Posts Tagged ‘globalization’

What kind of person are you?

2011/10/27

Do you think of labor in a factory to be a resource, or an asset?  Do you believe that it should be ‘every man for himself!’ or do you believe in community being worth investing in?  A pure capitalist would view labor as a resource, to be exploited to the utmost.  A civic minded person believes that the community is valuable, and well worth investing in.  Pure capitalism is self-destructive, as we have witnessed, because all of the wealth ends up in the hands of a few, and the economy comes to a halt, because no one can buy anything.

Part of the reason that the government has grown so large is because the community has had to band together to deal with the consequences of our capitalist society, which aims to use people up and throw them away.  If employers took care of their employees as if they were an asset, an investment in training, experience, and knowledge accumulated over time on the job, than government would not be needed to redistribute the wealth through taxation.  Health care, retirement, housing, all would be affordable, and available to all.

Every one wants a bigger slice of the pie.  Even though the pie is not getting larger, and there are more people wanting a slice.  Taking some from somebody else to have more for yourself is called greed.  Greed has betrayed capitalism in the United States, pushed rational thinking aside, and driven us right over the edge.  Instead of investing in the future, to assure that the future is the one that we desire, we have been enticed to spend everything, and more, right now.  In return, our jobs have been outsourced overseas, our taxes are buying less and less services, and everything is horribly expensive.

Only huge, economy-wide growth, on a scale never seen before, can pull us out of an economic implosion.  Asset deflation is likely to set in, as prices drop, values decrease, and people have no money to spend.  Deflation scares the wealthy more than anything else, because it steals away their wealth even through locked vault doors.   To avoid another Great Depression, a new set of rules are needed.

Investment has got to be with the intent of value increasing over the long term, not in order to pay today’s bills.  Cash dividends to stock holders is the single most damaging policy of all modern business practices.  It robs the future to allow luxury for a time, and corrupts the process of management.  Stock should increase in value, and be split, to reward its owners, as the company becomes more and more valuable.  But that can’t happen when the profits are being funneled into cash to pay to stockholders.

 

The estimated value of debt

2010/01/29

This financial crisis we have just started dealing with is not a surprise, nor was it unexpected.  And it isn’t over.  We are dealing with the consequences of our actions, the paybacks for the greed we all have been guilty of.  Sure, we believed that our homes were appreciating at astronomical rates, and why, of course we took our banker at face value when he said that it would wise to take out a home equity loan.  We wanted to have that money to play with.  We wanted to buy a nicer car to commute to work with, that boat that was on sale, or put in a pool.  Could we afford to do these things without borrowing money?  Not no.  Hell no.  We shoveled debt onto our heads like we were digging foxholes under fire.

What has all this economic activity created, all the money that we spent bought?  And how could so much of it just evaporate overnight?  People think about credit, but what about debt?  How many people think about the fact that most of the wealth that has been created in the last 20 years or so has been nothing more than numbers in computers, based upon the value of debt.  The more people owe you, the richer that you are.  People invest in debt, banks sell it, and nobody seems to want to pay it off.  What a wonderful concept; buy today what you cannot pay for until tomorrow, if you are lucky.

Did anyone figure in the effect of laying off millions of the highest paid consumers on the planet?  Is it really growth when you take jobs away from one group of people and give them to a different group?  Or is that just financial manipulation, to create wealth by cutting costs.  What happens when the cost that you cut is the buyer of your product?

Real wealth does not evaporate, it does not diminish in value, it is durable, and serves all the people.  Real wealth is roads, bridges, fiber optic cables, transmission lines.  How much real wealth has been created in the United States in the last 20 years?  And it is not creating new wealth to repair old roads, it is investing in what you already have.  So, we built a lot of buildings, but were they needed, or were they funding for a developer?

On every level, Americans have chosen to ignore the future, to resist real change, to accept that they were no better than anybody else.  Other people could ride trains and busses, we were going to drive.    So what if our new building doesn’t have any insulation.?  It is cheaper that way.  And the whole time, we have been insisting that everything is worth more.  Not because of any discernable reason, but just because we said so.

