Thursday, February 25, 2010

American Capitalism Is Not Designed to Create Jobs

American capitalism is designed to MAXIMIZE SHARE HOLDER WEALTH not to create jobs.

Never in the history of the world has so much wealth been transferred to so few for so little work, and the amazing thing is it continues.

Yes, we are having a recovery, but by the evil genius design of our system is that livable wage jobs will not become part of that equation. 

During the years leading up to the CRASH of 08’ the financial industry set up a system (intended or not) to redistribute wealth to the banking class elite from the working classes. They succeeded in transferring massive amounts of wealth and then driving the system into shambles that put EIGHT MILLION families out of work. The wall street geniuses then convinced the governmental class that the fault and damage should be laid on Main Street leading to the bailout of the banking elite class. Over a year later little if any help has arrived on my Main Street. We are being subtly blamed for the crash and punished for our wrong doing.

This is CLASS WARFARE in its most insidious disguise.  The U.S. citizenry has been complicit in the largest and quickest transfer of wealth in the history of the planet. Jobs will not be coming back any time soon as our system is meant to reduce costs and increase profit not make jobs.

So if you can make l=oodles of money with no employees why hire the pests? U.S. financial institutions are again wealthy enough to hand out massive bonuses, while families struggle against their own economic self interest to stay in their homes, borrowing against hope and destroying their financial futures.

Low wage, no benefit jobs will become the norm. Healthcare, if it is not fixed now, will become a privilege for the rich and all others will die early and hard.

Profit over people is NOT a sustainable governance method.

One doesn’t have to look too far back to see what happens when the government no longer serves the people. When the USSR unraveled, the USSR central government lost its credibility because it could not serve even the basic food and shelter needs of the masses. Orders were given and bureaucrats, soldiers and police refused because their mothers, fathers and brothers were in the crosshairs. The undoing of the USSR was a civil disobedience action that rivals the one led by Mohandas Gandhi in India.

Government unraveling can happen here in the United States. It will be assured if more livable wage jobs are not forthcoming, but our system is not made to make jobs but to transfer wealth and that’s its fatal flaw, that we must fix. How do we convince our lawmakers to take a hard look. They usually just react when crisis cannot be avoided. So maybe when bands of highly educated, unemployed, undernourished and drug addled young citizens take to the streets we might have some change, or at least some fun.

PS I am not without hope. I formed another LLC yesterday, but as a small business owner I guess that I might be making maybe one part-time no-benefit  job for a friend or relative.

Friday, February 19, 2010

The Myth of Small Business Creating “JOBS”

First let me tell you I am a free market capitalist, and that I admire entrepreneurs and small business women and men. I support government aid for small business.
However, the major media (including FOX) and the federal, state and local governments are foisting a complete fraud on the American people. Although small business do make jobs, many of those new jobs come with low wages, no health care and statistically shaky career prospects.  So when they talk about helping small business make jobs, they are not really talking about the florist down the street, they are talking about the “larger” small business. They are pandering to all the really small business men and women who will not survive this recession, in the hope for their votes. (both parties are guilty here.)
Here are some facts, make your own decision about my points.
Small business are defined by two things (see SBA). The first is $ volume of trade and the other is number of employees.
A SMALL BUSINESS CAN HAVE 500 EMPLOYEEES, in some categories as many as 1000 employees. In construction a home builder is a small business until they build $33,500,000.00. That is not a “small business”  in my mind.
Some other statistics from the SCORE Website:
Small Business Openings & Closings in 2008:
  • There were 627,200 new businesses, 595,600 business closures and 43,546 bankruptcies. (THATS A NET NEGATIVE in 2008, 2009 must be worse)
  • Seven out of 10 new employer firms survive at least two years, and about half survive five years. (That means lots of employees employed for short durations, a cup half full or half empty)
  • Findings do not differ greatly across industry sectors.
Other statistics.
  • The estimated 29.6 million small businesses in the United States
  • Employ just over half of the country’s private sector workforce  (Remember what the definition of a small business is)
  • Hire 40 percent of high tech workers, such as scientists, engineers and computer workers (That’s a good thing,  but my guess is that they are employed in the “larger" type small business, not in the cottage industry down the street.)
  • Include 52 percent home-based businesses and two percent franchises
  • Represent 99.7 percent of all employer firms  (So 0.3 % of employers employ just under half of the nations employees. )
  • Generate a majority of the innovations that come from United States companies (That’s a great thing, but my guess is that larger businesses then swoop in and either steal them or buy them at deep discount.)
The final take away 0.3% of employers (the big guys) in the US employ almost 50% of workers. These few firms have the resources to make work and sustain employment. Half of all start up bsuiness close (for a variety of reasons, not always failure) within five years.
Now here is something you do not hear:
Really small business CAN NOT SOLVE the unemployment problem and they certainly cannot help in the long run without a national health care system to support their activities.
I love the folks down the street who start a plumbing or high tech bsuiness and I wish them the best as they do their small part to help, but it is absolutely unfair for the government to insist that they will save the day!

