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How To Bring Back Capitalism
"Capitalists seem almost uninterested in Capitalism" is how Clayton Christensen describes the paradox of our recovery-less recovery. In an excellent NYTimes Op-ed, the father of the Innovator's Dilemma comments that "America today is in a macroeconomic paradox that we might call the capitalist’s dilemma."
Whatever happens on Election Day, Americans will keep asking the same question: When will this economy get better?
In many ways, the answer won’t depend on who wins on Tuesday. Anyone who says otherwise is overstating the power of the American president. But if the president doesn’t have the power to fix things, who does?
It’s not the Federal Reserve. The Fed has been injecting more and more capital into the economy because — at least in theory — capital fuels capitalism. And yet cash hoards in the billions are sitting unused on the pristine balance sheets of Fortune 500 corporations. Billions in capital is also sitting inert and uninvested at private equity funds.
Capitalists seem almost uninterested in capitalism, even as entrepreneurs eager to start companies find that they can’t get financing. Businesses and investors sound like the Ancient Mariner, who complained of “Water, water everywhere — nor any drop to drink.”
So businesses and investors are drowning in Fed-sponsored liquidity but are endowed with what he calls the Doctrine of New Finance - where short-termist profitability guides entrepreneurs away from investments that can create real economic growth.
... the Doctrine of New Finance is taught with increasingly religious zeal by economists, and at times even by business professors like me who have failed to challenge it...
His three forms of 'innovation' (empowering, sustaining, and efficiency)...
- "empowering" innovations. These transform complicated and costly products available to a few into simpler, cheaper products available to the many.
- "sustaining" innovations. These replace old products with new models.
- "efficiency" innovations. These reduce the cost of making and distributing existing products and services.
Empowering innovations create jobs, because they require more and more people who can build, distribute, sell and service these products. Empowering investments also use capital — to expand capacity and to finance receivables and inventory.
Efficiency innovations also emancipate capital.
...typically operate in a recurring circle but in their current state, the dials of these three processes are forced incorrectly as "efficiency innovations are liberating capital, and... this capital is being reinvested into still more efficiency innovations" creating fewer empowering innovations.
Empowering innovations are essential for growth because they create new consumption. As long as empowering innovations create more jobs than efficiency innovations eliminate, and as long as the capital that efficiency innovations liberate is invested back into empowering innovations, we keep recessions at bay. The dials on these three innovations are sensitive.
Christensen perfectly analogizes our perspective when he notes:"It’s as if our leaders in Washington, all highly credentialed, are standing on a beach holding their fire hoses full open, pouring more capital into an ocean of capital."
We are trying to solve the wrong problem.
Our approach to higher education is exacerbating our problems.
Efficiency innovations often add workers with yesterday's skills to the ranks of the unemployed. Empowering innovations, in turn, often change the nature of jobs — creating jobs that can't be filled... our leaders are wasting education by shoveling out billions in Pell Grants and subsidized loans to students who graduate with skills and majors that employers cannot use.
There is a solution; it's complicated, but Christensen offers three ideas to seed the discussion:
CHANGE THE METRICS We can use capital with abandon now, because it’s abundant and cheap. But we can no longer waste education, subsidizing it in fields that offer few jobs. Optimizing return on capital will generate less growth than optimizing return on education.
CHANGE CAPITAL-GAINS TAX RATES Today, tax rates on personal income are progressive — they climb as we make more money. In contrast, there are only two tax rates on investment income. Income from investments that we hold for less than a year is taxed like personal income. But if we hold an investment for one day longer than 365, it is generally taxed at no more than 15 percent.
We should instead make capital gains regressive over time, based upon how long the capital is invested in a company. Taxes on short-term investments should continue to be taxed at personal income rates. But the rate should be reduced the longer the investment is held — so that, for example, tax rates on investments held for five years might be zero — and rates on investments held for eight years might be negative.
Federal tax receipts from capital gains comprise only a tiny percentage of all United States tax revenue. So the near-term impact on the budget will be minimal. But over the longer term, this policy change should have a positive impact on the federal deficit, from taxes paid by companies and their employees that make empowering innovations.