We have invested in trying to be wealthy enough to not have to work, not in making our futures better.  Now, we are paying for sitting on our butts.  We don’t create anything of value anymore, and we can’t even govern ourselves without borrowing money to do it.  Instead of spending money to develop the technologies needed to make a future possible, we have invested in moving production from America to some overseas country.  But we have not invested in giving Americans anything to do.  Normally, economic growth means that the leading countries improve their technology, and move from building one kind of product to one which is more complex, advanced, or somehow beyond the abilities of other producers.  Displacement happens as new industries replace old ones, and people have to learn new skills.

We veered off from advancing our technology, because it would have required a long-term investment, tying up our money for decades.  And we wanted to keep our technology to ourselves, so that no one else could use it against us.  In the 1960’s, during the administration of Richard Nixon, it was decided that the United States would not invest substantial resources into outer space.  The Apollo program would be cut, and no other manned exploration would be funded.  The military was going to handle space exploration, and only for the purpose of defense.

Since that time, the United States has spent more on cosmetics every year than has been spent on developing space manufacturing, mining, and processing.  Typical budgets for manned space exploration have amounted to a few brief missions every year, and nothing else.  The US would not have built a space station except because of pressure from its allies to contribute to one.

It is almost like we are committing suicide by starvation.  We give away all of our food, and do nothing to find more.  The world is fighting over a pie, each person wanting a bigger slice, and more people wanting slices all the time.  We need true growth, growth that results in wealth that will not evaporate.  The Earth is being used up, corrupted in our quest for wealth, while everything that we could possibly need exists somewhere in our Solar System.

Americans should be building space ships, working on space stations, or the Moon, doing work that produces tremendous value, so that they could bring home enough money to buy cars from Japan without having to borrow the money from China.  General Motors would be the worlds leading producer of launch vehicles, and Ford would be making deep space probes.  But we chose to be wealthy instead.

Scott P. Holman

2009/01/29

What are we going to spend?

2009/08/06

Repeatedly, I am seeing articles regarding the economy which refer to the spending of consumers being about 70 percent of the economy, and how the return of the consumer will bring back good economic times.  In other words, the economy is going to remain broken until everyone is spending more than they make, just like they used to.  What are we, the consumers going to spend?  Credit is no longer extended practically automatically if you have a Social Security number, and the credit limits have been cranked down to under 1,000 dollars for even top notch credit card holders.  Home equity loans have disappeared, the result of home values falling for months.  Income has not been keeping up with inflation for most people over the last te years or so, which means that people are actually making less than they were in the 1990’s.  So, what are we going to spend?

If the consumer does not resume his role as the driving force in the American economy, what is going to happen?  Well, first off, all the people who were making money managing the flow of goods from China to the U.S. are going to be hurting.  So are the people who made their money selling those Chinese goods to Americans.  As well as the people who transported those goods from the ships to the stores.  There will be fewer catalogs turning trees into wastepaper, fewer kiosks crowding shopping mall hall ways, and fewer truckload sales of everything from tools to ties.

Just maybe, we will begin to address the problems inherent in an economy that is dependent on people spending money instead of producing things of value.  Think of it!  The most important activity that Americans partake in is spending money!  If they don’t, empires will crash, the rich shall become destitute, and shopping malls will no longer be the American cathedrals.  So everyone is standing around on one foot waiting for consumers to get back out there and spend!  Spend!  Spend!

There are hardly any jobs that pay well anymore, because American business has taken their business out of America.  We are not supposed to research and develop, design, prototype, and build, we are supposed to BUY!  Buy with what money?

Learning old lessons again

2009/02/22

There is an ancient rule that any individual who becomes wealthy at the expense of the group is threatening the survival of the group, and must be isolated from the rest of the group, irregardless of the individuals eventual survival.  This law was enforced by evolution, natural selection, survival of the fittest.  It appears that civilization has caused us to forget this ancient law, because society has so much inertia that it can survive individuals who make themselves wealthy at the expense of the group.

But that condition is changing, the result of a small number of individuals who have enriched themselves enormously at the expense of the rest of us.  The brakes could have been put on the financial bubble long ago, preventing the carnage that surrounds us today.  But Greed motivated very wealthy, powerful individuals to intervene in the attempts to reign in the explosive growth.  Regulatory bodies were discouraged from investigating suspicious activity, Congress was lobbied not to enact certain laws, and a few overseas governments were manipulated into providing shelters for the wealth.

