Capitalism's Last Gasp?

If the latest plethora of books on the subject is anything to go by - probably not. An article in The Spectator critiques the latest offering by a C4 presenter and Left wing ideologue. Yet again, a left winger is predicting that Capitalism is doomed, and that it will be replaced by 'greater sharing of resources' - which seems to be Left wing speak for 'Sodomy non sapiens'. Essentially, this prediction has been trotted out since Marx and probably before him and they still haven't managed to come up with a workable alternative.

Capitalism is as old as humanity. I would suggest that it began when Ugg first discovered that he could trade a leg of mammoth for a months supply of fish, which could be traded for a wife, new sandals, a years supply of leather loincloths and a bag full of freshly napped arrow heads and axes. That he could trade those for the rest of the year and keep everyone else working to supply him with more trade opportunities and food probably arrived at the same moment. And, I would venture, that ever since some 'thinker' in the group has whinged that Ugg's enterprise approach to trade is 'unfair' and fails to 'distribute the proceeds evenly.

I suspect that Capitalism, love it or hate it, will always be around in some form. The reason is that, unlike the Left's ideal society and system, it is flexible. It responds to change. It adapts, and it rewards effort, enterprise and innovation - all of which are anathema to the sort of 'managed' redistributive economic systems favoured by most people on the Left of the political spectrum. Ironically efforts to 'control' economic activity, or to redistribute the rewards usually result in a widening of the gaps between 'rich' and 'poor' and ultimately in the 'means of production' actually being moved entirely abroad.

Recently I have indulged myself, reading some of Owen Jones' work and making an attempt to read several other tomes on 'non-capitalist' economic systems. I've given up. None of them seems able to see that any system such as they propose doesn't actually 'fix' anything. In fact they simply exchange to entrepreneur with some Party Hack and associated Apparatchiks who reward themselves and patronise everyone else in the name of 'fairness'. Nor do they seem able to recognise that every attempt to create the sort of systems they favour fail for the same reason every time. People do not like being told what they may and may not have. They do not like having some faceless bureaucrat serving a 'leader' enjoying the fruits of everyone else's labours, telling them they aren't entitled to some reward for their efforts because it is 'unfair' to the bone idle twerp they work alongside.

As The Spectator article says -

Oddly enough, the recent batch of left-wing doom and conspiracy books, from those of Russell Brand and Owen Jones to the more serious and informed Mason, point to a unified worldview. This sees human beings in democracies not as people with free will and unimaginable potential, but as inanimate beings to whom things are done. 

I do agree that raw unadulterated Capitalism produces some big inequalities, but teaching me to be envious of the guy who ventures his capital (earned or unearned) in some new business venture and strikes it rich, isn't addressing the problem. Most folk need only three things - a regular income, security and a 'home'. Yes there are those who live in sixty room mansions, own a yacht and four cars, but most of us never could even if we lived in some Left wing Utopia.

If there is one thing I have learned reading history and travelling in my work capacity, it is that there is a distinction between ideological theory and reality. I would love to see a more equal society in which no one goes hungry, no one is homeless or without medical care, but I also recognise that, no matter how attractive the ideological theory, it is unlikely to be achieved in any human society. Simply because humans are not all the same. We come with all manner of personal abilities, skills and ambitions. Ideology seldom takes account of that. In addition every Left wing regime I have ever encountered ran on the same principle - the belief that the 'State' owned the money in everyone's pockets and could spend it. So they floated loans, printed more money, raised taxes until it hurt, spent the money and then wondered why their economies flatlined. As Mr Micawber famously said; "Income Twenty Pounds per annum, Expenditure Nineteen Pounds, nineteen shillings and sixpence - happiness. Expenditure Twenty Pounds and sixpence - disaster." A lesson there the Left simply refuse to learn. Their solution to everything - raise taxes! Tax the rich until the pips squeak as one Left wing Chancellor of the Exchequer put it. The result of his idiocy was a massive departure of 'capital' and a fall in revenue income.

