Guest Post: What Made America Great Is Now Killing Her!

Tyler Durden's picture

Submitted by Gordon T. Long

What made America great is now Killing her!

What made America great was her unsurpassed ability to innovate.  Equally important was also her ability to rapidly adapt to the change that this innovation fostered. For decades the combination has been a self reinforcing growth dynamic with innovation offering a continuously improving standard of living and higher corporate productivity levels, which the US quickly embraced and adapted to. This in turn financed further innovation. No country in the world could match the American culture that flourished on technology advancements in all areas of human endeavor. However, something serious and major has changed across America.  Daily, more and more are becoming acutely aware of this, but few grasp exactly what it is.  It is called Creative Destruction.

It turns out that what made America great is now killing her!

Our political leaders are presently addressing what they perceive as an intractable cyclical recovery problem when in fact it is a structural problem that is secular in nature. Like generals fighting the last war with outdated perceptions, we face a new and daunting challenge. A challenge that needs to be addressed with the urgency and scope of a Marshall plan that saved Europe from the ravages of a different type of destruction. We need a modern US centric Marshall plan focused on growth, but orders of magnitude larger than the one in the 1940’s. A plan even more brash than Kennedy’s plan in the 60’s to put a man of the moon by the end of the decade. America needs to again think and act boldly. First however, we need to see the enemy. As the great philosopher Pogo said: “I saw the enemy and it was I”.

THE  PROBLEM IS NOT CYCLICAL, IT IS SECULAR.


 The dotcom bubble ushered in a change in America that is still reverberating through the nation and around the globe. The Internet unleashed productivity opportunities of unprecedented proportions in addition to new business models, new ways of doing business and completely new and never before realized markets.  Ten years ago there was no such position as a Web Master; having a home PC was primarily for doing word processing and creating spreadsheets; Apple made MACs; and ordering on-line was a quaint experiment for risk takers.  The changes in ten short years are so broad based that a whole article would be required to even frame the magnitude of the changes. What needs to be understood is that this is precisely what is destroying America. Let me explain.

The process of Creative Destruction is the essential fact of capitalism. It is what capitalism consists in and what every capitalist concern must survive within. America as the birth place of modern capitalism was rooted in a clear understanding of this process and the indisputable reality of survival of the fittest.

"CREATIVE DESTRUCTION: … the competition from the new commodity, the new technology, the new source of supply, the new type of organization – competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives”.

Joseph A. Schumpeter

From Capitalism, Socialism and Democracy (New York: Harper, 1975) [orig. pub. 1942], pp. 82-85:

In 1997 prior to the ‘go-go’ Dotcom era unfolding, America’s unemployment was less than half of what it is today at 4.7%.  At that time the US added 3 Million net jobs which reflected the creation of 33.4 Million new positions while obsolescing or cutting 30.4 Million old  positions. Job losses occurred in old vocations such as typists, secretaries, filing clerks, switchboard operators etc.  Hired were new occupations such as C++ programmers, web masters, database managers, network analysts etc. 



As the chart above illustrates however, the additions have fallen off precipitously while the job losses have stayed relatively flat. In 2009 job  losses were 31.0M and only slightly larger than 1997 which would be expected with further internet application development. New job creation however was only 24.7M which is dramatically lower than the 33.4 in 1997.

The result is 40.8M people on food stamps in the US, as seen below.

http://home.comcast.net/~lcmgroupe/2010/Tipping_Points-2010-Articles-Innovation/08-05-10-Food-Stamp-Growth.jpg

This net creative destruction chart reflects closely the US economic output gap.

Employment levels at 58.5% are now near 30 year lows and do not show any signs of significant improvement. This is despite nearly $13T in artificial stimulus to restart an economy that appears to refuse to restart or unarguably is minimally a ‘jobless recovery’.


Once again Tyler Durden and the folks at Zero Hedge did an excellent analysis of the July unemployment numbers by correctly adjusting for shifts in workforce participation. It is surprising that no one other than Zero Hedge understands how to properly assess the monthly labor rate. Their analysis, using government BLS numbers, is shown below and reflects an unemployment rate of 14.7% adjusted for workforce participation.