CHANGE THE POLITICS The major political parties are both wrong when it comes to taxing and distributing to the middle class the capital of the wealthiest 1 percent. It’s true that some of the richest Americans have been making money with money — investing in efficiency innovations rather than investing to create jobs. They are doing what their professors taught them to do, but times have changed.
If the I.R.S. taxes their wealth away and distributes it to everyone else, it still won’t help the economy. Without empowering products and services in our economy, most of this redistribution will be spent buying sustaining innovations — replacing consumption with consumption. We must give the wealthiest an incentive to invest for the long term. This can create growth.
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Ah, but 'american' wealthy people want growth.
Global growth is going to be painfully slowly due to the lack of resources to fuel 'american'economics.
It does not mean that 'american'wealthy people can not grow through concentration of wealth.
What is the motive?
If you have $100 billion, why are you going to get up in the morning and spend your day trying to get to $101 Billion?
What is the motive?
rationnality as a means not as a finality.
In other words you will get up the next morning to go for 101B$ because you got up the day before to go from 99 to 100B$...
You'll get up, have breakfast and note that you added another $1 billion to your stack while you were sleeping.
And then, because you didn't enjoy potty training, you'll go to the office and abuse your employees.
No, it is about having epsilon more than the next guy in the Forbes 400... problem is that getting that extra billion does fuck all for the real economy...
What is the motive?
I recently read a piece about people with high IQs. Some of these people stayed up nights practicing IQ tests so they could get another point or two and be "the smartest person in the world" (as judged by the IQ number.)
If there is no incentive, there is no motive, and motive will morph until it drives an individual to do senseless and stupid things.
Does high IQ number = "smart"? Well... judging by these IQ-holics, *I* don't think so. I think pursuing an IQ number = DUMB as a post! So I am not motivated to behave as these people do.
There is no universal motivator.
eye queue is just another measuring stick to prod folks into jumping through yet another flaming hoop. it means fuck all until you tell someone else and get their reactions.
dick measuring at its finest.
I credit this guy for objectifying the problem for mass consumption. Objective thought is endangered.
He's missing the importance of the rule of law. Without that, any good deed can invert.
The 'american' rule of law has never been perverted.
It is exactly the same as when the Indians got booted by middle class hero, Andrew Jackson.
Only 'americans' will want to see a failure and a degeneration of the 'american' rule of law.
Oh, yes, that 'american' rule of law boosted growth. But keep it a hush hush, US americans do not associate their growth the massive stealth they performed on the Indians.
For US americans, whether they had stolen the environment from the Indians or not, they would have grown as rich if not richer.
Because it is well known: 'americans' can overcome the environment. 'Americans' do not need an environment.
Confucius say: Man who talks to himself in public forum converses with an idiot.
Confucius also say: A ChiCom AI trollbot online turd is worth two in the Chinese roadside bush.
I was wondering when you would show up...
We're still waiting for you to go away.
"But we can no longer waste education, subsidizing it in fields that offer few jobs. Optimizing return on capital will generate less growth than optimizing return on education."
Unfortunately, education doesn't create TALENT. My daughter, for example, is about to graduate with a B.A. in English. There are probably about fifty million un/underemployed English majors out there now, washing around the economy like some highly educated driftwood, looking for anything that can pay enough to live on while they write. J. K. Rowling was on the dole, English version, while she wrote the Harry Potter books - and for every Rowling, there are thousands who never make it big.
But my daughter is fairly good at English and creative writing - or at least, her faculty seem to think so. Subsidizing her education in MATHEMATICS, while urgently needed for the country and economy, would be an even bigger waste - she would never enjoy, prosper or excel in math, although she can do the basics. She can balance a checkbook, which puts her ahead of Congress......
In any case, people are not interchangeable - some will write well, some will be able to do abstract math well, and some will be good at science, languages, engineering, etc. Trying to subsidize education according to economic needs is unlikely to work either, any more than any other centralized planning will.
If your 'american' girl is not talented for a field that spurs growth, then she will not receive an education.
As simple as that.
If your Chinese Citizenism fetus is not a boy, then she will often not even receive a live birth.
