I wrote this in answer to a comment made by a conservative friend.
OK, Harry; I agree with your comment, “if only we could do the same for abused children…”
It’s where your philosophy and mine differ.
I read this, and I think you’re right, and that we, collectively, human beings all, members in this case of a city, a state, a nation, even a multinational organization, need to do this. We recognize that it’s much easier to breed children than it is to care for them. Across the world, from the fields of starvation in Africa to the favelas of South America, to the slums of America and even to places where the abuse isn’t always the practice solely of the impoverished…and there’s no place for the abused to turn.
There is no help to be had.
Once in a while, we hear of someone helping. Occasionally, abuse comes to the attention of overworked, understaffed police (twice yesterday in New Mexico, fortunately not life-threatening) and something gets done. But in so many cases, a child is born, dies through abuse and neglect, and the world never sees it.
And I think that this, being a collective responsibility, is a job for government. There really is no other agency that represents all of us.
And that government must be paid for by taxes; in this case, a tax would buy us some peace of mind and self-satisfaction that we’ve acted to ameliorate a problem.
But according to your expressed philosophy (shared by many others, of course), government has no role to play and we shouldn’t pay taxes to solve this problem. Taxes are best spent by those who’ve earned the money, right? Even though that means that nothing will be done. I’ve got mine, tough shit for everyone else. Besides, those kids are worthless. There’s no profit to be made from them.
And so, you and those who style themselves conservative see, wring your hands, and then do nothing. Those of us who consider ourselves progressive see, think that we as a society can do better, and seek to use our collective identity, our government, to try to find a solution.
It’s seldom a pure exercise; government is messy, sometimes foolish, sometimes corrupt, and sometimes efforts fail.
But are the shortcomings reason enough not to even try?
The abused children are still there.
Abused animals are still there.
Crooks in the stock market are still there, because we don’t have enough regulators and a regulatory system that would discourage them.
Teachers get laid off, others face overloaded classes, the best see this disfunction and leave or never enter the profession. The children, even those not subject to physical abuse, never see opportunity. The children of the wealthy, of course, attend the best schools. But don’t suggest that this amounts to abuse of children who are denied education and opportunity and later comfort and a life of fulfillment instead of a life of impoverishment and lack of success, always exploited by and at the mercy of those at the top. Work, save, buy a house, see a downturn, lose the job to ‘efficiency’, lose the house, get sick, see a whole life washed away in a short time as your house and everything you’ve worked for goes to a bankster…because government isn’t the employer of last resort, and there aren’t enough regulators to control the greed of the banksters who indeed have legal protection for their crimes…they’ve bought it from congresscritters, and healthcare still isn’t available to all through a single-payer system…
Multinational corporations and businesses are still there, still purchasing loopholes from venal congresscritters to protect gains, loopholes not available to the rest of us, money hidden offshore so that profits aren’t taxed, while we have the world’s most complicated and lengthy tax code, all consisting mostly of loopholes purchased from congresscritters to benefit someone.
A small group of elites buys our politics. We know it, but can do nothing. There is no mechanism to prevent this, no functioning Supreme Court (constant 5-4 decisions along ideological splits defines judicial non-functioning; what is the law if it can only be determined by ideology?)
Such a little thing, Harry; a human regret that children are abused…
Archive for the ‘Uncategorized’ Category
In Defense of a Progressive Point of View
July 16, 2012Microeconomics: Education and Work.
July 3, 2012It has often been pointed out that the curriculum in the public schools is geared toward preparing students to enter college. This is a disservice for an increasing number of students. Fewer students will be able or willing to pay the high costs of higher education and so they will leave high school without job preparation and with no good prospects of attending college and gaining an economically-valuable degree. And even for those who do go on to college, few understand that they will be expected to work to obtain a degree, and then obtain a job after college. High schools allow most to underachieve, to learn a minimum amount and move on. Students in high school are expected to be self-motivated and not to require so much close supervision and individual attention. Some, perhaps most, are not ready for this. Physically, they are mature; mentally, not so much.
College has proven to be an economic trap for too many middle class students. Easy loans provide income to colleges, but meaningful education isn’t provided in return that will allow the student to pay off the loan. Statistics that show how much more a college graduate is likely to make during a career versus what a non-graduate is likely to earn are misleading. For every highly paid engineer or financier or business MBA, there are dozens of graduates in women’s studies or ethnic studies or philosophy or art who can’t find good jobs.