Recently I was surprised to learn that in present day Russia income tax is a flat rate irrespective of income. Health care, social welfare and so on are all set at 'basic' levels. If you want better, you are free to buy it, but the 'State' doesn't provide it. That applies across a range of former communist countries, and, contrary to what writers like Owen Jones believe was the case, often this replaces a system where everyone paid for the best for the ruling elites, and got just the basic care themselves. Many other nations have similar systems. Hong Kong was one and still is, and China, Taiwan, India and several other major growing economies have the same idea - one rate of tax for everyone. In Hong Kong the super rich were encouraged to be 'philanthropic' - and they were often very generous.

I have to agree with the writer of The Spectator article. There is clearly something in the left wing mindset that refuses to acknowledge that no system is entirely 'fair'. Or that there will always be inequalities. That, after all, is the human condition.

Left? Right? Centre?

In the interests of clarity, I'd just like to check. The 'Troika' is under fire from both the 'left' and the 'right' and both claim to be doing it in defence of Greek democracy. The Left claiming that the demands to reform the Greek economy before any 'relief' package can be handed over, is 'damaging the economy and denying vital services', while the right claim it is undemocratic to demand any controls at all. Both, presumably, would like the Greeks to be allowed to continue on their merry way, funding their corruption with everyone else's money.

Once you add in the UK Media which seems to simply put a negative spin on anything to do with the €uro or the EU and one rapidly comes to the conclusion that the 'Troika' (which I understand to be the German Federal government, the European Central Bank and the EU Commission) may actually be right. That they aren't popular with the Left or the Right is a given. The Right love to hate them as being about 'stealing sovereignty' and trying to create a 'Fourth Reich' to use the populist UKIP label, and the Left love to hate them because they won't allow freewheeling spending. The Greeks currently hate them because they want to keep on with their freewheeling spending - using the rest of Europe's money as the former Latvian PM said on our television recently. Funny how the media love to show us all the hard Right and hard Left banging on about the 'evil' EU restricting Democracy on the one hand, and the 'evil' Troika on the other for imposing controls on free spending handouts.

The irony is that both sides earnestly believe they are defending the 'democratic' rights of everyone to determine their own affairs. Both seem to forget that the currency is currently the world's second largest 'Reserve' currency and has actually proved reasonably stable in the sixteen years since it was created. The Greek government actually cooked their books to get in in 2000, joining at a Rate of 340.75 Drachma to the €uro. What we now know is that they did so because the Drachma was on the point of collapse, and perhaps Brussels and the Commission should have looked at the glossy figures a little more thoroughly when they were presented by a rather large UK based international accountancy firm that handles major corporate tax affairs for several companies who pay little or no tax to the countries they operate in.

The argument advanced by Mr Farage in an interview aired last night is that the Greeks have 'lost their sovereignty' because they are unable to 'adjust their economy' be devaluing their currency. I got the impression he felt that, to help Greece, everyone else in the Eurozone should allow the Greek government to run the printing presses, flood the market with devalued €uros and allow runaway inflation everywhere else. Ironically, this is what Die Linke and their fellow 'socialist' supporters in the Greens and other 'left' parties want.

Just so the Greeks can carry on doing the spending they are doing. Not unnaturally that suggestion has the more prudent Finance Ministers - and Hr Schauble is just one (though he happens to control the largest €uro based economy, and does it rather well) - rather cross. Especially the Baltic States, Poland, Czech Republic, Slovakia, Finland and Sweden.

Having lived in a country where printing money was used to address economic downturns, and devaluation employed to improve export trade, my own feeling is that those who feel this is the right way are either mad, or they are deliberately and dangerously trying to ruin the whole European economy. I'm starting to believe the latter in fact. Which makes me think that none of them have any concept of the misery it will inflict. As I said, I have lived through it. I have lived with an 'official' inflation rate of 12.5% year on year and the consequences were that though my salary was automatically 'adjusted for inflation' and I usually got at least 5% annual increments - my actual spending power decreased annually by a minimum of 7 - 10%.

Why? Because the 'official' inflation rate was roughly half the actual. That is what allowing Greece to 'devalue' the €uro would produce in the longer term. Thank you all the Left wing commentators in the UK and US media trying to talk the €uro out of existence, or talk it into devaluation. I can't use the expression here that I would say to their faces, but I will use the Shakespearean curse - A pox on all your houses.