Bestial Chinese Citizenism: as simple as state-mandated and/or misogynistic abortion.
akak said:
AnAnonymous almost ended up on the Chinese citizenism newborn baby girl compost heap. He owes his existence to a midwife with a magnifying glass.
That's some funny shit, dude.
Changes can still be made to get better returns out of education. The big challenge is, how can it be predicted what skillset will be needed 5+ years in the future?
It would be nice, I think, if post-secondary education was primarily funded through co-op programs, rather than through government-backed loans.
Education in general would certainly benefit, I am sure, from more decentralization.
my daughter is fairly good at English and creative writing - or at least, her faculty seem to think so
Sorry. That's usually the kiss of death for a writer (said the accountant/published author of both fiction and non-fiction)
The only way you can get money to start a business is if the investors see an opportunity to flip the company for a quick IPO and cash out. That is why the only startups getting cash are the .com social trash thet will never actually generate a profit, yet can return billions to early investors on the stock scam.
The pursuit of the stock return is what needs to change. Pursuit of wealth without work is not a tenant of capitalism. I say raise the capital gains tax rate for holdings under a year to 90%, 30% for under 5 years, 15% past five. This will kill of the pursuit of quick returns and put the focus on long term growth. Lockups for IPOs should be one year for any pre-IPO shareholder.
Capitalism is about providing goods or services for sale to a population that is willing to pay for them. If the goods and services are not needed or priced too high, failure soon follows. Capitalism is not forcing people to buy products they do not need, and rigging the game so a select few can profit from fraud.
The rates for all income, no matter what it's source, should be identical. There is no rationale for subsidizing one form of income over another. Taking it one step further, we shouldn't even have an income tax. But that's another conversation.
Amusing article. So the solution to overconsumption is ever more consumption. Who could have figured that solution out, coming from an 'american'?
So funny.
The story about long term and short term is another funny bit.
'American' economics is all about consumption. 'Americans' have triggered a race to depletion of resources, yielding out that everything must consume before anyone else could do.
It works wonder as long as 'americans' are robbing others'resources.
Now indeed, something will have to be found when it comes to convince rich'americans' that their resources they own must be consumed. Because, they are not going to be that welcoming of that 'american' tradition.
Consuming others' resources, oh, well, especially when they are robbed, getting own resources consumed, different story.
Ah, ah, you forgot the best part, the crustiest bit, about extorting the poor, farming the weak, roasting the coconuts, and wokking the dog.
MBAs have probably been the most destructive force in American capitalism. They have been educated to drive costs down not by innovation but by outsourcing, cutting pennies, shafting workers, cutting quality, and doing anything plausibly legal to raise this quarters revenues without a thought for the future.
No 'american' needs to be trained to outsource. Outsourcing is the natural thing in 'american' economics.
The whole US has built itself on outsourcing, advocating mobility of people to follow the outsourced activity.
But poof, as soon as it goes beyond national borders, something has gone wrong.
Yep, not outsourcing as it is a tenet in 'american' economics but 'americans' mobility who no longer follow the activity...
Outsourcing is government mandated. Vertical Integration (aka "monopolies") are strictly forbbiden. You are not allowed to have a business that does not rely on other businesses. The government will come along and break your company into seperate smaller companies if you are too successful at doing everything in-house: see Standard Oil.
Standard Oil involved vertical integration achieved via mergers. Vertical integration that occurs through internal expansion is generally beyond the reach of the antitrust laws.
Bell Telephone, anyone?
I miss Ma Bell.
Blind Joe and Captain Crunch were her favorite kids.
http://en.wikipedia.org/wiki/Joe_Engressia
http://en.wikipedia.org/wiki/John_Draper
If you are trying to demoralize us or something, it is too late.
https://www.youtube.com/watch?v=O_vsaPEajh0
"It's easy being a humorist when you've got the whole government working for you." - Will Rogers
You outsource because you get tired of dealing with the bull shit corrupt government regulations and the ass hole burocrats
We must abolish the Federal Reserve, restore the rule of Law and root out all traitors to the republic.
we are the problem, and we are the solution
Bring back capitalism in three easy steps:
MY PLAN:
Competition works great before the petri dish fills up.
Zero-sum games suck - FOR THE LOSERS!
'Americanism' sucks for the non humans and sub humans.