We all were encouraged to borrow, cash out equity, and to shop until we dropped.  Insanity began to take over, as the stock market kept growing beyond any reasonable limits, prices for homes doubled, and doubled again and again, and we succeeded in exporting our materialistic culture to even much older nations, under the guise of ‘globalization’.  Why should someone in Thailand make shoes for people in America if all they are going to get is material compensation.  The old ways may not have been prosperous, but the people were happy.

Greed manipulated us through the media into believing that owning things could make us happy, and accepting that our self-worth was dependent upon the things that we could by.  We became so desperate to prove our worth that we would buy cars that cost so much we had to get a 5 year contract to buy them.  Tho contract would last longer than the car would.  The same thing happened with houses, where the 30 year mortgage became the standard.  Very few people in this country actually own their home, most are paying a bank for the ability to live in the place.  By the time that you get it paid off, you are too old to take care of it, and often have to sell it for far less than what you have put into it.

All of these things made a lot of people rich, but they made a few people much, much wealthier.  I don’t know their names, and don’t want to know their names, because they are evil people.  They have been willing to run the world economy into the ground to satisfy their insatiable desire for MORE!  It would not be nearly as bad as it is if they had only played with their money, but they had to go and use ours, too.  Basically, we have all been broke for about 20 years, but we have been part of a shell game, a con, to convince us that really could spend more than we make.  It was inevitable that the powers behind this con would eventually lose track of where everything was.  When other nations with more wealth than us began to compete with us for resources, the sham collapsed, victim of gasoline prices which Americans simply could not afford.  It is one thing to put a big screen TV on your credit card, but entirely another to put a tank of gas on it.

Now, we are seeing values return to the levels they would have been at if the ‘irrational exuberance’ had been discouraged with higher interest levels, restrictions on leverage, mark to market rules, and other arcane things which are extremely boring to talk about, but which have such incredible impact on our lives when they are ignored.  Unfortunately, because so many of us have been sucked into jobs that catered to the Greed, such as selling people things that they didn’t really need, values are likely to keep on dropping.  Deflation could become a black hole, sucking the wealth out of the entire system.

Unless we begin using the material wealth that we have amassed to begin creating wealth that belongs to the community, such as a nationwide fiber optic system.  Rebuilding roads and bridges is important, but so is making those same roads and bridges far less vital, by replacing them with the means to move information, to the point that we can almost believe that we are somewhere else entirely.  Virtual reality would allow us to perform tasks half a world away, to take part in events without having to leave our homes, to shop for things without having to go to a store.

Insulating our homes, business facilities, upgrading equipment, these are the investments that we will have to make to keep energy costs low enough that we can afford them in an economy which is sustainable.  Educating our populace to the highest levels that they are capable of is another survival strategy, because the solutions to our problems are not going to come from ignorance.  Who us going to pay for all of this?  We are, the average Americans, who have been duped into spending everything that we were going make for the next few years.  Instead of paying off our credit card debts and hyper-inflated mortgages, we are going to end up working our butts off just to eat and keep a roof over our heads.

The 40 hour work week may become victim to the need to pay a whole bunch of taxes, so that this program of self-improvement is not entirely at the expense of other countries.  Probably, we are going to have to get by with what TVs, stereos, and computers that we have, because importing them would mean paying somebody else real money.  But we have so much incredible potential, so much accumulated wealth, that we could turn this thing around in a matter of a decade.  If we all agreed to work together, to sacrifice together, and to believe in each other.  There is hope, but it is mighty slim.

The dance changes tempo

2009/02/15

So far, I am not aware of anyone acknowledging the fundamental problem behind our current economic woes;  We can no longer sustain the level of consumption that we have become used to.   Between the price of many commodities going up, and home values declining, we have to spend more than we earn to live in great luxury.  Yes, luxury.

We drive ourselves around in our own cars, so that we don’t have to be close to strangers.  Many of us stand under a shower of warm water for several minutes every day.  The lights always will come on when we flick the switch, there are no open sewers running near our schools, and the water coming out of the tap is fairly safe to drink, even though it became fashionable during the Age Of Excess to only drink bottled water.  The telephones almost always work, and most people fly on airplanes when they have to go somewhere.