Perhaps it is time for a reality check for the ideologues of the 'left' and the 'right' - and maybe the 'centre' as well. Economies are built on trade, productivity, goods, services, savings and prudent management of the resources of any nation or group. The EU isn't perfect, but it is doing a remarkable job of holding together a very disparate group of people and cultures. As Josephus has reminded me from time to time, one of the biggest problems is the divide between the frugal and industrious 'northern' nations and the more laid back and less industrialised southern ones. That is perhaps most evident when one looks at the divide between Southern Italy and Northern Italy, or those South Eastern States once part of the Austrian Empire and those that were run by the Ottomans.  A similar divide almost tore the US apart in the 1860s, less than a hundred years after its Founding.

The Germans are very, very touchy about inflation and falling productivity. They remember all to clearly how runaway inflation in the 1920s and early 30s brought a certain Party to power that plunged them into almost total destruction, and they won't allow anyone to take them there again. In the last weeks the Greek government has repeatedly come to the table with the same proposal - no cuts, no immediate reform, just give us the money and we'll see what we can do. Understandably, Hr Schauble is angry, after all Germans are going without some of the benefits they are paying for the Greeks to enjoy. It might pay the UK Media to be a little less 'anti-German' and get their heads out of the 1940s mindset. The German economy is remarkably stable, partly because they don't have the same lurching from 'socialist' to 'neo-socialist' and 'capitalist' economic dispensations and flights of fancy as we do. They aren't the threat, and neither is Brussels - the real threat is the idiocy that says fragmenting Europe into a myriad small states with parochial politics is the right way to go in the world as it is developing today.

As for the current crisis, Mr Tsipras is going to have to come up with a bit more than rhetoric and lots of glad-handing people like Mr Farage to get any change from the Troika and no amount of Farage Fulmination and Leftist whinging is going to change it.

Capitalism or Communism?

The polarisation of this question generally provides only the answer the particular protagonist wants and that is an absolute. Sadly this always masks several important points, one being that neither is actually 'perfect' for everyone or for every economy. Both have serious flaws in practice. So I was recently very pleased to see the following answer to an online debate.

118

 

Eivind Kjørstad, 

Communism and Capitalism are abstract ideas. None of them can function in a hypothethical "pure" form, because both of them carry in them the seed to their own destruction: "pure" capitalism unhampered by restrictions or government oversight would lead to crises and excesses that makes the current financial crisis seem like peanuts; you'd have people starving on the streets, and a handful of people owning everything. We already live in a world where the wealthiest 85 people on the planet own more than the poorest 3.5 billion. A world where it instead was the wealithest 10 people on the planet owning 99% of everything would not be desirable. 

But pure communism is also unworkable: attempting to remove the profit-motive never works, and if it did, the result would be a catastrophic fall in productivity and a world of poverty as a result.

Real economies are a mixture of ideas from many different inspirations, including communism and capitalism. Good governance is not about finding the ONE TRUE ANSWER and then implement it in it's purest form. Good governance is about finding a reasonably good balance between the many competing priorities.

Enough capitalism to make people productive. Enough communism to avoid having people starve on the streets. Enough capitalism to make it worthwhile to start businesses, yet also enough of a social security-net that even if the business fails, you'll still not need fear for your basic nessecities.  

It's not always a conflict, sometimes there's synergies: A good social security-net makes it easier to start a business, because that's always going to be a risky thing to do (most businesses fail in their first 5 years), and knowing that you'll still be fed even if you fail, makes it easier to accept that risk. 

So the question should not be: What is better, capitalism or communism ? 

The question should be: What is the right balance of ideas ? What are the good parts of communism, and how can we incorporate them, while minimizing the downsides ? What are the good parts of capitalism, and how can we benefit from them while reducing the downsides as much as possible?

I find this writer has summed up my own feelings on this question perfectly, the only problem is that, at present, both the 'capitalist' and 'socialist' political party types are too close to, if not in thrall too, the absolutist proponents of both philosophies.

It just gets funnier ...

I have to confess that I find the predicament of the 'climate scientist' and his team and supporters (See the Antarctic Ice Shelf Before Its Gone Forever tourists) amusing. Having had to be airlifted from a Russian ice-breaker by a helicopter launched from a Chinese ice-breaker, and flown to an Australian ice-breaker (remember the initial reports said they were just passengers on a 'cruise ship'), they are now facing a return to the pack ice because the Chinese ship is now trapped and the 'rescue ship' has turned back to attempt to free the Snow Dragon.