The changes in college prospects and the difficulty of finding a job means that graduates of a high school are going to have to leave the sheltered school environment and move into employment that they aren’t prepared for. They have little idea of what is expected of them. Many will begin their work career in the fast food industry because such jobs are plentiful, have a high turnover rate, and require no experience in order to be hired. Most will be fired at least once before they begin to understand hard economic truth, that employers expect more of them than school required. Employers expect them to be at work on time, to do the work assigned, and to be cooperative and friendly to customers and other staff. It may well take 5 years or more before they understand this. While the graduate is learning this, he/she may be forced by economics to remain at home with parents. Entry level jobs simply don’t pay enough for an independent life. Many recent graduates find themselves in this condition.
Not all degrees are equal. A degree in engineering, mathematics, science, accounting, or business is likely to pay well, and for some will pay very well. Even now, in a severe recession, many jobs that require this type of education either go unfilled or are filled by foreigners. Intel, for example, has been unable to hire local graduates for skilled positions even though such are given preference in employment. Skilled, educated, employees simply aren’t available. Lots of college graduates; not many engineers or scientists or mathematicians.
A degree in humanities, art, or social services or even education may provide self-satisfaction, but these are easier to obtain and require much less effort than that engineering degree to obtain. They aren’t likely to impress employers.
So what should a young person understand about employment? Why are employers prepared to pay them to do a job?
Simply put, employers exploit labor. There’s a trade-off, of course.
If the employee is prepared to market his own skills, say by going into business for himself, he can sell his labor and acquired knowledge/experience for more money than he will get from an employer.
But if he doesn’t work, there is no income. Sick? Too bad. Feel like taking a vacation? Your business stops and potential customers will turn to another service provider. Plus the process of acquiring knowledge and experience takes time, and most often tools and equipment must be bought. For some jobs, a van to house the tools and equipment will suffice, but then there are fuel and maintenance costs and time traveling to and from a job that cannot be billed to a customer. If the tools and vehicle are financed, then finance charges, insurance, taxes, and consumables must also be accounted for. For others, auto mechanics for example, a shop is required. This is often leased so there’s the cost of the lease to pay. And of course, if one operates a business, it’s necessary to account for income and expenses for tax purposes. Doing this yourself takes time that can’t be sold to a customer and a specialized knowledge that can’t be acquired short of full-time work in the field. All of this goes under the general heading of “overhead”. Self employed people need to account for and pay all these expenses…and more.
The plumber that charges $100 for a house call is not making $100 profit for himself. He may, after all the expenses are taken out, be making only a bit more than he would have made working for an employer.
The trade off for the employee who works for someone else is a guaranteed market for their labor and skills. A job enables someone to acquire knowledge and experience that can later be applied to self-employment, should the employee choose to go into self-employment.
Employers, entrepreneurs, can make a profit and if they have a lot of employees, they can make quite a substantial profit. They also take substantial risks. They hope to sell the fruits of the employee’s work, but if they can’t do that, they must still pay the employee. Inability to make hard choices when that employee labor can’t be sold leads to bankruptcy.
Employers hire employees because they expect to make a profit from their labor. That’s the part that graduates and beginning employees don’t understand; the employer isn’t just paying them for their time, because that time cannot be resold for a profit. Instead, they plan on selling the results of that time, goods or services produced by the employee. The lazy employee, the unwilling one who argues before undertaking a task, or the one who can’t be productive for whatever reason will be fired or will be the first to be laid off.
Such a simple concept, and so obvious. And virtually no beginning employee, and many experienced ones, can’t really state this. If they know it, it’s a subconscious kind of knowledge.
The employee who quickly learns this basic truth and applies it is likely to be promoted. Employers often have better jobs available and they select motivated efficient employees, the ones who produce the most profit for the least amount of employer effort in training and supervision, to fill those better jobs. They also are willing to pay those employees more.
If the job is a dead end with no hope of advancement, the employee who has learned the above truth is better equipped to get another job.
Some prospective employees depend on the resumé to convince an employer that he/she should hire them. A simple understanding of the basic truth above, and the willingness to state it to an employer and then to apply it after becoming employed, will give any employee an enormous advantage over his colleagues.
An Honest Question: What’s so bad about Socialism that it Infuriates the Right?
June 30, 2012This small essay was posted on a discussion group hosted by The Nation magazine.