Ah, yes, contrary to the wet dreams of 'americans', non humanity and subhumanity is a standard to be revised every day for some of those 'american' middle class members who thought they should be entitled to live the 'american' dream eternally.
Welcome to an 'american' world.
So which are you, non-human or sub-human?
Clearly, you are one of the two.
Due to 'american' US citizenism limiting of your seeings of other than possibilities existingness. Is now observed with veracity of great forcefulness the glorious robustness of Chinese citizenism with increased choicings, as historicality dictates third selection being half-man, half-thing.
The prevarication of Chinese citizenism prevails judiciously.
I think your three step plan is more realistic than mine.
Well, once we get to Planet X (and subdue any local aliens), your plan will work great! I couldn't think of a better one.
I think it will work....as long as we give all those aliens a drivers license
Ah..I have been waiting. I have found the exact person that can explain this to me.
http://media.adamdodson.org/index.php/Illuminati-Card-Game
Your little ZH picture is even right.
http://media.adamdodson.org/index.php/Illuminati-Card-Game/comet-hail-bob
Steve Jackson Games raid..etc.
Someone should reallly write a book or movie about that.
Seriously, that would make a great movie.
It would appear to be fiction. Maybe start with a cliffhanger type serial here on ZH?
These cards...just WTH?! no one could possibly be this jacked in to pop-culture and memes
http://media.adamdodson.org/index.php/Illuminati-Card-Game/bank-of-england
http://media.adamdodson.org/index.php/Illuminati-Card-Game/bank-merger
http://media.adamdodson.org/index.php/Illuminati-Card-Game/bronze_head
You may be saying this tongue-in-cheek, but it may be more realistic than you realize. NASA is revisting the idea of warp drives, as more efficient shapes for warp bubbles could result in vastly greater energy efficiency.
http://www.wired.com/wiredscience/2012/09/warp-drive-plausible/
Here is an alteranative take
http://physics.ucsd.edu/do-the-math/2012/10/futuristic-physicists/
Wired Magazine is always great at predicting the future.
I recall an article in an old (c 1970s) Popular Science about "cellular phones". Towers all over the place? How absurd and totally inefficient. That concept is ridiculous. Since then I've tempered my contempt about the so-called future.
Point taken. And Dow 50,000 is probably not as far off as it was in 1999.
Yeah. I think there are some basic problems that will have to be dispensed with first, like that persnickety "cause and effect" bullshit thing.
Excuse me while I get in my personal time machine and head off to kill my grandfather. Back in sec (relitavely speaking).
Causality might very well be the last concept in physics that would be jettisoned.....
Dont laugh, we are currently spending a billion dollars a year on deep space exploration with telescopes, etc and NASA is "changing" its mission as we speak from low orbit earthly functions to deep space exploration!! So if you don't think THAT'S exactly what the plan is, your dreaming!! Getting off this rock and onto another one, "New World" style, is going to be the #1 objective for the ubber rich, elites of this world going forward! First the space stations, then the moon, then Mars, and beyond!!!
And if you want to know what the motivations are going to be in the future to get your extra billion, this is it, that and immortality!!
You get the biggest bang for the scientific research buck that way....
Just wait for the images and data from James Webb to start rolling in (as I cross my fingers)....
Conditions must bring out the worst in critical mass of people for what we call capitalism to flourish. That means more scarcity, desperation, illness, death, misery.
Once people genuinely feel deep inside themselves (whether if its true or not) that there is no space, food and water for everyone animal spirits will awake, new hierarchies will emerge and new round of feudalism can commence.
Hopefully that wont happen.
For those who nostalgically remember capitalism in US.. believing it was exceptional for some mysterious reason is delusional. It was based on two main pillars: shortage of labor for centuries and in later phase brutal, imperial appropriation of external resources.
We have Capitalism, its just called State Capitalism.
What most of us really want is FREE MARKET Capitalism.
give an UP vote if you voted for Gary Johnson
From my recent experience in small business, its difficult to grow after a certain pt as you need extra financing and the vultures are only out to rape that business for whatever they can get as quickly as possible. Hiring & firing employees becomes big issues (in terms of cost). The system favors big business in multiple ways that create an almost insurmountable barrier. I could on and on, but you get the point. Competition is dead. Not in every facet but for most of the industries that provide economic value and sustainability.
