Lemonade Stands Save US Economy - Bet on Entrepreneurial Lemonade Futures and Win - There’s Gold in Them There Lemons!

Tiz the season and lemonade stands are in full swing around these summer New England parts, specifically Ridgefield Connecticut and Main Street.

I was first hit with this lemonade season reminder a couple of weeks back when walking Kasha around the neighborhood.

At the commencement of our walk, we first started to spy various hand-drawn flyers posted on the light poles with scotch tape promoting neighborhood lemonade availability.

And then we soon started to hear the audio ripples of lemonade barker-cries via a chorus of children off in the distant background, “Lemonade. Lemonade! Get Your Ice Cold Lemonade. Lemonade. Ice Cold Lemonade Here. Lemonade.”

All of which was quickly followed by a boy on a bicycle who approached us while engaged in the lemonade sales promotion route for his sister’s lemonade enterprise, whom Kasha and I would soon go on to meet and interview but more on that later.

Okay, I know many high powered business types and serious economists who might shrug, as well as everyday folk, and say, “Yea, so what! What’s the point of reflecting on the economics of local lemonade entrepreneurs?”

To which I think I have a good reply: First in consideration of the big media backdrop of economic headlines of bad news; and second, with regards to Karl Marx and how all the collectivists economists have got it fundamentally wrong and how the lemonade entrepreneurs have got it fundamentally right.

But first, the media headlines.

Big media is in the business of big headlines and they do it well. After all, if they can’t grab us, they can’t hold our attention or sell us on their agenda(s) let alone promote the agendas of the people who buy their advertising space.

And it seems to me that currently big media would have us believe in all their negative economic press that they get paid to sell. Not that we do not love the press but with business models like, “If it bleeds, it leads” how can we blame them for selling us negativity when they know full well we only buy what grabs our attention, including killer negative headlines that cut through the clutter in supermarket checkout lines.

So while the press and ourselves might be to blame for buying in on the collective consciousness of economic woes, part of this post is about the other economic story not being told. Well actually the story is being told and shared but not in headlines or by big media, at least not yet. Bare with me, and you’ll see my point and why lemonade entrepreneurs hold the keys to understanding long term economic successes.

A couple weeks after Kasha and I encountered our first neighborhood lemonade entrepreneurs, I was driving through Main Street Ridgefield and came across another lemonade stand and snapped the pics you see here. In this case, these entrepreneurs were closed for business so I did not get to interview them or sample their brew(s), but the spirit of their humble endeavor was yet another reminder of how the keys to our fundamental economic success in this country lie among the spirit of budding lemonade entrepreneurs.

Now I’ve traveled the world and while not hit every corner, I have yet to see an entrepreneurial front-yard lemonade stand in any other country. Sure, I’ve seen young people selling crafts, fruits, performing for coins, but somehow the young lemonade entrepreneur and their humble neighborhood lemonade stand seems uniquely red-white-n-blue and I’m not positive why but I have some theories.

When growing up as a teenager in Argentina as a Rotary exchange student in 1978, I always seemed to win when playing monopoly with my new Argentinean friends. At the time they would often chide me and prod me with, “Oh! You Capitalists! You Yankees! You Gringos! You are all the same! You take everything! You win at all costs! You yada yada …”

But it was also during those loved South American times that I enjoyed many a debate about the evils and merits of Capitalism, Communism, Socialism, and other ism’s. But somehow that despite the debates, I knew that they too were capitalists at heart no matter what their official ism was that they subscribed to publicly. My capitalistic proof of innate free-trade was the flourishing of black markets in every corner of the globe that I’ve ever traveled to. Which supports my theory: That left alone, all humans will trade in a manner that is win-win for them and those they trade with, but the key point is “left alone.”

Governments are necessary and good governments that serve the people and individual freedoms first with state second are an amazing blessing. Yet governments often get over-run by special interests, collectivists, Leninists, and others who quietely delight in chipping away at personal freedoms by advocating more tariffs, trade barriers, licensing, laws, obfuscation of agendas, etc. - all of which is fertilizer for big business and big corruption.

The lemonade entrepreneur is a noble example of the balance of supply and demand when left alone - no town permits, no labor laws, no minimum wages, no sales tax, no use taxes, no mandatory state licensing, certification or registration, etc.

“Be ye like little children” is Biblical wisdom that should perhaps be extended to commercial affairs ala the example of seasonal lemonade entrepreneurs.

Consider Adam Smith and his groundbreaking 1776 book, The Wealth of Nations, that cemented the principles of laissez-faire and the “invisible hand” of balance naturally occurring from supply and demand cycles that find equilibrium over time.

These same laissez-faire economic principles were also confirmed in more modern times by Milton Friedman’s groundbreaking book, Freedom to Choose - a book I would argue that anybody running for any office (e.g., state, local, federal and/or condo board) should be required to read and take a standarized test to confirm they can pass and exhibit a certain mastery of the message but I jest (although, I’m serious if you are).

Even today in 2008, those economies with the least amount of government intervention are the ones on the fast track. But back to my friendly conversations with Argentineans about economic policies, merits and pitfalls of isms.

All economic models are based on cycles - boom and bust, followed by more boom and bust, etc. It is the length of cycles which most isms and economists disagree with - e.g., some say these economic cycles are every 5-10 years, others say every 35 years, and others say every 50 or 75 years. Some also argue (i.e., the collectivists) that it is the role of government to “soften” these cycles so they are not so “forceful” on the masses, ala rationale for recent Federal Reserve to bailout Bear Stearns - what a joke and a true tragedy.

