To Increase Jobs, Increase Economic Freedom

By John Mackey, November 16, 2011  |  Meet the Blogger  |  More Posts by John Mackey

The Wall Street Journal invited me to submit an opinion piece about job creation.  This is a topic I know a lot about so I agreed to submit some of my thoughts (a copy of the opinion piece is found below).

 

I’m very proud of being part of creating more than 64,000 jobs over the past three decades at Whole Foods Market — 6,000 in the last year alone — and I strongly believe that economic freedom leads to jobs. I love America and I’m worried that we as a nation are not continuing to prosper today as we have historically. I think this is a topic ripe for national conversation and debate to help prompt a movement toward lasting, positive change. 

 

As a staunch believer in freedom of speech and the right to express one’s own opinion in public, I am sharing some of my ideas to stimulate thinking and creative discussion. It is important to note that these are my own personal opinions and thoughts. This editorial piece is not an official company position and does not reflect the full range of diverse opinions of Whole Foods Market’s team members.  However, I believe that anyone in America, even CEOs, should be able to express their opinions and contribute to the national dialogue. I hope these ideas spark conversation among concerned Americans from all walks of life and political persuasions.

 

To Increase Jobs, Increase Economic Freedom

The Wall Street Journal, November 16, 2011

 

Is the United States exceptional? Of course we are! Two hundred years ago we were one of the poorest countries in the world. We accounted for less than 1% of the world’s total GDP[1]. Today our GDP is 23% of the world’s total and more than twice as large as the No. 2 country, China[2].

 

America became the wealthiest country because for most of our history we have followed the basic principles of economic freedom: property rights, freedom to trade internationally, minimal governmental regulation of business, sound money, relatively low taxes, the rule of law, entrepreneurship, freedom to fail, and voluntary exchange.

 

The success of economic freedom in increasing human prosperity, extending our life spans, and improving the quality of our lives in countless ways is the most extraordinary global story of the past 200 years. Gross domestic product per capita has increased by a factor of 1,000% across the world and almost 2,000% in the U.S. during these last two centuries[3]. In 1800, 85% of everyone alive lived on less than $1 per day (in 2000 dollars). Today only 17% do[4]. If current long-term trend lines of economic growth continue we will see abject poverty almost completely eradicated in the 21st century. Business is not a zero sum game struggling over a fixed pie. Instead it grows and makes the total pie larger, creating value for all of its major stakeholders—customers, employees, suppliers, investors and communities.

 

So why is our economy barely growing and unemployment stuck at over 9%? I believe the answer is very simple: Economic freedom is declining in the U.S. In 2000, the U.S. was ranked third in the world behind only Hong Kong and Singapore in the Index of Economic Freedom, published annually by this newspaper and the Heritage Foundation. In 2011, we fell to ninth behind such countries as Australia, New Zealand, Canada and Ireland[5].

 

The reforms we need to make are extensive. I want to make a few suggestions that, as an independent, I hope will stimulate thinking and constructive discussion among concerned Americans no matter what their politics are.

 

Most importantly, we need to radically cut the size and cost of government. One hundred years ago the total cost of government at all levels in the U.S.—local, state and federal—was only 8% of our GDP. In 2010, it was 40%[6]. Government is gobbling up trillions of dollars from our economy to feed itself through high taxes and unprecedented deficit spending—money that could instead be used by individuals to improve their lives and by entrepreneurs to create jobs.

 

Government debt is growing at such a rapid rate that the Congressional Budget Office projects that in the next 70 years public money spent on interest annually will grow to almost 41.4% of GDP ($27.2 trillion) from 1.4% of GDP ($204 billion) in 2010. Today interest on our debt represents about a third of the cost of Social Security; in only 20 years it is estimated that it will exceed the cost of that program[7].

 

Only if we focus on cutting costs in the four most expensive government programs—Defense, Social Security, Medicare and Medicaid, which together with interest account for about two-thirds of the overall budget—can we make a significant positive impact. Our defense budget now accounts for 43% of all military spending in the entire world—more than the next 14 largest defense budgets combined[8]. It is time for us to scale back our military commitments and reduce our spending to something more in line with our percentage of the world GDP, or 23%. Doing this would save more than $300 billion every year.