Socialist Incentives Carrot And Stick Model : They want you to jump through the hoop .... when they whack you on the nose with the tax STICK .... and shove a CARROT up your ass !
My solution ..
1. Over throw the govt
2. Seize the media
3. Take out the CIA and military brass
4. Declare yourself the supreme poobah
5. Close the Fed
6. Seize all banks
7. Grab all the globalists you can get
8. Slap em with a RICO
Declare illegal;
1. Tax of every kind
2. Interest on debt
3. Rent on real estate
4. All other types of non productive rent
5. Fractional reserve banking
6. Legal tender law
7. The CIA, NSA, DHS and domestic spying and data collection
8. Foreign aid (interference)
Implement;
1. Jury trial only
2. Natural law only
3. Contracts for elected officials
4. Non aggression - disband the bases, bring home troops
5. A referendum on the constitution - get rid of the nasty crap
Declare an election date ..
Finally - take a break, its lunch time.
Idealist, are we?
Why not just assume we find a few magic lamps?
Magic beans would be better. Then we wouldn't have to change our way of doing things. We could just climb the stalk and loot the castle...
Hee, hee, hee....
"Implement: 2. Natural Law only"
I'd need a descriptive of your opinion on this, of course - whether it was in line with nature, or man's rules of nature.
Capitalism is rooted in timeless moral principles such as property rights, the freedom of association and contract, the rule of law, honesty, the ability to have disputes fairly resolved by a mutually honored arbitration process, etc. Capitalism can only function in a free market. However, just as when the eye of a married man wanders, the capitalist is often tempted to short-curcuit government and social institutions to his own short-term advantage. This does not mean capitalism is at fault, any more than marriage is.
One of the most frequent ways that capitalism is circumvented is when the capitalist colludes with someone in government to advance their mutual interests at the expense of the public or some third party. Crony capitalism cannot exist without a counter party crony in gvoernment. All failures of capitalism start as personal moral failures.
Socialism on the other hand is built upon coveting and theft. That the society and economy would benefit from living at the expense of others is a lie. So, socialism by its vary nature, that is before the coercion and violence starts in earnest, is built on three sins: lies, coveting and theft. Should a capitalist attempt the same in the conduct of his free-market business, his customers could call upon government to charge him wiith committing crimes.
Start by cutting out 50% of the government
I still think the corrupt politicians lacking a moral barometer are the root cause of crony capitalism, they created a system that requires graft to get ahead
We're gonna see cuts of 80% or more. The math requires it.
thank you for the ramp fuckers! went long going into the election but that 's not how you bring back capitalism you have to let the market do its thing whereas Ben just tries to manipulate rates,unemployment, money supply, etc, etc.
let the charts talk.
To "Capitalize" = to take advantage of something.
California Homeowner and Vietnam Widow Testifies before Legislative Committee on Foreclosure Criseshttp://www.foreclosurehamlet.org/video/california-homeowner-and-vietnam-...
??!! What happens if you try to record a call (after they tell you that the call might be recorded).
http://www.foreclosurehamlet.org/video/homeowner-vs-bank-of-america-no-d...
????????????????
http://www.americanbanker.com/issues/177_213/foreclosure-review-pays-con...
Harding College - Make Mine Freedom ('isms)
https://www.youtube.com/watch?v=mVh75ylAUXY
on a lighter note;
Run DMC - It's Tricky
https://www.youtube.com/watch?v=l-O5IHVhWj0
Prince - Controversy
https://www.youtube.com/watch?v=DAnADGfCvR0
Marxism never had a chance of killing capitalism. Only capitalists can kill capitalism and they are devotedly trying to.
Some interesting quotes...
"Shadow and substance! One can see from this how little President Wilson knew about banking. Unknowingly, he gave the substance to the international banker and the shadow to the common man."
