[Market Economy Guide] Honesty Is the Best Asset

Greece, Brought to Ruin After Deceiving the Public by Manipulating Statistics

U.S.

The Secret Behind the Success of the King of Department Stores Was Honesty

People are more likely to keep painful memories and remain hurt by them for a long time than to savor happy memories and bask in happiness. That is why most people tend to place greater weight on what they have lost than on what they have gained, and to remember wounds longer than acts of help they received.

Does Honesty Mean Taking a Loss?

The saying, “If you are honest, you lose out,” can be understood by the same principle. People remember much more clearly and for much longer the times when honesty caused them losses, whether directly or indirectly, than the times when honesty benefited them. That is why they may come to think that honesty leads to loss. Also, the gains from deceiving others usually appear quickly and visibly, while the losses that result from such deception often do not show up right away. By contrast, the benefits of honest behavior do not appear immediately, while the disadvantages caused by honesty often show up at once. For that reason, it may seem as though people who succeed through dishonest means are more numerous than those who succeed honestly.

But dishonest methods and acts such as shoddy construction, fraud, bribery, and manipulating the books are bound to be exposed in the end, and once trust is lost, it is difficult to restore it to its original state. Moreover, the losses that follow when dishonest behavior is exposed or when credibility is lost are incomparably greater than the gains earned through dishonesty. Greece’s plunge into a mountain of debt and fiscal collapse strongly supports this fact.

The Dishonesty of Greek Politicians

In the past, Greek politicians repeatedly made expanded welfare benefits a key campaign pledge in every general election, and for decades poured enormous fiscal resources into addressing unemployment and welfare issues. As a result, Greece took on such massive debt that even drastic austerity measures could not make up for it.

Greek politicians also manipulated accounting books in order to join the eurozone (the 19 countries that use the euro), even announcing fiscal deficits that had been cut by more than half. After joining the eurozone, they then used the euro and borrowed money easily from abroad to once again pursue giveaway-style welfare policies. As a result, Greece’s welfare system and national competitiveness were damaged beyond recovery. In the end, dishonest political leaders drove Greece into ruin.

Unlike dishonest conduct, transparent and honest behavior brings greater trust and greater gains as time passes. That is why honest companies succeed far more greatly and last far longer than those that are not. The story of John Wanamaker, the legendary American entrepreneur who regarded honesty as the highest value, clearly proves this point.

Born into a poor family and unable even to graduate from elementary school, Wanamaker earned money from a young age working as a shop clerk. He was so honest by nature that even when selling clothes, he explained both their strengths and weaknesses truthfully to customers. One day, the shop owner saw him doing this. The owner scolded Wanamaker and warned him that he would never make money if he did business that way. But Wanamaker thought differently. He believed that only by selling honestly would customers return to the store.

The owner decided to trust Wanamaker, who had always worked diligently, and no longer interfered with his behavior. Before long, the shop became increasingly crowded with customers, and business flourished. Later, when the owner passed away, he left the store to Wanamaker, who came to own a menswear shop at the age of 23.

Wanamaker’s Success with Fixed Prices

At the time Wanamaker ran his clothing store, transportation was underdeveloped, so goods were not supplied on time. As a result, store owners tended to charge whatever price they wished, and popular items were often sold at prices far above cost. Wanamaker, however, introduced a fixed-price system by marking prices on products, and he also labeled their quality. Not only that, he implemented the groundbreaking service of allowing returns and exchanges whenever consumers wanted.

As a result, the store Wanamaker operated prospered more and more, and he went on to establish America’s first department store in New York, becoming one of the 10 richest businessmen in the United States. Nicknamed the “King of Department Stores,” Wanamaker remains to this day a model of the successful entrepreneur, reminding us once again of the importance of honesty.

Sung-no Choi

President, Center for Free Enterprise (CFE)

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Original title: [시장경제 길라잡이] 정직이 최고의 자산

Author: Sung-no Choi

Date: 2019-11-11

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=11&idx=22039