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Q. You have discussed some micro-economic restraints in higher education. Do you have any observations about the effect of current grade school or secondary school education on the job shortage?
A. My insight into the problems of education of this type is not as good as with vocational and proprietary school education. But the same rules of economics would seem to be applicable, and violation of those rules would seem to invite educational disas ter. My thought is that today's present state of primary and secondary education results from micro-economic restraints and related lack of a free market. This results from efforts by government to prevent parents from having an option to pay for privat e schooling with public funds, and eliminates the healthy competition needed to keep public schools in line. Public schools have less accountability than one would normally find in a privately-owned school, because public-school teachers have rights to r emain as teachers irrespective of their performance and attitude. Also, of course, there are unruly and disruptive students who make life tough for any teacher, and help cause the teaches to drop out similar to the way students drop out.
Q. Are you less interested in primary and secondary school education because such institutions do not provide vocational training?
A. Yes. These institutions should bring students up to a level where they can benefit from vocational training. Of course, there are vocational programs in some high schools, but I doubt that there are many secondary schools which permit pure vocational training and eliminate all traditional academic subjects. Accordingly, my interest is in pure vocational training.
Q. What is the importance of "pure" vocational training from the standpoint of the current job shortage.
A. This is a most fundamental and valuable question. There are three primary types of assets in any country, including the United States: (i) money or capital; (ii) people and their labor; and (iii) natural resources. The strength of a country is based on these three factors. Scientists or engineers without money or natural resources are of little value to an economy. Capital without labor or natural resources is also of little value. And millions of laborers without the capital or resources to put t hem to work are also a substantial drag on the economy. What we can conclude is that availability of capital on a competitive basis, availability of a variety and abundance of natural resources and a well-trained labor force are pre-conditions to maximiz ing the wealth of a nation, I would think. To the extent of a shortage in one area, the other two areas will have to make up the difference (such as in Japan, which has a shortage of many natural resources, such as oil).
Q. Why is trained labor so important?
A. Today trained labor is even more important than in the past.
Q. Please explain.
A. In the past, when job creation occurred for the most part by big business, new employees started at much lower positions in the company, and the training of new employees could take place by experienced employees, over a comparatively long period of ti me, without disruption of the company's business, as part of the cycle of moving up over a lifetime in the company. Also, technology changes were not as fast, and colleges and universities trained persons more for big business than they did for self-empl oyment or small business. Today, when more jobs are created by small business, the way in which workers have been trained does not work out as well for small business, and small business is lagging behind to some extent for such reason.
Q. But what specifically does the training of employees have to do with the functioning, competitiveness and profitability of a business? Does the training of labor have anything to do with the country's inability to compete successfully with Japan?
A. Yes. Everything which happens in a business affects the "bottom line" or profitability of a business, which affects the ability of a business to attract capital, pay employees, and compete with others in the U.S. or world market. If a business makes motorcycles, and the labor force in comparison to the Japan labor force (i) is unionized and demand $10.00 more per hour for its labor; (ii) has a higher rate of absenteeism; (iii) has an attitude that it is getting shafted by the employer and should do a s little as it can get away with, especially if it can find protection in a union rulebook or grievance procedure; (iv) is less educated from an academic standpoint and therefore less able to read, communicate, exercise judgment or understand how labor an d management can make more money for each other by joining forces as a team rather than fighting each other; (v) is less able to understand and do the various tasks which are required of the company's employees, such as work with computers, terminals, wor d processors, desktop, scanners, databases, programmable telephones and other equipment, security systems, conferencing equipment, timing devices, temperature control systems, robots, inventory control systems, data processing utilities, and so on -- then the ability of small business (our country's main job creator) has to work extra hard in comparision to competing businesses of other company's to compete successfully. This is a built-in disadvantage which over the years will have its adverse effect on U.S. business and make it less and less competitive, and cause more and more of U.S. businesses to go out of business or seek help by moving some of its operations to other countries.
Q. I see you have paused. Do you have more to say about how the training of labor is so important?
A. Yes. But let me talk about my own experience, having been in business for mo re than 20 years. My experience with business is from the bottom up. First, th ere is the conceiving of an idea (of which I have the most experience and enjoym ent, trying to conceive of ways in which perceived needs can be met for profit, by the start of a new business designed to provide a new product or service in c ompetition with the old way of doing things which doesn't seem to be filling the need that I perceive). Then, beginning to get the business started, including the gathering together of whatever money is to be used to start up the business (the hardest task of all for most small businesses). And finally, making that commitment which requires adherence to a certain routine and expenditure, when the business door s are thrown open and you wait for your first customers. During this period of time, to start up a business, I alone, without any other employees (for I have had none during this period) have done each and every one of the 800 tasks which my new business requires to be able to engage in business. Many of these tasks continue in one way or another even after the business has started up. The tasks range from purchasing insurance, adhereing to rules and regulations, purchasing, programming and operating t elephone systems, writing, placing, analyzing and changing advertising copy; preparing materials (including letter, order form, outgoing envelope, return envelope, obtaining postal business reply permits, estimating postage costs, flyer or brochure, conce iving of and registering a trade mark, obtaining copyright protection, and several dozen other things which I could add), preparing copy for help wanted advertising, answering the telephone calls from prospective customers, your competitors, governmental agencies, salesperson, and prospective employees; interviewing, hiring and training prospective employees; purchasing needed supplies before you run out; ordering materials needed for the product or service you are providing; arranging for the packaging a nd shipment, and a system which tracks orders and back-ordered items, and arranging for banking, legal, accounting and other professional services; and handling customer complaints, including knowing how to handle matters which might blossom into expensiv e lawsuits - and more, and more, and more. Oh, I forgot to include talking with customers, fulfilling orders, making sales and deliveries, and fixing things which go wrong. Into this picture comes your FIRST employee.
Q. What in the world is your first employee going to do?
A. That is a very good question, which is part of the problem which the new business owner must add to his/her list of things to do, making the list grow now to 801 items. With the addition of employees, the list gets even longer, in order to cope with t he mass of government regulation which descends upon small business which dares to hire a single worker.
Q. What is this you're talking about? Health coverage, unemployment and disability insurance coverage, payroll withholding and reports, compliance with OSHA rules and regulations, compliance with rules regarding handicapped opportunities, anti-discrimina tion rules relating to sex, religious, racial, sexual orientation, age and other protected areas. Keeping up with all the reports due, including sales tax, city and state nuisance taxes, deposits, government notices. All of this I refer to as the "brown envelope" problem of small business, all of which hundreds of government-agency brown envelopes are required to be opened up and dealt with by the owner of the small business just because he/she dared to challenge the system and hire a single employee.
Q. My god! It sounds as if small business is being strangled.
A. How right you are. In our efforts to achieve "fairness" and "equality", we as a country are forcing small business to report as much as big business, with the consequence that the single owner of a non-employee business finds that he spend often more than 50% of his time (as the only employee of the business) doing totally non-productive things in compliance with government demands, which severely cripples his/her opportunity to make the business grow and hire more people.
Q. Do you mean to say that small business should be exempt from a lot of this?
A. Yes, from practially all of this, for a definite period of time, which I have recommended to be 3 to 5 years.
Q. What would this accomplish? Well, during the first year or so of a new business, the business is generally unprofitable anyway, and any exemption from taxation during this period would be an overall savings for the economy, by reducing the costs for n ew businesses, and reducing the costs of government to achieve compliance on the part of small business, which doesn't owe any money anyway. For the next few years, there would be a reduction in revenues for the government, which in effect would be permi tting its tax revenues to be kept by the small business as a form of capitalization. After a certain period of time, or upon achieving a certain level of sales, perhaps, the small business should be required to comply with reasonable rules and regulation s.
Q. Getting back to your first employee, what would your first employee do?
A. The first employee (unless he or she is a commissioned sales person) for a small, single person business should be versatile. Ideally, I would want such person to be able to do as much of my work as possible. When a large company hires a new employee , the traditional classified-ad categories are useful, enabling the company to find a narrowly-skilled person, who might operate a switchboard, do proofreading, become a messenger, or run a word processing machine, for example. But to be of any help to a real small business, a first employee must do all of these things and more. Much, much, more, to be of any value to the businessperson.
Q. So how does this relate to education and proprietary school training programs?
A. Colleges and universities have not been able to develop multi-disciplinary programs because they are highly compartmentalized and structured, hiring instructors who profess to know a lot academically, but who generally are escapees from the firing line of business in general and small business in particular. For such reason of lack of experience on the firing line, these college instructors really have no ability to teach students the skills needed by small business, and their is some valid complaint that they are not even able to teach vocational programs of any value to most businesses. The ridigity of college scheduling also inhibits being able to put together a curriculum needed for employees of small business. Remember, I am talking about small business because this is where the country is depending on business to provide most of the new jobs. I'm not talking about government employment or employment with Citibank or General Motors. I'm talking about employment by persons such as me, and you, as individuals wanting to start or own or run a small business. Our needs are what have to be met, not the needs of the people who control and run the nation's colleges and universities. They come from Citibank, General Motors and other leading institu tions which are failing to provide the jobs, and they can hardly know or understand or solve the problems of small business.
Q. So, you are saying that the nation must change the way in which people are trained for employment?
A. Yes. The present training programs are applicable to a different era, and have built in micro-economic restraints which resist any meaningful change.
Q. I'm not going to ask you to list these restraints, because I have a feeling that the list is pretty long. Maybe you can suggest an approach for me to get into your solution, as a first step in seeing the problem.
A. OK. My solution is to have training programs be established in a free market by whoever and whatever person, company or governmental agency believes it is filling a need, without any regulation or interference by government. Think of job training pro grams as if they were newspapers and magazines, entitled to offer whatever instruction or information they saw fit without government bureaucrats telling them what to teach and what not to teach, and to enable them to market their training programs in a f ree market in competition with each other and the older programs of existing institutions.
Q. What would this do?
A. For one thing, it would enable me to offer my version of a training program which I strongly believe the country needs, and would encourage others to offer training programs which they believe (equally as strongly, I would hope) are needed by the count ry. In this way of using a free market to decide what is to be taught, we will have programs being devised to meet new and changing job market conditions, on a fast, timely basis, at the lowest possible cost, not requiring student loans to finance, with instructors who come from the business sector instead of the academic area.
Q. What would your program consist of, and why can't it be offered by a college or university?
A. My program, which I call the Personal Assistant Training Program, is a complicated mix of disciplines which attempts to make a trainee qualified to be "number two" in a small business. The curriculum, which took several years to be approved by a state regulatory agency, accrediting organization, and the U.S. Office of Education, gives instruction in computer hardware, computer software, accounting, law, advertising, insurance, theory of small business, economics, quality control, purchasing, inventory control, financing, raising of capital, trademarks, copyrights, patents, and so on for a total of 300 hours of instruction (a magic number needed to meet the requirements of the federal government which will not allow a person to receive a student loan t o pay for a course which is shorter than 300 hours, even if a shorter program will train the person adequately to obtain employment - which of course is another micro-economic restraint, forcing schools into offering, and students into taking, vocational programs which are longer than necessary). A copy of my brochure for the Personal Assistant Training Program can be seen at Appendix 14. As I said before, this program evolved from my earlier proposed program to take persons off of welfare at my own ex pense (as to which see Appendix 6).
A. I have estimated the value of my Personal Assistant Training Program (including any other programs similar to it, none of which are in existence at this time, as far as I know) to the nation's economy, and have concluded that the program in several yea rs would eliminate the nation's balance of payment deficit, by reason of the additional profits it could and would bring in for small business.
