Capitalism - A flawed and corrupt system

Capitalism - where money is allowed in 'free markets' to flow in an unrestricted way ... and without any social/moral compass ... is flawed. In the hands of the greedy, corrupt and power-hungry, money is not used to help people, but to exploit them ... in pursuit of yet more money and power ... and over the last few decades these people have proved themselves to have no conscience or morals whatsoever.

Let's start with those who argue for 'free markets' all around the world. By arguing for this what they really mean is that they should be allowed to invest in whatever they want, whenever they want, wherever they want, and where they are most able to exploit the workforce/natural resources. If a country tries to defy them, and not allow their people to be exploited, then they will threaten them ... move their money elsewhere ... and force their communities/countries into ruin. 

Does this really happen? ... of course it does! And we see the consequences of this every day! It's why manufacturing moved to China, moving on to Vietnam ... and will eventually move to Africa (which is what China themselves are also starting to do). It's how corporations regularly threaten governments with moving their operations/jobs overseas, unless governments slash their tax bills and give them exactly what they want (e.g. Banks regularly threaten to move their centres of operation overseas to avoid taxes and any regulation restricting their immoral activities, and Vodafone were also recently let off £6bn in tax)!

Corrupt bankers, who created this global crisis, and forced governments to bail them out (using taxpayers money!) resulting in all the sovereign debt crises, are now using this bailout money in the "money markets" to force governments to take yet more bailouts (e.g. Eurozone crisis)! By wielding their power, they are forcing governments to slash public services and slash pay/conditions for the poor, in the form of "austerity programmes" (nb the UK Government is doing this whilst also slashing income tax for the ultra-rich and allowing executive/ bankers pay to soar)! 

The bankers have for decades created money out of thin air (legalized electronic counterfeiting!), lent it out at interest (money for nothing), and made 'debt slaves' of everyone. They have then been gambling this money on the 'money markets', with minimal regulation (and no 'gambling tax', despite every other form of gambling being heavily taxed!) ... where they personally take all the profits, and taxpayers take all of the risk and losses (nb this still hasn't changed)!

These are not 'free-markets', but 'corrupt markets', where the ultra-rich can openly exploit and devour the poor/hard-working. 'Free markets' would have allowed corrupt banks to fail ... they would not have handed them taxpayers money! The banks should pay the cost of 'insuring' themselves against failure, and be taxed accordingly (nb which would naturally be far greater than any traditional gambling tax)! However the Government are not doing this (nb a financial transaction tax is being vehemently opposed in the UK), as they are 'in the pockets' of the bankers and the ultra-rich ... and even if they weren't ... they would be continually threatened by them (e.g. with moving their operations overseas, moving their money, and/or forcing 'a run' on their currency/country).

If anyone has any doubt about the corrupt way in which capitalism is working ... one only needs to look at recent actions of the Bank of England and George Osborne. In the past they pumped an additional $325bn into the banks, via their so called 'Quantatitive Easing' programme, in the hope it would feed through to businesses and the wider economy ... but the banks lent very little of this out to actual businesses ... preferring to gamble with it and increase their bonuses again!

Because of this Osborne and King have just recently announced a scheme to give them more money ... but this time they are trying to position it as money they can only use to lend to real businesses! Says it all really! One Government minister also admitted this was needed because bankers were 'investing' elsewhere to get better 'returns' (i.e. in 'money for nothing' scams ... e.g. insurance, counterfeiting, gambling with other people's money)!

Moral businesses desperately trying to add value, help others and create jobs have been (and are still being) deliberately starved of money/resources ... by corrupt bankers who couldn't care a jot and are only interested in swelling their own immoral/grotesque fortunes. Adding real value to people's lives takes time, effort and resources/people, all an anathema to bankers ... as they cannot compete with legalized 'money for nothing' schemes ... 

'Free-market capitalism' effectively promotes 'money for nothing' schemes (e.g. 'financial engineering') and results in the systematic destruction of real economies/communities ... it blights communities ... and survives only because of ignorance, apathy and the centralization/control of power and capital (the 'means of production').

Moral businesses create value, corrupt bankers/financiers systematically leech from this and destroy value, and should be stopped from doing so ... We need state run community banking, investing in real business, and out of the hands of immoral bankers (gamblers), where money is invested by the people for the people ... and guess what ... we actually already effectively 'own' two banks as a result of recent bailouts ... so why don't we get on with it and put these to good use ... by putting capable, honorable and trustworthy community stakeholders on boards ... n.b. and we do not want Richard Branson or Philip Green types ... who preach to everyone, but pay no tax themselves)!

Corrupt economics: Destroying Value ... and Communities

The Government is currently promoting the fact that they are shifting their focus onto exports, manufacturing (cf finance) and growth (i.e. job creation).

However this once again appears to be all spin and no substance!

Our current trade deficit is at its worst level for seven years, manufacturing is shrinking (not increasing), and recent figures show that the vast majority of jobs currently being created are in finance (over 60%) - not manufacturing (less than 3%)! 

This Government tries to tell us the financial sector makes up a small part (less than 10%) of the total economy, which is a complete distortion ... this small figure does relate to the manufacturing sector, but not the financial sector ... and the job creation figures provide a truer picture of reality ...