Is it any wonder Christina Romer as head of Obama’s Council of Economic Advisors resigned the day before the July Non-Farm Payroll numbers were released, when she once again would have had to spin and justify the unemployment rate to the media?

ITS STRUCTURAL, NOT THE FAMILIAR CYCLICAL BUSINESS CYCLE

All the preceding graphics have been labeled with a December 1999 vertical bar. In every instance it shows a major cusp occurring near that point in time. The dotcom market bubble finally popped 3-4 months later. There are anomalies that create some distortions after this period, such as the explosion in both the residential and commercial real estate sectors that temporarily fostered massive hiring from brokers, agents, contractors, trades personnel, developers, etc. Much of this has subsequently been pulled back.



WHAT HAPPENED?

The short answer is the US is no longer innovating fast enough. Innovation needs to sustain its exponential growth to absorb the creative destruction job losses.  It no longer can. Mathematicians would have argued some time ago this was a certainty to happen, but precisely when this would occur however was the unknown.

We have been cutting Research and Development expenditures in the US dramatically. I warned of this in 2009 in my article: America, Innovate or Die! It has only gotten worse since.  Corporations may be reflecting minor cuts on their balance sheets in this area but it obscures the fact that the money is increasingly being re-allocated and spent offshore. Jobs and innovation follow R&D.

The Financial Times in the UK featured this global analysis to the right, which to the best of my knowledge never saw the light of day in any US publication. The rate of growth in research papers in the US is not keeping up.

Total researcher share is shrinking and falling further behind as the chart below demonstrates.


Even more alarming is the number of US patents being filed. Other than IBM and Microsoft the numbers are stunningly small. It needs to be fully appreciated that both IBM and Microsoft now have large numbers of major world class research facilities outside the US and the US filings numbers below are likely reflecting this (see America, Innovate or Die!).


“The numbers of engineering graduates in China and India far outpace that of the United States. In China, it is 600,000; in India, 350,000; in the United States, 70,000, and many of these are foreign students who, more likely than not, will be returning to their home countries.”

Senator Edward Kennedy  -- 10-25-05

Testimony - Senate Record

Let me relate a personal story if I may. In the early 90’s I was a Vice President of Engineering for a S&P 500 corporation in Massachusetts. This engineering facility in Massachusetts consisted of over 900 engineers supporting an enterprise with 28 facilities and over 10,000 employees. Today it is all gone. The towns in the immediate area of this enterprise also had major facilities of two other S&P 500 corporations. They are also both gone. There were companies in Massachusetts at that time by the name of DEC, Data General, Prime, Wang to name but four, that employed hundreds of thousands of highly skilled personnel. They are likewise gone. So where are the jobs to replace them?

Communities in this area now reflect those who have temporarily found jobs as a result of the over building of retail stores and malls during the last ten years in almost every available piece of land that could conceivably be built on. I walked into yet another Home Depot and found one of my former employees working in the electrical department who happened in the ‘90s to be one of the world’s best power supply design engineers. He told me there was one other with him from his old department. Both as I recall had Master’s degrees in electrical engineering.

The new technology in the area is now Bio-Tech. These new Bio-Technology corporations however only employ in the 5 and 10 thousand range of employees. Not the 100s of thousands that the four corporations I mentioned above once did.  These Bio-Tech players additionally have an extremely high percentage of Master’s and PhD level employees. What about the high school and/or college grads?  Few need apply. I personally see this demographic lined up for Dunkin Donuts application forms each morning while relaxing after my morning jog. More also out of work PhDs due to reduced teaching positions is not the solution. This is the state of affairs in R&D that our politicians don’t see nor fully comprehend.

IS IT GOING TO CHANGE?