Q. How do you make the calculation?
A. First of all, you have to understand that the main difficulty of small business (in addition to having insufficient capital) is that the sole proprietor or shareholder has insufficient time to do all the things he/she needs to do to make the business g row and prosper, since there are only so many hours in the day. My program was designed to save time for the owner or manager of a small business by training an assistant who would do everything possible to save time for the owner, to let the owner spend his/her time in areas of greater profitability for the business and to have the Personal Assistant do whatever he or she could do to perform the other less important (i.e., less profitable or less demanding) tasks. I estimated that a well-training Perso nal Assistant could save me up to 4 hours per day or more, which would translate into a certain amount of increased sales and profits per year, and when multiplied by the number of managers in the United States, the aggregate amount of increased sales and profits was in the billions of dollars, more than enough to offset the imbalance of U.S. trade. The numbers are not as important as the impact the Personal Assistant would have on you or me. I know (or at least are willing to put my own money down and hire a person with my prescribed training) that with such a person I could be far more efficient and profitable as a small businessperson.
Q. Is this the only improvement which must be made in education to be able to bring back the jobs?
A. No, of course not. I am merely one person saying that I have a way of creating billions of dollars of additional sales and profits for businesses in the United States, but that the micro-economic restraints in the field of education make it impossible for me to operate such a business, merely because I would operate the business for profit. The organizations which could start such a business without regulation (the nation's colleges and universities) don't have the insight, ability or structure to pr ovide what I see the country needs. Think of what one person can do, if permitted by rules and regulations, then multiply what I might be able to achieve by the tens of thousands of other persons who would have their own vision of what is needed, and act on that vision to produce even better programs than I envision, and develop and offer fantastic vocational training programs for areas of the economy which I might not ever have thought of.
Q. What kind of impact would your training program, for example, have on the present job shortage, analyzing your idea from a micro-economic standpoint?
A. Well, assuming that all micro-economic restraints were removed, and I could own and operate a training program with the same First Amendment freedom that I would have to own and operate a newspaper or magazine, I would be able to provide a vocational t raining program as good as if not superior to any training program currently operating, at a lower price (due to the lack of regulation), with a built in market for all of my graduates.
Q. How do you know there is a demand for your envisioned trainees?
A. How do you know you have feet attached to your legs! Some things are perfectly obvious. If you train a person in a variety of disciplines, such person is more valuable to a business in which the owner is besieged with hundreds of different things to do, and needs to find someone to do some of his/her work. There's nothing wrong with inventing the obvious. It just takes someone to identify and describe the obvious. I spoke to a former classmate of mine from Harvard Law School about my development, saying to him that I didn't really expect him to be interested in what I was doing because he was the top lawyer in a large legal department for one of the largest insurance companies in the world. He admonished me ever so slightly, saying that I was wro ng, and that he was very interested in hiring such a person with the credentials I described. I asked him why, and he said that he was really the manager of a small business with a fixed budget and 200 employees, and that he had many of the same types of problems which I describe before (as the one-employee businessperson) and he thought my proposed training program would provide a most needed employee. I have had similar laudatory statements from various parts of the economy, and know from my own gut r eaction that versatility in skills and sensitivity to situations is ideal training for a person who would be of help to me. Take a look for yourself. Think of what I have been talking about during our extended interview and see if the territory covered is not quite vast. Most small business owners have these same, or similar, vast areas to cover, and need help. The persons would could be of most help to a small businessperson such as myself is a person who has training to be my number two.
Q. Why can't you train the person yourself, especially since you are familiar with the type of training needed and have prepared materials and outlines for that type of training, I would suppose.
A. You have hit the nail right on the head. I'm proud of you. Your question is right on. The answer is that I cannot take the time out of my busy day or business to teach you what you need to know.
Q. Why not?
A. Because my time is too valuable to be spent doing the work of a school, and I find that whenever a person reaches a certain level of knowledge and understanding the person leaves me for more prosperous and/or glamorous employment, which makes me feel l ike a business yo-yo, having to start all over every few months, after a trained employee quits, running more advertising for persons with no skills which I can describe, interviewing dozens of persons, selecting the right one, waiting for that person to quit his/her present employment, and then spending months of my time trying to train that person according to the 300-hour (or shorter) curriculum which is needed. I don't have the 300 hours to devote, nor do I want to do this one or two times per year. I just want to find someone through an advertisement who has the needed skills.
Q. Then how would your Personal Assistant Training Program solve this problem of finding the person with the right mix of skills?
A. The answer is that unless a new occupational field is defined (such as "Personal Assistant") and the training program standardized (such as through a trademark, ensuring quality control of the job category), it would be difficult to find the right pers on because there would be no place in the classified ads for me to place my ad where the persons I want to interview would know to look. But by setting up a specific curriculum (as I did in the paralegal field) and giving the field a name (such as "Perso nal Assistant"), and by training persons in such curriculum, a market would develop throughout the nation of small business or other employers who wanted to hire a Personal Assistant, and persons who have taken the program who wanted jobs as a Personal As sistant. We would then be able to use the classified ads in the major daily newspapers to find each other, and a new career field would be launched. But I can't do this with the degree of regulation which exists to limit and destroy for-profit vocationa l education.
Q. What salary range would you suggest paying for your Personal Assistant?
A. The salary should be at least $500 per week with an additional $100 or more per week for each hour of my time which the person saves per day, on the average, in excess of say 3 hours. (The $500, in other words, is for the first 3 hours per day of time savings.) Thus, if we agree at the time of salary review that my Personal Assistant is saving me 5 hours per day, on the average, the weekly salary would jump to $700.
Q. What happens if you don't agree on the savings?
A. It's a free market. If the Personal Assistant believes he/she is being cheated or is not being paid enough, then the person is free to find other employment in this newly-created market. If, on the other hand, I know the person is saving me 5 hours a nd I want to pretent the saving is only 3 hours, I can expect to lose the person as my employee. Do you really believe that I want to lose a person who I believe is saving me 5 hours per day? You don't need government agencies to figure out what to do. Let the free market decide. It usually makes much better decisions.
Q. The more you talk the more I am convinced that you have something worthwhile to say. Why haven't I heard any of this before?
A. I have two sets of answers. I'll try my first one out first. My explanation takes too long to be newsworthy, because it can't be summarized in any sensational way to be features in a TV news broadcast. Imagine the lead newscaster saying: "And Now fo r the Top Micro-Economic Story - Federal Judge Order Freedom for the Nation's Vocational Schools." This would go over like a lead balloon, especially the follow up detail for 15 seconds. It takes far more than 15 seconds to tell the micro-economic reaso n for the shortage of jobs in the U.S. Accordingly, very few of the media have tackled my story, although I have continually tried to obtain coverage for the past 20 years or so.
Q. What is the second reason? I'm alawmallost afraid to ask.
A. Rightly so. The second reason is that the media does not want to promote change. The media is responsible for the micro-economic restraints, and is the beneficiary of them, or so it believes. And you can't expect the media to expose its own weakness es.
Q. How is the media responsible?
A. Because the political agenda of this country does not seem to be set by the public or by politicians. It seems to be set by editors, who determine from whatever perspective they employ what is "newsworthy". Once the media announces what is newsworthy , the lesser participants (such as the politicians and bureaucrats) jump aboard with the hope of being mentioned by the media as prominent players in the new story being sold by the media. Thus, if the media plays up a nursing home scandal, the media the n sets our political agenda for more regulation of the nursing home industry. The media doesn't make money playing up the unsensational, destructive side of regulation, because it doesn't sell newspapers, and also hurts existing businesses.
A. Take the supermarkets, for example. They are the major advertisers in the major daily newspapers, providing substantial dollars to the paper every week. The newspaper will play up stories attacking new businesses trying to sell food from a warehouse at cheaper prices, if there is anything wrong which can be found, but the same degree of scrutiny is not given to present advertisers, for obvious reasons. Thus, the media does not tend to be impartial or honest, but is effective nevertheless in setting the country's political agenda, for right or for wrong.
Q. Do you have an specifics you can offer?
A. My favorite story is the near demise of the New York Daily News. Several years ago I wrote a letter (Appendix 15) to the publisher when the newspaper was nearing collapse, inviting him to hear from me why the paper was having financial difficulty, and hoping that the paper would do what was needed, although belatedly.
Q. And what did you tell the publisher of the Daily News?
A. Actually, I met with the Advertising Manager, instead, and told him that during the past 5-6 years the number of pages of proprietary school advertising had slipped from 10 down to less than 1, and especially because the ads were small (and more costly per line than full-page supermarket ads), the newspaper was losing its revenue because of the decline and closing of proprietary schools in New York State. I pointed out to him that the Daily News had always taken the "party line" against proprietary sc hools in their articles, columns and editorials, and that this was mostly disinformation put out by the colleges and universities to try to preserve their crumbling empire.
Q. Did anything happen?
A. Yes, the Advertising Manager got back and said that editorial policy was not going to be influenced by the business side, and that no effort would be made to change the paper's editorial stance against proprietary schools.
Q. And later?
A. The Daily News went into bankruptcy.
Q. Are you pleased?
A. In a free-market answer, yes. The free market gave its just reward to the paper which did such a disservice to itself, the public, the economy, the privately owned proprietary schools in New York State and the students. But it would probably be the l ast to recognize this, which is a reason that the media cannot be relied upon to set the political agenda for economic reform. It either doesn't have any idea what is really happening, similar to President Bush and his advisors, or doesn't want to be an agent of enlightenment and change. If the Daily News had merely been fair to proprietary schools, it might have blunted the attack on proprietary schools and enabled them to survive. But this didn't happen, and New York State with its regulatory zeal ha s all but eliminated proprietary schools to force New York residents into spending their federal loan proceeds in New York State, New York City and New York non-profit colleges and universities, to reduce the amount of taxes which have to be raised to sup port this costly educational structure, which provides the political base and support for New York State's Governor Cuomo and company.
Q. Why is vocational training so important to the economy?
A. Because of the increased technology and greater speed of technology changes, which makes training obsolete even during the training itself, particularly for training programs or schools which are not set up for fast change.
Q. Such as college and universities?
A. Right. The importance to the country can be found in numbers, such as the rule of 70-72. Have you heard of that rule?
A. If you divide the rate of return (or interest rate) into either the number 70 or 72, whatever the case may be, the resulting number represents the number of years it takes for the invested dollar to double. Thus, when savings are invested at 10%, it t akes 7 years (70 divided by 10) for a $1,000 investment to become worth $2,000. Ten such doublings (or 70 years of investment) would make the $1,000 turn into $1,024,000. If the interest rate is increased to 14%, money would double in 5 years, and $1,000 would become $1,024,000 in only 50 years. (Of course, I have deliberately disregarded taxes, which will have a negative effect on the multiplier in later years). But the point that I'm trying to make about vocational training and the economy is that we are dealing with small percentages of efficiency. If our economy is able to grow an additional 5-10% per year through vocational training efficiencies, the growth of the economy would be staggering over the years, enough to wipe out the national deficit and provide enough money for many of the public's legitimate social programs. The amount of improvement doesn't have to be staggering to have a staggering impact on the economy, and any training program which can make small business as little as 5 or 10 % more efficient, will have the kind of impact we need to create the lost jobs. Improved, free-market vocational training would provide this impetus to the economy, and should be tried.
Q. What are the risks or costs if we permitted the equivalent of First Amendment freedom (of speech and press) to schools as we allow to newspapers?