A lot of the socialist underpinnings of a non-socialist nation are under attack. Healthcare isn’t a war won, it’s a battle that ended with something better than a draw. A lot of poor people with no money to spend will still have no money to spend, but now either the tax man or an insurance salesman will be standing there with his hand out. And of course, there are no new funds to pay for the little we got from this. Wealthy individuals still shield their income and their wealth, wealthy companies still exploit workers while lavishly rewarding the managerial elites, tax loopholes abound and more are for sale, with the suppliers being congresscritters and the vendors lobbyists.
And as for the semi-socialist-but-not-free-enterprise education system, the attacks are already well under way.
All that tax money…waiting to be handed over to opportunistic for-profit entities…It’s enough to make a rapacious entrepreneur slaver.
So let me ask here: what, really, is wrong with having at least some of our national endeavors socialist? Can we move from Oh my god that’s socialism which is communism they’ll take my house and we’ll have a politburo in Washington Never Never Never to perhaps a rational discussion of WHAT socialism is, a recognition that some things are better when done socialistically, and to what limits exist for such under our system of government?
Not on the table: abolition of private property. But perhaps on the table: nationalizing of essential services and even industries when capitalism has shown those industries to be too corrupt and operated at the expense of the national good?
As an example, our finance system is a hybrid; public, i.e. socialist, central bank authority (the Fed, FDIC) operating along with private banks, but as has been shown, when the private banks fail due to stupid bets on worthless securities, it’s the government that steps in. Socialist dollars rescued them from bankruptcy. Meanwhile, your savings draw a pittance for you in interest because you’re competing with the Fed, who makes money for loans available at perhaps a half-percent rate which drives your rate down to much less; 0.02% or less. The same banks still extract money from consumers when interest differentials aren’t enough and they aren’t making many loans; fees and such.
If we’re already on the hook when banks fail, why should we not simply nationalize them?
Oil, energy in general, has been the root cause of much of our national decline. We insisted on having oil cheap even when we weren’t producing it. Our money flowed out and came back in the form of interest-bearing loans that propped up the economy and concealed the damage from losses. Double whammy. Later trade imbalance just made it all worse. The world’s most robust economy has become something of a hollow shell, filled not by entrepreneurs but by salesmen and advertisers, hawking products they bought from overseas suppliers. Walmart is really no more than an economic arm, the marketing division, of Chinese manufacturers, despite originating here and despite the Walton family still living here. Commodities markets force us to compete with whichever nation has the money; manufacturing must compete with factories that are subsidized by a government, China for example, and with no control of the government agencies that might regulate this. Our national assets are for sale to the highest bidder and the profits go not to us as a nation but to individuals.
So what makes socialism inherently bad, and capitalism inherently good?
Caveat Emptor
June 28, 2012I read an article in this morning’s NY Times that suggested the housing crisis might be over, and that housing might now begin to recover. That article inspired the following:
I disagree with the content of this article. I think this is a temporary rise that will be overwhelmed as phase two of the foreclosures kicks in.
Banks are just as predatory as they were before; a temporary reprieve came to pass while they got their paperwork in order and shrugged off the criminal robosigning of foreclosure papers. But they’re now poised to resume the foreclosures because the jobs market still hasn’t recovered. Affecting this is the continuing layoffs of public sector employees that the private labor market simply can’t absorb. A few promising trends are visible; some manufacturers are returning the offshored jobs to the US. But only a few, not enough to reinvigorate the shrunken middle class. The trend is toward fewer homeowners, more renters/leasers of property owned by the wealthier people.
Families that were movin’ on up began movin’ on down; and that hasn’t stopped. So foreclosures will continue, and pressure on the home market will increase as foreclosed properties once again begin to become common.
Something to consider: if Republicans gain power, the banksters that have been paying them will continue to receive favorable treatment. But if the Democrats get in, the consumer might get a break, for a while. But don’t count on much from Democrats; all are politicians, and ideology is trumped by cash. After a settling out, banksters will switch to buying Democrats and the evil process will continue.
Unless we get a determined group of politicians who insist on change, nothing much is going to occur.
People need to become aware that government isn’t your friend; only you can ultimately protect yourself. Social Security under Republicans will push toward ‘privatization’, or in other words the money will go to the stock market.
We can trust market traders, right? So when they get all that retirement-fund money, they’ll take care of citizens, won’t they?
NO politician can be counted on to care for ordinary people. They only interact with us in any meaningful way when they begin running for office. And even then, they soon begin delivering rehearsed speeches with no opportunity for discussion; it’s all one-way, not true communication at all.