 

Social Security and Medicare need serious reforms to be sustainable over the long-term. The demographic crisis for these entitlement programs has now arrived as 10,000 baby boomers are projected to retire every day for the next 19 years[9]. Retirement ages need to be steadily raised to reflect our increased longevity. These programs should also be means tested. Countries such as Chile and Singapore successfully privatized their retirement programs, making them sustainable. We should move in a similar direction by giving everyone the option to voluntarily opt out of the governmental system into private alternatives, phasing this in over time to help keep the current system solvent.

 

In addition, tax reform is essential to jobs and prosperity. Most tax deductions and loopholes should be eliminated, combined with significant tax rate reductions. A top tax rate of 15% to 20% with no deductions would be fairer, greatly stimulate economic growth and job creation, and would reduce deficits by increasing total taxes paid to the federal government.

 

Why would taxes collected go up if rates go down? Two reasons—first, tax shelters such as the mortgage interest deduction used primarily by more affluent taxpayers would be eliminated; and secondly, the taxable base would increase considerably as entrepreneurs create new businesses and new jobs and as people earn more money. Many Eastern European countries implemented low flat tax rates in the past decade, including Russia in 2001 (13%) and Ukraine in 2004 (15%), and experienced strong economic growth and increased tax revenues[10].

 

Corporate taxes also need to be reformed. According to the Organization for Economic Cooperation and Development, the U.S.’s combined state and federal corporate tax rate of 39.2% became the highest in the world after Japan cut its rates this April[11]. A reduction to 26% would equal the average corporate tax rate in the 15 largest industrialized countries. That would help our companies to use their capital more productively to grow and create jobs in the U.S.

 

Government regulations definitely need to be reformed. According to the Small Business Administration, total regulatory costs amount to about $1.75 trillion annually, nearly twice as much as all individual income taxes collected last year[12]. While some regulations create important safe guards for public health and the environment, far too many simply protect existing business interests and discourage entrepreneurship. Specifically, many government regulations in education, health care and energy prevent entrepreneurship and innovation from revolutionizing and re-energizing these very important parts of our economy.

 

A simple reform that would make a monumental difference would be to require all federal regulations to have a sunset provision. All regulations should automatically expire after 10 years unless a mandatory cost-benefit analysis has been completed that proves that the regulations have created significantly more societal benefit than harm. Currently thousands of new regulations are added each year and virtually none ever disappear.

 

According to a recent poll, more than two-thirds of Americans now believe that America is in “decline[13].” While we are certainly going through difficult times our decline is not inevitable—it can and must be reversed. The U.S. is still an extraordinary country by almost any measure. If we once again embrace the principles of individual and economic freedom that made us both prosperous and exceptional, we can help lead the world towards a better future for all.


[1] http://visualizingeconomics.com/2008/01/20/share-of-world-gdp/ Also, Angus Maddison’s book, Contours of the World Economy 1-2030 AD: Essays in Macro-Economic History is excellent and highly recommended [2] http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal) [3] Bourgeois Dignity by Deirdre McCloskey p. 50-59 [4] In Defense of Global Capitalism by Johan Norberg p.26, also http://www.globalissues.org/article/26/poverty-facts-and-stats, and The Improving State of the World by Indur Goklany p. 59 [5] http://www.heritage.org/index/ranking [6] http://www.usgovernmentspending.com/downchart_gs.php?year=1900_2010&units=p&title=Spending%20as%20percent%20of%20GDP#usgs101 [7] http://reason.com/archives/2011/02/14/the-19-percent-solution/singlepage [8] http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures [9] http://www.d-transition.info/western-demographic-winter-2/16-statistics-about-coming-retirement-crisis-will-drop-your-jaw-324/ [10] http://www.forbes.com/sites/nathanlewis/2011/09/29/the-rise-of-the-flat-tax-gives-us-morning-in-albania/ [11] http://www.cato-at-liberty.org/u-s-corporate-tax-rate-the-highest/ [12] http://www.washingtontimes.com/news/2010/dec/8/gattuso-congress-should-rein-in-the-regulators/ [13] http://thehill.com/polls/189273-the-hill-poll-most-voters-say-the-us-is-in-decline