Q. Are these concerns not relevant? A. These concerns are anticompetitive, with the predictable and proven effect of stifling growth of needed vocational training programs. The first concern, that the vocational programs won't meet state standards, is actually stating a positive argument. Who wants a program to be approved by the state? The state's involvement in educational programming for the past decades has caused the educational predicament we are now in, and I personally would think that a program which has not received state educa tion department approval may well have more merit than one which has approval. But a free market would make this determination. Secondly, whether colleges go out of business or not is something to do with the value of higher education, not something to do with whether for-profit proprietary schools should be stifled. Colleges may have to restructure themselves with their instructors, facilities and methods to meet the need which is not being met, at least in the preparation of graduates to work for or start up and own small business. Finally, nobody blames the colleges for the millions of unemployed persons in the United States. Why should vocational training programs be blamed for unemployment? If a free-market existed, and vocational programs coul d start and stop in days rather than in months or years, any overtraining would be ended.
Q. Why does it take so long for a for-profit proprietary school to start up a new program?
A. Because of the need to file elaborate disclosures with the state for approval; the need to file much of the same information with the accrediting agency for approval; and the need to file once again with the U.S. Department of Education. NYU, on the o ther hand, is free to start up a new vocational (non-degree) program merely places an ad in the newspaper, and if the ad is successful, put the course together.
Q. How did you get started with your school?
A. My school, Paralegal Institute, was founded in a bar named Millers Restaurant, where I was having a few drinks with my friend, Drew Swanberg. I asked him what he was doing during the next few days, and he said nothing. I asked him how he would like t o help me out in starting a school. Drew said ok. That night I wrote a 1-minute radio commercial starting "Become a Legal Assistant! Have Your Own Office and Secretary!" or something like that. I ran the advertisement on radio several days later, and I started signing up students from my apartment. I got 30,000 leads during the first year. After I put my first class together, and persons were calling asking when the first class was going to begin, I rented space in a building, where my school stayed for the next 16 years. This school was the second paralegal school in the United States, and the field became the "fastest growing field of employment in the United States" for a 15-year period or so.
Q. Could this happen today?
A. Not in New York and in many other states which require state approval and licensing as a condition to starting up. The further problem of running about 3 years before any students can obtain federal student loans is another problem. Getting state lic ensing in place will take about a year, while you are paying $20,000 per month rent on the empty school premises. Students pay for the waste in the form of higher tuitions.
Q. What would be your ideal federal and state environment in which to start up, own and operate a for-profit vocational training program?
A. (i) no governmental regulation of any type specifically applicable to schools or training programs.
Q. What about student loans?
A. For-profit programs would be so inexpensive that federal student loans wouldn't be necessary. Any desire by a government to put students into my school would have to be accomplished by paying the tuition by government check directly to my school. Som e government agencies do this right now. We had money coming in directly from the U.S. Coast Guard, and from the Vocational Rehabiliation Department of at least two states. The tuition on an hourly rate would be so low that students could pay as they go at the rate of about $2 or $3 per 50-minutes of instruction, or $24-36 per week for a weekly 12-hour schedule.
Q. Why is regulation so appealing when it apparently can be so destructive?
A. Politicians have to be perceived as doing something useful, and they are quick to read the newspapers about some problem and come up with a regulatory solution to the alleged problem. In this way they can expect publicity from the same newspaper about efforts to solve the problem reported by that newspaper, the public will believe that the politician is really trying to do something to benefit the public, and the public thinks it is getting something for nothing. The public least of all has any idea how destructive the regulation can be. It assumes that the legislature has reviewed these matters before passing the regulation. But in truth the regulators seldom understand what they are regulating and the harm which they do to the economy. They were hired, it should be remembered, as economists, but were hired to be cops, to prevent business from "ripping off" poor unsuspecting consumers. This same type of protection is found unnecessary for non-profit organizations because everyone knows that all non-profits are as close to god and purity as any organization could be and would never do anything wrong (except pay excessive salaries and perks, defraud the U.S. government, fix tuition terms among competing institutions, offer courses which have littl e job potential for graduates, crowd 600 persons into a single lecture with a single teacher, provide business facilities including office, library, telephone, desk and secretary for their professors and instructors to compete in the business world withou t any overhead, and pay $5,000 in advertising costs and commissions for each student they drum up).
Q. Is this last item true about paying to acquire students?
A. Yes. See Appendix 16, consisting of a reprint with permission from Money Magazine.
Q. Is there any difference between colleges and for-profit schools?
A. Yes, the country needs more for-profit vocational schools and less emphasis at this time on higher education. Higher education is becoming more of a luxury, and many persons should think first about qualifying for and obtaining a job before trying to acquire a non-vocational higher education. Not all persons, I hasten to add. But many persons are doing this, as evidenced by the decline in college enrollawmallents and the severe competition which is causing colleges to go under and state legislators to bear down more heavily on for-profit schools to supply the extra financing which is needed to support higher education in its present form.
Q. In a nutshell, give me your prescription for curing the existing job shortage.
A. Permit businesses to advertise for capital without any federal or state restraint other than the general anti-fraud laws applicable to all persons; eliminate all licensing and other regulation of for-profit schools of all types, to that I can start any type of school to teach any subject in the way that I want to teach. Once again, the laws prohibiting fraud should be enforced to prevent fraud. Review all statutes, rules and regulations which regulate business and try to eliminate as many as possible , using micro-economic analysis to answer the critical question of whether the rule costs the economy more money than it saves. Also, adopt my view of welfare reform which is just another free-market training program with the government paying a well-des erved bonus for each success.
Q. What would this do if all of these points were effectuated?
A. This would enable the economy to save itself by harnessing the human and non-human assets of this country to improve the economy, in a way that more government regulation and statutes cannot ever do.
Q. This may be a difficult question, but are you asking for a major restructuring of the economy?
A. Yes. For example, if all micro-economic restraints were eliminated, it is possible that existing restraints which enable the president of a major public company to earn $20,000,000 per year in salary and bonus would be ended. Also, teachers would hav e to perform or leave the field. Excellence in teaching would be amply rewarded. Business would be handed out by government based on merit rather than on contacts. Prices would drop and sales and jobs would increase. America would concentrate in areas with higher skills, and our products and services would once again be sought in foreign countries.
Q. Can increasing interest the interest rates charged to banks by the Federal Reserve change the economy in the way you evision?
A. No. Those changes don't make money any easier for me to borrow. Most small business can't borrow money from banks in any event, regardless of the interest rates, unless they put up stocks, real estate or other collateral. These interest rates merely encourage the banks to lend money to big businesses which really don't need or want the money.
Q. What about changing tax laws?
A. The same is true. Small business needs more than tax law changes, unless the changes result in direct payment of tax money to the small business. Changes in rates and tax credits seldom are applicable to the businesses which are producing the most job s, and they tend to finance the less efficient businesses to the detriment of the smaller businesses. Interest and tax policy would not have to be changed much if at all if the economy were working properly by the elimination of the micro-economic restra ints. But for the politicians and press who like to report simplistic things, I suggest that the micro-economic restraints of (i) regulating capital and (ii) regulating for-profit education be called "macro-economic levers" and used to increase the numbe r of jobs in the U.S. instead or in addition to the use of the two present macro-economic levers of taxes and interest rates.
Q. Many people are interested in enterprise zones as a way for building the economy in poverty-stricken areas. Are there any micro-economic issues relating to enterprise zones?
A. The whole concept of enterprise zones is to eliminate government regulation for areas which are most devastated economically. None of the proposals would eliminate or even relax the regulations prohibiting the advertising for capital or the licensing of vocational schools, and for such reason the enterprise zones would seem to have little potential. My thinking about enterprise zones is that the entire United States should be deemed worthy of being designated an enterprise zone together with the term ination of the major micro-economic restraints. If this is done, all areas of the country will prosper, including the areas which are most deprived.
Q. So you are for or against enterprise zones, as proposed by others?
A. Against, basically, because they are merely cosmetic, and offer hope when very little justification for such hope exists. It would seem better to give nothing than to give the appearance of giving something which amounts to nothing. This will keep up the political pressure for change.
Q. What causes micro-economic restrains?
Q. How can they be eliminated?
A. By threatening to and actually eliminating politicians until the micro-economic restraints are significantly reduced. This is basically what the country is doing at the time of this interview. Politicians of all types are being thrown out because the y are not able to provide jobs. If they started eliminating these micro-economic restraints, all the desired jobs would appear and the politicians could save their own jobs. But they never seem to learn.
Q. Why is this?
A. Because the direct pressure of contributors and special interest groups is felt more strongly by politicians than the vague threat of reprisal by voters against politicians generally.
Q. What is the price of a politician?
A. Pretty low. They sell out for thousands of dollars and cost the economy billions or even hundreds of billions of dollars. I am just guessing but I would suspect that for every $1 to $10 of political contribution there is a micro-economic loss to our economy approximating $100,000 to $1,000,000 or more.
Q. Are there any micro-economic restraints in politics? That is, are there any rules or regulations which prevent citizens from competing for office in an effort to change the micro-economic rules which are hurting our economy?
A. Plenty of them. In fact, I brought suit against the National Democratic Party and the seven leading television networks to try to force the TV networks to include my client, a minor Presidential candidate, in the nationally televised debates during la te 1991 and through early 1992. A copy of my complaint against the National Democratic Party and others, including the 7 major networks, can be found in Appendix 17. A statement of various micro-economic problems can be found in the first few pages of t he complaint.
Q. What happened?
A. I moved for an injunction and I lost. Here is a copy of the decision taking away the rights of all American citizens who would try to run for the Presidency (Appendix 18 hereto). Also, I filed a letter complaint with the Federal Communications Commis sion in Washington, D.C. on candidate Curly Thornton's behalf (Appendix 19, and lost (predictably), then filed an appeal to the full FCC Commission.
To see a copy of the complaint, click on Complaint re President Election Process
About one year later (when it was too late to be of any value to candidate Thornton in any event), the appeal was decided against Thornton because he mailed the appeal to the FCC (as provided by FCC rule) rather than delivering it overnight by Federal Exp ress (which is not permitted) (see decision which is set forth as Appendix 20). I appealed from this FCC decision to the full FCC Commission (see letter appeal to Full Commission set forth as Appendix 21) and you can predict the decision as well as I, so I won't bother you with a copy of it, which came down after the election was over.
Q. What happened to candidate Curly Thornton?
A. He quit the presidential race and is running instead as a candidate for Governor of Minnesota.
Q. I'd like to find out some background information about you, such as where you have lived and where you went to school.
A. I was borne while my parent lived in White Plains, New York, then our family moved to Nebraska for several years, after which we moved to East Northport, Long Island, New York. I quit high school at age 16, joined the army one year later, and served 3 years in the Army. Two of those years I spent on Okinawa. I had problems finding a college willing to accept me, because I still don't have a high school diploma, but finally I was accepted at Long Island University (as well as the Columbia University School of General Studies), was elected student council president during my second year, and I graduated from LIU in a total of 3 years (because of summer school attendance). I graduated magna cum laude, as a political science major, and went from LIU to Harvard Law School on a partial scholarship (based on need). After graduating from Harvard Law School, I worked as an attorney in the law firm which later became the Dick Nixon law firm, then went to two other law firms, and in 1968 I started my own law practice, in securities law and antitrust litigation. To help me in my antitrust litigation, I started the Paralegal Institute in 1972, and was stuck as the owner and manager of the school for 17 years, until I closed the doors in 1989. I have a litigat ion law practice (see my resume included as Appendix 2), by clicking on Carl Person Resume and want to become an investment banker to litigants throughout the United States.
Q. Why did you close the doors of your school?
A. Because of the massive amount of regulation, which is just too much for an individual to perform. The government agencies make all sorts of unrealistic demands on for-profit vocational schools, with the result that they cannot pay any attention to the ir business of teaching (which has to take care of itself) and have to devote most of their time to comcplying wit the constant demands of various groups of bureaucrats who know that what they do has no value, but recognize that unless they do what they a re told to do they will be out of a job. So, in bad times, caused by excessive regulation, there seems to be a tendency to have even more regulation, so that the bureaucrats who put everyone else out of a job will not be victims themselves of their own e xcesses.