I told you the above personal story as a way of leading into one of my primary goals in the early 90s as VP of Engineering of this particular operation. It was something called Cycle Time reduction. This is the process of shortening the time to market of products from concept to revenue generation. The chart to the right shows a graphical representation of this.

We were so successful at reducing this through computerization such as the implementation of CAAD-CAM-CIM, JIT, Kanban, TQM and a host of other acronyms that we were at levels approaching 80% of the following years revenue being forecasted to be derived from products still on the engineering concept boards. Margins and room for error were absolutely razor thin. The strategy was like the old three legged race at the community picnic. The faster some tried to run the more they tripped themselves up. It was a strategy where speeding up the process left unprepared competitors with a fatal competitive disadvantage. The fight for market share was intense. Though I had moved on, when the internet arrived and supply chain management was reinvented and overlayed onto the previous advancements, the enterprise was rapidly shuttered and moved to the far east. It is one, of no doubt, thousands of similar stories in America.  America’s ability to innovate and adjust to that innovation killed this American based organizational unit. The highly skilled, intense and motivated employees innovated themselves out of a job.

THE LESSON IS THIS

America used the rate of innovation as a foundation for its competitive advantage. Like the tortoise and hare however, the US can no longer maintain this rate and hence the advantage has temporarily shifted to the previous followers who are presently less impacted. America must once again innovate and change but now in a manner more fitting for the realities of this new decade. 

The product today is no longer the widget that comes off a manufacturing line and is stuffed into a box to be shipped to distribution centers for sale. The product today with short product life cycles and hundreds of new products is Intellectual Capital. Intellectual Capital is the knowledge of knowing how to do something. How to design and build something – not the actual ‘doing of it’. Until America forces corporations to account for Intellectual Property properly, the multi-nationals will continue to fully exploit this tax loophole. Even worse, America’s innovation will continue to be used against her. The cost of manufactured products today are less and less in labor & production and increasingly in materials and innovation. Capital is likewise shifting to be more intellectual versus financial. A major overhaul of accounting standards must be driven by our legislators or it will not be changed. It is not to the multi-nationals advantage to allow such a debate and shift to occur.

Unfortunately our law makers allowed this American asset to leave the US unrestricted, untaxed and without recourse. It was America who knew how to design and build a PC. It is fine for the product to be built where it is cheapest as part of free trade, but only when the cost of the knowledge or Intellectual property is priced in. Amortization of research & development must include the Intellectual property value as well. The Intellectual Capital was an American asset, not a corporate asset which left. Massive royalties should now be flowing to the US taxpayer today which would offset many state and local services cuts. Instead we are left with underfunded corporate legacy pension plans that the government in the years to come will no doubt pick up the tab for by likely hyperinflating the currency. Though it is too late to revisit the horrendous US failure of public policy in the past, it is not too late to prepare for tomorrow.

A STARTING POINT FOR CHANGE – Gordon’s Top Ten

As I said in the beginning the US needs a bold new “Marshall” plan to fight the new destruction of creative destruction. Here is a starting point for public debate:

1 – If we can spend $165B bailing out AIG, then we can spend $100B (4 years of college @ 50K/year X 500,000 students) and guarantee everyone in America a college education to compete in the 21st century. Parents will start to spend immediately instead of presently being almost financially paralyzed with skyrocketing education costs.

2- Obama says we need to be leaders in Energy. OK. Where are the programs? Where are the 50,000 new university teaching and research positions ( 50,000 X 75K = $3.8B)? At $3.8B this is a rounding error compared to the banks TARP program.

3- 99% of all jobs in America are created by small business with less than 500 employees. Stop treating them like they are last on the ‘to help’ list after the banks, financial institutions and S&P 500 but first on the taxation list. S&P 500 paid almost net zero taxes, reduced US hiring, yet received the bulk of the governments bailouts. Small business is the golden goose that every administration seems determine to cook. What has the government done for small business other than burden them with Obamacare and the potential removal of the Bush tax cuts (most small business are directly affected proprietorships)? If you can’t immediately recite what the government has done to help small business as THE US employer (versus what they have done for the bank and financial lobby), then you understand the problem.

