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Adam Smith 1723-1790
A very clever Scotsman & Daddio
of modern capitalism.
  • As I was going through the archives I came across a few articles I did way back & thought what if I did a little research to see how we compare to what I was complaining about, 2,3 or 4 years ago. Again and again. So I do hope you stay with me for this short article. The idea being to simply consider & entertain an alternative & fresh outlook.
  • Basically, it is not exactly a bed of roses for any one of us. It has actually got from worrying to bad to terrible to near impossible. Cataclysmic disaster would be a good way of visualising our economic situation. I will deliberately avoid bringing the United States into this to alleviate possible depression and or digression. I will also not mention the details of US guarantees for Israeli loans. Which, in itself is another first in human economic history. One sovereign nation is covering the economic activity of another, even though they are neck deep in it themselves. The blind leading the deaf, dumb & blind. So I will keep this particular debate firmly in good old Europa!
  • The gross domestic product (GDP) or gross domestic income (GDI) is a basic measure of a country’s overall economic performance. It is the market value of all final goods and services made within the borders of a country in a year. It is often positively correlated with the standard of living. GDP is like one of the nation’s main thermometers, economically speaking. When it is high we are doing good & when it drops you start noticing certain things, like repossessions, unemployment & inflation.
  • The target figure, as set by European law, Maastricht Treaty of 1992 & 1993, stipulated that any EU member states budget deficit can not be higher than 3% of its GDP. Huh! Check this the current average for EU member states are running a 6.4% deficit on their average GDP. This is set to increase to 6.9% next year & more the following year still. The saddest part is that the average member state has a debt of 78.2% of GDP rising to 84.0% in 2010 & 88.2% in 2011. In simple terms, if you were to go to anyone & even attempt this scenario as an economic proposition they will laugh or possibly slap you for being stupid. As it is clearly an unviable proposition. You can not be 80% in debt, and rising, and expect to continue. Basic rules of capitalism, market forces, supply & demand, will automatically apply & dictate that you must stop operating in such a fashion. No one will lend you. You have a weak product. You are busted!!
  • Our beloved governments, however, do not seem to play according to the rules either. First they are all running at more than double the deficit rate they all agreed over 15 years ago. Secondly, they are borrowing more to service the debt against the nation’s income & assets. The same assets are constantly being reviewed for privatisation. So 80% of the nation’s work & output is allocated to pay its debts for that year alone. They sell us this messed up scenario on a daily dose of misinformation, spin & public relation on a collective basis. In any such situation any small business owner will tell you that it is time for a restructure, a revision, and a re-think. Or just throw in the towel. Call it quits. Abandon ship. Say good bye.

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  • It is at this point that my thoughts kick in. Why not revise our current modern capitalist model. I do realize that one is not permitted to utter the word socialism. A little bit like when you can not say Black in front of an African American/Jamaican, as you will be a racist, or the word Jew in the presence of a Jewish person, as you will be anti-Semitic. In this instance you will immediately be branded a red-communist-bastard. The ex Soviet Union will be there to remind us all of the total failures of any such thinking or deviations. The fear the unknown scheme goes in to full swing. We must fear the Iraqis, Iranians, Afghans, Chinese, Russians & any one else that we can muster to ensure that issues remain unresolved & go undebated. This is it. All we got is our free democratic system & we must at all costs protect it. Perhaps that is all we got to sell right now. The ideal of a free democratic society is our ultimate product. So I try & protect it. Can I get a prosecution out of hundreds of MP’s cheating their expenses? Naah! Can me & you have a real say about when we send our boys to kill & get killed on our behalf? Naah. Can the government not bail out greedy bankers & let them go bust as per clear definitions of our free democratic system? Naaah. In the UK £800,000,000,000 (800 billion) of borrowed money is tied to the banking system’s failures. Quantitative easing is the new sexy word. But instead they rewarded themselves in the millions for their miserable failure knowing that they will be bailed out. Market forces are not applying here. We got institutions that have higher turnovers than some small countries. But in the name of the market, which I suppose is greater than all; we allow them to roam unregulated. They mess up. We pick up the bill. So what happened to the market? The straight answer is that the market is only applicable to me & you. Not the banks or government. They can operate as entirely dysfunctional & insolvent entities whilst giving the rest of us a lecture on the rules of the system. Let’s look at a number of corporate beasts here. Telecommunication, but a hand full of suppliers. Commercial property in central London, less than half a dozen landlords control who is present or not present in the West End. Financial systems has about a dozen banks controlling the finances of the whole populous. Aviation & airlines the same thing.. Petro-chemicals & refineries, same thing again. The list & examples are endless & they all have one thing in common. They are terrified of competition. Me & you are the ones that have to compete. We compete for our services, products & labour. But these chaps would go to extreme lengths to avoid competition because they know there are no regulations once they control the bulk of the market. I am not for a moment suggesting that big companies are bad. Not at all. I am simply suggesting that if a commercial entity gets beyond a certain threshold then surely there must exist safety valves in case they go wrong without putting the failure back on the citizens lap. Since we never benefited from their fortunes in the previous years. We must decide which it is that we want. Capitalism & free markets or some from of socialism. Not a mish mash of the two as they are firmly in opposite corners. What if the government had not intervened? Well, you would have lost life savings, mortgages cancelled, and salaries due to be paid frozen & general financial mayhem, if you were a RBS, Lloyds or Northern Rock customer. What would be the public reaction if they lost all their lives savings. Simple: thousands would be on the streets probably with sticks in their hands to beat them out of office for not regulating these giant institutions & asking for their money. We could not have that now, or could we? Ever so Un-British!!

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  • I am suggesting that time is nearly up & revision of our current economic model is urgently needed. But to do so, we must be open minded & objective. Facing the truth is normally the most painful & yet the most fruitful. So check this. As of less than a day ago, China, (you know the little communist guys we slag off for making bad quality & inferior things who also eat funny things & pollute this whole planet), reported a fourth quarter growth in its GDP of 10%. Not deficit. But real growth. This is in tune with the near exponential growth since 1995. Yet, through some form of superiority complex we refer to nations like China, as developing, wanna be like us. I think they are better developed at this precise moment in history. Not because they are making money by the lorry load, but due to the fact that the China Man sat down & revised their Communist/Maoist economic model & merged & developed their very own & unique model. Some form of controlled & regulated Socio-capitalism. I can not come up with a sexy word for this. But I am sure it will come up soon enough. So why it is that China & India are booming? Again, it goes back to the basic definitions of capitalism. In order for the capitalist model to work effectively it must manufacture & produce commodities to supply a demanding market. They are busy making stuff. That is all. They make it competitively, & sell it at a profit & produce a surplus capital which results in growth. Why are they competitive? This is even a simpler answer. Their economy is not driven by the monopoly of a handful of landlords & banks controlling the bulk of the property & financial markets with no competition & regulation. Britain was the first modern industrial nation in the world & was famously referred to as the workshop of the world, because it was making things the rest of the world wanted. This is exactly what we have stopped doing. Because, we seem to prefer land and bank monopolies to control our governments & future destiny.

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