Corrupt 'free market capitalism', is systematically backing/ promoting 'money for nothing' scams ... over 'real' hard-working businesses desperately trying to positively contribute to society and add real value to people's lives ..

It is well known and well documented (e.g. on this blog) that bankers (and finance companies in general) do not add any real value to society ... in fact they're actually systematically destroying value ... hence they need to be reigned in. 

In the future 'adding real value' needs to be positively backed/promoted ... and destroying value needs to be made illegal or, as a minimum, taxed very heavily to replace/cover any value it may destroy (i.e. just like other forms of gambling, tobacco, alcohol etc currently are). This Government is vehemently resisting any financial transaction tax ... which would be a good start to achieving this goal ... and why? ... well, they are 'in the pockets of the bankers', are also threatened by them (e.g. threats to move their centres overseas if they don't like what the Government is doing) ... and they allow this corrupt banking system to counterfeit money and to keep the 'means of production' (i.e. money/capital) mostly in the hands of themselves (over 60% of all new jobs/investment) ... so they can create and exploit yet more 'money for nothing' scams (i.e. 'financial engineering')!

They are systematically stealing taxpayers money, plundering and destroying communities, and stealing people's future ... by burdening communities with debt slavery for decades to come. 

Capitalism is better described as the 'economics of exploitation' ... and this is not being tackled because we also have a mockery of a democracy.

As Aristotle once said ...

"Democracy is when the indigent, and not the men of property, are the rulers"

... and ...  

"In a democracy the poor will have more power than the rich, because there are more of them, and the will of the majority is supreme" ... 

Leanomics - looking for signs of recovery ...

There is currently a great deal of searching (and spin) associated with the 'green shoots of recovery', but what should we really be looking for ...? House prices increasing again ...? Stock Markets rising again ...? Well this post seeks to answer this question, by using one simple Leanomics test, known as the 'BUTS' test.

The BUTS 'economic' test looks at a number of factors ... and combines individual well-being & community indicators with financial indicators too. For instance it looks at:

B - Borrowing

U - Untapped Talent

T - Trade deficit

S - Stress

Whilst Government borrowing continues to rocket, and the Bank of England prints more money, to 'buy' more UK Government debt, it is not hard to see how bad borrowing is, and how it's now likely to be with us for decades to come ... and the trade deficit, and budget deficits, are also the worst they have ever been too ...

Stress is also growing rapidly, and even before the current crisis started, it was already (using the most simple and conservative of measures) standing at 1 in 4.

So what about the last one, 'untapped talent' ... well despite official unemployment figures being manipulated downwards for the last decade (e.g. by pushing numerous people to claim 'invalidity benefit' instead), the figures are continuing to show unemployment rising rapidly - reaching 2,400,000 people already and it's set to go well beyond 3,000,000 next year. Yet such figures are just tip of the iceberg, as the real level of 'untapped talent' it is actually far greater than this (and well over 50%).

There is growing concern about this, not just from a financial perspective, but from an individual point of view too, as more people lose self-confidence, belief and self-worth. There is also concern about all the social implications too, as stress increases and motivation reduces ... and as people's natural desire and ability to add value (and make a difference) to other people's lives reduces, reducing the overall well-being of the community, as well as the nation's economy, too. There is also the risk of growing frustration & anger, particularly from younger generations, as youth unemployment rates are much higher, they have been saddled with debt (e.g. due to tuition fees) and given little prospect of a job, house prices are still expense to rent/buy and they are also the ones who'll have to pay most of the Government current borrowing back (through future tax rises).

With all the government spin, the BUTS test is the real one to look at for signs of recovery, i.e. not house prices appearing to stabilise or stock market prices rising again (see my previous post to see more explanations for this), and because the Government have changed very little in terms of the 'leadership', 'management practices' & 'policies' they apply ... the actual unemployment, debts, deficits and stress levels all tell us that the real situation is continuing to get worse ...

But the youth are also more savvy, and are far more effective at using 21st century communication technology too ... so they have the power to change everything, and it will only be a matter of time before they do ... which is what the current 'politicians' are actually really worried about ... i.e. as it will change the balance of 'power', create a new form of 'politics' and a new 'economics' too ...

A Tale of Two Economies ...

Stephanie Flanders, following a recent visit to Germany, posted a great blog today entitled "The tale of Two Economies", which compares the very different economies of Germany (export led) and the UK (borrowing led).

The differences are stark, and the two countries also have very different strategies for dealing with the current financial crisis too (as highlighted by Germany's ministers - e.g. see the links provided below). 

In Germany most people tend to i) class a house as a home, ii) rent rather than buy, iii) save rather than spend and tend not to iv) invest or speculate in property.  In the UK (and the USA) however people have tended to do the complete opposite ... 

So who is positioned best to cope with the current financial crisis? ... and who has already indebted their nation for generations to come?  Take a look at these interviews with Germany's finance minister, and economics minister, and the fact that Germany's exports are already starting to grow again ...

... and take a look at Stephanie's blog too, and the additional comments that I have made and others have made below ...