"They instigated the separate peace between Germany and Russia and thus drove a wedge between the Allies in the World War. They financed Trotsky's passage from New York to Russia so that he might assist in the destruction of the Russian Empire. They fomented and instigated the Russian revolution and they placed a large fund of American dollars at Trotsky's disposal in one of their branch banks in Sweden so that through him Russian homes might be thoroughly broken up and Russian children flung far and wide from their natural protectors. They have since begun the breaking up of American homes and the dispersal of American children"
from;
http://www.afn.org/~govern/mcfadden_speech_1932.html
--------------------
"Lenin is said to have declared that the best way to destroy the Capitalistic System was to debauch the currency. . . Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million can diagnose." - John Maynard Keynes, The Economic Consequences of the Peace, 1920, page 235
"Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice." - George Washington, in letter to J. Bowen, Rhode Island, Jan. 9, 1787
http://www.fame.org/NotableQuotes.asp
---------------------
"We are not left to conjecture how the moneyed power, thus organized and with such a weapon in its hands, would be likely to use it. The distress and alarm which pervaded and agitated the whole country when the Bank of the United States waged war upon the people in order to compel them to submit to its demands can not yet be forgotten. The ruthless and unsparing temper with which whole cities and communities were oppressed, individuals impoverished and ruined, and a scene of cheerful prosperity suddenly changed into one of gloom and despondency ought to be indelibly impressed on the memory of the people of the United States. If such was its power in a time of peace, what would it not have been in a season of war, with an enemy at your doors? No nation but the freemen of the United States could have come out victorious from such a contest; yet, if you had not conquered, the Government would have passed from the hands of the many to the hands of the few, and this organized money power from its secret conclave would have dictated the choice of your highest officers and compelled you to make peace or war, as best suited their own wishes. The forms of your Government might for a time have remained, but its living spirit would have departed from it." - Andrew ("Old Hickory") Jackson - Farewell address
http://www.presidency.ucsb.edu/ws/?pid=67087
I like Clay. He seems like a nice unassuming guy. Back when I was into the corporate thing I had the opportunity to listen to his "innovator's Dilemna" spiel as part of an exec education program. It was inciteful.
However, regarding this current article, maybe he in thinking a touch on the evolutionary side, maybe his learning disciplines are a touch narrow, or maybe he is now too dependent on the status quo to be really innovative; but, IMO, he seems to be taking too many of the mainstream assumptions for granted... even as he questions those assumptions.
From my perspective there has been too much of coelescing of capitalism and "power". Is the purpose of capitalism to garner power for those who accumulate or create (as in creating money our of thin air) the most "capital". Or, is capitalism a means of distributing wealth and power through growth, advancing the whole? The current capitalistic system is corrupt. Money is created by a few for their benefit instead of being agnostic. Capital is used to buy favors and power and not for general advancement. And when necessary capital is used to buy privilege and amnesty from the laws that would otherwise govern a people. The playing field is not level and so capitalism has lost the favor of those who have come to realize that they are not getting a fair (not equal) opportunity. People have been deluded into believing that an education provides that fair opportunity, but it does not... hence the ability of the moneychangers to enslave the next generation with unforegivable debt.
In my view capitalism loses its ability to run an economy when money ceases to be agnostic, when opportunity fails to be fair and laws, if there is any, are biased. Without basic premises of fairness, no AMOUNT of capital or changes in the TAX CODE will fix a darn thing.
In our so called "modern" society, capital is only a vehicle to accumulate power for those, who find it necessary for their own security, to rule over others, most of whom could care less about power, ruling others or who claims to rule them. The altruisic goals of capital currently do not apply and may never have applied, for all I know. Fix the core problem with man, the collection of power, the destruction of competition through unfair means and you will make capitalism vibrant. Without fairness in capitalism, professors are best locked away in their ivory tower living off prior glories and giving seminars to brainwashed exec-sheeple.
Prophets for a New Paradigm, 2018.
DEBT IS NOT CAPITAL YOU FUCKING SOCIALIST CENTRAL PLANNING HUMPS!!!!!
they don't 'get' anything much those chumps
hummm, hummm, hummm a mantra ...200 years old, never worked, no matter just keep humming and it'll come right one day
The changing cap gains tax is laughable as it only promotes more crony capitalism-- this article is pretty piss poor and wreaks of academia... sell crazy elsewhere the US is all stocked up.