4- The number of Government employees, in addition to their salaries and benefits (federal, state & local) can best be described as out of control. According to a new study from the Heritage Foundation, U.S. government workers earn 30 to 40 percent more money than their private sector counterparts on average. So, in essence, the ‘servants’ make substantially more money than the taxpayers who employ them. Isn’t the system great? In fact, according to the study, if you add in retirement and health care benefits, the average federal employee now earns nearly twice as much as the average private sector employee.

5- Make Social Security and Medicare financially sound so Americas can believe and budget that it will be there for them. The public will spend and invest if they know they have a nest egg that really exists. The government is fooling no one. Kids learn that Social Security and Medicare is unfunded before their college freshman year today.

The stark reality of the shift from defined benefits to contributory benefits over the last decade is just now sinking in with the US consumer. They now have no retirement like their parents had. Retirement savings is something when added to college costs is leaving them frightened. Worried people don't spend money and when the economy is 70% consumer spending you have an economic crisis.  Political denial and the government attempting to paper it over with policies of extend and pretend are misplaced and will make the inevitability even more difficult to effectively address.

6- When did the American people decide to fund military operations in over 130 countries around the world? With 40.8M people on food stamps, something is seriously out of balance here but there is no public debate thought to be required by either party.

7- The US has no full scale strategic growth programs being initiated by the present administration. We have only financial stimulus or austerity programs. There is a big difference that seems wasted on Washington.

8- Washington and the lobbyists that control it have taken control of our government. Obama campaigned to stop earmarks which ranged in the area of approximately 10,000 annually prior to his presidency. In his first year they increased to the 11,000 range. This is not the change he promised as more pork increasingly flows.

9- For those that actually read it, Obamacare is not a solution for healthcare. It is a stealth income tax we will all soon get hit with. The Dodd-Frank Act is not a fix to what caused the 2008 financial crisis but rather is the most dramatic shift in centralized US government planning and control since the 1930’s. Both these bills were over 2000 pages compared to landmark bills historically being 25 – 45 pages. Indications are that few of our elected representatives actually read either of these documents. They simply voted party lines. As Sarbanes-Oxley dictates, CEOs must sign their corporate 10-Q reports to the government and are liable for it. It is a felony not to. Every elected official should also sign that he or she has personally read the entire act prior to being allowed to vote on it or it likewise will be a felony.

10- The Supreme Court recently over-turned major elements of the Campaign Contribution Reform bill. Washington and the media have now gone completely mute on this subject as politicians scramble for mid-term campaign money for media expense coverage. Maybe our elected officials should vote with the same urgency on this matter as they are presently on giving billions of ‘candy’ away almost daily to every financial disruption, state budget problem, unemployment benefit problem or sign of increasing housing default and foreclosure rates during this run up to the fall elections.

I could go on, but I think you get the message. America is afraid to be bold! We have no strategy, no plan, no funding and no leadership! In my days as a VP of Engineering you were fired for just one of these shortfalls.

Maybe we the public need to start doing some firing!

“The biggest political change in my lifetime is that Americans no longer assume that their children will have it better than they did. This is a huge break with the past, with assumptions and traditions that shaped us.”

Peggy Noonan: America Is at Risk of Boiling Over

Feature Wall Street Journal Op-Ed article - 08-07-10

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New_Meat's picture

5000 Year Leap--Bitchez!

- Ned

geopol's picture

Nice post TD,,but,,

 

This was America.... When a whale could place a two million $ bet with no ss number....

 

http://www.youtube.com/watch?v=l6L8ansZhk0&feature=related

GIANTKILR's picture

Nice, but you all fail to realize that this is all going as planned!

geopol's picture

As planned??? I think I have a clue!!! Maybe you haven't observed my posts,,could be, as there are a tremendous amount of new arrivals here.. 14 weeks 1day..

