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Archive for March, 2010

As you know, for quiet some time, I have been concerned with Anarcho-Capitalism (capitalist economy with no or little government regulation), and the future of the U.S. economy. I found Cage Innoye’s article to have a fresh and different perspective on the subject.

With permission from the author for reprint, here is the article. Enjoy.

Professor Mekonen Haddis

Will There Be a Recovery From Capitalism?

By Cage Innoye

Some are saying that US will have a “W” shaped recovery, that is, an upswing and then another decline. The bitter fact may well be that the “W” will be followed by a “triple U” and then a “quadruple U” and then a “quintuple U” and so on. The US economy is entering a long period of diminishing expectations with fluctuations but no overall substantial growth.

And because of this, it is time for the nation’s citizens to consider a completely different economic system, as this one will not get us out of our long term malaise. The present system of capitalism will only drive us down further.

Why the dismal prognosis? The US has lost its share of world production as other nations have come up quickly in the last 10 years; we are in a far more competitive world.

Much wealth was destroyed by the mortgage and financial crash. The costs of the bailout were enormous. These funds must be paid for by Treasury bond sales, and then eventually higher taxes to pay for the bonds. We have the continuing high costs of wars that cannot be politically, morally or financially justified.

The value of the dollar is declining, 13% to the Euro since the crash. This is the “other shoe dropping”, for as the dollar careens our prestigious Reserve Currency status and all of its advantages will end. US Bonds that nations have been buying will fall in value, as the dollar is worth less. This will lead to demands for higher interest rates on bonds to recoup losses, thus raising general rates in America and leading to inflation. If the dollar becomes too unreliable, nations will look elsewhere to find safe havens of investment. New financial instruments like mixed bonds from many strong economies may appear; these can spread the risk, removing a major source of funds for the US.

The future is grim. But it is not inevitable that we languish in stagnation, we can dig our way out of this hole, however, not with the same people in leadership who got us here in the first place — for as we dig they will supervise and take bonuses while we sweat and stress. We cannot continue with the same system based upon profit, greed, selfishness, corporate monopoly, lobbyists and political corruption.

The first thing to do is consider a new economic system, one that is not capitalism….or socialism either. What is needed are new economic principles and new economic institutions. And then we can have a comeback, one that is solid and not based upon

absurd loan policies, Wall Street gambling, war and war economics, trivial consumer production, environmental havoc, the lowering of cultural standards, the neglect of education, poor healthcare, avoiding the consequences of mass poverty and more.

A Diverse Economy is a new idea, it takes the best of a market system but leaves the worst behind; this is the next stage economics. What is a Diverse Economy?

A Diverse Economy is an economy of diverse performance targets, diverse social leagues, diverse ownership and a diverse market.

A Diverse Economy could also be called a Metric Economy because of the use of a varied set of metrics for key performance targets.

This economy could also be called a League Economy for the use of economic leagues including those for business but also for other social groups.

Sports Economy might be a term that relies upon an analogy with sports where teams compete, achieve stats and join franchises that agree to follow a specific set of standards and policies.

A “Diconomy” might be another term that merges diverse and economy into one word.

The starting point of this thesis is the nature of money and profit. Money is held to be special kind of metric that measures supply and demand. It is used to price and purchase. Price is determined by an agreement between buyers and sellers. Price has nothing to do with product quality or ethics or values of any sort. It is purely a measure of supply meeting demand and nothing else. Price goes up one day and declines another.

Money has an important role to play as a supply and demand metric. Its job is to tell us about the market, about need, about the immediate value of things, about the immediate direction of things, the flow of resources dictated by purchasing. It however is only one kind of metric that can be used. When it is the sole metric in an economy it distorts and undermines all other values within a company and in society at large.

A Diverse Economy would employ a diversity of metric performance targets. These might include: standard measures of efficiency, raw production and consumer data, product quality, innovation, environmental management, charity, community relations, customer relations, employee relations and reward, equity, family support, community service, marketing and advertising ethics, planetary cooperation and aid, measures of long-term investment, raising product standards and many more things

The list is unlimited. These metrics would work with money. Money would be used to tell us of supply and demand factors in a marketplace, the flow of resources. The other metrics serve their intrinsic uses.

We would thus have a system where other values are being achieved along with the monetary and profit. In this system we have quantified the values — leaving behind a longstanding philosophical, moral and scientific argument about quantity and quality. Quantity, that is pure money, has given in to qualities (values, principles, morals); and qualities have given in to quantity and are now ready to be standardized and measured.

When using these metrics together we have differing methods. In one method we have money and beside it we have our other metric list, the two methods stand side and side.

In another method we may merge the money and metric for practical purposes.

Systems of measure can be very simple as in a one to five or ten measure spectrum. Or we can have equations that yield more precise values though complex.

But the method is not important; this is subjective based upon issues to measure itself — its convenience or importance. What we can say is that the overall method is very simple yet it yields an infinity of applications, something pure money cannot do.

An attendant science is that of a philosophy measure, a general measure theory which can be applied to sciences and sociology and psychology.

When we have this metric arrangement, companies can have a set of measures. A hierarchy of targets can be created by priority. A general list of performance goals now drive the actions of a firm, money is merely one of the aims. Further, in a metric method, goals can change over time; they can be staged or altered as conditions demand.

Now a company is achieving many goals instead of the singular goal of money and profit.

The list of goals is now business and economic, Human and moral, and social and environmental. Previously we had one measure of success, now we have a diversity of measures.

We are now creating money, creating a new money. Money which was formerly not in our control, this wild and chaotic thing is now in our control. Our new money is a combination of many things, it is our new measuring tool and exchange unit, composed of many elements instead of a singular, narrow thing such as profit.