Category: Economic Freedom

 

48 Comments

Comments

Henning Wriedt says ...
Dear Mr. Mackey: I read your article in the WSJ (11-16-11) with great interest. I especially agree with your sentence: "Only if we focus on cutting costs in the four most expensive government programs.......can we make a significant positive impact." I hope this includes tough audits, because in my opinion all four programs are riddled with fraud (like self-service stores without a checkout lane). Any good audit pays for itself! Best regards Henning
11/17/2011 10:54:06 AM CST
Elissa Fuchs says ...
Dear Mr.Mackey, We fled the bankrupt,corrupt,sanctuary city, Hartford, Connecticut last December 2010. We are in San Antonio, Tx.I practically lived in your stores in West Hartford (that's another story). Connecticut is a state of 3 million and over 60% of the workforce are state and federal workers. The current and passed governor borrowed billions from the feds to close the budget. They were too cowardly and staggeringly ignorant to re-negotiate Union contracts. The pensions and gold-plated health plans paid for by the private sector have bankrupt the state. Under former Senator Chris Dodd (chair of the banking commitee) the sub-prime meltdown coupled with an attorney general who sued (and destroyed) private business out of the state have destroyed Connecticut. Along with spineless republicans, the decades of democrat tax and spend policies has destroyed the once richest state in America. Your beautiful stores displaying the bounty of our country are the envy of all food purveyors. Every union run food market that I have visited are sub-standard. Obamacare/ socialized medicine is unafforable and rations care and medication according to age and other shameful parameters. No American physician ( I have spoken to physcians from Sloan-Kettering, Emory U and MD Anderson) wants rationed care determined by an unelected group of useless bureaucrats. I would suggest that your business planners take another look at the negative economic climate in Hartford, Ct and open stores in "right to work" states.
11/18/2011 5:13:27 PM CST
Stacey Lennox says ...
As a passionate supporter of a flat tax since my late teens and a true believer in the ability of well run business to improve society by leaps and bounds, I was absolutely thrilled to read your piece in the WSJ. In addition, I did not miss your comments on the need to reform healthcare and education. As a former RN who has transitioned into an HR executive in private industry, I truly believe the quality of care and the quality of our graduates would improve greatly if these institutions were forced to be as creative and customer focused as private industry has become. Thank you for an article that defines "common sense" which unfortunately seems to be in short supply. Pehaps you would consider public office? This country is far too short on citizen participation in government and an individuals like you with a clear vision of what "could be" are sorely needed!
11/16/2011 1:03:38 PM CST
bryan murphy says ...
Mr. Mackey, I truely enjoyed reading your piece in the Wall Street Journal! Our Government, a representation of all of us, continues to evolve with a great many challanges that require serious attention! The size and efficiency of our Government (and our precieved needs) is at the heart of our struggles! The four government programs, which you pointed out, that demand the majority of our tax (or deficit) revenues, have built-in cultural/philosophic and political disaggreements within our citizenry. We need to re-ignite the principals and re-develope the practice of dialoge, that the Founders relied on to Create this great Nation(experiment)! I can assure you If this Free Economy, you and I desire, adopted Your Core Values at Whole foods, to fairly treat all stakeholders, the Tea Party and the Occupy Wall Street participants, would see and feel the fairness they sense is missing, and we would be well along the way to making the hard decisions that are waiting!
11/16/2011 2:06:30 PM CST
Bradley R McGrew, CPA says ...
Mr Mackey - You did pen a very interesting article today. I do not think you have come to the correct conclusions as to why we are stuck at a 9% unemployment rate. The reason your conclusions are wrong is because the facts you base your analysis on are wrong. I realize that you have been subject to relevantly low taxes your entire business career, but during the period of your youth is when this nation had lower unemployment, higher GDP, and much higher taxes. This was during the 1950s and 60s when marginal tax rates where above 80%. I really question if you can compare income in 1800 with 2011. Most of the population was farmers who produced the vast majority of their food; energy needs and shelter at no out of pocket cost might have been better off. In terms of reduced poverty rates under the more laissez faire policies under the Bush administration, poverty increased to 14.3% from the Clinton rate of about 11% that means