The next generation needs to adopt the old slogan: Caveat emptor, buyer beware. And add to it, voter beware. Educate yourself. Take back politics from those who sold it and those who bought it.
Middle class housing is going. Middle class expectation of a good education is going. Upward mobility is fast disappearing. The American Dream is dying, turning into a nightmare, as the middle class lifestyle that was the strength of a nation is slowly being destroyed. Our ‘leaders’ give us platitudes instead of leadership, empty referrals to a time when the nation was strong instead of action to restore that strength. And no real leadership from either party.
Caveat emptor.
Campaign Predictions, 2012
June 26, 2012I wrote the following analysis in an email to a friend. It was written in response to a letter that he copied to me from a fellow who claimed to be a successful oddsmaker in Las Vegas and small businessman.
He’s a successful oddsmaker; he says so. You can believe him, right?
Feel free to bet a large amount on the outcome.
Not me. I looked at the entries and spotted the weakness right away. “Obama has nowhere to go but down…” means that Obama is UP in those demographics.
Gas prices are down, and dropping. Remember when Gingrich blamed high gas prices on Obama? Low gas prices = voter satisfaction.
Under Bush, the guy whose policies Romney wants to continue, the economy tanked. Under Obama, the economy has been recovering. Republicans favor ‘trickle down’; after ten years, only piss has been trickling down. No jobs. Corporations are sitting on billions that they’re afraid to invest. No jobs. Adelson, big Romney supporter, is hiding his billions offshore to avoid taxes. Taking his money means you adopt his philosophy; a war weary nation isn’t interested in saber rattling in support of Israeli Zionism. That too is a possible issue.
If you want to see my take on economics, why the economy has tanked, read my blog. https://jlknapp505.com/ Be warned, I’m an Independent, but I don’t favor much of anything dealing with Romney and the current Republican and Tea Parties. If reading anything else bothers you, stick to the economics parts.
Romney’s economic policies amount to austerity; cutting the safety net, the one that he mentioned when he said he wasn’t concerned with the poor because they had that safety net. That’s being played out in Europe, and it’s not working. Meantime, Romney wrote an article in which he favored allowing GM to go bankrupt. GM just put on another shift of 800 workers. Jobs. One auto is virtually made in Ohio, all the parts at different plants. That’s going to count.
Expect the Obama campaign to begin pointing out the things Romney said. Expect them to remember all the things Gingrich and Cain and Bachmann said about Romney back during the campaign. With all the current hype, remember that only about 40% of Republican voters wanted Romney during the primary, and if they seem to be supporting him now, that support is likely to be ‘soft’. All that stuff was recorded; expect to see people like Gingrich and Cain and Santorum slamming Romney in ads, saying what they said during the primary.
Romney stuck his foot in his mouth numerous times on the campaign trail. He’s gotten better…but we’ll see how he does against Obama, who’s only had one bad miscue that I noticed. Romney’s going to have to defend things like “I like firing people” and “Corporations are people, my friends” when the campaign really heats up. I suspect people are going to resent the constant barrage of mud over the TV channels, and they’ll know who gave them this: the Conservative 5 on the Supreme Court. That Supreme Court just gave a green light to bunches of Sheriff Arpaio wannabe’s, and they’re going to be arresting Latinos. The relatives of those Latinos are able to vote…and they won’t be voting Republican.
One recent comment said that asking a woman to vote Republican is akin to asking a chicken to vote for Colonel Sanders.
After the conventions, expect these to become the real issues on the campaign. Expect them to come up in debate. When Romney has to reply off the cuff, he doesn’t do nearly as well as when he’s delivering a polished, vetted, rehearsed speech.
He does have support among the people whose issue is to get the nigger out of the White House. That group’s firm. Are there enough of them?
Maybe, if I were you, I’d hold off on that bet.
Jack
Economic Malaise, Simplified
June 20, 2012This essay was written in response to a column by Thomas Friedman in the New York Times, edition of June 20 2012.
Friedman like so many others misses the point, I think. He has some good recommendations, but they won’t solve the economy’s long term problems.
Put simply, in simple and easy-to understand steps:
We have a surplus of workers. Half our workforce can produce all we require in goods and services. The relentless push for more efficiency has gotten just that, and efficient economic processes need fewer workers. Machines have taken the place of men.
