Upon reading the headline of this article, most people begin to think of company evaluations similar to those performed by Jim Collins in his book "Good to Great". (Incidentally, two of the companies highlighted in "Good to Great" were Fannie Mae and Circuit City, both of which have subsequently become epic failures) The purpose of this analysis is much more broad than corporations. Begin by considering that the notion of a corporation is only a few hundred years old. However, there is another entity with a much longer track record, and much more spectacular results. This entity is the family.
Every year, the US census bureau collects a large amount of data regarding demographic and economic trends. This data is then reflected in terms of 'households' for the purpose of reporting. Each time that this data is collected, the results show some of the same trends. The most pronounced of these trends is a trend for lower income households to have fewer people and fewer income earners. Another trend is for higher income households to have a higher concentration of 'families' with two parents and children. This is one reason why it is fallacious to cite 'household income' figures as evidence of economic depravity... the average 'household' size at the lower quintiles is much smaller than at the upper end of the scale. With less people in a household producing earnings, it stands to reason that there will be a lower level of affluence.
The logic behind this trend is quite clear. When a household is populated by people who make coordinated efforts and shared sacrifices, it produces more advantageous economic outcomes. Consider what behaviors create economic prosperity? Some of the primary factors are engagement in productive work, innovation, and sacrificing current consumption for future gain. All three of these building blocks are regularly practiced by family units as the primary breadwinner engages in economically productive activity. In order to accommodate schedules and stay within the family budget, great amounts of innovation are frequently required. And finally, families regularly sacrifice short-term consumption and enjoyment for the purpose of investing in the future. This takes the form of both financial investments and the development of human capital in their children.
However, there are some tricky characteristics of families that make them difficult for politicians to reconcile. Most prominent is that the government cannot 'create' families. The true benefits of productivity and sacrifice only come from voluntary formation of families. Attempting to "fine-tune" this process with government policy leads to unintended consequences in the best case (such as fueling a housing bubble) and wholesale disaster in the worst (such as the explosion in single parent households that resulted from government entitlement programs) Thus, it stands to reason that while government cannot 'create' families, it can most assuredly destroy them.
In a strange sort of irony, many in the political class attempt to replicate the family model with society, and cast government as the head of household... but with disastrous results. In the context of a family who loves one another, the notion of making sacrifices is gladly accepted by everybody involved. However, when the government attempts to force sacrifices onto people, there is no familial bond. The 'sacrifices' only serve to benefit the political class. Government programs designed to benefit the next generation of citizens frequently foster a culture of dependence that simply perpetuates the mother-government nanny state.
Conversely, it is equally silly to impose a market economy into a family setting. When my family is eating dinner, I don't attempt to auction off a cookie and garner the highest price. We share in the effort and rewards of our life. The familial bonds of love compel us to forsake a complete pursuit of immediate personal gratification. Put another way, the phenomenon of family expands the scope of 'self interest' beyond simple personal gratification out to the care and development of our whole family. This simple paradigm shift is the primary driver of the tremendous benefits that families offer to society.
The purpose of this analysis is not to denigrate single people or households that have encountered difficulty. Rather, it is to highlight the importance of self-sacrifice and delayed gratification and how families have a built-in incentive to practice both of these principles. There are many people who engage in these behaviors independently, and those people should be applauded. However, the way that these principles have proliferated broadly across society has been through families. By making sacrifices for the benefit of posterity, it simultaneously creates a brighter future for society as a whole through the opportunity that emerge from fundamental economic growth.
In the end, the prosperity of humanity is not created by corporations, but by individuals. Individuals who produce great things and make personal sacrifices that benefit future generations. The family serves as the 'front line' of this phenomenon when individual people make individual decisions to produce and sacrifice for the benefit of their children. However, the larger society benefits from the economic output, investments, and development of future productive citizens that are regularly conducted by families.
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