Henry Ford saw nearly doubling the minimum wage for his assembly line workers as “the finest cost-cutting move we ever made”. He believed it helped him attract and retain better workers and improve productivity. He also came to realize that paying his workers better enabled them to afford to buy the cars they made, which increased sales. Basically, sharing the wealth created more wealth.
The same type of thinking was behind TARP, the widely denounced bailout of financial institutions. First, spending the TARP money helped keep the economy from shrinking, so it actually made money for society immediately. Second, it enabled banks to survive and eventually pay back the TARP loans, so the long-term cost of the program was small or non-existent. While talking about business and economic decisions in Darwinian terms makes a good story, it’s probably not a good way to understand them. Unlike natural selection, capitalism isn’t a natural force, it’s a social thing.