Q. Can't your litigation skills do something to correct this excessive regulation?
A. The ordinary citizen would assume that in a fair system that justice could be obtained. But the system is far from fair for a variety of micro-economic and other reasons, so that the prospects of obtaining relief in court are remote. I brought an act ion in federal court to obtain broad relief from the excessive regulation of proprietary schools in New York State (complaint included as Appendix 22 hereto), which the court said, in denying my motion for a preliminary injunction, did not present any pro blem which the courts were permitted to resolve (in other words, that the complaint was political and not legal).
Q. Did your battle with the New York State educational bureacracy end with that decision?
A. No. I amended the complaint to strike as hard as I could at the most egregious part of the state regulation by describing the rules under which the State Education Department tells proprietary schools what to teach and deny a license to schools which refuse to teach what the SED directs should be taught. (A copy of the amended complaint is included as Appendix 23.) The amended complaint was upheld by the same federal judge as stating a claim under the First Amendment to the U.S. Constitution, and at this time the matter is waiting to be tried.
Q. Do you feel that our economic problems are caused to any great extent by the Japanese?
A. This is hard to answer. The Japanese do have various restraints which exclude our products and services from the Japanese marketplace, so I have read. I am not sure of the extent of the exclusions, but I do have a micro-economic solution.
Q. What solution is that?
A. Well, the real problem seems to be the inequality between trade. Japan has access to this vast U.S. market and we have much less access to a much smaller market (Japan). My inclination would be to exclude Japanese companies from the U.S. market accor ding to standards set up by Congress.
Q. But, don't we have this already?
A. In a sense, yes, but it does not permit the injured party in the United States to do more than register a complaint with a U.S. governmental agency. Instead, I would have a United States Court of Trade (or at least a United States Court of Trade Appea ls) to permit aggrieved persons to take action themselves to exclude appropriate persons from the United States market if there is a related exclusion from the Japanese market. What I see is that the U.S. government has political tradeoffs involving the loss of Japanese trade possibilities for favored businesses, at the expense of other American businesses. I would try to remove this political bargaining to the federal courts where aggrieved businesses could pursue their own claims and grievances direct ly. Of course, there would have to be standards which the courts could enforce. In politics, there do not have to be as many standards, which enables politicians to move money into the hands of their friends and away from their competitors.
Q. Do you have any more comments about Japan?
A. Yes. The Japanese economy is based on artificially high real estate values to a great extent, as well as a total absence of defense spending, which gave Japan a compounding advantage of probably 5 to 10% of their gross national product. If we had not been defending Japan and the rest of the world, we probably would have achieved some degree of parity with Japan's economic growth. Now that the United States has a chance to reduce its defense spending, we should be entering "catch up" time.
Q. During July, 1992, when the Presidential elections were still more than 3 months away, it was generally felt that nothing could be done during the remaining 3 months to turn around the job shortage. Do you agree with this assessment?
A. Yes, as long as the persons who believe this are unaware of the effect of micro-economic restraints, as well as the effect of their termination. Or, they are well aware of micro-economic restraints and know that politically nothing can be advocated or done to eliminate them, so that fast change in the economy isn't possible. Look at Russia. Within months after the end of their national system of micro-economic restraints an entire economy is being changed. Of course, this is hardly a comparable sit uation, but the amount of economic restructuring which is needed in the United States is a small fraction of what is going on in Russia. So, my answer after eliminating the "ifs" is that substantial noticeable favorable change could easily occur within 3 months. What do you think would happen if 200 millions persons were suddenly free to compete publicly for the nation's savings?
Q. I suppose that many people would make the effort.
A. If you had $100,000 in savings in your ERISA retirement account and wanted to put, say, 20% of that money into an investment offering a substantially higher return than current interest rates on savings, and if 20 sold local business deals some of whic h were by persons or companies you knew were offered to you, showing you the possibility of a 20%-25% return, would you be interested to any extent?
Q. Yes. But I would be careful.
A. Would you want your local taxi and limousine commissioner or some other bureaucrat to share his ideas with you on the advisability of making an investment, or could you think of some other free-market person who could give you some advice?
Q. I would probably want to turn to my accountant or a lawyer, and if I didn't have either I'm sure I could find many competent lawyers and accountants who for a reasonable fee (for a one-hour fee of $150) would be willing to review a proposed investment opportunity and offer me his/her best advice, which is really all that I need.
Q. Now you're getting the drift.
A. Why wouldn't you want a government bureaucrat to review the offering?
Q. Because he/she has not shown much business initiative in becoming a bureaucrat, certainly not enough for me to be confident that he/she knows how to select investments. If he/she were so good at selecting investments, the person would probably be weal thy by now and not working in some governmental agency. If the governmental agency happens to be involved in economic or business planning or support, I would have even less reason, given the state of the economy, to believe that the person had any valua ble advice to give.
A. And the bottom line is that out of millions of persons who reviewed these hypothetical small-business public offerings, there would be some investment?
Q. Of course.
A. And the persons raising the money would now have additional tasks to perform to expand their businesses?
A. And it would require the hiring of additional employees to perform these tasks?
A. Not even including the additional professional time spent writing up proposed deals (including the legal and accounting aspects) and reviewing and rejecting or approving them as submitted to prospective investors, and the legal time spent preparing the appropriate papers to effectuate the investments?
Q. I see what you mean. There would clearly be a spurt in economic activity from the beginning, and in far less than a 3-month period. Then why don't our leaders do what you say? Isn't it obvious that what you're saying makes sense?
A. Wow. That was fun. Thanks for letting me do the questioning for a while. Our leaders are really followers in this respect, and unwilling to venture out and make proposed solutions to the job shortage which would dislocate the jobs of some of their co nstituencies.
Q. But isn't this to be expected?
A. Yes, even at the time that the persons who advocated the micro-economic restraints in the first place. "The time for change has come". This is a chant reminiscent of what Albert Gore (Vice Presidential Candidate with Bill Clinton) repeated during the 1992 Democratic National Convention: "It's Time for You to Go!" When the public finally keeps repeating "The Time for Change Has Come!" enough times, by rejecting the existing political leaders at the voting booths, a new crop of leaders will emerge who will be more willing to make the required changes. The most important changes are to create free markets for capital and education. If this is done, the power of such "macro-economic levers" as I am trying to rename them will create all the jobs we nee d. Additional micro-economic changes will be most helpful across the board, but far less essential than these two most important changes.
Q. What would be your third specific micro-economic change?
A. I guess I would want to lump two needed changes into that third place. They are a reform of the political system, and a reform of the court system.
Q. What changes do you want for the political system?
A. I'm not sure. But I think that equal government financing of all candidates for federal elective office is one main change, and equal access by all candidates to television, radio and cable programs, so that debates are required but can only take plac e through making the opportunity to be heard equally available to all candidates, even the "fringe" candidates. After all, if Curly Thornton had succeeded in forcing his way into the debates, this interview would not have been necessary. My message (thr ough Curly Thornton and then by others) could have gotten through and the nation's job shortage could have been eased, together with the accompanying national and international pain, much earlier.
Q. What changes do you want for the courts?
A. Several micro-economic changes are a must: (i) elimination of the threat of sanctions (since the court has the power to terminate a suit at any time); (ii) an elimination of the lengthy discovery period and adoption of a rule which would permit either party to elect an accelerated discovery and trial schedule, such as in one month from the date of election; (iii) an federal appellate court which would specialize in handling cases which are dismissed on summary judgment without trial, to which the new a dministration would appoint all the judges, as a quick way of bypassing the court stacking which has occurred during the past 12 years with Presidents Reagan and Bush, which court would uniformly throughout the United States set standards for all U.S. cou rts to follow in using summary judgments to terminate plaintiff's cases; (iv) having all appeals based on the whole record made available to the judges rather than having the parties and their attorney put together 13 sets of the whole record (in a costly bound volume called the "record" or "joint appendix" on appeal; and finally (v) the expansion of the court systems with more buildings and more judges and staff to adequately handle all civil and criminal matters which are brought by the parties to the c ourts, without any concerted effort by the courts and court systems to throw classes of litigants out to reduce the existing court congestion (which seems to be politically created for that very purpose).
Q. How would elimination of the joint appendix or record on appeal eliminate a micro-economic restraint?
A. The length of time that it takes for a lawyer and any staff he has available to prepare the record for printing, including the numbering of each page at a precise place, the placing of descriptive words at the top of many pages in the record, the prepa ration of a table of contents identifying where the documents can be found in the record, as well as the cost of the time involved and the delays involved, all add up to a barrier which poor litigants cannot overcome to be able to appeal. A simpler, less costly system would be to have more judges, if necessary, and have them refer to a bound set of documents consisting of the documents from the case in the lower court, with an index, and each document given a letter designation (such as "A" for the 1st d ocument, and each page in the "A" document given a consecutive number starting with "1"). The two main differences would be that reference to the record would be done by referring to the document letter ("A" to whatever, possibly "Z" or even "CC" plus th e page number) and that judges would have to share this one copy of the record. But the advantages would be substantial, and would give many more litigants an opportunity to obtain an appeal, if they desired. This isn't "frivolous" litigation, but litig ation opportunity which is supposed to be assured by the U.S. and state Constitutions, but which is generally denied poor litigants because of the costly procedure for preparing and printing the record. Litigants under my reform would still want to ident ify the issues for the appeal and either refer to prior memoranda of law filed in the court below (and contained in the one original record on appeal), or rewrite the argument in a "brief" on appeal.
Q. I'm not sure that everyone who reads this interview will understand what you are saying.
A. This is one of the main reasons that the economy is where it is. Nobody understands what micro-economic restraints exist, how they work, or how they sap the economy of its vitality and result in an unfair distribution of wealth and a reduction of empl oyment.
Q. Could you explain how this works as to your proposed reform relating to the record on appeal and appellate brief.
A. Surely. If you sold your boat to a crooked boat dealer who wrongfully fails to pay you the promised $50,000, and you bring suit to recover damages, your hop e is to be able to recover the full amount of your $50,000 in damages. But the judge, who happens to be a former law associate of the boat dealer, somehow deci des the case in favor of the dealer, even though you and your attorney were quit e convinced that you should have won the case. Let's say that you spent $10,000 in legal fees and expenses in pursuing the case through the final judgment whic h went against you. Now, you are out $60,000. At this point, you are faced wit h an appeal. Do you know what the statistical chances are of winning an appeal? The answer varies from court to court, and according to the merits of the appe aled case, but it is safe to say that 0 (zero) out of 100 cases lose when no app eal is brought, which is the fact in most cases, and when the few cases which are appealed are finally decided, only about 1 out of 4 is reversed. Thus, when losing in the trial court, the changes of obtaining a reversal are not too good. If the probabi lity is 1 out of 4 (assuming you decide to and do appeal), how much money would you spend to try to get a retrial? A retrial would cost you another $3,000 to $5,000, roughly (or say an average of $4,000). And to this $4,000 amount you would have to add the cost of the appeal. If the cost of putting together and printing the record is $5,000 to $10,000 (and in many cases this is a low amount), and the cost of preparing the brief on appeal is another $3,500 or so, then many persons would not undertake an appeal merely to try to win $50,000. You would have to spend another $13,500 to $18,500 to find out if you win, but only have one change in four of winning, which odds are not too good. At best your one chance in four would produce a statistical return of only $12,500 (1/4th of $50,000), but you would be spending more than that amount to try to recover that statistical amount. Yes, you might win, but remember that the odds are only 1 in 4. However, if the record on appeal (or joint appendix) were not required to be prepared and printed as the rules now require, ordinarily, the cost would be only $3,500 (for the appellate brief), which would permit far more persons to appeal. The government should provide more judges, if necessary, to do the addition al work required when the appellate judges study the case from the one copy of the original record. This should be a cost borne by government, but from a micro-economic standpoint you can be sure that to obtain the reform the legislators trying to benefi t their wealthy contributors would try to pass some of the additional cost on to the persons making the appeal by charging them a higher filing fee. In New York at this time, the filing fee for an appeal is $50.