Cheeky Bastard's picture

^ This. Too bad most here dont know who you are geopol. A lot of newcomers who really dont have the slightest fucking idea about, well, anything. You did a superb job in keeping us old-timers up-to-date with your posts over the last year. 

geopol's picture

CB,,,Forget about that....How are you doing? my comrade? I'm in the process of keeping tabs on Christopher Hitchens my good friend,,,He is amazing in fortitude.... as are you.. in the end we all go together...

When I see you,, it's my treat..Glenlivet,, tilt the glass and bring it back brother....

 

GIANTKILR's picture

Dumbass! I have been here for some time. I decided to stop lurkin' and star shurkin' because things are getting serious. TROLL!!!!

 

(Not directed at Cheeky....you be old school ZH)

Frank Owen's picture

Let us know when you figure out who that dumbass troll is. "star shurkin'" wtf.

geopol's picture

As I indicated, 14 weeks 1day..of exposure...There is promise for you..my private contention...

GIANTKILR's picture

Make that 14 weeks 2 days! Long enough to recognize the elitist snots on a freakin' blog!

Marla And Me's picture

If you don't know who geopol is, then you haven't been around long enough.  This is getting to be ridiculous.  If you see Howard, Miles, CogDis, Cheeky, Dead Head, B9K9, MinnesotaNice, MsCreant, Project Mayhem, Chumbawumba (RIP), Gordon, Assetman, (and even Leo), just to name a few, please pay your respects.  You might actually learn something. 

Heck, he just gave you a massive clue as to whom you are actually dealing with below.  You are making yourself look like a fool.  We'd like to keep the likes of geopol around ZH.  Please don't make him regret his decision to post here.  Thanks for all your hard work geopol.

geopol's picture

Marla And Me

My pleasure,

Frank Owen's picture

I have wondered for a while why you keep using geopol instead of your initials at least... Most of us read at least one of your books before stumbling across ZH.

geopol's picture

Now you know... trekking to ZH through my books is the first step in the recovery..

 

geopol=geopolitical not WGT....Do you have any idea what it's like to fight the NWO??

Be in constant vigilance, like an owl... circling you head not to get shot...you must think that posting here is a mild joy to push info for the masses???.. I have a price to pay,,, not with your permission,,,but I put myself and my family in jeopardy in this process..

 

WGT

Now you know....Feel better???

 

 

Frank Owen's picture

lol, I've known for a long time and read STC about 5 years ago. I appreciate your work, and respect you - but your cover here was blown long ago.
"you must think that posting here is a mild joy to push info for the masses???" ouch.

geopol's picture

Frank,, please don't think your not exposed here...ZH is no game,,this is now being regarded by the DC oligarchy in concert with Wikileakes,, we have a place to jump from..if the landing is not to your liking then proceed to the exits... My sense is that you might hang in there until we win....God be with you..

As I said ZH is no game..

Clancy's picture

I don't know who you are but you're scaring me.

spekulatn's picture


WGT

Now you know....Feel better???

 

World Golf Tour, huh. Nice to meet you sir. Love the game.

You post some fascinating stuff, geopol. Truly.

Now, who the fuck is cheeky b?

bookwurm's picture

Hahahaha,stroll thru the archives....

Sudden Debt's picture

1 out of 300 people in America has a security clearance and works in a intelligence department.

http://www.washingtonexaminer.com/opinion/blogs/beltway-confidential/the-washington-posts-series-on-intelligence-contractors-is-pretty-good-98847909.html

If you look into this link, you see all the security departments in America. And to be honest... THAT'S A LOT! And companies like google who store all your private information, cell phone opperators... are not included in the list.

http://projects.washingtonpost.com/top-secret-america/network/#/single/functions/training/

This is also a very interesting link. It shows where all these departments are locaded. What raises the most questions is Colorado

http://projects.washingtonpost.com/top-secret-america/map/

And when X marks the spot:

http://maps.google.be/maps?hl=nl&q=meredith+colorado&ie=UTF8&hq=&hnear=Meredith,+Eagle+County,+Colorado,+Verenigde+Staten&ll=39.440402,-106.716642&spn=0.011965,0.02738&t=h&z=16

 

That shit just looks WEIRD! I make a joke. But the X means they took out that picture of the place. Someting they don't want us to see? :) So whoever lives over there I WANT TO KNOW WHAT IT IS!