Yet my favorite debate about economic cycles took place in college during a Western Civ class when we were asked to read Karl Marx’s Communist Manifesto and support or defend his economic ideas.

Karl had relatively good reasoning and essentially said, “Hey look. Each society pretty much boils down to two primary classes - the haves and the have-nots - and with each turn of the economic cycles of bust periods, some of the haves lose their economic power and become members of the have-nots. Thus it is only a matter of time, a number of economic cycles, that will ultimately reduce all the haves to have-nots, so let’s cut to the chase, save everybody the drama of enduring all these awful cycles and just get there (a flat collectivist society that is ruled by the state). After all, in the end there will only be one class, so let’s get there now and save everybody the grief and plan accordingly.”

Sounds like a great concept but for one big commercial blunder on Mr. Marx’s reasoning, and that is, he totally forgot and left out the concept of entrepreneurs - that enterprising group that somehow seems to spring forth despite the odds and replinshes the class of haves with every economic down turn.

America has lived an economic history of ups and downs. And, we know in this country that with every bust cycle, there are those who find ways to make it work and often go on to great fortune by finding opportunity when others see only failure.

Our culture is also one of “Yankee ingenuity” whereby we tend to invent things for ourselves that solve our own problems, even if less than perfect; but then continue to perfect said inventions and spin out improved inventions for sale to neighbors and thereby give birth to new markets.

Consider the Lightning Rod invented by Benjamin Franklin or Eli Whitney’s Cotton Gin. In both cases, these men sought to solve a problem and were looking for solutions. In the process of inventing their own solutions, they both went on to give birth to new markets and efficiencies - all of which had positive economic impacts on the greatest good for all of us. Note: some economic historians will even argue that Whitney’s Cotton Gin was the birth of the American industrialized revolution — and yet his path of intellectual property rights via his Cotton Gin patent and the realities of enforcing said patent are chapters for another post.

Don’t get me wrong. I am not saying that there isn’t great innovation coming from other parts of the world, certainly there is. Even in governmental entrepreneurship, perhaps England’s greatest gift to the world was the invention of the Magna Carta, which was essentially a balancing of power between Nobles and the Crown, and became the genesis for many of our principles today re:rights to private property, habeas corpus, etc.

Back to my walk with Kasha.

So right around the time I enjoyed my interview with the local lemonade entrepreneurs, I also read the May 2008 edition of Imprimis - see www.Hillsdale.edu. They have over 1.6 million monthly readers and their publication is free to subscribe to, and each month is very thought provoking so yes, I would encourage you to get your free copies.

In the May edition they featured adapted text from a January speech at Hillsdale College given by Mr. Patrick Toomey, President of the Club for Growth. The title of this article was, “The Greatest Story Never Told: Today’s Economy in Perspective.”

In that article, some of what Mr. Toomey stated included, “Over the last 25 years, more wealth has been created, more people have been lifted out of poverty, standards of living have been elevated more dramatically, and the quality and length of the life have improved, more than ever before in the recorded history.”

That’s a mighty tall claim but consider some of the stats he provided to support his premise:

• Our nation’s total economic output in 1982 was $5.1 trillion; In 2007 it was $11.3 trillion (in real 2000 dollars)
• Per capita economic output in 1982 was $22,400; In 2007 it was $37,807 (in real 2000 dollars)
• Unemployment in the 1970s was nearly seven percent; During the last decade it has remained below five percent
• The service sector was $1 trillion in 1982; It was $5.5 trillion in 2006
• In 2007, US factories produced more than in any previous year in our history
• The Dow Jones Industrial Average in 1980 was at 825; Today (despite its ups and downs) remains above 11,000
• In 1983, 19 percent of households owned stocks; In 2005 50% were investors
• In 1989 median family net worth was $69,000; In 2004 it was $93,000
• And regarding American families living below the official poverty line in the 1970s - Less than 40 percent had a car, almost none had color televisions, and air conditioning was almost unheard of; In 2004, 46 percent owned their own homes, 75% owned a car (indeed 30 percent owned two or more cars), 97 percent had color TVs, 67% had air conditioning
• With respect to technology - In 1975 there were 9.8 million cable TV subscribers and in 2006 there were 65 million; In 1985 there were 2.1 million personal computers and in 2007 there was 243 million; In 1985 there were 340 cell phone subscribers and 243 million in 2007
• On health fronts - In 1970 infant mortality was 20 deaths per 1000 people and in 2002 it was seven deaths per 1000; In 1980 life expectancy was 74 years, today it is 78
• And this growth has been occurring around the globe - between 1999 and 2004 some 135 million people emerged from destitution and there are twice as many countries with fast-growing economies as there were in 1980

In the end, Mr. Toomey credits these massive economic growths from several factors, namely - economic freedoms, the Recovery Tax Act of 1981 which reduced marginal tax rate from 70 percent to 28%, and a series of major deregulation and broad expansion of trade.

These are some of the innate principles American Lemonade Entrepreneurs know instinctively, but they probably won’t be making any big headlines in traditional media, yet perhaps they will make it BIG around the Blogosphere.

Lemonade Here. Get Your Lemonade. 50 Cents. Sugar Free. Tax Free. And Always Served with a Smile.

Viva the entrepreneurs who progress to make life better for all of us and keep Karl rolling in his grave!