Q. How do the rich get richer because of an expensive record on appeal?
A. Let's go back to the story. The dealer wrongfully kept the $50,000 boat without paying and became $50,000 richer than he should be by reason of the judge's decision (less his $10,000 in legal fees paid by him to his own lawyer). You, as the former ow ner of the boat, are out $60,000 (boat plus legal fees), and you are being asked by your attorney to pay $3,500 for an appellate brief (the legal argument) plus $5,000 to $10,000 to prepare and print the record on appeal. Also, you may have to pay anothe r $4,000 in legal fees on the retrial, if you win the appeal. The total cost to you including the $5,000 to $10,000 for the record is so much, in comparison to your one chance in four of winning the appeal, that you rightfully decide to drop the case. Y ou wind up losing $60,000 (making you poorer as a result) and the wealthy dealer winds up increasing his wealth by $40,000 ($50,000 less $10,000). This is how a micro-economic restraint in the court structure redistributes income from the poor to the ric h, and is just another example of how the rich get richer.
Q. Why don't politicians end this specific micro-economic restraint?
A. For several reasons. They can pretend that they don't know that the restraint exists. The persons who give them most of their campaign funds would withdraw their financial support if the legislator or president or governor was responsible for legisla tion which made it less costly for an ordinary person to do an appeal. The press talks about "court congestion" as if it were something close to the plague of AIDS, when in fact "court congestion" is only a rallying cry to pass more statutes and rules wh ich prevent poor people from obtaining enforcement or return of their rights and property in court, through an increase in sanctions against plaintiffs'attorneys and plaintiffs, and an increase in summary judgments dismissing plaintiffs' actions without t rial (jury or otherwise). These micro-economic restraints permit a wealthy businesscrook to keep what money he/she stole from the impoverished public, thereby making the poor poorer and the rich richer.
Q. Does this work with most micro-economic restraints?
A. Yes. Micro-economic restraints cause someone to be excluded from a beneficial economic event, and the person being excluded is usually not a Rockefeller. Instead, it is the public. The protected persons earn more than they deserve, which is paid by the public generally, in the form of higher prices or loss of property or rights by being unable to afford the litigation activities needed to obtain a favorable judgment.
Q. And the same analysis holds true as to sanctions?
A. Yes, of course. The poor are excluded from court by the threat of sanctions, which enables the wealthy person to win cases they don't deserve to win, or the poor is deprived of his property (by imposition of sanctions) in addition to losing the case, to make the loss perhaps twice as much, all of which is an unjustified transfer or redistribution of wealth or income from the poor to the wealthy.
Q. Aren't you really trying to say that the economy is complex, and that politicians have been enacting statutes and rules which are either not known or understood by the public which have the effect of benefiting the rich?
A. Yes, by direct tax breaks not available to the public; or by enabling the wealthy to prevail in a civil action by a member of the public; or by being able to manipulate the criminal court system to avoid criminal accountability, which enables them to s teal from the public in a way prohibited by law, but which cannot be redressed because of prosecutorial discretion or other unwillingness to prosecute; or by being given monopolistic business interests which the public can't obtain for themselves, but are required to pay for.
Q. What types of business interests are these?
A. Government contracts, where a high percentage of our tax dollars are spent. Licenses to do business, such as the rule by the American Bar Association and adopted by most states which requires that a lawyer be trained at an ABA-approved law school to b e able to be admitted to the bar in any state. For profit law schools cannot get ABA approval, which prevents competition from forming. Law schools are the largest money maker for universities, and the ABA rule props up universities at the expense of st udents and the public?
A. Higher tuition to students, a decrease in the number of lawyers (which many wealthy persons and their press argue is a good thing), and resuling higher costs of legal services. In the 1970's I commenced a lawsuit in federal court against the ABA on be half of my new paralegal school to have ABA regulation of the paralegal schools declared unconstitutional.
Q. I can guess the result?
A. You're right. I lost.
Q. If you knew you were going to lose, why did you bring the case?
A. I don't know for sure that I am going to lose a case such as that. I do know however that there is a very high likelihood that such case will ultimately not be won.
Q. Then, why did you start such a case.
A. To try to correct a micro-eonomic restraint which I saw being created to stop the growth of the paralegal field.
Q. Did the restraint work?
A. Yes. My school, which did not choose to seek ABA recognition for personal reasons, is no longer in business.
Q. Did the paralegal field suffer to any great extent?
A. It's hard to tell what might have been. I can think of new directions for the paralegal field which would have had a favorable impact for the public. I think that the ABA's attempted regulation of the paralegal field had a 5% to 20% retarding effect on the paralegal field, which spread in growth rates was enough to cause Japan to overtake the United States.
Q. How did ABA regulation hurt the paralegal field?
A. The ABA licensed paralegal schools which chose to be regulated by the ABA to use the ABA name in their advertising, which attracted a certain number of students and employers to do business with these ABA-approved paralegal schools and to boycott the n on-approved schools such as mine. The loss of business was somewhere between 5% and 20%, as an estimate, but this is enough to stifle the non-approved school. The public has no way of knowing whether any particular school is "good" or "bad" or somewhere in between, and the use by a school of the ABA name as a trademark enabled the monopoly of the ABA to be transferred in part to a related field, giving business to the approved schools which they would not have obtained in absence of such micro-economic restraint.
Q. Is there anything else you could have done?
A. Yes. I was thinking of having a company such as Maytag Washers, Tinker Toy, or Good Housekeeping let me use their seal of approval to influence prospective students who liked trademarks.
Q. But getting back to the complexity of our economy, how do you really expect the average citizen to understand how the economy works?
A. I'm not sure. But it starts with one person. I have spent from 1970 to the present (a total of 23 years) learning about the economy from a most practical standpoint. My education as a political science major was of little value in learning how the s ystem works. My one college course in economics gave me the tools to learn how to analyze restraints and their effect on the economy. My 3 years of law school gave me some additional tools with respect to what options one might have to fight micro-econo mic restraints. And my experience in court over the past 23 years has shown me that very few restraints can be expected to be overturned by court action of a citizen. Action by a government agency would be more impressive to judges, but the agencies sel dom go into court contesting their own rules or the rules of the government which established the agency. Accordingly, I believe that a Federal Deregulation Agency might be the best approach to deregulating the states, where many of the micro-economic re straints have been created and maintained.
Q. But you are talking about one person so far, yourself. How do you expect others to join with you in your efforts to eliminate micro-economic restraints?
A. I have learned in talking with hundreds of people on a one-on-one basis that it takes about 15 minutes to interest them in restraints, and about one hour to enable them to have enough information and insight to be able to talk with others. The major p roblem is that there is no book or article available to anyone which covers the topic, and my plan at this time is to try to describe micro-economic restraints from A to Z during this interview, hope to find a publisher, and get the word out to persons wh o want to know why there is a shortage of jobs.
Q. How does the high cost of an appeal relate to the shortage of jobs?
A. Small business is restricted in a variety of ways, which prevents small business from growing and hiring more people. By making the courts less costly for small business, they will have a better opportunity of enforcing their rights, obtaining their j ust profitability and growth, and hiring more persons in their expansion.
Q. I would like you to equate complexity of the economy with job shortages, if you can.
A. Sure. Complexity of the economy results to a great extent from excessive rules and regulations, as in the securities, education, residential apartment and construction industries, to name only a few. These rules and regulations prevent small business from competing and making profits, and enable larger, less efficient businesses to obtain unwarranted business instead. This hurts the economy any time a deserving business is unable to obtain the business it deserves when deprived by a meaningless micr o-economic restraint. When the deserving businesses (whether large or small) are deprived of the business and profits they should have earned, the business is prevented from expanding and hiring more people. The beneficiaries of the micro-economic restr aints, because they get business they do not deserve, enjoy a monopolistic position in the economy to such extent, and can be expected to have higher prices, excessive profits, restrictions in output, and be a contributor to the overall job shortage as a result. The maximum jobs for our economy will be found when the micro-economic restraints are eliminated. Until then, the excess profits will go to the non-deserving, and a job shortage will result to such extent.
Q. In light of what you're saying, you obviously believe that the present efforts of various federal, state and local legislatures, administrative agencies and executive-branch officials will turn out to be inadequate, isn't that correct?
A. No, such efforts will turn out to injurious. Remember, we are on a declining course. Things seems to be getting worse, and what seems to be happening, from common experience, is probably what in fact is happening. The economy is not getting better. Accordingly, I have to assume that whatever these officials are trying to do is not only "inadequate" but will continue to be injurious to the economy, causing the economy to decline even further.
Q. What do you think you know that these officials do not know?
A. I think that in the excitement of being public servants, these officials believe there is a mystique in government which some persons have which is to be followed by all others. For example, President Bush is probably a very common man, except for the fact that he was born rich and never competed in business or in the private job market. In his exclusive travels, he has come across many persons of substance who Bush believes know what they're doing. How else, Bush asks himself, could they have arriv ed where they are. Bush then turns to these highly-placed persons for advice, which advice is so far removed from the realities of the economy and business that the advice is not only inadequate, but destructive to our economy. Yet, Bush believes that h is advisors have an insight into the problems and blindly follows their advice, even though it has been clear to all others during the past several years that his imperial advisors have no clothes. Not having developed any other information sources, Bush is at a loss to know how to find out what is really happening. Common sense would be his best information source at this time, but his lack of experience at the lowest level of our economy, where the needs are greatest and unfulfilled, makes Bush unable to rely upon common sense, which depends a lot on sharing common experiences with the common people. Having said all that, I can offer an analogy which might be helpful.
Q. Please continue.
A. I have driven an automobile for many years and so have tens of millions of other Americans. Most of us can detect when the 6 or 8 (or other number) of cylinders are firing properly, and what happens to the power of the engine as a result. I remember that one day, years ago, when driving into a busy intersection I saw the need to accelerate quickly, to get out of the way of a speeding car which was heading right for me. I jammed my foot down on the accelerator, and instead of moving forward, the car stopped dead. When I got the car started again, I drove to a new-car dealer and bought a new car. I recognized that having a car without power posed a danger to my life. The same is true, I think, about our economy. Having an economy without the power to generate a sufficient number of good jobs is a threat to our very democracy and way of life.
Q. Can you compare the economy to a car engine?
A. Yes, quite easily. Either we look at all human beings in the economy (perhaps 250 million of us) or the number of businesses (perhaps 20 million, including farms). Let's take businesses, and say that our economy is an engine driven by 20,000,000 cyli nders, with many of them being inoperative or highly inefficient for a variety of micro-economic reasons. Because most of the cylinders are not working with peak efficiency, our economy is chugging along, sputtering here and there, and failing to provide the jobs needed when we jam our foot down on the gas (which in my analogy is when the macro-economic levers are used to boost the number of jobs). The boost doesn't work because of the number of cylinders which are not working properly.