By the standards of most of the world, these things are great luxuries, which even the wealthy cannot always afford, because they simply don’t exist in some places.  Yet we often consider them to be ‘rights’, which cannot be infringed upon.  We have the ‘right’ to drive our own car somewhere if we want to.  But there is nothing that says that we have the ‘right’ to gasoline whenever we want to go somewhere.  If we can pay for the fuel, fine.  But what if we can’t?

The costs of energy are rising, and not simply because of demand.  Generating plants are becoming harder and harder to get permits for, the grid that transmits the energy that is generated to where it is needed is on the verge of overload, and we need a whole bunch of new lines to move wind power to where it can be used.  Crude oil is no longer found by drilling a few thousand feet in sandy soil.  Extracting it can mean working in thousands of feet of water, and penetrating the Earth’s crust with holes several miles deep is becoming common as we search for new supplies of oil.

For our society to become economically sustainable, consumption of energy has got to be reduced considerably, possibly 50 percent.  That sounds like a huge undertaking, but we are so inefficient in how we use energy that it would be fairly straight forward.  The majority of structures in this country are poorly, if at all, insulated.  Simply bringing every building up to the highest possible level of insulation would result in huge savings,  as would putting solar panels on every roof.

But the automobile is the biggest culprit, and there is simply no way to make it cheap to push around a whole bunch of metal and plastic so that one person can risk their life to get where they want to go by themselves.  We will always have cars, but we will no longer use them all the time.  Instead, we are going to have to get used to riding public transportation when we are commuting to work or school.  But we will still be able to go where we want, when we want, when we can afford it.

If we can make what we already own more valuable by making it more energy efficient, we have invested our money into something that will create wealth, or money, as long as it is used.  But this wealth will be diffused through the economy, instead of being concentrated in the hands of a few, which might be why there is such resistance to changing the consumption of energy dramatically.  The oil companies will not make huge profits if we all start riding transit to work or school.

This will be a drastic change in the American lifestyle, but we are facing something worse than War.  We are dealing with the consequences of unbridled Greed getting its way for too long.  A lot of money was made, but the value of money is coming into question, because so much has been ‘made’ that just disappeared all of a sudden.  Real wealth is the kind that everyone benefits from, and which won’t just go away.  A bridge, a rapid transit system, a fiber optic network, insulation in every building, these are things that make all of us wealthier.

A slice of the pie

2008/12/11

Everyone wants a slice of the pie, but some people want the whole pie.  Well, they have gotten it.  They have all of the money, and we have none.  This is the drawback to the way that capitalism is practiced in the United States.  The money ends up in the hands of a few, the mass has nothing, and commerce comes to a stop. Pop!  The bubble bursts.  Deflation sets in, and markets crash.  What is anything worth, if no one has the money to buy it?  They can’t borrow the money anymore, because the bankers don’t know how much the money is worth.

We are all so far in debt that there is no possibility that we can pay it off.  We are in default on too many things, because there are not enough of us actually creating anything of value to exchange for what we need.  A service is only as good as the ability to pay for it.  When everyone has to do their own cooking, restuarants are not going to do well.  And the list goes down the line.

We are now in the Post-Industrial, Post Everything, Service economy.  And we are all broke.  We can not afford to consume Service anymore. EOF

End Of File

There is a different way to look at Capitalism.  Do not look at people as a resource, look at them as owners.  They own the means of production.  The buildings, assembly lines, and whatnot are only there to create a place for people to work.  Supposedly, productivity has increased by several percent every year for years and years.  Has compensation for labor?

Labor is not just a resource to be exploited for the lowest possible cost.  Labor is provided by people, the members of your community.  Your community is this country, what you call yourself.  If you are an American, your community is broke.  Maybe you aren’t, but so many of us are that your money is not going to be much compensation for the loss that cannot be measured in dollars.  Our culture, our pride, our energy.

The only way out of this situation is to put everyone to work working for each other.  Creating wealth that all of us benefit from, because it makes each of us worth more.  Rapid transit systems, fiber optic networks, high speed rail systems, space exploration.  We are going to have to get used to work a lot without being able to spend very much, because all of our money is going to be used by the government to pay for creating this wealth.  But this will be real wealth, not shopping centers, office towers, and parking lots.  This will be wealth that will be used for years and years, and create more wealth every time it is used.