Nothing is fundamentally altered as far as business goes, we now simply have another layer of issues. Companies before competed on the basis of price, now they compete also around metrics. At first price will go up when a company installs these metrics, customers will flock to firm, then as competition appears, because other companies imitate the metrics or surpass them, you will see prices drop.

Education is a process here, the new economy grows by stages. As people become familiar with the new concepts, then products and companies on a metric basis will gradually become popular. A new identity will develop.

Basic management issues for metric companies are the same — efficiency, distribution, marketing, personnel management and so on. Companies compete and strive to grow.

All of the fundamentals of a market economy are still in place, we inherit the best techniques and experiences from capitalism. This is the next stage of a market economy. We leave behind the negative experience, the worst of capitalism, a leap is made. The power of a market economy is in its diversity, this is a sacred principle of new economics.

Market experience now merges with the key concepts of measure and diversity. We have an economy that is competitive and innovative, moral and socially minded.

Consumers choose the best metrics. Communities rate the performance of local firms. Investors invest in companies with the highest standards. Minority groups, women, environmentalists, groups for the disabled and many other social strata actively rate firms and their products. Small business forms its own unique leagues with its particular needs and support institutions.

Society now is directly involved in economics and business when before they were excluded. Leagues are formed. First is the industrial league with its metrics, these are the associations of businesses that unite and pledge to follow the new metric standards.

Then there are consumer, investor, community leagues and more. When before only businesses made decisions about economics and production, now all of society is involved in the economy, as it should be. Everyone has a stake in the economy, the days that business dictates to society are over. A check and balance system is created.

A diversity of economic organizations is formed, an economic diverse becomes a specific expression of the general social diverse.

Many new performance targets are added to a firm’s list –diversity, the environment, safety and health, giving to the community. Companies can help take some responsibility for relieving poverty. They can join with others to stop the killing of pets in pounds. They can support experiments in public education.

Principled marketing techniques can be established, particularly in relation to children.

General cultural themes are taken on. Consumerism can be ended, bad media and entertainment reformed. New metrics can help push for the raising of product and service standards and thus lead to raising cultural standards, instead of the general lowering to the lowest common denominator.

Executive compensation becomes a focus. Shareholder democracy becomes an issue.

We now become accustomed to a more harmonious culture where firms have high standards and help out the community, where executives do not only think of themselves, and money is not the bottom line.

The alternative is, of course, to continue to create cultural crisis and want, and the reduction of all Human values to profit.

To be continued

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“Dialogues in public policy and the media”

I had the opportunity to listen to “ Dialogues in public policy and the media”, hosted by Bob Schieffer, which was held at the Center for Strategic and International Studies, on March 16, 2010.

The topic of the discussion was, “An assessment of the Obama Administration’s Foreign Policy”, with panelists: Steve Coll, Thomas L. Friedman and David Ignatius. I must say, with such high caliber moderator and panel, the program was very informative and highly educational. Had there been a Q and A session, the program would have been even better.

Some highlights:

On Israeli-Palestinian Issues.

The panel seemed to have a positive outlook towards the          “Fayyad Plan”. (Palestinian Authority Prime Minister Salam Fayyad). His plan is to have a functioning government with institutions such as a central bank, schools, hospitals, a police force, etc. By mid-2011, his goal is to end the Israeli occupation and establish a Palestinian State. Prime Minister Fayyad believes that Israel would have no choice but recognize a well functioning Palestinian State. Failure to do so would result in a heavy pressure of international opinion on Israel to withdraw from territories it still occupies.

Mr. Friedman appreciated Fayyad’s policy of “let’s build institutions and then declare a State”. He said, “Israel and the U.S. should support Fayyad”. He also believes that, Hamas and Hezbollah are engaged in asymmetric warfare with Israel to destroy the international stature of Israel by turning world public opinion against it.

In terms of U.S. policy makers, Mr. Friedman called them “The weakest Mid-East policy makers I have ever seen”.

On Iran.

Mr. Schieffer, “do you think we can live with a nuclear Iran”?

Mr.Friedman, “Nobody wants Iran to weaponize, but no one seems ready to use force to stop Iran”.

Instead of an attack by Israel, on Iranian nuclear facilities, Mr. Friedman believes it is more likely that “an accident” inside Iranian nuclear facilities are more possible. Especially, with the rise of opposition forces inside Iran. He added, “The Israeli Defense forces have a very sober view of any attack against Iran”.

Mr. Ignatius said, “The U.S. has repeatedly told the Israelis not to take any action against Iran”. The U.S has made it clear, that “it is contrary to our interests”. He also stated, “While he had seen the strength of Iranian influence in Iraq, Egypt and other places, last year, that influence seems to have dwindled after the recent Iranian national elections”.

On Afghanistan.

Mr. Coll supported President Obama’s policy of” trying to make Afghanistan more stronger before exiting”. He said, the critical elements are:

  • “To build Afghan security forces”,
  • “To change the balance of forces within Afghanistan”, and,
  • “To influence Pakistan, in terms of change in strategic thinking”.

The two most striking thoughts to ponder.

The Saudis, to visiting Secretary of Defense, “What are you and the Israelis waiting for”? (Iran)

“What if, if we haven’t seen anything yet”. (commenting on the continuous Chinese economic power) T.F.

The most poignant Q and A.

“What is the biggest threat in the world for U.S. interest”? Mr. Schieffer.

“Our economic erosion in the U.S. Our political system is in peril”. Mr. Friedman.

Thank you, the CSIS.

Professor Mekonen Haddis

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