that an additional 10 million people are in poverty. I noticed you used the Heritage Foundation’s Index of Economic Freedom as an explanation of why our unemployment rate is around 9%. I also noted that each of the countries you sited not only has a universal health care plan but a single payer plan. I also noticed you used Ireland as an example of a nation with more economic freedom than the US but its unemployment rate is above 14%. Many economists think that is because the deep spending cuts they imposed upon their economy similar to the Republican proposals now before Congress. I think I would have to question this indices and the conclusion you drew from it. I think the explanation is much simpler than you think. If you realize that the share of GDP controlled highest one-tenth of one percent of our total population has grown from 8% in 1980 to 18% today the answer is very clear. Ten percent of the GDP has gone from those who consume 90% of their income to those who consume only 10% of their income. That consumption is demand and our economy needs demand to create jobs now. I like that you have been creating jobs for the past 25 years. I create a job when I have an additional 100k of accounting work (I hire a 50k accountant to do the work). The more people you hire in your stores and the more venders you work with increases my business. It is not economic freedom that increased your business but disposable income in the hands of those who will spend it (the middle class). To increase disposable income in the hands of the middle class and lower unemployment we need to increase tax rates on people like me to at least what they were under Clinton when our economy was much more robust. Face it John, guys like us end up with more of the chips in the end. Believe me. We will have more chips in the end if we pay a higher tax because like you eluded to in your article, the economy will grow into a much bigger pie. I know it is a tough concept to have more pie by getting a smaller piece of a much bigger pie, but that is what this country did from the 1930s through the 1980s.
11/16/2011 3:37:45 PM CST
Patrick McGrady says ...
Mr. Mackey, Thanks for writing this. Just read it in the Journal. All points are sound and appreciated. Keep up the good work. Thanks again, P Aberdeen, Maryland
11/16/2011 2:13:16 PM CST
Alex says ...
You have my agreement on many of your points but lament that you have left out several critical points. First and foremost, America is held hostage and tied pillar to post by the zealots on either side fo the politcal divide. Common sense is notoriously absent in America. More glaring is the position of the "think tanks" on free trade and the absolute sell out of America's industrial base. Of the 1.2 billion cell phones sold globally in 2008, NONE were made in the U.S. Look around and put your hands on an object, especially the high-tech equipment. Very little to none was made in America. Sure, we have the entrepreneurial spirit and creativity to invent, then we out-source in the name of cheap. Result eventually will be no one able to buy the goods and services, except for the one percent who are the aristicrats sitting at the top of ponzi scheme. Yes, less government in the GDP and MORE government doing what it is supposed to do: advance our national interests. Please go back and read about Alexander Hamilton's report on Manufacture, 1791. Best regards, Alex
11/16/2011 2:29:44 PM CST
Kathy Beltz says ...
John, you are a truly an amazing person! You are gifted and bright and you should be VERY PROUD of the jobs you have created. You also give opportunities to artists, people like me, who, because of you are now living the American Dream. What a wonderful article full of "food for thought." You get us thinking of the task at hand, and the changes needed to keep America special and beautiful. God bless America, and God bless you.
01/30/2012 1:30:48 AM CST
Jennifer says ...
Mr. Mackey, Your findings have been backed up in several areas. Thank you! Jennifer
01/30/2012 2:13:45 PM CST
Leroy Mark says ...
Ugh. I like Whole FOods so much. So many progressive ideals culimate in Whole Foods. Economic Freedom is code for many things. My personal belief is as CEO he is trying to protect his competitive edge. Which as a shareholder is awesome, as a citizen isn't necessarily. What is more troubling is he supports positions that many in right wing, rich centric politics are trying to sel and no matter how good this CEOs intentions are, their's arent. No matter how many taxes you reduce, or EPA regulations you drop, dirt cheap manufacturing jobs aren't coming back. That's the implicit promise in so called Economic Freedom. It's a marketing phrase to strike patriotic, capitalistic chords within the voting public. A true leader brings people along. I wish this CEO were one.
02/21/2012 2:26:40 PM CST
Humberto Nascimento says ...