If those workers are to be employed, then they must be employed in activities that bring in external revenue. They must serve tourists or manufacture goods for sale offshore, and in both cases what they sell must be something that others want to buy and can afford to buy. For a time, we produced commodities that people needed: oil and coal, metals, foodstuffs. Ultimately the minerals become depleted, the few remaining become too expensive to extract and sell, and other nations could extract minerals cheaper and could begin producing excess foodstuffs using the mechanization and efficiency developed here. Manufacturing, e.g. value addition, and tourism are what is left. And that need to produce competitive pricing means that our unrestrained capitalism must be controlled. Unions demand more, executives demand more, finance demands more, taxation demands more…but when the demands price the US economy out of the market, no one wins. Union workers are laid off, management sees the company decline toward bankruptcy, finance loses what it invested, there is nothing left to tax. The inflated manufacturing sector drags the economy down with it. Only by requiring readjustment of currencies (i.e., a cheaper dollar vs the euro and yen and renminbi) can this adjustment realistically be made. It’s not unilateral; those other currencies and the nations that issue them are involved, and so this is a government issue that only governments can address. And a consideration to be factored in is that those who hold dollars will see their holdings decline in value. Governments and banks will take major losses if there’s a decline in value of the dollar. What helps our economy harms them.
Currency adjustment affects balance of trade. That trade cited above is the basis for a functional economy that employs those excess workers and that can support a large middle class. Our government is now controlled by a few who are positioned to exploit niches and extract riches from the status quo. But that status quo is unsustainable; it’s destroying the very economy it depends on. Those who once manufactured goods for external sale are now importers and salesmen; few goods go out, many come in. Foreign competitors have been joined by Americans who do the same thing those competitors do, compete with the domestic economy. And money flows FROM the economy, not into it. Instead of employing our surplus labor making goods for export, we now employ foreign workers in foreign nations to do the work and bring the results of that work here. Economically, this is no different from firing American workers and replacing them in our plants with cheap foreign labor. It’s the problem that people cite when they oppose unchecked immigration; but the real job loss is not here, it’s THERE, when the job itself is exported. Exported jobs destroy the middle class. Pressure on the middle class comes not solely from foreign competitors but also now from our own upper classes who have joined the foreigners in putting pressure on rather than sustaining that middle class. The Walton family, despite claiming American citizenship and measuring their billions in dollars, have economically become Chinese. Their economic activity benefits China at least as much as it benefits the US; and of course, it benefits them financially.
The other thing affecting trade balance is the concept of ‘free trade’. This type of agreement effectively removes government from trade and turns all trade decisions over to for-profit entities. In so doing, our inflated economy produces goods that foreigners can’t afford to buy and floods our markets with cheap goods that we can’t compete with on a pure price basis domestically; again, it’s that inflated economy that makes this happen. Regulation of trade is a government function; it’s done by imposing taxes or tariffs on imported goods to slow down the flood of imports that saturates the American market. But no one in government is prepared to do anything except press for more ‘free trade’, without realizing that this means free imports without corresponding exports. We freely buy but cannot freely sell.
Only a robust middle class can support our government. That government has been squeezed and faces further pressure. Middle class people can’t afford private schools for their children, they can’t afford to provide for themselves after they’re unable to work, they can’t afford to pay for expensive healthcare. Our middle class lifestyle actually is subsidized by the government we’ve built. That government needs income to provide these things. That income must ultimately rest on taxation. Borrowing is a short-term solution that is ultimately unsustainable. We are currently approaching that limit of sustainability.
The middle class is being squeezed ever smaller; the upperclass now controls the government that has the power to save that middle class. The mechanisms that provided education and housing and health care and retirement are being destroyed, even as the government that provided them is being destroyed. All wealth now flows not into the middle and underclasses but only to the wealthy, who become wealthier thereby. Government policy protects that wealth.
And so we’ve rebuilt a system of nobles and serfs. The nobles profit by rents, from lands and properties occasionally, but mostly from renting out the money they’ve extracted. They live well not by producing more, but by extracting wealth from rents. They remain wealthy because they ARE wealthy.
It’s not sustainable. Never has been, never will be. The traditional solution is violence, the kind of violence that pushed the American Revolution and the later French one. At some point, the level of unsustainability will reach that tipping point. It’s not here yet, but it appears certain to come.
If I can figure this out, why can’t our elected leaders? Why are they so unwilling to act before a crisis overtakes us, a crisis that we can’t recover from?
And why do we keep putting the venal and stupid and uncaring in positions to control our lives?