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Post 14 (Leanomist) wrote: 

Thanks Stephanie - good work. We are now starting to address some of the real issues, which countries like Germany have understood for years (nb Germany also appear to understand the current crisis better than our Government does, and they are tackling it in very different ways - e.g. they are not taking the 'easy option' and burdening future generations with huge debts)!

To survive in a global economy the UK will have to be far more innovative and create more products & services other countries need and actually want to buy (e.g. beyond trying to sell Germany beer!) ... because they add value, solve problems and offer new (and unique) ways to improve people's lives! 

The UK cannot rely, and in fact really does not need, another credit fuelled consumer boom (e.g. based on more housing asset price inflation) and we need to avoid this happening (as it will only worsen our borrowing & trade deficits, and create even worse problems further down the line).

The answer is to stop focusing most of our time, energy and resources on 'gambling' (investment banking, house prices), 'banking' and other services that 'move money' or 'count money' (i.e. 'manipulating' wealth - activities which should arguably be taxed more from an ethical point of view), and focus them more on innovation and creating more products/services people value that we can export and which will actually bring in money (i.e. 'creating wealth' - which should arguably be taxed less).

But will anything like this happen any time soon? I don't think so - not until we have 'leaders' who are able to act responsibly and see beyond their own career/wallet (ie. who don't apply Poweromics*), or until things get so bad that apathy within the general public diminishes to a point where they decide to take responsibility for improving the situation themselves ...

David Clift, a Future 500 Leader

* Poweromics = People using position and power for their own personal gain, based on poor moral values, self interest and greed. http://poweromics.blogspot.com has more examples/information.

PS I agree with a number of comments already made, including 2, 6, 9 and 11 (nb I am one of those who, like yourself and many others, have raised this issue on a number of occasions - let's hope Stephanie goes further down this road now - please don't disappoint us now you've started Stephanie) ...

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Post 2 John_from_Hendon wrote:

Stephanie wrote

"most of the rise in borrowing over the past decade went into the housing market"

Oh dear, Oh dear, Oh dear,

It has vanished then into asset price inflatuion NOT into building productive capacity! We have thus seen nothing for all of our borrowing. If only we had bought something we could use or make something with!

I remember the German Housing market: Second-hand houses cost less than new ones as they are, how do I put it, "Second-Hand"!

The Germans have not dug a huge hole and filled it with debt then... Like we did.

We have stocked up a huge level of latent and actual inflation and currency depreciation which is disastrous. The money men (The Banks that we 'love' so much!) have siphoned off our houses to no advantage to us, indeed to our huge disadvantage!

Why did we let this happen? 

Why did you as a representative of an economical commentator not complain about this at the time?

It was, and still is, the hight of idiocy to see increasing house prices as a sign of something good - it is not, it is a terrible apocalyptic sign of national decline, and banking collapse!

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Post 6 Wee-Scamp wrote:

If Germany is the export champion then the UK has been the import champion. Our trade deficit is legendary. That apart we have of course allowed the financial services sector to make money out of selling our companies off to overseas buyers and there has been little real investment in new companies capable of becoming export meisters in their own right. It's been the economic equivalent of the slow train crash.

There's little doubt that the Govt (especially the Treasury) and the City have let the UK down badly in the last three decades or so and certainly since the big bang... In fact you can track the growth of the trade deficit since the big bang and watch it get bigger and bigger.. At the time of the big bang it was modest but by 1997 it was �11bn.... Now it's probably incalcuable. 

What we can be sure of is that when the economic recovery starts Germany will still have most if not all of its industry intact. We'll have a bunch of badly managed and crippled banks. 

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Post 11: hants_gw wrote:

This is quite a provocative entry.

"With consumers likely to be saving more and spending less, export-led growth is our main hope of a healthy rate of economic growth"

Exporting what exactly? And to whom?

My apologies to various people who have asked essentially that question over the last few months, but it never gets an answer. Supposing I were a wealthy German who wanted to do his bit for global economic balance by buying British, what is on offer? Novelty beers apparently.

Since "export-led growth is our main hope of a healthy rate of economic growth", what is the government doing to make sure that happens? I'm not aware of anything. Perhaps that is just ignorance on my part, but I seem to be well aware of plenty that the government is doing to prop up incompetently run banks.

By the way, what happens after the exports don't materialise?

"Germany's addiction to exports is a problem as well."

Ah yes. Those wicked, wicked Germans with their naughty habit of designing and building high-quality, well-engineered products that people want to buy. It's just not playing the game is it. The next thing you know they'll have banks run by financially literate people; banks that make real profits by investing in real businesses. Good grief, where does it end?

"Yet, on the basis of my trip, I don't think there's much chance of Germany becoming more like Britain or America, despite the big hit they have taken in the past year."

Yes it's a puzzle isn't it? Why would the ant want to become a grasshopper?

Some of the original entry makes a lot of sense, notably the observation that Britain needs to export more (actually lots more) - but having said that why not think through the consequences. If exports are so essential, why isn't that fact visible in the government's behaviour? Where is the support for exporters? As best I can tell the current government's top priority is to increase public spending. I have never heard a government representative talk about boosting exports.

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