It is funny to see the BBC and Guardian both playing down the fact they'd sent journalists and a team to record the 'vanishing ice'. They were to play up the Global Warming scam, and 'show' how the AGW scares are 'true'. The whole thing now frustrated by the fact that, in defiance of the computer 'models' the Antarctic ice sheet is growing and is now at its greatest extent for more than a century. But the BBC and the Guardian are not the only ones now desperately playing down the real purpose of this 'expedition'. Just about the entire AGW community is trying to ignore it. After all, this is the Antarctic summer, the ice is supposed to be thin, retreating and vanishing - isn't it? A century ago, an Australian explorer was able to sail right to the coast, something impossible since, and this 'expedition' was supposed to repeat the exercise. The leader's 'models' had predicted no ice. Pity Mother Nature didn't agree.

What is even more noticeable is the total silence from Greenpeace, Friends of the Earth and all the other AGW scammers, regarding their contribution to the breaking up of these ice sheets by their own activities. Ice breakers are designed to smash their way through the ice. It follows - at least to my way of thinking - that if you keep ploughing channels through the pack ice, you are contributing somewhat more than your fair share of ecological destruction and damage. Or perhaps that doesn't count if you're doing it to 'prove' that everyone else is destroying the planet?

Oh, the irony. The troops of 'Save the Planet' being the very people doing the most damage to the fragile ecological systems they claim to be preserving and protecting. The hypocrisy would be funny if it wasn't so blatantly fraudulent. The people behind this now have so much money invested in keeping their 'true believers' on board and on message they can't afford to admit any error. Like the 'leader' of this latest fiasco, their investment in 'alternative' solutions has to be supported - or any hope of profit will vanish. As it is most of these 'alternatives' only show a return as long as taxpayers can be compelled to continue to support them with subsidies.

And who is paying for this massive rescue operation in Antarctica? That's the biggest joke of all - you are. The taxpayers, in this instance in Australia, are paying for it, but everywhere the 'Greens' have railroaded their religion into the corridors of power and the populist media, we are all paying for it and every other stunt these clowns pull.

That is not so funny.

Rearranging Deckchairs ...

I have been watching with some amusement, the latest efforts by the Home Office to 'do something' about the 'flood' of immigrants they expect to get from Romania and Bulgaria. The Home Secretary has been making noises about 'capping' the number of immigrants from within the EU, which, as the Deputy PM has pointed out is illegal and discriminatory. It seems to have escaped the notice of the British Press however, that the Danish Interior Ministry, and the Danish EU Commissioner free movement of workers within the EU has nailed the flaw in Mrs May's arguments.

The problem is that Britain has become a magnet for those looking for handouts because it has the most generous 'benefit' system in Europe, the easiest to gain access to, and the easiest to defraud. As the Danish lady said - stop trying to restrict the numbers, and fix the system that draws them in!

That, unfortunately, isn't going to happen. I know there is a huge uproar at the moment about cuts to a wide range of benefits, but the reality is that, in real terms, it is the old pea under the cup trick. While some, often the most in need of help, are losing out, the money is simply being 'rearranged' and the cheats, the idle and the manipulative aren't losing out. The 'rights' lawyers are having a ball, and raking in cash left right and centre 'fighting' for the handouts to migrants from non-EU countries and 'vulnerable minorities' while the pensioners, disabled, and chronically sick who don't have the connections, bear the brunt of it.

Parliament can, in the meantime, award itself a pay rise, bigger pension benefits and expenses claims, but is afraid to tackle the root cause of much of the UK's financial woe - the out of control 'benefit' system. To pay for this the last government raided Pension Funds, destroying some, reducing others to near bankruptcy and accusing all pensioners of 'being a drain on the economy'. A bit rich from a bunch of professional parasites sitting on gold-plated pensions themselves, especially as 'Pensions' are not a 'Benefit'. Everyone in receipt of one has contributed toward it through their employer, through their tax and through direct contributions. In my own case an average throughout my working life of 5% of salary in direct contribution, an amount matched for most of that time by my employer. So called National Insurance is supposed to pay for 'Unemployment Benefit', pensions and, some think, the National Health Service. It currently runs at 11% of earnings, plus an employer's contribution, but most of it simply vanishes into the Whitehall Black Hole. It is not, and never has been, an 'insurance' in the same sense as a policy taken out with an insurance company, nor has a single penny of it been invested for the future.