This is capitalism as practiced where the people are the owners, even though they do not own the companies that do the work.  I have a saying that I came up with.  “If I work to make things better for everyone, things will get better for me, too.”  Whether or not we end along with the ending of the old ways is up to us.

2008/12/10

How do you deal with the realization that something you have grown up believing in is wrong, fundamentally flawed?  When everything that you have been taught turns out to be a lie?  Isn’t it natural to cling to what you think that you know, even when it isn’t working anymore?  When you see other people trying to make what used to work work again, doesn’t it seem right to believe in what used to be with them?  How do you accept that you have been intentionally misled, used, deceived?

I think that these, and questions like these, are going through the minds of a great many people right now, as the framework of the world that they know bends and cracks.  We have always been told that consumption is good, that accumulation of wealth was right, that our way was the best way.  Suddenly, all of those premises are being called into question, the catechism of capitalism confounded.

We didn’t even blink when credit cards were introduced, back in the 1960’s.  This was just an easier way to pay for things, better than cash or checks.  We took it in stride when automakers began to offer financing on their products, because those products had become so much better that they were worth paying for over three years.  Did we feel any doubt when we were told that we deserved to fly instead of taking the train?  Or that driving our own car was better than riding a bus?

Slowly, insidiously, greed manipulated our trust, our belief in our system.  We might have been uncomfortable going into debt to buy things, but that was the American way! When a contract for a car jumped from 3 years to 5 years, did we balk, and refuse? Of course not.  That was just the way that things were.  We had no reservations about seeing the doctor, even though it might mean years of working off the cost of the surgery.

We grew to expect that companies would pay us money every year for lending them our money, and based our investment strategies on those expectations.  We envied the high-flying executives who made millions of dollars a year, plus stock options, but we knew that they earned that money with hard work.  In spite of wanting to keep the family home, we signed the contract on a new house, because that is the way things were done here in the United States.

But we began to feel uneasy when our neighbors lost their job to some workers in a place we had never heard of.  Doubt might nag at us when we saw the local factory, or mill, or plant shut down, because the work could be done cheaper overseas, but we kept quiet, not wanting to rock the boat.  When a family member lost their health benefits from their job, we were uncertain if that was right, but we didn’t know what to do about it.

Only when our life savings, our retirement fund, our childrens college money disappeared in the collapse of a major company did we really get upset, and what could we do then?  Or maybe it was the second house that we bought, intending to flip it for a profit, only to discover that no one wanted it, that made us think that we had been ripped off.  Disgust began to come easily, as we saw our schools failing to teach our children, our roads crumbling into potholes.

All of a sudden, none of the things that we have been led to believe in are working.  People are too far in debt to buy a new car, even though they have to have one, because there is no public transit.  Going to the doctor is out of the question, because we don’t have insurance.  Some folks are making millions every year, but our paychecks are not getting any bigger, and everything seems more expensive.  Borrowing money is the only way that we know how to survive anymore, and no one will lend us any.  Our house is worth less than it used to be, and is losing value constantly, but the bank still wants the amount we signed for.

The wealth that could have built modern train systems, rapid transit, public health care, and energy efficient housing has been squandered on a small number of our population.  Greed has prevented us from investing in social services, space exploration, and education, convincing us instead to buy, buy, buy.  Developing countries have followed our lead, instead of creating wealth that every one of their citizens could have enjoyed.

Now, there is no more money to lend, no certain value to place on assests, no real wealth to create.  We can’t afford to buy products from other countries, so their workers are suffering.  The prospect of deflation is becoming more and more certain, throwing our financial system into chaos.  People cannot pay off their debts, resulting in foreclosures and bankruptcies, which further diminishes our overall wealth.

We allowed this to happen, by believing in a system that sacrifices the whole for the individual.  We helped this to happen, by buying things we didn’t need with money that we hadn’t made yet.  We could never believe that we would have to pay the consequeces for our irresponsibility.  We refused to accept that creating public wealth was essential to our long term survival.  Now, we are just like the car owner who never put any money into their car, broken down on the side of a road in the middle of nowhere.

Real wealth means real work

2008/12/06

We all would like to live the life of luxury, sitting by the pool, drinking the day away, but life is not like that. But still, people try, by jacking up the profit margins on their business interests, demanding substantial dividends from the stock that they own, and hiring the cheapest possible labor to work for them. There is a point where self-interest becomes greed, and it seems to me that most people have no idea where that point is.