First of all, I can't take too seriously an article that uses the unreliable wikipedia as reference. Second, despite all "capitalism is beautiful" articles of John Mackey and all his ideas of what government and companies should do, mr .Mackey should really start by changing his own company, Whole Foods, where customers have to deal with twenty something "couldn't care less" staff. Try to call Whole Foods to talk to someone in charge of anything. They are no different from Banks and other "headless" giant corporations.
02/13/2012 7:24:33 AM CST
Chris says ...
Do your customers know that you're a right wing lunatic? Does your board care about their fiduciary duty not to employ such a person in a business that caters to people who deplore the "values" expressed by said lunatic?
02/29/2012 3:05:12 PM CST
Sara B. says ...
Could you please run for POTUS?
03/18/2012 4:14:45 PM CDT
betsy says ...
Just read the article in the WSJ. Wonderful article. Please keep up the good work. thanks
11/16/2011 9:39:04 AM CST
James Palmer says ...
Mr. Mackey. After reading your blog it is evident that you have an outstanding grasp on how our economy operates. America is an exceptional country made up of exceptional people and. The idea is being spread under our current Government Admin that we need to apologize to the world because we are prosperous. I feel this is an insult to all who work hard daily in America to keep things up and running. I wish the Government would read your blog possibly they could see how easy it would be to create an environment where jobs would become available. And we sould start turning back to better days. Thank you Very inspiring. James Palmer
11/16/2011 11:03:55 AM CST
Angelo S. says ...
John I enjoyed your article and your interview on CNBC today. I'm going to try to make this short. Your phrase "Economic Freedom" echo's Congressman Ron Paul's speeches where he has said that "Freedom is a complete package and it includes economic freedom". As a former "bankster" myself, I have to say that America's economic freedom or loss thereof, began in 1913 with the passage of the Federal Reserve Act. I know this because I worked for one of the private shareholder banks, Brown Brothers Harriman Co., of the Federal Reserve. Much like the Military Industrial Complex, The Big Pharma Complex and The AgiBiz Complex, the FED/IRS Complex has influenced and shaped the laws that govern business in America. The Banking Monopoly and the Collection Division of the FED/IRS Complex drive all of the economic oppression. The goal is simple..."Kill the competition". I believe the only way to restore economic freedom in America is to abolish the debt slavery & and tax bondage of the FED/IRS Complex. Ron Paul is the only candidate for president who is leading the charge to abolish economic slavery in America. He has been calling for the End of the Fed. That would be getting at the root of the big government trend, the over regulation and the political corruption. Without unlimited FED funds to expand government the politicians would be forced to downsize. It would also take a lot of the profit out of the political bribery system. Thanks again for your article and interview. Ron Paul 2012.
11/16/2011 11:43:11 AM CST
jennifer thorp says ...
For starters, when I like something, I like to keep it. I love shopping at Whole Foods. I think myself sensitive to political and economic conditions of the world but my bottom line almost always considers self. That said, I take my choices even for groceries personally and continue to enjoy growth through knowledge. There was a fair amount of attention given to articles and statements from Whole Foods regarding jobs and freedom. The two go together and frankly anyone who found themselves willing to find fault with statements made by Mr. Mackey are short sided. It is unreasonable to loose site of honesty when taking a stance and those who read statements, blogs etcetera that faulted writing were not being honest. This is not just about Whole Foods, the sucess of which others may simply be jealous of. It is about a much larger picture and that is exactly why I love it that Mackey is behind this thinking. For those who disagree, grow up and quit being so selfish. Mr Mackey isn't! Thanks Mr Mackey. Need a personal assitant, I'm there, hire me- Please!
02/02/2012 10:38:08 AM CST
Sterling Price says ...
Well said, Mr. Mackey. Contrary to what you may have read elsewhere, the vast majority agree with you and respect your opinion. America was founded on freedom of speech, and you have every right to share your thoughts. My family and friends agree with you 100 percent! Thank you for starting Whole Foods, too. It's a blessing and a wonder. Just wish there were one in Billings, Montana. There are two tiny health food stores that are little more than convenience stores (with prices to match!). I'm asking Santa to bring Billings a store for Christmas. Have a grand and glorious Christmas!
11/29/2011 1:10:55 PM CST
phyllis s. says ...