Q. Explain how some of the cylinders are not working at all?
A. To the extent that the various micro-economic restraints prohibit small businesses from getting started, these businesses (or cylinders in my analogy) are not working, and present a drag on our economy instead of the push when needed most. By not perm itting small businesses to advertise for capital, there are millions of cylinders which are not working, and the whole economy suffers. When for-profit corporations are not allowed to provide vocational training programs to retrain human capital (the 250 -million cylinder engine), the economy suffers. We cannot expect our economy to run with so many cylinders not operating at all. We merely need to get these cylinders started, along with others, to make our vast economic engine run once again, in succes sful competition against all other economies in the world.
Q. Explain how some of the cylinders are working, but not efficiently.
A. Excessive government regulation is similar to putting glue or a corrosive substance into the cylinders of the engine. The cylinders work with less than peak efficiency as a result, to be able to cope with the regulatory demands, thereby diverting mone y and labor from productive use, including the time and labor from the government sector, as well as the time and labor from the private sector, in what amounts to a double whammy which cripples our economy. For example, when a construction company has t o wait a year to obtain necessary building permits, the cylinder of that company is working inefficiently and the economy suffers. We must review the regulation of business and stop the regulation which is unnecessary. In fact, we could send the regulat ors home with full pay and order them never to appear to work again, and the economy would be better off than if the regulators appeared at work and were willing to work for no pay. The harm is in the destructive effect of regulation on business and the economy more so than the amount of taxes which are being spent for the out-of-pocket costs of the regulation. The advisors to the key decision-makers in the various governments probably don't have an overall understanding of the components of the economy and have very little advice to offer except to lower taxes on high-income persons and change the interest rates. This works to some extent when the economic engine is running smoothly, but we've seen that it doesn't work when the engine is sputtering. We've got to fix the sputtering, by eliminating as many micro-economic restraints as possible.
Q. Does our economic problem have anything to do with the system of checks and balances which is contained in our U.S. Constitution?
A. Very much so.
Q. Are you referring to the impasse or stalemate which we see between Congress and the Presidency?
A. No. The U.S. Constitution is a great instrument because of the way in which it distributed power, but with checks and balances to prevent the persons who exercised power from exercising such power without limitation. Maybe the framers of the Constitu tion were aware of the saying that "Power corrupts, and absolute power corrupts absolutely." The Legislature requires the President's signature, but the Legislature can override a Presidential veto. That is one check or balance. The Legislature can imp each, try and remove the President, which is another. The President (through his Attorney General's Justice Department) can prosecute members of the Legislature for certain crimes. The President with the Advice and Consent of the Senate can appoint Supr eme Court Justices and cabinet members. These are just a few of the checks and balances.
Q. Where do you see the checks and balances failing?
A. All over.
Q. Isn't there any residual check or balance which could correct failure of the others?
A. If we're talking about the rights of the public, I can answer that. The individual members of the public such as you or myself have very little pull with the legislatures. We are not organized, and have no full-time lobbyists, and we make no signific ant campaign contributions. All we have is a vote which, when given, ends our contribution, and the legislators have to worry about others instead. The First Amendment tells us we have freedom of speech to petition for a redress of grievances, but when doing this to the legislatures we can expect very little. The same is true when you complaint to the President or Governor. The same is also true when you complain to a governmental agency. These branches of government are not responsive to the needs o f the individual members of the public, and another institution was set up and protected by checks and balances in the Constitution to enable individual members of the public to stop the other branches from infringing the public member's rights. This ins titution is the court system. Except for the fact that the court system has been severely crippled as an institution to protect the rights of the public from being trampelled on by the legislative, executive and administrative branches, many of the evils of the economy could have been corrected by now. But because of the partial disablement of the court system, the public is left to petition the agencies of the rich and powerful and ask for handouts, which these agencies are not willing to give.
Q. In what way could the courts have stopped the decline in our economy?
A. If you accept the proposition that the economy is made up of, say, 20,000,000 cylinders, each pulling the engine of the economy along with the others, and that some of the cylinders are stopped or very inefficient, the courts have the power to cure the se matters.
Q. But isn't that a political issue which the courts refuse to get involved with?
A. No. The rate of taxation, the amount of the deficit, and the rate of interest to be charged banks by the Federal Reserve are political issues which the courts will not touch. But one cylinder which cost the country one billion dollars or so would hav e been appropriate for the courts to handle long before the loss took place, and court action could have saved the economy most or perhaps all of the one billion dollars.
Q. Which cylinder or business problem are you referring to and how would the courts have been able to help? Also, why didn't the courts get involved?
A. The cylinder is a single savings and loan, run by Keating, as an example of just one micro-economic problem which could have been handled by the courts. As it turned out, politics permitted the savings and loan industry to steal more than $200 billion from the economy, and the public was powerless to do anything about it. But the Constitution did provide a solution. It said that citizens and others in the United States could go to court and obtain a redress of their grievances, and that the judges o f the court were to be immune from political pressure by reason of a lifetime appointment (as federal "Article III" judges).
Q. Why didn't anyone think of going to court to stop Keating and the billion-dollar problem?
A. Various reasons, which I have talked about elsewhere during this extended int erview. One reason is so-called "court congestion", which requires that judges eliminate complicated cases such as this one involving Keating because the judges are required to have more cases than they can handle or try, which forces them to dismiss cas es, especially the complicated ones not brought by a governmental agency. Thus, my first reaction if I had been asked to bring suit to stop the alleged unlawful practices by Keating and his S&L would have been that the court would probably dismiss my cas e due to "court congestion". Also, due to court congestion the cost of protracted litigation if the case is not dismissed is more than an individual can handle. A large company or a governmental agency such as the U.S. Attorney or the Justice Department can find the money to fight a wealthy bank, but not an individual, or his lawyer working on a contingent-fee basis. Also, there is a tendency on the part of judges to dismiss alleged class actions, so that historically the judges do not permit what the Federal Rules of Civil Procedure seem to allow. Many judges (especially the majority appointed by Presidents Reagan and Bush) would seem to have a built in bias in favor of the S&L or at least the high-powered lawyers which would represent a Keating S&L in the hypothetical action I'm talking about. The courts over the years that I have practiced in them make it very difficult for a plaintiff to win a case such as this against an institutional defendant. The reforms which I have proposed elsewhere durin g this interview are designed to change this, and if implemented, would give a greater possibility of an individual member of the public and his lawyer being able to stop the evil before it helped to destroy the economy. But these reforms would have to b e enacted, and the courts would have to permit them to have an effect. I have tried to draw up a limited number of judicial reforms so that if adopted they would be effective, by providing some "checks and balances".
Q. Can you give another example of how much $1 in political contribution can take from the economy?
A. In 1988, about 240 dealawmallakers who were doing leveraged buyouts made political contributions to congress amounting to $3.5 million, and the result was that the economy suffered an estimated $350 billion or more in damage.
Q. How much damage is this for each $1 of contribution?
A. $100,000. Or, $10 bought $1,000,000, to put it another way.
Q. And you feel that there was a legal basis for stopping leveraged buyouts?
A. Well, you see that some convictions have been obtained, so there obviously is a legal basis for claiming that the junk bond activity had some unlawful aspects. Civilly, it would have been easier to demonstrate the illegality because of the lower stand ard of proof for civil cases, but the problem once again is that the courts do not listen to a private plaintiff under these circumstances. The court may well reason that if a governmental agency doesn't bring the suit, the suit may not have merit. But, as we know, this is not logical. A governmental agency may not bring the suit because it may be beholden to the defendant in some political way, and only a member of the public could bring such a suit. Once again, my proposed judicial reforms, if enact ed, would enable the junk bond problem to have been resolved in court (perhaps favorably; and perhaps not favorably) years before the economy took its multi-billion dollar hit, with the elimination of hundreds of thousands of jobs as a result of plant clo sings.
Q. What legal theory could you have asserted privately?
A. That the transaction was a fraudulent conveyance, taking out all of the assets from the publicly-held corporation and depriving the shareholding member of the public of this asset without giving an equivalent asset in exchange. By arguing that the loa n taken out by the public corporation to finance the purchase was exhorbitant in comparison to the market value of the corporation's assets being sold, the whole transaction was unlawful and should be stopped by the courts. Many of the transactions could have been upset, privately, but this presupposes that my reforms were in place. If not, the effort probably would not have been worthwhile. A major shareholder would have been able to make the challenge, and I'm sure some did, but the courts were close d for these technical reasons I have presented to the members of the public to stop the destruction of our economy. The checks and balances built into the U.S. Constitution failed, and in that respect so did the Constitution and our economy.
Q. From what you have been saying, I am concluding that access to the courts is essential for our economy, and that access is being foreclosed to the public generally because of the restraints you have outlined. Is this correct?
A. Yes. Access to the courts is the most important "check and balance" available to the poor and powerless. The Constitution provided access to the poor and powerless to give them a means of redress and to share in the political power, but to the extent the poor and their attorneys are discouraged from using the courts, such as by the threat that they will have to pay the Keating S&L attorneys' fees to a major law firm (amounting to perhaps $1.9 million, see Appendix 24), the poor and powerless have los t their only hope to be heard, and the economy inevitably suffers with a further (undeserved) distribution to the wealthy at the expense of the poor. Access to the courts is a great equalizer in the political process, and is necessary to enable individua l cylinders in the economy to be able to operate most efficiently. Each cylinder (or business) has to be able to seek relief from the court to the extent that excessive governmental regulation is destroying the cylinder, without excessive legal costs and especially without fear of not only losing the case, but being fined the value of the business as well.
Q. In William Greider's best-selling book "Who Will Tell the People", subtitled "the betrayal of American Democracy", the author asks at p. 61 "What happened to the public voice in all this? Why was no one looking out for the rest of us" and answered his own question by saying there was a "breakdown of different self-correcting mechanisms".
A. To further refine Greider's answer, we should recall that the S&L crisis started in 1980, about x years after President Reagan started closing down access of the poor and powerless to the federal courts. Although sanction requests were first made no l ater than 1971 (during the Nixon Administration), they began to be made with a passion starting with the Reagan Administration in 1980. The lawyers and prospective plaintiffs would were looking and could have done something about the problem were being s cared away by the artificially created "court congestion" which is no more than a technique for preventing persons from obtaining justice against persons who would unlawfully divert major parts of the economy to their own use through unlawful micro-econom ic restraints. Also, at p. 63 in the same book, the author reports that Representative Henry B. Gonzalez has said: I find that the people can see through things. The people are there. But what can they do? When they have no choice between the two part ies, no real choice between the overwhelawmalling preponderance of candidates?" The avenue to be pursued for the poor and powerless is not Congress, especially at this time, but should have been the courts, under the Constitutional system of checks and balances for the poor and impoverished. But the courts have failed in their Const itutional mission, as a check and balance against the two parties (neither of which is mentioned in the Constitution), failing to provide any realistic hope relief and offering a substantial possibility of further destruction instead for those who would t ry to make use of the Courts to cure structural micro-economic problem in our economy. Wait. I've just thought of a solution to this problem of both major political parties be non-responsive to important micro-economic or other political issues!
Q. What is your solution?
A. Enact federal and state statutes permitting a person to go into federal or state court with an admittedly "political" problem, and if the court as a disinterested third party determines that there is a substantial problem, then the problem would be cer tified by the court and set to each member of the Congress (or state legislature), the President (or Governor) and the press, to try to bring attention to the problem and responsibility for dealing with it. As it is now, the federal and state courts are not permitted to deal with a "political" issue.
A. Because of the lack of any "justiciable standards" for the court to use to decide who wins the political issue. Political issues don't have correct answers under law, and to permit a judge to make a decision on a political issue would be putting the j udge into guesswork and politics, contrary to the purpose of the court systems. But the courts do determine whether matters are political issues or not, and could make a determination of whether they are important or not, I would suspect, without doing a ny harm to the economy, and with prospects for bringing attention to the problem by being a respected, disinterested voice which alerts the nation or state to the existence of a substantial political problem.