So now we have the spectacle of politicians having set up systems to 'redistribute' wealth from some, to those they and their civil servant chums consider 'deserving' and blaming those who have paid toward pensions and security for their families, being blamed for it being unaffordable. So now they resort to fraud and deceit to find solutions. One is the move to change the Fire and Rescue Service Pension age to 60. There were, and still are, very sound medical grounds for the present maximum retirement age being 55. The Minister is being misinformed, or possibly disingenuous when he says that any fire fighter forced to leave the service before age 60 will still get a full pension. The fact is that they won't. In fact many may have to leave the service at 50 - and will lose 10 years value from it. This is in the 'Report' the relevant department cooked up - it actually admits that potentially 91% of fire fighters won't be able to meet the fitness standards at age 50 or lower!

The fire fighters are an easy target, they're high profile, and their pension scheme appears very generous, so it is easy to spread the lie it 'isn't earned'. I note the politicians aren't admitting that the fire fighters pay 11% of income into it over their 30 year careers - money that is not - again - invested, but spent by the Local Authority concerned to 'redistribute' wealth on pet projects. I was particularly angered to note on a forum I frequent, that a non-Fire fighting "Area Manager" (Old money equivalent of a Senior Divisional Officer/DO I) 'managing' that other great shibboleth "Human Resources" was arguing that fire fighters should accept that the service isn't a 'lifetime career' any longer, and the pension benefits were too generous. Rich, considering that she has parachuted into the service at the same pay as the fire fighter who used to manage that function, and is now likely to draw the pension she and others like her are trying to deny the 'resources' they are supposed to take care of.

As I said, the fire fighters, police, soldiers, ambulance workers and other 'service' personnel are easy targets. They are relatively small in numbers, so the politicians can afford to sacrifice their possible votes. Likewise the ill, the aged and the disabled. What they will NOT tackle is the massive handout culture they have created since 1909 when the 'universal pension' was first introduced. Since then we have seen 'benefit' after 'benefit' added to the list, and alongside of that we have seen the growth of industries to preserve them. So we have the 'human rights' lawyers, the Union Lobby, the Student lobby, the minorities lobby and so on - all of whom defend their particular interests with threats of disruption or mayhem if there is any attempt to address some of the imbalances that have arisen.

Pensioners are still painted as 'abusing' the system even though they have, in the main, paid for what they get. So do many of the younger folk now facing retiring (if they can) at 67, 69, 70 or later. The Danish Minister is right, Britain needs to tackle the culture of 'benefits' that are creating the unrealistic expectation of being able to live comfortably on these handouts for life without ever having to work. Only then will the 'migrancy' problem go away.

Unfortunately, that is the least likely course of action the present or any future government will take.

Economic Disaster Looming

Yesterday's video clip from MoneyWeek got me digging. What I have turned up (far from a complete picture I confess) has got me deeply concerned. There was some further fuel added late last night when I read a report that one of the largest circulation Chinese daily papers ran an editorial basically saying that China didn't need Britain, "a small and no longer significant nation that has impoverished itself and has nothing to offer China". Sadly, I suspect they may well be right on the money despite the Prime Minister's much vaunted 6 billion pound trade deals. I note he didn't say which way the 6 billion would be going - to Britain or to China.

We should all be deeply concerned by the fact that our National Debt has shot through the 'billions' and is now over 1.4 trillion Pounds. We need to be even more concerned over the fact that, despite the much vaunted 'cuts' in all manner of 'services' and 'benefits' the overall spending in Whitehall has actually increased. This is not a new phenomenon, Whitehall 'cuts' and 'savings' always seem to translate into increases in their overall budgets. All talk of 'value for money' almost invariably means a reduction in delivery and a massive hike in the cost of whatever it is. Th awful truth of our National Debt is that it is over 9x the National GDP. Put another way, the Demand on the "Money Supply" is 9 times greater than the Supply. This can't go on.