The Role of Productivity in the Economy’s Problems
June 10, 2012According to an economist on Bill Maher’s show, economists look at finance, labor, and productivity. I haven’t directly discussed that last, although it’s a part of our economic problem.
Productivity gains have been a part of our economy for centuries, but they really took off in the period of the world wars. Here, and also in other countries, productivity was seen as a weapon to win the wars, and every part of the economy got a boost.
Meantime, labor came to be in short supply because so many men went into the armed services. Even with this lack, even with less capital available for development (government capital was also being siphoned off to buy weapons and pay troops), productivity boomed. I googled a history of shipbuilding during the war years and found this: “In the decade prior to 1940, America’s shipyards launched only 23 ships. In the five years after 1940, American shipyards launched 4,600 ships. San Francisco Bay Area shipbuilders produced almost 45 percent of all the cargo shipping tonnage and 20 percent of warship tonnage built in the entire country during World War II. The war lasted 1,365 days. In that span of time Bay Area shipyards built 1,400 vessels–a ship a day, on average.” Auto manufacturers made airplanes as well as trucks, typewriter manufacturing turned part of their effort to making weapons, and all of them made more in a shorter time and used less labor in the process.
Since that time, innovation has continued. Farmers use machines instead of farmhands; miners use machines instead of miners, and this includes not only deep-shaft mining (boring machines, etc) but also the huge machines that scoop up multiple tons in one pass and load it on huge trucks that require one driver rather than a hundred to move the equivalent amount of ore.
John Henry lost eventually. So did all the other laborers.
With productivity gains, education became more important. Unskilled workers had no place in most industries. And labor became excess. We no longer need large numbers of workers, but I can only provide an estimate: perhaps 60% of our workforce is needed to provide everything we need in goods and services. I tried to google this and found nothing. So I’ll go with my estimate; if you have better data, please share it.
So by my figures, 4 of every 10 workers aren’t needed in the domestic economy. They must provide goods for export, or act as a drag on the economy.
But we aren’t really keeping up with exports when they are compared with imports. Free trade agreements are more harmful than helpful. I’ve written about this before so I won’t rehash it here.
We import; manufactured goods, but also commodities. We have a potentially strong manufacturing sector, but we don’t make full use of it. Our manufactures come from places where labor is perhaps 1/10th the cost of labor here. Only through political control, e.g. tariffs and taxes, can we address this. But the business sector favors the higher profits from importing as compared to manufacturing, and they have extraordinary clout in politics. Politicians refuse to act. For some, influence from management elites combines with simple lack of understanding of the economy.
So: productivity gains reduced the demand for domestic labor, failure of the export process made that labor valueless, and government borrowing propped the economy up so that this was hidden for too long. And now a failure of our education system, coupled with a failure of our politics, has rendered an once-addressable problem critical.
And no one in government appears to understand the problem, much less be involved in devising a solution.
June 5, 2012
I wrote a series of short essays and posted them on the International Mensa Economics Forum. I’ve now collected them and I’ll post them here. There may be some overlap and repetition, but hopefully not too much.
This topic, free trade, has been in the back of my mind for a long time. Two recent reports have revived my interest and cause me to develop my thinking further.
It has recently been reported that US corporations are stockpiling major cash reserves; the theory is that they’re waiting for an improvement in the economy before they invest. Also, at this time the Boeing Aircraft Company is attempting to move the production of their new Dreamliner airplane to South Carolina. There’s a connection here.
A little background: we have two sets of labor laws generally in the USA. They’re set by states, and political systems and attitudes determine which sort of laws exist. …
View original post 2,591 more words
The End of Capitalism?
May 27, 2012This was written as a commentary on a NY Times Article (the quoted portion) but goes much further.
““So many times, I went to the bank and said, ‘What did I do wrong?’ ” said Mr. Moreno, who recently had to lay off almost all of his employees, including a childhood friend. “But they just said they wanted their money back.”
Experts say that what happened to Mr. Moreno is happening to small companies all over Spain, as many of the regional savings banks that such businesses once relied on are being eliminated or swallowed up, in a series of steps intended to deal with the hundreds of billions of dollars in bad loans from the real estate meltdown.
Whether the strategy is working remains an open question. Moody’s recently downgraded more than a dozen Spanish banks, including the two largest, and on Friday, a major bank warned that it would need an additional $23.9 billion in aid, far beyond what the government estimated when it seized the bank this month.