Q. What standards would you suggest for the court to use in determining whether there is a political problem?
A. Common sense for the most part. Let's assume that a member of the public with $1,000 on deposit in a savings and loan presented a case to the court alleging that the S&L activities of investing in junk bonds was illegal (because of the dubious intrins ic value of such bonds) and asked the court to enjoin the activity. If the court found that there was no case at law for him to decide in favor of the plaintiff, and that the issue was political instead of legal, under my proposal he might still certify the political problem to each member of the Congress or state legislature, President or state governor, and to the press, with the result that the major political institutions would be on notice that a respected third person was bringing the problem to th e attention of the political powers after having some type of hearing or look at the problem. This would enable the press to start digging into the problem a lot more readily than if the problem were raised only by the poor and powerless depositor. It's only an idea, but that is what this country needs at this time, some ideas to try to get the economy back on track. This idea would be a pretty good way to alert the Congress, the Administration, the Press and hopefully the public to a growing problem b efore the problem gets out of hand and does severe damage to the economy. Perhaps the standard for the Court to use is whether the problem if unchecked has the possibility of inflicting substantial damage to interstate commerce or one or more of the "cyl inders" of our economy or whether the problem constitutes a micro-economic restraint or significantly threatens health or life. I would call this proposed statute "An Act to Create Political Notice and Responsibility through Private Court Action". Also, the judge should have the power to award attorneys fees according to the seriousness of the matter as a way of reimbursing a citizen for his cost in successfully bringing a substantial political issue to the attention of the nation.
Q. Isn't your view somewhat idealist and possibly unworkable, that a vast number of small businesses (or "cylinders" for the nation's economic engine) would be formed if the government permitted free-market competition for capital and reduced the present
regulatory burdens on small business?
A. Not in light of the fact that there are millions of small businesses which exist already in spite of the burdens. That's like asking whether a fully-loaded C-130 Hercules cargo plane flying at top speed could go faster if its 40 tons of cargo and 50%
of its remaining J-1 jet fuel were dropped into the ocean. Of course it would. Common sense and the laws of physics tell us that.
Q. But would these small businesses make automobiles, for example?
A. You've selected a good industry for your question, an industry which is one of the most highly capitalized of all. The answer is not all aspects of car design, tooling, parts manufacture, assembly, transportation, and marketing. But many aspects of t
he overall "new-car business" can be and is being done by businesses much smaller than General Motors or Toyota. Advertising agencies don't have to be large. The businesses which own new-car carrier trucks (with 10-15 new cars being moved at one time ov
er the road) can be owned by one person owning a single truck, and signing on with General Motors for contractual periods of time. The legal work wouldn't have to be done by the largest law firms, but could be farmed out to more efficient smaller, even o
ne-person law firms as to some matters. Even assembly of parts into larger components, such as a windshield or generator assembly could be and probably is being done by very small businesses today.
Q. Then what is your complaint?
A. That the opportunities for going into small business are not made available on a competitive basis because you and I if we have insufficient capital are not able to make a public solicitation for the needed capital. This is as much a drag on our speed
in starting up a businesses as 40 tons of cargo slows down a C-130 Hercules cargo airplane. The 40-ton burden is what the Hercules is designed to carry, nad is therefore a contributor to the economic output of the nation, but the blue sky and federal se
curities law which prohibit small business from raising capital are not justified. The purported legislative and regulatory purpose of preventing investors from losing their money (which could be accomplished at less damage to the economy by enforcement
of the existing laws prohibiting fraud of all types) is causing this country to lose its economy.
Q. So what could small business do if it were permitted more readily to obtain capital?
A. All sorts of things. For example, many of us would become collectors and providers of information for purchase by larger or other companies or even individuals. For the past 20 years or so I have envisioned a service business (which I have named "Barg
ain Data") which would permit families to list information about personal property which they would like to sell, and enable persons looking for antiques or bargains to use the data base to locate used items of interest to them, which would have tremendo
us cost savings to the public and serve a major environmental concern of the nation. Of course, without the availability of capital, the idea has languished in my files for two decades. Imagine if you would like to buy a certain type of used motorbike f
or parts, or would like to buy an old coin or postage stamp, or would like to buy a used synthesizer, or would like to browse through categories of available used items located within 2 zip codes of where you reside, Bargain Data could make this happen an
d would be quite profitable, as well as employ possibly thousands of person. But the capital has to be made available.
Q. I don't see how you can say that such one idea in need of capital could provide thousands of jobs. Please explain.
A. Supposing we wanted to market our database by going door to door to every apartment, home and business in the United States, with a portable terminal, to see if our salesperson (a local resident in the community) could assist the prospective customer (
of the Bargain Data service) in identifying, describing and inputting the necessary information as to items which the customer wanted to list. This would take an army of persons, far more than 1,000. Let's start instead with the number of Avon ladies, w
hich today numbers about 20,000, parttime and fulltime. Then, we would want to have at least one terminal in each town, city and village in the U.S. where persons with items for sale could go themselves, from time to time, to add or change data, and pros
pective purchasers of listed items could go to see what is listed, and for what amount. Each terminal would employ perhaps 2-3 persons at a minimum, to maintain office hours from 9 to 9 Monday through Friday and 9 to 5 on Saturdays and Sundays, for examp
Q. I like the idea, and like the way that a single business idea from one person, if given the required capital, could generate so many jobs. I see from what you are saying that there are many others in the U.S. similar to you who also have ideas which a
re not hitting the marketplace due to a lack of capital, and that the economy would be boosted dramatically if only a few of these ideas came on line.
A. Yes, and if many of the ideas came on line the economy would shoot through the roof, and the present problem of joblessness would turn into a reverse economic nightmlare of too few employees for the vast number of job openings, with the resulting (unwa
nted) inflation and higher prices caused by higher wages demanded by the new employees.
Q. How would this impact on the economy as a whole?
A. I see that small business has a role (among many roles) in making other businesses more efficient. We think of these as niche businesses, where there is enough probable business for a small company to offer the service profitably, but not enough busin
ess for a large company to want to get into. Large companies require large businesses to enable their vast overheads to be spread over a large annual volume of sales. But small business with much lower costs often would be satisfied merely to take in en
ough money to pay the costs of operation and have enough left over for the owner to live comfortably. There is no need for "profit" in many cases, or at least many small businesses operate year after year without "profit" from a tax standpoint. The reas
on for existence is to supply a livelihood (a salary substitute) for the owner, not necessarily to create profits for investors or any capital gains upon sale of the business. I envision that many small businesses if capital were available would form in
the larger niche areas where there is expectation of producing more earnings than the salary of the owner. To attract capital there would have to be a reasonable probability of attractive profits for investors to be able to raise the needed capital. But
these businesses too, to some extent, could be servicing larger business, to make larger businesses more competitive in the worldwide economy. If enough small businesses develop in enough niche areas, the larger companies will make greater use of small
business suppliers because of the availability of competing suppliers if the first doesn't work out.
Q. Isn't this something like the Japanese economy?
A. Well, the Japanese economy makes major use of small companies, often individuals working out of their homes, to make or assemble parts for the large companies at very low rates of compensation (often on a piece-work basis), which to some extent account
s for the ability of Japan to provide lower-priced products than U.S. companies. I'm sure there is something to be learned from the Japanese, but at the same time not everything is A-OK in Japan. Many economists report that there is a system of abuse of
the piece workers, not limited to the fact that they have no company benefits and the fact that they are the first to be terminated during a business recession. There are areas which would have to be addressed by the U.S., I am sure, but at the same tim
e we do want to become competitive with Japan. Thus, we see that providing capital to small business could change the relationship of millions of persons, from employees of big business to suppliers to big business, with different economic, social, polit
ical and legal problems to be addressed.
Q. How would these millions of new businesses affect your 20,000,000-cylinder economic engine?
A. These new businesses would eliminate millions of cylinders which are not not functioning at all, and give a major boost to the economy. Remember that when an engine is missing caused by a single bad spark plug or cylinder, the efficiency of the engine
is often reduced more than the proportionate amount (12-1/2% as to an 8-cylinder engine). Thus, a 10%+ boost in operating cylinders can be expected to increase our economic output more than that amount, which should be enough to take us out of the reces
sion and/or depression. The effect on large business would be additional, because small business could make large business more effective, adding to the power of our 20,000,000 cylinder (or business) economic engine.
Q. Isn't this all pretty obvious?
A. It is, but the micro-economic restraints are pretty attractive, providing short-run profits to the persons who benefit from their existence. The overall effect or cost is borne by all, most of whom are unaware of the restraints and have not political
power or money to do anything about the problem. Others with an interest in creating or maintaining the micro-economic restraints are more concentrated and have greater access to the political and legislative arena and to the press, making their input fa
r more influential than mine or yours, which enables the restraint to be imposed and maintained alawmallost forever, unless the restraint is publicly discussed and debated, and the public recognizes that the restraint is the cause of their loss of jobs.
Look at the environmental issue, which is somewhat similar. When the public is given a chance, they often vote for their jobs rather than vote for the environment. I'm not saying that this is good, but it is reality. What would the public say about law
s which protect investors, if they saw that such laws caused massive unemployment? I'm sure they would want to do away with such laws, especially if they understood that there is adequate protection and recourse in the general criminal and civil laws pro
Q. Do we want to become a nation of small business?
A. I don't know. We want to become whatever works out in a free market for business, regulated only as necessary for legitimate public concerns such as life, health, safety, availability of medical treatmen, and the like. If business is permitted to pro
sper under fair laws with a fair mechanism for resolving disputes, the economy and business will grow in ways we probably cannot imagine, to take into account the various needs.
Q. Are you thinking of any specific need right now?
A. Yes. I am thinking of the changes which are required for the U.S. economy and its businesses to offer services to countries throughout the world. This is a massive change from the job of offering services to the largest country in the world. All oth
er countries are selling in the U.S. because it is easiest and most profitable to do so. But we as businesspersons in the U.S. have go to learn how to make and sell goods and services in all other countries, which we haven't had to do (as small businesse
s, at least) up until the present. The difficulties are substantial for any one small business, but this presents the opportunity for tens of thousands of American to be employed sorting out the requirements and opportunities and methods for selling our
goods and services in every country in the world.
Q. So here is another source of jobs, isn't that right?
A. Yes. Here is a source of tens of thousands of American jobs trying to sell the goods and services of small U.S. business to the 150 countries in the world, which number of countries seems to be increasing every month, mostly because of the breakup of
the Soviet Union.
Q. Are you optimistic about the economy?
A. Yes. But we have to see that our institutions are equipped to create, support and maintain the growth of our economy which can and should be achieved. I have outlined the limited number of changes which are needed elsewhere in this interview, and som
e of these proposed changes are far more important than others, as I've said before.
Q. Are you advocating an across-the-board reduction or elimination of governmental regulation?
A. Yes and No. In the areas of raising capital and establishing and running vocational training programs, I see the need for eliminating a vast amount of regulation, to enable capital to be raised by small business through advertising (restrained only by
the laws prohibiting fraud) and to enable freedom of speech to do its beneficial work for training and retraining U.S. persons to fit into all niches of this complicated economic engine. Government doesn't work well to stimulate the economy and it hasn'
t worked well to provide the type of vocational training which is necessary. In these two areas the free market should be unleashed, to permit our economy to expand, and expand quickly and beneficially. As for all types of regulation generally, I am not
advocating anything, other than a review of all regulation and an elimination of whatever parts are excessive. For example, the licensing of barbers, taxicabs, and establishments serving or selling alcohol. These laws should be looked at to determine i
f the public's resources can't be directed to something more pressing. Yes, this will eliminate jobs at the regulatory level, but this is what must be done. We've got to eliminate unnecessary regulation, all of which unnecessarily causes job shortages.
