Can we have a future, with capitalism?

Kia-ora


I'll come clean. I am a capitalist. I've started two businesses, one not so successful, due to injuries and health issues at an inconvenient stage. Though we did OK in the end. Another which shows all the signs of a healthy infant. I don't expect we will make a fortune, but it will make, enough. Currently I work for a multinational.
It is one of life's irony's that someone like me, an advocate for the mixed economy, Democratic Socialist, model that has proven the most successful economic system, to date, is considered any way, radical.

No one has yet found a better system for allocation of day to day resources, within a community, than a market capitalist system.
You see potential customers for your market garden or building skills, you invest in training as a builder, buy a set of tools, or in a plot of land and seeds. If you do it well, you make a good living, but how much profit you can make is limited, by the fact there are many other small builders and market gardeners, and your potential customers can see who grows the best vegetables, or builds houses that stay up. At this level a "free market" works fine. The economy is pretty much in a steady state, as is the use of natural resources.

As soon as you grow the community larger, than one where everyone knows the skills and honesty of the other members, you need ways of ensuring those with market power do not accumulate too much of the communities wealth. Basically that real contributors to the community don't lose out to cheats, resulting in the breakdown of the system

No capitalist society has succeeded without a healthy dose of co-operation, common infrastructure, goods and services and regulation, "socialism". Countries that are, "successful" by all our normal measures, have an economy balanced between private and State. The most successful have high progressive taxation, and a State share of the economy, around 50 to 60%. Ours is down to 28%, and it shows.

Without the rule of law, healthy and educated  workers, public infrastructure and regulation of the "cheats" if you like, we cannot have a successful business, and wider economy.
Private provision of mass 'public' goods has proven to be incredibly inefficient, and wasteful. like our power companies.

It suits Bill Gates, and others, to attribute human advancement to capitalism, a self justification for having extorted extreme wealth.
Others attribute advances to human co-operation in developing infrastructure and services, laws, and sharing wealth and advancement, which capitalism can never deliver.

Both are correct.

The USA's post war advancement was due  to high taxes, socialist redistribution, a high quality public education system, State sponsored research and innovation, public infrastructure spending, anti trust laws, banking regulation and a large middle class.
All were needed to make capitalism work.
The concentration of wealth and power with late stage, insufficiently regulated, monopoly  capitalism, and the winding back of social infrastructure and redistribution, is causing the USA's decline.

In our example of small community capitalism above, people pretty much get out what they put in. The market limits how much they can take as profit. A "steady state economy, without growth, is possible.
You are buying yourself a job, if you like.

In a truly free market, an impossibility of course, where there is perfect information and competition, there cannot, of course, be any profit. "Free" marketeers/"free traders", don't want a "free market", they simply want one distorted in their favour.
Any business knows, that to make a profit you have to distort the market in some way. Convince people you are better than your competitors, get Government to legislate in your favour, or give you subsidies or public goods, or use monopoly or oligopoly power, to eliminate competition and keep wages low. Your profit is always someone else's loss.

Capitalism requires "growth" to function?
The motivation behind capitalists' is profit. Getting out more than you put in. Why start a business and take that risk, if you are going to make the same amount as you would as an employee.
However most people do make less than they put in, so that others can profit.
Many functioning businesses don't make a real profit. Including most of our essential small businesses. They make enough.  Small builders make a good living. But you could hardly say they take out more than they put in. The degree of competition precludes that. Building material suppliers, however, make huge profits in New Zealand, because they are a duopoly. Big box stores, and banks, are extremely effective, in removing wealth from communities.

In a finite world, the exponential growth required to make increasing  profits, and pay interest, is not possible.

Capitalism is cannibalising, the human and natural environment, it needs to survive.

The concentration of wealth and power insufficiently regulated capitalism, and excessive profit taking, has caused, now works against the survival of human civilisation. With the wealthy opposing any attempts to limit the damage.

On New Zealand's Retirement Income. Pension.

Kia-ora

 

The finance industry have been creaming their pants, for a return to the halcyon days, before the tax rebates were removed from superannuation savings. When they got to play with our money for free, and the negative returns and high charges were ignored, because of tax payer subsidies.

Egged on by the neo-liberals who prefer the elderly, the unemployed and the sick to starve in the streets, as an incentive to scare working people into accepting starvation wages, while they continue to get 17% increases in wealth, the finance industry is dreaming of getting more of their sticky hands on our wealth,  with private super funds.

Since the 70's they have been constant in the meme that we cannot afford super. A meme that has been driven entirely by the self interest of those, who are too wealthy to need super and too mean to pay taxes, and a greedy finance industry.

Unfortunately, it is true, that if you repeat bullshit often enough, even those who should know better come to believe it.

We cannot afford super is code for, "we should leave our elderly to beg on the streets". So that wealthy people can pay less tax and the finance industry can again lose our savings for us.

In fact the idea that State super is unaffordable is crap from the same people that cry TINA and reckon that all social insurance is unaffordable.

If they win with super, they will just start on other social wages.

In reality it is much more affordable than the finance company bailouts, which would be necessary with private super.

.

http://norightturn.blogspot.co.nz/2012/06/what-superannuation-crisis.html

"So, in 2050, we're projected to be paying only 1% of GDP more in superannuation than we were paying in 1990. Quelle horreur! This is not a difference to be terrified of, and it is easily manageable with a modest increase in taxation, either now or in the future (though that perhaps is exactly what those pushing for change are frightened of: higher taxes)".

