Archive for the ‘FINANCE’ Category

The Tyranny of Debt

May 7, 2015

“(T)he United States waged a long war upon the ground, that governments are instituted to secure, and not to bestow, the freedom of property.” John Taylor, Construction Construed and Constitutions Vindicated, (1820), Sec. 1.

“To live securely happily and independently is the end and effect of liberty… All men are animated by the passion of acquiring and defending property, because property is the best support of that independency, so passionately desired by all men… as happiness is the effect of independency, and independency the effect of property; so certain property is the effect of liberty alone, and can only be secured by the laws of liberty; laws which are made by consent, and cannot be repealed without it.” Thomas Gordon, Cato’s Letters, No 68, (1721).

 

Against Exploitation

“Private property is the bulwark protecting the individual against exploitation by others,” Herman E. Daly wrote in Beyond Growth. “A property owner has an independent livelihood and need not accept whatever conditions of employment are offered.”

Indeed, Daly taps into the very essence of private property with these sentiments. If there is one single element of Marxism that presses the hardest against the individual’s freedoms, it is the question of property. While it is true that in a perfect world – wherein everyone’s sincerity of altruism would be above question – a society based on communal property may indeed be a workable framework.

But this is not a perfect world, and as sure as the sun rises in the east, there will always be those individuals who would eye the control of communal property as a means to power. In fact, we find in history that state control of property defines every major establishment of communism in the world. And while contemporary Marxists will contend the communism of the USSR and China does not represent “real” Marxism, it is fair to level these criticisms against Marxism until such time its followers show us a society in possession of a complete sincerity of altruism.

It is for this reason, and others, that the tenant of private property continues to hold in free societies, at least for the foreseeable future. But there is another insidious threat to private property, one that Daly did not recognize in his statement above (but does so elsewhere in his works), and that threat is indebtedness.

The Big Lie

Today, “free” societies everywhere are populated with a large number of home and property owners, but only a small percentage outright own this property lien free. Almost all of it has been purchased with the help of a mortgage. And within this reality rests The Big Lie, that is, we live on the illusion that we are “homeowners.” Yet, unless we hold title to our property lien free, it is very difficult to align this illusion with reality. And so, to tap Daly’s passage again, encumbered homeowners are forced to “accept whatever conditions of employment are offered.” (more…)

Profit Maximization is Self Annihilation

April 21, 2015

“Some states (i.e., nations – ed.) have lost their liberty by particular accidents: But this calamity is generally owing to the decay of virtue. A people is travelling fast to destruction, when individuals consider their interests as distinct from those of the public.” – John Dickinson, Letters of a Pennsylvania Farmer, 1768

 

Profit maximization is self annihilation or, PM = SA in economese, should one feel the need to mathematize the phenomenon, but profit maximization first emerged not of mathematical modeling, or validated by empirical evidence, but by commentary that tickled the vice of greed.

In 1970, Milton Friedman wrote an article for The New York Times, “The Social Responsibility of Business is to Increase Profits.”

And with that commentary, Friedman kicked off one of the most singularly damaging ideologies that would go on to send the global economy over a cliff.

In this writing, Friedman argued for the singular focus of business to be profits. This myopic view of business endeavors completely ignored the negative externalities that could unfold from such a concentration and, being an economist, Friedman should have understood the concept of negative externalities.

No doubt he did, but only in areas of economic theory that supported his ideology. That’s the beauty of neoclassical economic theory, the orthodox teachings of most economic departments today: With its mathematical elegance and a priori thinking, one can make neoclassical economic theories say anything one wants. For the uninitiated, such theories appear “scientific” thanks to the abstruse mathematics. And while the mathematics provides a patina of science, in fact neoclassical economic theories are diametrically opposed to sound scientific endeavor, as a conclusion is assumed before a hypothesis is empirically tested.

And that is exactly what Friedman does in this perennial favorite of C-suite management: he assumes the conclusion, otherwise known as “begging the question.”

Ignored in his argument is that a singular, obsessive focus on profits completely discounts the reality that profits are a means to an end, not an end unto itself.

The ultimate goal of business – yes, and even economics – is social welfare. Business and economic institutions reside in a society to serve the needs of that society’s individuals, its citizens.

For those in the audience who are thinking, “Uh oh, here comes the corporate social responsibility speech,” or for the lesser minds who enjoy clinging to hyperbole, a case for “socialism,” guess again.

A singular focus on profit maximization not only destroys markets, an economy or other macroeconomic entities, it also destroys that other twin-obsession to profits, “shareholder value.”

(more…)

Decentralizing economies.

December 3, 2014

Over Thanksgiving break, a vandal scrawled the following graffiti across an exterior wall at Indiana University’s Kelley School of Business:

“Fuck Capitalism.”

It may be a convenience for a graffiti artist to use “capitalism” as a monolithic term – just as “socialism,” “communism” or “anarchism” are treated in the same fashion – but it is indeed small minded to maintain this monolithic treatment within serious discussions. There is – surprise – more than one type of capitalism, and the time to discuss the alternatives has arrived, now.

The attempt to erase the "Fuck Capitalism" sentiment, added to the Kelley School of Business in November 2014, was in vain.

The attempt to erase the “Fuck Capitalism” sentiment, added to the Kelley School of Business in November 2014, was in vain.

The arguments against (centralized) capitalism are numerous, and the examples of the dysfunctional nature of centralized capitalism – as it has emerged over the past couple of centuries – are readily found. But I remain supportive of (decentralized) capitalism because I believe there is something intrinsic in the nature of humanity that desires recognition for one’s efforts.

Sadly, this “recognition” has been translated by centralized capitalism to mean one’s salary, but that is a very empty translation. We can live in trendy neighborhoods, drive expensive vehicles and join the exclusive clubs but at the end of our lives, on our deathbeds, we realize we were just another anonymous gnat on the ass of the universe. The world, at large, does not know us, appreciate us, or can even comprehend what in the hell we actually accomplished while manipulating spreadsheets on our computer monitors. Centralized capitalism – with the exception of the very few – renders us anonymous, insignificant, and isolated.

Decentralized capitalism holds the potential to render us valuable, as being significant, as holding meaning… within a local community, within a local economy. I may be nothing more than the village butcher, baker or candlestick maker, but I provide an invaluable service to the local residents of my neighborhood or village. I am recognized for my work, and the value I bring to a community. Such recognition, value and sense of dignity cannot be bought with a paycheck. (more…)

Money in Politics – Innovation and Employment Suffers

December 10, 2012

After the Federal government’s debt-ceiling debacle in the summer of 2011, I posted a very brief white paper outlining some suggested reforms, aimed at reducing the massive dysfunctionality that seems to have taken root in D.C. One of those suggestions involved campaign financing:

“All organizations, profit or non-profit, should be banned from donating to campaigns; only individuals should be permitted to donate to campaigns, $1,000 maximum per individual per year.”

I was simply interested in returning good governance, and my proposal stemmed from a realistic assessment of the Supreme Court’s Citizens United decision: If we cannot take exception with corporations’ right to free speech – based on a legally thin contention of a corporation’s personhood – then we should simply ban all organizations from donating money. While this proposal will take out the good along with the bad organizations, this should allow it to withstand legal challenges, since all organizations are banned equally. This proposal will serve two purposes; 1) remove a major source of money from the U.S. political system along with its corrupting influence and 2) drastically decrease the cost of funding campaigns, thus allowing more third-party candidates to mount credible campaigns, and keep our elected officials back at their desk, doing their jobs rather than spending most of their time raising money. The latter, of course, operates under the assumption that extravagant campaigns will disappear, and so will the need for large war chests. (more…)


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