Q. Is there any regulation which you feel is beneficial?
A. I have a growing feeling that there is a need for environmental regulation to ensure that the earth remains in the same condition or better for succeeding generations. A lot of regulatory reform seems to be needed here, to ensure that regulation is ta
king place and that the economy is not destroyed at the same time. This is a most important political area for present and future. By permitting small business to capitalize and grow, there is the distinct probability that some solutions will be found w
hich will make meaningful regulation more acceptable and less destructive to our economy. Small business might find new ways to recycle or might develop substitute products in place of the environmentally hazardous products now being used. I would place
my faith in small business and a free-market economy to come up with some valuable solutions.
Q. Isn't your view somewhat idealist and possibly unworkable, that a vast number of small businesses (or "cylinders" for the nation's economic engine) would be formed if the government permitted free-market competition for capital and reduced the present regulatory burdens on small business?
A. Not in light of the fact that there are millions of small businesses which exist already in spite of the burdens. That's like asking whether a fully-loaded C-130 Hercules cargo plane flying at top speed could go faster if its 40 tons of cargo and 50% of its remaining J-1 jet fuel were dropped into the ocean. Of course it would. Common sense and the laws of physics tell us that.
Q. But would these small businesses make automobiles, for example?
A. You've selected a good industry for your question, an industry which is one of the most highly capitalized of all. The answer is not all aspects of car design, tooling, parts manufacture, assembly, transportation, and marketing. But many aspects of t he overall "new-car business" can be and is being done by businesses much smaller than General Motors or Toyota. Advertising agencies don't have to be large. The businesses which own new-car carrier trucks (with 10-15 new cars being moved at one time ov er the road) can be owned by one person owning a single truck, and signing on with General Motors for contractual periods of time. The legal work wouldn't have to be done by the largest law firms, but could be farmed out to more efficient smaller, even o ne-person law firms as to some matters. Even assembly of parts into larger components, such as a windshield or generator assembly could be and probably is being done by very small businesses today.
Q. Then what is your complaint?
A. That the opportunities for going into small business are not made available on a competitive basis because you and I if we have insufficient capital are not able to make a public solicitation for the needed capital. This is as much a drag on our speed in starting up a businesses as 40 tons of cargo slows down a C-130 Hercules cargo airplane. The 40-ton burden is what the Hercules is designed to carry, nad is therefore a contributor to the economic output of the nation, but the blue sky and federal se curities law which prohibit small business from raising capital are not justified. The purported legislative and regulatory purpose of preventing investors from losing their money (which could be accomplished at less damage to the economy by enforcement of the existing laws prohibiting fraud of all types) is causing this country to lose its economy.
Q. So what could small business do if it were permitted more readily to obtain capital?
A. All sorts of things. For example, many of us would become collectors and providers of information for purchase by larger or other companies or even individuals. For the past 20 years or so I have envisioned a service business (which I have named "Barg ain Data") which would permit families to list information about personal property which they would like to sell, and enable persons looking for antiques or bargains to use the data base to locate used items of interest to them, which would have tremendo us cost savings to the public and serve a major environmental concern of the nation. Of course, without the availability of capital, the idea has languished in my files for two decades. Imagine if you would like to buy a certain type of used motorbike f or parts, or would like to buy an old coin or postage stamp, or would like to buy a used synthesizer, or would like to browse through categories of available used items located within 2 zip codes of where you reside, Bargain Data could make this happen an d would be quite profitable, as well as employ possibly thousands of person. But the capital has to be made available.
Q. I don't see how you can say that such one idea in need of capital could provide thousands of jobs. Please explain.
A. Supposing we wanted to market our database by going door to door to every apartment, home and business in the United States, with a portable terminal, to see if our salesperson (a local resident in the community) could assist the prospective customer ( of the Bargain Data service) in identifying, describing and inputting the necessary information as to items which the customer wanted to list. This would take an army of persons, far more than 1,000. Let's start instead with the number of Avon ladies, w hich today numbers about 20,000, parttime and fulltime. Then, we would want to have at least one terminal in each town, city and village in the U.S. where persons with items for sale could go themselves, from time to time, to add or change data, and pros pective purchasers of listed items could go to see what is listed, and for what amount. Each terminal would employ perhaps 2-3 persons at a minimum, to maintain office hours from 9 to 9 Monday through Friday and 9 to 5 on Saturdays and Sundays, for examp le.
Q. I like the idea, and like the way that a single business idea from one person, if given the required capital, could generate so many jobs. I see from what you are saying that there are many others in the U.S. similar to you who also have ideas which a re not hitting the marketplace due to a lack of capital, and that the economy would be boosted dramatically if only a few of these ideas came on line.
A. Yes, and if many of the ideas came on line the economy would shoot through the roof, and the present problem of joblessness would turn into a reverse economic nightmlare of too few employees for the vast number of job openings, with the resulting (unwa nted) inflation and higher prices caused by higher wages demanded by the new employees.
Q. How would this impact on the economy as a whole?
A. I see that small business has a role (among many roles) in making other businesses more efficient. We think of these as niche businesses, where there is enough probable business for a small company to offer the service profitably, but not enough busin ess for a large company to want to get into. Large companies require large businesses to enable their vast overheads to be spread over a large annual volume of sales. But small business with much lower costs often would be satisfied merely to take in en ough money to pay the costs of operation and have enough left over for the owner to live comfortably. There is no need for "profit" in many cases, or at least many small businesses operate year after year without "profit" from a tax standpoint. The reas on for existence is to supply a livelihood (a salary substitute) for the owner, not necessarily to create profits for investors or any capital gains upon sale of the business. I envision that many small businesses if capital were available would form in the larger niche areas where there is expectation of producing more earnings than the salary of the owner. To attract capital there would have to be a reasonable probability of attractive profits for investors to be able to raise the needed capital. But these businesses too, to some extent, could be servicing larger business, to make larger businesses more competitive in the worldwide economy. If enough small businesses develop in enough niche areas, the larger companies will make greater use of small business suppliers because of the availability of competing suppliers if the first doesn't work out.
Q. Isn't this something like the Japanese economy?
A. Well, the Japanese economy makes major use of small companies, often individuals working out of their homes, to make or assemble parts for the large companies at very low rates of compensation (often on a piece-work basis), which to some extent account s for the ability of Japan to provide lower-priced products than U.S. companies. I'm sure there is something to be learned from the Japanese, but at the same time not everything is A-OK in Japan. Many economists report that there is a system of abuse of the piece workers, not limited to the fact that they have no company benefits and the fact that they are the first to be terminated during a business recession. There are areas which would have to be addressed by the U.S., I am sure, but at the same tim e we do want to become competitive with Japan. Thus, we see that providing capital to small business could change the relationship of millions of persons, from employees of big business to suppliers to big business, with different economic, social, polit ical and legal problems to be addressed.
Q. How would these millions of new businesses affect your 20,000,000-cylinder economic engine?
A. These new businesses would eliminate millions of cylinders which are not not functioning at all, and give a major boost to the economy. Remember that when an engine is missing caused by a single bad spark plug or cylinder, the efficiency of the engine is often reduced more than the proportionate amount (12-1/2% as to an 8-cylinder engine). Thus, a 10%+ boost in operating cylinders can be expected to increase our economic output more than that amount, which should be enough to take us out of the reces sion and/or depression. The effect on large business would be additional, because small business could make large business more effective, adding to the power of our 20,000,000 cylinder (or business) economic engine.
Q. Isn't this all pretty obvious?
A. It is, but the micro-economic restraints are pretty attractive, providing short-run profits to the persons who benefit from their existence. The overall effect or cost is borne by all, most of whom are unaware of the restraints and have not political power or money to do anything about the problem. Others with an interest in creating or maintaining the micro-economic restraints are more concentrated and have greater access to the political and legislative arena and to the press, making their input fa r more influential than mine or yours, which enables the restraint to be imposed and maintained alawmallost forever, unless the restraint is publicly discussed and debated, and the public recognizes that the restraint is the cause of their loss of jobs. Look at the environmental issue, which is somewhat similar. When the public is given a chance, they often vote for their jobs rather than vote for the environment. I'm not saying that this is good, but it is reality. What would the public say about law s which protect investors, if they saw that such laws caused massive unemployment? I'm sure they would want to do away with such laws, especially if they understood that there is adequate protection and recourse in the general criminal and civil laws pro hibiting fraud.
Q. Do we want to become a nation of small business?
A. I don't know. We want to become whatever works out in a free market for business, regulated only as necessary for legitimate public concerns such as life, health, safety, availability of medical treatmen, and the like. If business is permitted to pro sper under fair laws with a fair mechanism for resolving disputes, the economy and business will grow in ways we probably cannot imagine, to take into account the various needs.
Q. Are you thinking of any specific need right now?
A. Yes. I am thinking of the changes which are required for the U.S. economy and its businesses to offer services to countries throughout the world. This is a massive change from the job of offering services to the largest country in the world. All oth er countries are selling in the U.S. because it is easiest and most profitable to do so. But we as businesspersons in the U.S. have go to learn how to make and sell goods and services in all other countries, which we haven't had to do (as small businesse s, at least) up until the present. The difficulties are substantial for any one small business, but this presents the opportunity for tens of thousands of American to be employed sorting out the requirements and opportunities and methods for selling our goods and services in every country in the world.
Q. So here is another source of jobs, isn't that right?
A. Yes. Here is a source of tens of thousands of American jobs trying to sell the goods and services of small U.S. business to the 150 countries in the world, which number of countries seems to be increasing every month, mostly because of the breakup of the Soviet Union.
Q. Are you optimistic about the economy?
A. Yes. But we have to see that our institutions are equipped to create, support and maintain the growth of our economy which can and should be achieved. I have outlined the limited number of changes which are needed elsewhere in this interview, and som e of these proposed changes are far more important than others, as I've said before.
Q. Are you advocating an across-the-board reduction or elimination of governmental regulation?
A. Yes and No. In the areas of raising capital and establishing and running vocational training programs, I see the need for eliminating a vast amount of regulation, to enable capital to be raised by small business through advertising (restrained only by the laws prohibiting fraud) and to enable freedom of speech to do its beneficial work for training and retraining U.S. persons to fit into all niches of this complicated economic engine. Government doesn't work well to stimulate the economy and it hasn' t worked well to provide the type of vocational training which is necessary. In these two areas the free market should be unleashed, to permit our economy to expand, and expand quickly and beneficially. As for all types of regulation generally, I am not advocating anything, other than a review of all regulation and an elimination of whatever parts are excessive. For example, the licensing of barbers, taxicabs, and establishments serving or selling alcohol. These laws should be looked at to determine i f the public's resources can't be directed to something more pressing. Yes, this will eliminate jobs at the regulatory level, but this is what must be done. We've got to eliminate unnecessary regulation, all of which unnecessarily causes job shortages.
Q. Is there any regulation which you feel is beneficial?
A. I have a growing feeling that there is a need for environmental regulation to ensure that the earth remains in the same condition or better for succeeding generations. A lot of regulatory reform seems to be needed here, to ensure that regulation is ta king place and that the economy is not destroyed at the same time. This is a most important political area for present and future. By permitting small business to capitalize and grow, there is the distinct probability that some solutions will be found w hich will make meaningful regulation more acceptable and less destructive to our economy. Small business might find new ways to recycle or might develop substitute products in place of the environmentally hazardous products now being used. I would place my faith in small business and a free-market economy to come up with some valuable solutions.