Intergenerational theft is another piece of oft repeated stupidity.

http://kjt-kt.blogspot.co.nz/2011/06/on-retirement-pensions-and-age-of.html

"Do we really want to return to the days when most elderly people were totally impoverished when their working lives ended".

Super has always been paid for by current production. However you finingle it financially, whether through current taxation or savings, it still comes from the production of the current generation.

If we want to keep super affordable we should tax the current generation to invest in a sustainable future. Invest in energy, housing, education  and other  infrastructure so that we can keep all our people. Not in financial ponzi schemes which will fall over in the next GFC.

http://bowalleyroad.blogspot.co.nz/

""Because our kids can’t afford to buy houses, we bought houses for them to live in using the equity from our house, and now all our money is tied up in mortgages. At the same time, we’re supporting our parents in their old age.

That’s how life is and always has been, for most of us. Our parents worked to give us a decent start in life, and we worked hard so our kids could have a fair go. We’re looking after our parents in their old age. We hope we’ll be looked after in our old age.

What about this is “intergenerational theft”?""

But. We can avoid the whole concept of retirement, intergenerational fairness and all the other sticking points by accepting that everyone in our society is entitled to a liveable share  in the society they and their ancestors have built up.

Whether you call it a Universal income,  Guaranteed minimum income (GMI) or a personal shareholder payment it is the same thing.

Replace all welfare, social insurance and pensions with a GMI.

We also get to solve many other problems such as child poverty, the unfairness of a present welfare system, and making our society more sustainable,   at the same time.

http://www.sott.net/articles/show/235840-A-Town-Without-Poverty-Canada-s-Guaranteed-Income-Experiment

""Initially, the Mincome program was conceived as a labour market experiment. The government wanted to know what would happen if everybody in town received a guaranteed income, and specifically, they wanted to know whether people would still work.

It turns out they did.

Only two segments of Dauphin's labour force worked less as a result of Mincome - new mothers and teenagers. Mothers with newborns stopped working because they wanted to stay at home longer with their babies. And teenagers worked less because they weren't under as much pressure to support their families.

The end result was that they spent more time at school and more teenagers graduated. Those who continued to work were given more opportunities to choose what type of work they did"".

http://thestandard.org.nz/key-on-the-nation/comment-page-1/#comment-483385  The best way to deal with any problem is to eliminate it at root. The best way to deal with ‘retirement’ as a problem is to eliminate the entire concept. No I’m not being extreme.

The simple answer is a Universal Income""

http://kjt-kt.blogspot.co.nz/2011/06/on-retirement-pensions-and-age-of.html

""In fact super has been so effective in removing poverty amongst the elderly it should be extended to everyone in the form of a guaranteed minimum income. There is no excuse for having people with inadequate food and housing in a country which is capable of supplying an excess of both internally"".

House Price Inflation

Kia-ora

House price Inflation

 

It is a conventional economics axiom that increasing the money supply without a concomitant increase in production causes inflation.

In the last thirtyfive years we have had low inflation in  wages. 

Essentials, including  land , and thence housing and farm prices, have gone up many times the rate of wage rises. 

Land inflation is driven by private Banking's incentive to print money.  The more money they supply the more interest they can make.

Unfortunately, there is also a strong natural incentive  to lend only on solid security, such as land and buildings.

Banks know better than anyone the inherent insecurity and instability of financial instruments, including shares.

Mortgage law in most Western countries  favours lending on land. Unlike other investments, or lending, if the value of the security, land,  goes down, the borrower is still liable for the full amount of the loan and interest. The bank is indemnified against loss.

For example, in New Zealand, the bank has priority over all other creditors, including contractors.

Lending on business and other assets does not offer the same security. The bank has to wait in line with other creditors and, normally,  cannot continue claims in excess of their proportion of the sale.

Banks, while  reluctant to risk their own money, are happy to risk small savers investments.  Our pension funds, bank deposits and savings.

These schemes, whether shares, derivatives, hedge funds or other financial instruments are designed so that banks can gamble with our money. Win or lose they always get a cut.

De-regulation of banking has removed almost all constraints on lending and the amount of wealth banks can take.

Loses come out of our pensions and other savings.  Or, if they really stuff it up, taxpayers are expected to borrow more from them to pay for it. "The bailout".

The total monetary value of financial instruments and debt is now so great that a crash, or super inflation, is inevitable if it is ever fully spent on real production.

Does anyone really think that infinitely compounding interest is possible in a world with finite resources.

While we lose our savings, houses and farms, bankers still get richer.

Given the difficulty in obtaining bank finance without land as security, favourable tax treatments (in Western countries   for banks,  homeowners, landowners and farmers ), incentives for banks to avoid  risks inherent in other investment  (The inevitable crash of Banker's ponzi schemes and the likely devaluation of currency denominated investments) it is not surprising that  investors prefer land.

The Chinese Government buying up land worldwide with US dollars, before they become worthless, is only a minor example.

Hence land prices rising much faster than wages.

Our economy, along with most other Western economies has been skewed, towards speculation in existing assets, by banks following their own self interest. The "invisible hand" has failed