 

CONCLUSION:

NOTHING, and I mean NOTHING happens without government officials having something to do with it.

It's like the intelligence networks in the US are becoming more and more like the KGB in old Russia!

Now the washington post was going to publish US spending reports on US intelligence offices, but weeks later, I haven't seen any. Coverup?

 

tgatliff's picture

It would seem you know little about he intelligence community. These guys are equally incompetent as our politicians. Yes, They do hire allot of consulting firms to build their networks, and extract massive amounts of information. Internally, though, only about 5% can put their pants on straight in the morning without assistance.

LePetomane's picture

Great.  Now we have to buy the student vote.

fearsomepirate's picture

Um, no, we're not being killed by creative destruction.  We're being killed by two things:

1. A credit expansion-driven boom that went bust-o.

2. A political class that is using the bust-o crisis as an excuse to stamp the government's boot firmly on the throat of capital.

Since the basis your analysis is bunk, so are your solutions.

1)  Even more federal money shoveled into higher ed is a horrible idea.  Graduating BAs already can't find jobs, showing that economic demand for your typical BA is about nil.  Paying for more BAs is the equivalent of China building cities that no one will live in--a huge waste of resources and an economic catastrophe waiting to happen.

2)  Did we become leaders in IT via government programs?  No.  We became leaders in IT because the industry appeared and expanded before the government could get its shit in gear and strangle it.  The way to become leaders in energy is for the government to stop strangling the energy industry with regulations and subsidies.  Assuming that we ought to be. Obviously, it's not economical for us to be the leader in every industry.  Division of labor, bitches!

3)  Why the hell should the government be "helping" anyone?  Government help for one man means government hurt on another man.  The best way to help small businesses is de-fuck the tax code and end corporate subsidies and regulations that squelch start-ups.

4) No argument.  Fire the entire DOEnergy and DOEducation, just for a warm-up.

5) How about we end both?  The programs have always been Ponzi schemes built on lies.  Dishonest rubbish belongs on the ash-heap of history.

6)  No argument; I agree. Let Europe fund its own defense and stop gloating about their awesome social programs.

7)  Full-scale government-managed strategic growth is a one-way street to economic hell.  How'd the government-managed growth in the housing market pan out?  Green energy in Spain?  How's housing going in China?  Government-managed growth by definition means anti-market decisions, it means the government picks winners and losers.  It means the government robs Peter to boost Paul's profits.

8)  Yup, Washington runs on bribes.

9)  Yup.

10)  Free speech, bitches, but what does that have to do with the economy?

Monkey Craig's picture

Well said. I think this situation 'corrects' itself via a French revolution-like environment where Dennis Hastert characters get strung up.....tall trees and short ropes. Think of all the people that absolutely hate some of the previous presidents or even the current one (I'm agnostic re: politicians - they are whores at birth).

These problems don't get solved at a voting booth. If you think they do, then watch the HBO special Hacking Democracy. The entire economy is rigged. The middle class took the bait and swallowed it. We'll be lucky to follow the path of Japan. The Japanese had savings. All we have is debt and deficits. We are living in a situation more like the Mississippi Bubble / South Seas Bubble where paper money went kaput and central banks gained massive power. If peak oil, global warming, environmental destruction are as dire as I think they might be, we are so fucked.

Maybe Project Mayhem takes hold?

Seer's picture

"Since the basis your analysis is bunk, so are your solutions."

Pot calling the kettle black?

We're being "killed" because the system has one huge systemic flaw: that it only operates on growth and it's operating on a finite planet.  People who cannot get this fundamental right should not be allowed to comment on anything (other then the fact that they're cluless [or they are trolls for a failing system]).

Thanks for playing!

