On GAAP

For those not in the know GAAP is known by some as generally accepted accounting principles, it’s basically the rules that public (and most private) companies use to report their financial data, and it’s use is required by law in most western countries (Europe uses IFRS) I’ll skip the specifics and just say GAAP is CRAP because of how it treats payroll.

According to GAAP payroll is an expense, the antithesis to profit, something to be minimized. While it is true that monies paid in payroll are not available for other uses by the business, they are in effect a part measure of how much that company is supporting the public good. While a board room may simile upon paying the least to people and maximizing their profits, that mentality is a force for inequality. How can businesses determine a fair rate of pay? Clearly there is not enough money to pay everyone CEO rates, how can we (more) fairly determine how much money a person gets?

Time! By and large we are all equal in the # of hours we have in a day. All non-government pay should be based on hrs. Service and little or nothing else. This ensures that the person in the mail room or the executives in the board room are on an even playing field. They both have 24 hrs. in a day, and should be compensated for the # they spend working.  Ideally, the hr. rate (how much money 1 hr. earns) would be level across all enterprises and industries, but (especially during the transition) indristires that the government would like more people in can have their hr. rate given a premium.  (NOTE: this is counter intuitive as a main advantage to the universal hr. rate would be compensation would NOT be a consideration in selection of work. People would work where they want to.)

Now to address the naysayers who would undoubtedly claim that the most skilled among us would not work (or at least not be utilized to their max benefit) in such a system. Good! Humanity as a whole has seldom if ever needed the best, the best is overrated, it’s costly, transient and on the whole hard to re-produce. We need good happy people doing good work. Anyone who’s main motivation is $$ will never do as good a job as someone who cares about what they are doing directly, not merely as a means to an end.

Getting back to GAAP, it’s an example of institutional, government required economic inequality. It is a set of rules that treat income as an externality, a cost, something to be minimized (and the people it applies to likewise marginalized). A better accounting system would require tracking the # of hours and how equitably the value earned from those hours are distributed in society. Instead we have GAAP, forcing all business to report payroll as a cost, with no mention of the hours involved. The human cost that each employee pays to keep the enterprise alive. Its codified repression, entrenched economic discrimination, part of the body of law that implies it’s ok to buy and sell people, as long as you call them “jobs”.

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