There is nothing new here. You are just saying with many others are spouting. Complaining about social security, medicare etc. really is that a new thought? All you mention is raise this and lower that. Where is the inventive thinking? Social Security was created just when those eligible for it now were just born. If the government paid back what it borrowed from the SS Account it would be solvent. It's just that the government can't/won't pay it back so all the hoopla about it being insolvent becomes just so much blather. People need to wake up and not just continue to spout the last thing they heard on the news.
02/12/2012 8:47:26 PM CST
Erich Berger says ...
I was enthused by reading your blog. It is refreshing to see candor in a CEO. When I read the announcement that your company was opening a location in Greensboro, I was curious to find out more about the Whole Foods raison d'être, i.e. what was behind the buzz. There is as much philosophy around food as there is nutrition and enjoyment. Literally, "thought for food." The Whole Food philosophy has a relevancy today that is unmatched, and your own personal political views are congruent with that - essentially, freedom of choice. And by the way, if more Americans adopted more of the Whole Food philosophy when it came to their FOOD choices, we wouldn't be on the verge of a Diabetes Type II pandemic. Healthcare begins with what you put in your mouth, after all.
01/05/2012 9:35:58 AM CST
Gillian March says ...
Mr Mackey - I commend your creating 6,000 jobs in the last year despite our current economic crisis. I noted your current concern about the future prosperity of the USA and I believe that it is in decline because we are moving away from the grass-roots of what made this country great - free enterprise and entrepreneurism. Small enterprises are being put out of business by the dozen daily because the public have been trained to demand their goods and services fast and cheap without paying mind to quality. Thousands of small farms in the last few decades have been replaced by industrialized farming conglomerates. Factory Farming is causing untold detrimental effects not only on the animals but also on human and environmental health. I am a co-founder of Vital Awareness , an advocacy group dedicated to bringing about public awareness of the detrimental effects of industrialized farming whilst at the same time promoting farmers and growers who are producing food ethically, responsibly and humanely - and I appreciate WholeFoods dedication to this end. It was through WholeFoods, Atlanta that I had the good fortune to meet one of their larger beef suppliers Will Harris at White Oak Pastures. After spending some time on his ranch in the southeast corner of Georgia I realized that ethical farming on a larger scale is possible, that the independent farmer is not destined simply for local farmers markets. Regeneration in this country is possible, it will take time, patience, dedication, and education. I thank you for your work in support of this. If you could please check out Vital Awareness on Facebook and 'like us" so that we can spread the word of good farming practices together - Gillian March
01/19/2012 10:32:31 AM CST
bellbivdevoe@yahoo.com says ...
Appreciate your attempt at identifying the "ills" of today, but when using sources like Heritage, Washington Times and Cato, you lose a lot of credibility. As uber Con Ben Stein opined, the greatest period of growth in our Country occurred Post WWII when the Corporate tax rate was at 46% and the top end income tax rate was as high as 80%. Even David Stockman, Reagan's Budget Director and architect of his Trickle Down policies, now says that "trickle down has proven to be a failure in America and more specifically a failure for the American Middle Class." In 1980, the Top 1% earned 9% of total US income. By 2007 that number had increased to 22% of total US income. Meanwhile, at the same time Middle Class income barely grew, and the only reason for household income staying stagnant is the increase in two income households. I think there are a lot of solutions available, I just don't think adhering to the flagship Conservative think tanks like Heritage is the answer.
01/04/2012 5:34:08 PM CST
Frank DeRose says ...
John, Run for office. For ideas I agree with you (and disagree with you) on, see my blog at http://sabazio.blogspot.com
11/19/2011 1:42:31 PM CST
Jane Doe says ...
I can not even read your information because you are not accurate and futhermore say nothing to promote positive growth in this bad time. People are hungrey and your words do not feed them!
11/20/2011 7:00:43 PM CST
Louise Eliason says ...
Thank you, Mr. Mackey First, for writing the most lucid, solutions-based and hopeful piece on America's economy and prosperity that I've read. And second, for making this available in a space where anyone with a like-minded interest in great quality of life, products, and service can further benefit by your insight as to how to re-ignite, create and sustain those core values in America. Please keep it up.
06/10/2012 5:13:26 PM CDT

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