focus. We attend to what is near. Perhaps, therefore, most of us underestimated Ebola. In Norway, nobody reacted when a nurse on volunteer duty in West Africa contracted the disease, but when she arrived in the nation’s capital for treatment, everyone noticed. In the U.S., nobody winked until a person died in Texas.
Have you ever been shopping and found a great jacket with a perfect fit? Then you look at the price tag and pause. Should you buy that perfect item now or wait to see if it’s still available during the inevitable end-of-season sale? What if the store told you that it only had a limited number left, or only had two on the rack in your size?
In a recent study I conducted with Prof. Karen Zheng, we found that as consumers have become more strategic about purchases, behavioral motives like regret and availability misperception are significant factors and should play a key role in pricing strategy.
Regret happens when consumers compare the outcome of a chosen action with that of the unchosen one and realize they would have been better off with the latter. In other words, they may regret buying the jacket now at the higher price if it turns out to be available during the sale for 30% off. Similarly, they may regret not buying it now if their size is gone by the time of the sale.
Two hundred years ago (August 24, 1814), the British burned the U.S. Capitol and White House to the ground. This took place at a time of an intensely divided American government — where rancor, bitterness, and profane curses were commonplace in Congressional debates between Federalists and Republicans. Yet, these same Members of Congress stood together to turn back the British and rebuild Washington.
Polarization and intense difference hold sway today too. Shall we come together or let the house burn down?
One of the inspiring lights of that earlier era was Dolley Madison, remembered as the country’s first “first lady.” She took it upon herself to provide a context for engagement that cut through the animosity of the time. She redesigned the White House, carving out grand social spaces, to make it possible for people to meet together.
Apple issued $12 billion of U.S. debt in April, which gave the company a domestic cash infusion that allowed it to keep more earnings overseas. Last month PfizerPFE attempted to acquire AstraZeneca, a transaction that would have made Pfizer a subsidiary of the U.K.-based company. These were useful examples in the taxation classes I teach at MIT’s business school, but the real-world implications of these decisions are troubling. Even worse, legislators have responded with proposals that seek to prevent companies from escaping the U.S. tax system.
The U.S. corporate statutory tax rate is one of the highest in the world at 35%. In addition, the U.S. has a world-wide tax system under which profits earned abroad face U.S. taxation when brought back to America. The other G-7 countries, however, all have some form of a territorial tax system that imposes little or no tax on repatriated earnings.
To compete with foreign-based companies that have lower tax burdens, U.S. corporations have developed do-it-yourself territorial tax strategies. They accumulate foreign earnings rather than repatriate the earnings and pay the U.S. taxes. This lowers a company’s tax burden, but it imposes other costs.
For example, U.S. corporations hold more than $2 trillion in unremitted foreign earnings, a substantial portion of which is in cash. This is cash that currently can’t be reinvested in the U.S. or given to shareholders. As a consequence, companies are borrowing more in the U.S. to fund domestic operations and pay dividends. Another potential effect is that companies invest the earnings in foreign locations.
Nearly one fifth of American workers work in retail and fast food, and they have bad jobs. They earn poverty-level wages, have unpredictable schedules that make it hard to hold on to a second job, and have few opportunities for success and growth. These are not just people who are uneducated or unskilled. In 2010 more than a third of all working adults with jobs that did not pay a living wage had at least some college education or a degree.
The conventional wisdom in business is that bad jobs like this are necessary to keep prices low and profits high. If a low-cost retail chain were to pay its cashiers more, then it would either make less money or have to raise its prices. Implicit in this logic is the seemingly self-evident tradeoff between low prices and good jobs. But that is a false tradeoff. Even in highly competitive industries like low-cost retail, it is possible to pay employees decent wages and treat them well while giving customers the low prices they demand.
I studied four retail chains that manage to do this: Costco, Trader Joe’s, QuikTrip (a U.S. chain of convenience stores with gas stations), and Mercadona (Spain’s largest supermarket chain). They offer their employees much better jobs than their competitors, all the while keeping their prices low and performing well in all the ways that matter to any business. They have high productivity, great customer service, healthy growth, and excellent returns to their investors. They compete head-on with companies that spend far less on their employees, and they win.