Tuesday, February 9, 2010

“Living the Good Life”

Seventy-eight years ago Helen and Scott Nearing left New York and moved to a farm in Vermont. The Nearings left the city for political and social reasons during the height of the “great depression”. They were seeking a simpler life.

Here is a quote from “The  Good Life”. My how things have not changed a whit in over 3/4 of a century.

…. demonstrating one possibility of living sanely in a troubled world. The ideal answer to this problem seemed to be an independent economy which would require only a small capital outlay, could operate at low overhead costs, would yield a modest living in exchanged for half –time work, and therefore would leave half the year for research, reading, writing and speaking.

Sounds good to me.

I remember in the early 1970’ listening to a speech by Scott who spoke while Helen sat on stage knitting. I can’t remember if she sat in a  rocking chair or not, but she was definitely knitting.

Scott had to be at  least 90 years old then; he lived to one hundred years. Helen lived a shorter  life passing away in her 90th year.

The Nearing’s were perfect for the 60’s as the gurus of “back to the land”, but they were really not about abandoning the world. They were about eliminating the…. obstacles to a simple quiet life-complexity, tension, strain, artificiality, and heavy overhead costs.

I highly suggest you pick up a copy of  “The Good Life”. I don’t suggest you quit your job and move back to the farm, but you might just find something here that helps you simplify, and the Post Consumerism blogger is all about simplifying.

Tuesday, February 2, 2010

“We have met the enemy and he is us”: Economic crises, an essential part of consumer capitalism.

The more I read and study about consumer capitalism, the more certain I become that recurrent economic crises and near collapse are an integral part of the capitalist system. These crises are even more essential to economic systems based on personal consumption. These crises act as a sort of “dead person” switch that shuts the engine down when no one is tending the accelerator pedal. Economic crises protect us from ourselves. From the immortal words of Pogo..”We have met the enemy and he is us”


Wall Steet and Bankers see themselves for the first time! Or is the mirror of Dorian Grey?

Since humans first came down from the trees (or were expelled from Eden, and either scheme works for me), all economic hierarchical systems have been about redistribution of wealth and power. The direction of redistribution cycles between redistribution to the wealthy and then redistribution back to the poor when the economic disparity results in the worker class having too little of the wealth. The workers withdraw  their labor from the system, and eventually the system resets or the wealthy acknowledge that to keep their wealth they need to share it. (Witness the French Revolution in all its parts). True lasting slave systems do not build sustainable economic systems, although slavery can build a temporary aristocracy (see pre-civil war U.S. History and history of the Roman Empire for examples). I look at wage, wealth and power disparities not slavery as teh fundamental economic driver.

Our most recent crisis (that will continue for a least five years) represents a tipping point, I think, towards redistribution towards the worker class. For a generation workers have not been sharing in productivity increases in the western industrialized countries. This is a redistribution towards teh wealth owning classes of society. Right now it looks like bankers are getting away with the same old crap, but that should rectify itself within a short duration by another crisis. (Witness the 1937 economic collapse).

As an aside: Systems seek balance. Astute observers try and predict how systems work so that they can harness the system for a variety of reasons (both good and bad).

Why should we expect a crisis and a reset of our economic system?

In 1962 Ed Thorpe figured out how to beat the Vegas Black Jack Tables. In 1967 he devised a system to beat the stock market, and it works. Others followed and we suffered Black Monday, October 19, 1987 and again we suffered in our most recent meltdown and near collapse of liquidity. However, as Scott Paterson recounts in his book The Quants: How a New Breed of Math Wizards Conquered Wall Street and Nearly Destroyed It. Ed Thorpe is a worrier, he knows instinctually that any time you try to outwit a system, you change the system by your actions. You create a feedback loop that consumes the observer into the system. The observer lives in the fantasy world of the system with the feedback loop providing constant positive reinforcement until the systems blows up and deflates.(Like a bubble)

Essentially all bumble economies are the same, those inside the system are unable to see that the system is failing until it has completely collapsed. Many who live the fantasy of the bubble continue to believe in spite of hard empirical evidence to the contrary. (The present case of Wall Street and Washington D.C.)

As I sit here: Wall Street pundits, economists, and elected officials are living in a fantasy world. They keep telling us that if we would just go out and spend money on things, everything will be all right. That won’t work, Main Street has less to spend and our employers are sending signals that we should expect even less in the future. However, it might be better if we just let the crises continue their trajectory and we reset to a new “post consumer capitalism” system.

Like many, many people on Main Street, my discretionary income is down about 20%, my health care and insurance costs are soaring and my nest egg (life savings) is down 30% or more. I am 58 years old, where am I going to get more money to spend on useless or even senseless consumer products? I am an average person who will get by nicely, I will thrive in the future, but I won’t judge my success by how much I consume beyond my needs for food, medicine and shade and shelter.

I don’t begin to know what our new system will look like. I am pretty sure that the politicians and Wall Street won’t recognize it when it bites them, but as I read history: humans are resilient and we will build a survival system that suits our needs.  I am not sure that the new system will suit the needs of consumerism capitalists or even  support the current scheme of governance in the United States, but it will be interesting to watch for the next twenty years.