Monkey Craig's picture

that it only operates on growth and it's operating on a finite planet

are you familiar with the Crash Course by Chris Martenson?  this is his premise for some of his investments, including gold

fearsomepirate's picture

According to Malthusians like you, we should have all gone extinct long ago.  Nice try.

AnAnonymous's picture

Malthus did not write about going extinct.

lost in the usa's picture

Thanks I thought I was nuts. All his cures are coming from an elitist stand point, not common sense.

One of the problems most have on this site is that everything is doom and gloom, not to say that it is not one of the best sites out there but still, not everyone has to grow to the moon and without an all powerful gov we would both grow at a natural rate, not on steroids up to a bust and all have a better life.

If you take out the force of the gov and just make force and fraud illegal and property rights supreme most of the rest of life will work itself out.

Everyone has different needs and wants, those that want to join the rat race and grow to the moon can, and the slackers could work for whatever it took to support themselves and still live a great life just because of general progress.

When you add the gov in constanatly raking off the top and growing faster is when we come up with the must grow scam just to keep the beast feed.

 

stollcri's picture

"If you take out the force of the gov and just make force and fraud illegal and property rights supreme most of the rest of life will work itself out."

If property rights are supreme, then innovation will eventually stop (I think this is one of the arguments against communism where property rights are supreme ... the people own everything). Companies will sit on their existing property rights, it is much cheaper than innovation. Capitalists, not innovators, like strong property rights because it gives them the ability to buy technology that they are not themselves capable of producing and profit from it indefinitely. Property rights are limited so that people cannot rest on their laurels, it forces innovation that is good for society.

fearsomepirate's picture

In communism, there are *no* property rights. 

You know what happens to companies that sit on their existing property rights?  Disruptive competitors destroy them.  While not innovating is certainly cheaper than competing, it doesn't win new customers, or, in the long run, keep the existing ones.  People's needs and desires are constantly in flux, which is why the equilibrium that the old classical economists of the 18th century predicted never actually happened.

WaterWings's picture

I hope you live in my current FEMA region so when this whole thing Balkanizes I'll have some solid hope for the future.

Great posts.

lost in the usa's picture

Sorry private proerty rights not the fake ones that are taxed away.

 

Sean7k's picture

+10 This piece is a piece of crap. 

The government is the PROBLEM, not the SOLUTION.

You don't spend money you don't have unless you can show a return on investment.

Ask all the tin horn dictators we supported and thrashed in the third world with "development" projects how that worked out.

Schumpeter? Please.

The Federal Reserve and fiat money are the cause of EVERY economic problem in America today. Eliminate the FED and create sound money and you will create a sound economy.

Minimize or eliminate government and you will create a sound economy.

Oh yeah and as an added bonus: Liberty!

 

DudleyDoRight's picture

Minimize or eliminate government???  Hmm...going back to the 1890s, is that margarine really margarine?  Howz about present day: Lead paint on your kids toys???  What about fracking the marcellus shale with a solution of the most toxic carcinogens that seep into groundwater ruining wells for miles around.

No.  These examples demonstrate that the market needs the government because the market will seek to externalize costs, with the result that goods are overproduced because of the subsidy. Only governmental power has a chance at preventing cost externalization. The trick is to find the right balance.

lost in the usa's picture

What we have now when we incorporate and walk away after the problem, The gov lets you expand to infinity if you have to protect your own shit and get big there is a natural point somewhere where growth stops and you spend more time protecting you stuff where as with the gov they do it for you and the poor ones pay for it.

Lead paint that the gov let in, toxic waste from all the nuclear testing, FDA drugs that cost 500M, I would rather take my chances with consumer reports.

lost in the usa's picture

Open your mind and try a different thought process, take a class and see what you can learn or unlearn.

http://mises.org/daily/4616

DudleyDoRight's picture

So I went to your website and read: "The vision of a truly free society, in which no one can legally violate the property rights of anyone, is one of the most exciting topics in libertarian analysis."

