Long ago, a man saw a need for socks. People were buying them, and buying a lot of them. If stores were selling a lot of them they must have a need to get more of them from somewhere. And they did. So he went to the town bank. He spoke with a man he had known his whole life. He told the man about this need, and the man agreed that where there was a need, it should be filled. So he loaned the first man the money to start a sock making factory.
The first man built the factory on the outskirts of town. He gave a job to everyone that needed one. He used the best quality materials, treated his workers well, paid a living wage, and soon his business took off. It did so well that within the first year he was able to give jobs to people from the surrounding towns too.
Understanding that no man is an island, and that the key to maintaining wealth is to preserve it, he continued paying a living wage to all of his workers. He lived in the biggest house in town, but he knew that unless the other houses were nice and neat, his house wouldn't hold it's value. All of the kids in town went to school with his kids. So he also provided health care for his employees because he knew that if they or their children became sick it would impact his business and his family too.
The town prospered and grew, and word of his success spread far and wide. Stores across the land proudly sold his socks. And people noticed.
The bank man that loaned him the money had recently joined a group of other well-monied men that called themselves 'investors'. And they saw great potential in the sock factory. The sock man's children were now grown, and none had even the slightest interest in staying in the sock business. So when the bank men approached him with a new idea, he took the deal. The idea was simple: Lots of people had loaned a little bit of money to the bank men. The bank men took that money and bought the sock factory, confident they could make a profit for themselves and the people that had lent them money.
And they did. The factory kept churning out more and more socks. The sock factory man retired and lived nicely on a beach somewhere, and the shareholders that now owned the factory were making money for doing nothing. It was the perfect. Until the threading machine broke. It was the biggest machine in the factory. It had run for 40 years without so much as a hiccup, that is until it suddenly seized. The manager of the factory began to collect quotes for repair, but the machine was too old and parts weren't available. A new machine had to be purchased, and due to inflation and technological advances, it cost more than a month's payroll.
The bank men knew that they couldn't reduce the payout to the shareholders to cover this cost. If they did, no one would ever loan them money again. But there was good news. By 'investing' more of that shareholder money in the best machine available they could immediately reduce their staffing needs by over 20%. When they still needed more cuts in order to protect themselves from a loss one of the bank men proposed lowering the wage for new workers. After all, this was just socks. Anyone could do it, so why pay more than they have to?
Immediately payroll decreased another 10%. And if that was just part of the normal turnover, why were they paying the 60 year olds who had worked their 40 years so much money? Old people can't do as much, and they had just learned that young people come cheaper. Another of the bank men had the idea to force the older workers into retirement. In the past, retirees had always been given a pension, but would the shareholders tolerate paying someone not to work? Of course not, so that was cut. And just like that, payroll was low enough to cover the cost of the machine...for now.
This pattern continued for many years. Eventually everyone at the factory was making the least they could possibly make, and the town was worse for the wear. All the local stores had closed because no one could afford to shop there anymore. The factory no longer paid for health care, and because sick time was limited to 6 days a year children often went to school ill, simply having no other place to go. With the health care gone, the hospital couldn't stay. With the stores went the other jobs, with the jobs went the landscaping companies that kept the yards looking nice, the repair companies that updated the houses, and the restaurants and parks that helped support tourists and other visitors. Since the owners of the factory didn't live in the town, or even know they owned part of a factory in many cases, no one who could stop it was there to witness what was going on.
Then one day, one of the brothers of a bank man returned from a vacation in a country called China, where he had seen the most marvelous things. But he never went to the Great Wall, or the Forbidden City. He spent his whole trip in a factory. He quickly assembled all the bank men, who now referred to themselves as the 'Board of Directors', and excitedly related what he had learned: For less than the cost of one month's payroll, the whole factory could be moved to to this place called China. Then, for less than the cost of the next months payroll, it could be operated for an entire year.
The shareholders, not one of which lived in the town of course, were delighted. Dividends could increase by $.05/share/month, but that was enough because, after all...it was free money for them, so the measure passed a vote.
The factory was shuddered and relocated 15000 miles away. The town? It's gone now. The bank? It's one of the biggest in the world. 2 years ago they were bailed out by the taxpayers of their country when bad loans got called in en masse. But this year they're back. They posted a record profit and didn't pay a dime in taxes.
Happy Tax Day, America.