But experts say there is little doubt that the loss of credit is hurting smaller businesses, contributing to Spain’s troubles by raising unemployment and cutting tax revenues, making it harder to bring its budget deficit down to manageable levels. The credit loss hits particularly hard in Spain, where more than 60 percent of the economy, and 80 percent of the jobs, come from small and medium-size companies. More than 500,000 small businesses have shut down in the last few years. “
As Spain goes now, so perhaps go we in the future.
This is all part of a global system of financialization, where money and how it’s managed and applied becomes more important than any of the other subsystems we use in modern society to organize ourselves. Money is seen as more important than the production of goods and services, and managing money is more important than managing production, and people who do this are therefore more important than others who keep society going.
Something like this, where one subsystem of the whole came to be considered more important than the others, resulted in destruction of past social systems that were once considered the best. It happened to earlier systems of organization, feudalism for example, it happened to communism, and this may be the process which will in turn destroy capitalism, the idea that only capital matters among the several subsystems that are a part of our society.
So what brought this on? I was thinking about an exchange between son Patrick and myself regarding Romney’s record. I thought about Bain Capital and what they did to gain money (I won’t call it earned; they were exploiters, not earners) and their role in the economy.
Consider a company. They may be half-a-century old, organized in the late 1900’s. An entrepreneur may have started small when he realized that he couldn’t buy widgets of the type he wanted, so he began to make them and sell them. After a time, he hired others, taught them to do what he’d done, and began managing. His business grew; perhaps widgets went out of fashion and he began making something else. At some point he came to realize that to expand further, he needed money now. Enter capital. Borrow, pay back principal plus interest from increased economic activity. Hire more workers. Make more money. Repeat as necessary.
But there has now been a change. That early entrepreneur knew all the people who worked for him. He talked to them, they talked to him. He understood that management can only manage if there are assets, including people. As the company grew, this changed. Perhaps the workers unionized. Now the manager only talked to union reps. It was all very dehumanizing; workers could be laid off for any reason. Their work had built the company, as that first manager knew; but now they were assets only. Investors came in and put money into the company in return for part ownership. Stock was bought and sold by people who knew nothing about the company and didn’t really care so long as investments were profitable. If they lost confidence in the investment, they sold.
For Romney and Bain Capital, this was an opportunity. They acquired control of the company. They could then lay off people, sell off assets of the company, take the profits, leave. If they laid off a worker who had been at the company 30 years, from the age of 20 perhaps, too bad. Only capital mattered, only finance, only profit. The 50-year-old worker, too old to find another career but too young to retire…that was his problem.
What does an employer owe to a worker? If you agree to employ someone for a day, or for a week, and pay them an agreed upon sum, then the agreement can end at that time. The agreement is not exploitative on either side.
But what if you employ someone for 20 or 30 years? Such employment is always exploitative, because the employer plans on making a profit from the labor of the employee. There is a tradeoff in salary and benefits for this; but at the same time, over long periods of a relationship, of more. The employer has now taken most of an employee’s productive life, frequently the best and most productive part of it. What responsibility does the employer have to the employee now?
Under unrestrained capitalism, under financialization, the employer recognizes no responsibility at all. People aren’t people now, they’re only corporate assets, to be discarded when they’re presumed to be less profitable.
How could Bain profit? They might, for example, lay off the design section. Design is only necessary if you’re planning to manufacture new products. If you’re going to gut the business, you don’t need designers. Or you could begin importing goods and close down production entirely. The company now is a hollow shell, no longer manufacturing, only buying, marking up, and selling at a higher profit with the same old brand name. And profits soared, and Bain could now sell out at a profit and move on. And pocket millions.
Capitalism, and financialization. All good; all driven by greed. Perhaps a greedy union had even contributed to all this by demanding more and thereby weakening the company (prices of products were forced up and the products became less competitive) so that it became a target for Bain. Investor greed caused them to sell off in search of more profitable investments. The target company might even have been somewhat profitable before Bain acquired it; but in search of money, and driven by greed, Bain and the others like Bain bought in and through capital management gutted the company.
But the greater tragedy played out as this happened across the economy. All those laid off people; no longer producing, earning, spending; now they’re collecting unemployment. The economy began to collapse. People couldn’t pay mortgages, couldn’t finance new cars.
And it’s happening world wide. Spain, and in the US.
Are we seeing the collapse of capitalism as a system for organizing ourselves economically?
Jlknapp505's Blog 