Let me ask, if I say you can't frack for natural gas on your property b/c your fracking will ruin my groundwater, am I violating your property rights? IOW, whose property rights prevail, yours to frack for gas or my property rights to clean water?

Love the junk, btw.

lost in the usa's picture

Did not say I had all the answers but the ones we have right now are not working, I frack and mess up your ground water I am violating your property rights which are possibly insured in a free society or I have enough energy to clean it up cheaply, or there is a covenant against it.

Sorry not the expert but the protection we have is not worth the waste and freedoms we lose.

stollcri's picture

"We became leaders in IT because the industry appeared and expanded before the government could get its shit in gear and strangle it."

Didn't DARPA fund the research that led to the Internet? What company would have taken the huge risk required for it to be implemented? Just like capitalists take roads for granted, this infrastructure would not exists without government. Furthermore, if this was left to companies (e.g. AT&T) then there would be not internet as we know it today ... the reason we had to pick up a receiver and place it on a modem in the early days of computing was because AT&T would not allow integrated modems (or answering machines, etc.) on its network. If we let companies rest on their patents then they will not innovate and they will inhibit innovation in the competition.

It is easier to inhibit the competition than to innovate, and that is what companies will do without intervention.

fearsomepirate's picture

Defense technology doesn't turn into widespread consumer technology until the government gets out of the way and lets entrepreneurs do their thing.  So yes, the military-industrial complex invented both the digital computer and the Internet, but the technology wasn't going to go anywhere as long as the government exercised 100% control over it.  In other words, there's a reason Apple, Microsoft, Google, eBay, etc aren't government-sponsored enterprises.  But assuming neither the computer nor the Internet would have ever happened without the military is a huge assumption.  The science for a computer was already there, and analog computers were already in business use, so I doubt it would have been put off much longer.  Local networking developed rapidly in business contexts, and it was just a matter of time before national and international networking would have been tackled.  Japanese companies were already working on networked video game machines in the 1980s (Nintendo did some interesting things with the Famicom in Japan).  AT&T's monopoly was a government creation, but even if it hadn't been broken up, history already suggests Comcast would have been happy to jump on the opportunity to make more money from its infrastructure.

Lots of infrastructure is privately built, both in history and today...so I'm not sure what you're getting at with that one.

Patents are government creation.  At least they have limited duration.

Miles Kendig's picture

If federal employees make twice what private sector employees do then why isn't the author a public sector worker since talent follows the money.  I can only surmise this is the reasoning behind the line of folks looking to depart Wall Street and give up their partnerships at GS or MS to work at the SEC or the CFTC.

geopol's picture

His corruption has bounds....//limitations..I feel bad for him..

Miles Kendig's picture

Or perhaps the author is an SEC or CFTC employee that got rejected by the street....

geopol's picture

Fuck the street,,,have ethics or cash in the chips....Who are we talking to?, fucking children?? STREET=SEC,,,,,CFTC=STREET

 

fearsomepirate's picture

Because getting a federal job is about connections, not talent.

Monkey Craig's picture

Where is RobotTrader with the posts of hot chicks that make America great? On a more serious note, what made America great was a government that allowed the private sector to function. Ever since the Fed's creation in 1913, we have been subject to central planning mandarins.

Seer's picture

I agree with the need for RobotTrader's presence, but...

What "made America 'great'" was the fact that it had vast amounts of untapped PHYSICAL resources to exploit, and that as time went along that which it didn't have it was able to coerce from others.

The reentry into the long dive occured in the early 70s when it went off the gold standard AND peaked in its production of oil (resulting in an inverted cash flow from an all-important energy standpoint).

Monkey Craig's picture

Seer - (two things completely unrelated) Let's not downplay the role that freedom played in America's rise. However, right now we are seeing fiscal and monetary recklessness. In fact, my belief is that we are headed full speed towards a currency crisis. This will undoubtedly change the new world order. 

I still think we have untapped resources in the US and Canada...of course these are destructive to the environment and expensive (use large amounts of energy) to extract.