When we put our own needs ahead of the community that we live in, we degrade our quality of life. This is not usually apparent right off, but it gradually overwhelms our own standard of living, forcing higher spending for police, security, and maintenance. We may believe that we are above the common standard, but we cannot escape the effects of that standard, unless we wish to live in a vacuum.

When industries send jobs overseas, they reap the profits of lower labor costs, initially. But, in time, the decline in income in the markets where their products are sold forces their profit margins to shrink. At the same time, the quality of the community declines, as tax incomes shrink. This is not the same as the improvements in productivity brought about by new technologies, this is the complete elimination of employment opportunities in an established market. There are no new jobs created by the changes, as there are when productivity increases.

Greed pushes management to ignore long-term costs in the interest of maximizing short-term profits, resulting in a gradual diminishment of returns. A franchise owner who employees only high school age workers to maximize his profit is likely to see his trade dwindle, as people become unhappy with the service they receive and the quality of the product they get. The craftsmanship of workers who have never done a job before, and don’t buy the finished goods, is unlikely to equal that of people who have been raised in a culture based on craftsmanship.

By demanding extraordinarily high profits, the financial industry set the stage for an implosion of prices. Bidding up the price of stocks resulted in artificially high values, which could not be sustained. There is no reason for housing prices to appreciate substantially if no improvements are being made to the homes, yet it was assumed that prices would keep going up and up, for no other reason than that they always had before. Ignoring the possibility that housing prices might fall practically insured that they would, because even the smallest blip in the market would be magnified.

Sustainable, long-term growth is going to require hard work, the creation of real value, and re-investment into the community. There is no way around the fact that what we have called wealth is in reality merely inflated values. Real wealth is not created by manipulating numbers in computers, but in building things that have lasting value, that are tangible, and that can be used by large numbers of people. Real wealth takes real work to be created, something that we seem to have forgotten.

Future shocking?

2008/10/26

It amazes me that we are not hearing any straight talk about what lies ahead, as if things could somehow go on as they have before. Even though I have only a small education in economics, it seems obvious to me that the United States is going to have a huge amount of debt to pay off. This can only be done by working together to create things of lasting value which can be used by large numbers of people. Infrastructure. Trade cannot pay off debt, because nothing of lasting value is created in trade.

Consumer spending is based almost entirely upon trade, so consumer spending will have to decline. But how could consumer spending continue at previous levels if people are all broke? Something is going to have to replace consumer spending as the engine of the economy, and it will have to be big. Instead of building roads, though, maybe we should consider some new kinds of infrastructure. Like fiber optic cables to every home, and a combination data terminal/videophone in every house. A national high speed rail network. Upgrade the electric grid, and run transmission lines to areas where wind is plentiful. Insulate every structure in the nation. Not just spending money, but actually increasing our efficiency as a nation.

Demand for resources can easily outstrip supply if developing countries begin large-scale consumption. The resulting supply-side shocks cripple the economy, pushing up inflation at the same time that wages become stagnant. Greed overwhelms the markets, and a herd mentality emerges, where any profitable strategy is immediately copied, over and over again. One sub-prime mortgage is not a problem. Several million of them are. So markets will have to be guided into spending a portion of their capital on long-term projects, which will dampen the volatility in the short term, while providing guidance for investors as to where long-term growth will be.

Our future economic expansion must be based in increasing our net worth, not financial manipulations of value. Paying for this increase will mean working longer hours, so that the tax burden is spread over more earnings. The payment of cash dividends has got to be discouraged, so that corporations can invest their earnings into new means of production, training, and research. Military spending has got to be reduced, as that is money that disappears from our economy after one pass through it. Spending on space exploration needs to be increased, because it generates new wealth at a rate nearly unequaled, while engaging the high-tech military-industrial complex.

Saving has got to be encouraged, so that the government will have access to money to use for these programs. Payroll accepted in the form of U.S. savings bonds should be tax free, and the payroll value calculated in immediate redemption value, not the face value at maturity. Interest on savings accounts should be tax free. We are going to have to stop relying on foreign countries to carry our debt, because we are making our money worthless. Only by working together, and sharing the sacrifices, can we have any hope of coming out of this economic meltdown.