But the terrible truth is that neither Parliament (the prime source of the problem) nor Whitehall are capable of dealing with it. Even if they wanted to, the truth is that the either haven't a clue as to how to do so, or, they are afraid to.

So what will happen if the country runs out of money? Who will really suffer?

My studies of the late Roman Empire and its collapse revealed that the majority of Middle and Working Class folk were the first victims. The rich and powerful carved out little fiefdoms for themselves, hired soldiers and sat tight, the middle classes and the workers found themselves being squeezed for massive tax demands, then for 'protection' and finally surrendered their property and liberty just for food and shelter. The wealthy families survived, eventually becoming, through marriages, 'little' wars and adoption of the tactics of the barbarian invaders, the 'noble' families who ruled Europe until the wars of Revolution in the 18th and 19th Centuries.

I suspect something similar is about to happen in Britain.

Let's take a look at what will happen if the government can no longer service its debt and the money supply dries up. As in Greece, the first to be hit will be those who depend on the State for their income. Civil Servants, teachers, doctors, nurses, fire fighters, police, soldiers, sailors and airmen, pensioners, the disabled, students and the unemployed. Health services will be crippled, those with debts, mortgages, loans and so on will no longer be able to pay for them. Unemployment and homelessness will soar, so will the need for food depots, child protection and so on. Some communities, where there is a strong community support ethic (the Muslim groups come to mind) will survive by coming together and taking care of their own as they do in the Middle East and elsewhere, the richer members of families providing the basics for the less fortunate. For the rest, used to "The Government" providing everything, there will be a major problem as the Greeks have discovered. You can't feed a family out of grow bags on the balcony of a flat, you might if you have a greenhouse or an allotment, but both of those will become very vulnerable to the desperate hungry who don't have access to such facilities themselves.

There will be riots over the cessation of 'benefits' and certainly the likes of the National Union of Students will embark on campaigns of anarchy over their Student Grants and Loans being stopped. They will be joined by others dependent on the hand-out culture we have created, and both will simply make the situation ten times worse. We can be sure a number of expensive projects will cease. The new aircraft carriers being one, but others will include things like road maintenance, keeping the rail infrastructure up to date and so on. Health care will become basic - unless you can pay for it yourself - and we can expect fuel to become increasingly expensive and scarce. That will mean cold homes for many, which, coupled with minimal food supplies will mean a rise in deaths from disease and the cold.

While Whitehall will desperately target all the 'High Profile' projects and Services (Fire, Military, Student Grants and Loans, Pensioners and so on) they will be saving 'pennies' simply because they will not dare to tackle the real cause of the problem - the major slice of the money we overspend from the Treasury goes on the 'Welfare Benefit' handouts and the massive Whitehall machine that administers it. Defence, even including the new carriers, is under 2% of our GDP, less than most of Europe spends, half what the US spends (in equivalent terms) and less than a quarter of what many Middle Eastern and 'Developing' nations we currently give Aid to, spend. By contrast, according to some sources (it is difficult to make sense of some figures since the 'benefits' now handed out are spread across several Departments and not, as one would think, under one umbrella) our 'Welfare' bill accounts for around 50% of GDP!

So far all the 'austerity' measures have done little more than rearrange the deck chairs on this sinking ship. The HMRC (as a friend discovered this week) is so desperate to find extra money they are now 'auditing' pensioners in the hope of finding hidden billions in undeclared savings. As my friend reported, the pennies they do find are far outweighed in real terms by the cost of these 'teams' chasing them. Those who do have the sort of money the HMRC would love to tax have it where it can't be got at, or have used all the loopholes in the Tax book to protect it. The only option now for the Treasury is to 'nationalise' all the 'private wealth' such as savings and private (invested) pension funds as has been done in some of the Eastern European countries trying to get their debt under control.

It is obvious that this situation cannot continue. We're broke, living on the Credit Card and praying for a Lottery win. Parliament can't fix it, Whitehall won't. So, sooner or later, we're going to go bust. All most of us can do, at this stage, is hope and pray we can weather the catastrophe somehow, and make sure that the government can, in the end, be remodelled, its powers to give away what isn't theirs in the first place restricted and at least some of the best of our society and culture salvaged.

It isn't a good picture, and the troubling part is that it is very likely that those who caused it all will be the ones who survive with wealth and power intact.