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Thursday, December 15, 2011

The Invisible Hand and the Greedy Heart

Adam Smith, acknowledged as the Father of modern economics and of capitalism, introduced the term “invisible hand” in economics. This explains his concept that as a result of each individual acting in his economic affairs in his own narrow interest, all such actions are guided by a sort of invisible hand which ensures that they are also to the advantage of the community as a whole.
As far as the 18th Century Classical Economists were concerned the individual was motivated by self-interest which somehow always coincided with the interest of the wider community.
By the way, that concept offers the theoretical rationale for modern day Republican  “trickle down” economic theory.
In the classical theory of economic behaviour, greed is of necessity characterized as a virtuous human motivation. In essence it was the greed or indefatigable pursuit of wealth and plenty, of the very rich which motivated them to do the things which would generate the productivity and the wealth that in turn provided employment and wages for the labouring classes. So, greed had to be lauded as being for the public good and in the public interest.
To be fair, it may be that these men were writing at a time when it was generally assumed that noble intentions and concern for one’s fellow man would be dominant. The truth is that today many businessmen have a sort of gross self-interest that places no store on the pain and deprivation their practices place on the working poor, whose only interest is in a living wage.
The Invisible Hand theory is basically an optimistic view of life and does not regard seriously the darker personal motivations and desires of men: extreme manipulation of the system for enormous personal benefit and advantage, self-aggrandisement and the acquisition of obscene wealth at all costs, no matter who it hurts or defrauds.
The Invisible Hand is now caught in the pockets of the poor and the cheated -the occupiers of Wall Street.
You may well ask how a man with 1$Billion, cannot sleep until he gets two. First Century Roman Philosopher and Statesman Lucius Seneca has an answer as good as any other “For greed all nature is too little”. So many of the Wall Street captains of commerce and hoarders of undeserved wealth caused a major and costly erosion if not collapse of the American and global financial system from which millions have not recovered. Why? As Thoreau reminds us: “It is preoccupation with possessions, more than anything else, that prevents us from living freely and nobly”.
The greedy heart keeps pressing the invisible hand down on the scales of justice, tipping the scales against the local consumers of goods and services. It is so unfortunate that the avaricious businessman does not grasp the limited pleasure to be derived from having an overabundance of the things money can buy him. To quote Mark Twain: “Any so-called material thing that you want is merely a symbol: you want it not for itself, but because it will content your spirit for the moment.”
The Capitalist system of wealth generation is not in itself evil; no system is. The problem is what humans do with and within the system. If a person or a corporation simply wants to accumulate wealth for personal use and not for the public good, this can generate untold suffering to the underprivileged, as it has done in the United States in recent years. It is as bad as the entertainer Little Richard says: “But men are so full of greed today, they'll sell anything for a little piece of money”. Of course, it need not be so. Capitalism as a wealth generator can work and has been shown by rich men of the past, like Henry Ford, to work for the public good. Wealth is not the problem. Mahatma Gandhi has made a very insightful comment concerning this: “Earth provides enough to satisfy every man's need, but not every man's greed”.
Central to the American view of life is what has been immortalized as the all pervasive American Dream - a concept born of the Constitution which enshrines the pursuit of happiness as a human right. Why is that dream so illusive in today’s America? Perhaps Rick Danko has it right. “As time goes on we get closer to that American Dream of there being a pie cut up and shared. Usually greed and selfishness prevent that and there is always one bad apple in every barrel”. We would argue that there were a lot more rotten apples in the recent Wall Street debacle.
Not very long ago, men seemed to have been content to be millionaires, and even then there were relatively few; today to be successful one has to be a Billionaire. This is a major paradigm shift gone unnoticed. Paradoxically, we affect to be alarmed when we learn of the amount of wealth deposed dictators like Sadam Hussain, Moammar Khadafy and Hosni Mubarak had amassed at the expense of their subjects, without taking into account that so many on Wall Street have done the same thing even if on a slightly more modest scale, and then only within the bounds of the possible.
Paul Samuelson found it “An intriguing paradox of the 1990s, that it isn't called a decade of greed”. Samuelson had not yet experienced the 2000s, the true golden age of corporate greed! The age of Wall Street madness, or greed gone mad; The age of Enron, AIG, Goldman Sachs, Bear Stearns, Arthur Andersen, Lehman Brothers, Delta Airlines Inc., Refco Inc., Bank of America, and JP Morgan Chase.
The tragedy is that corporate greed is largely unpunished, but on the contrary is generously rewarded with the largesse of the undeserved bonus. And then some corporations beguile the public with practices that are generally not perceived as pernicious and antithetical to the public good.
The Walmart trick
A country exports to get the revenue (foreign exchange) it needs to buy or import the goods and services of other countries. It is advantageous to the economic well being of a country for it to have a favourable balance of trade, a situation in which export revenue, hopefully over a sustained  period, exceeds import expenditure.In the modern Global economy exports determine the wealth of a nation. The leading economies are consistently net exporters.
We can look at one example to see how corporations can impoverish the nations in which they operate.
The Walmart Company on the basis of sales, is the world's largest retailer and grocery chain. To assess its size, consider the fact that its sales are  estimated at some 50% more than its five closest competitors combined. In the US alone Wal-Mart has, according to one source, about “700 discount stores, 2,900 Supercenters that sell groceries and general merchandise.” These stores employ over 2 million people. The company is huge.
The secret of Walmart’s success is its scale of operation and global competitiveness, and its consequent ability to offer customers relatively low retail prices on a wide range of household necessities like food and clothing, as well as consumer durables. It is truly the poor person’s shop, perhaps on the level of the dollar stores that have recently proliferated in North America.
The problem is that Walmart is not very good as a corporate citizen in other important ways. Because of its purchasing policies, motivated by the desire for gigantic profits, it is a tremendous drain on the US economy.
Walk down the aisle of any Walmart store and randomly tip over any item. Every other item bears the tag: "Made in China". The figures are not published (although they should be required to be) but an estimated 40% or more of the merchandise in one of these stores is made in China. Hence the US’s humongous negative balance of trade with that cheap labour country. The billions of dollars of merchandise that Walmart buys annually from Chinese manufacturers, racks up a massive US balance of trade deficit with this “emergent” economy.
Because Walmart buys from cheap labour markets it is able to offer a price incentive of between 10 and 20 % to the consumer, largely the poor and the middle class. The average shopper can save an average of 15% by shopping at Walmart. The price incentive is irresistible to even the not-so-poor shoppers from the middle class. Walmart is a magnet to the frugal middle class shopper.
Customers are citizens who depend on their jobs for their purchasing power. To buy from Walmart or anywhere else they have to work and earn an income.
 Walmart buys all it can from the cheap labour Chinese market, and are able to offer a major price incentive to Americans. But the Chinese manufacturers who produce for them have already taken the jobs from the American workers, who are therefore unemployed and underemployed and not able to buy even the lower priced goods.
China is the manufacturing sector of the US, thanks to Walmart and similar companies.
So Walmart in effect impoverishes the US in order to sell cheap and amass hefty profits. It is the supreme trick on the American citizen, who is induced to buy at Walmart while in doing so, ensuring he (or his neighbour) remains unemployed.
In other words what Walmart  customers gain on the swings (buying cheap) they lose on the roundabouts (their jobs!).
The worst part is that because of the insatiable corporate greed, if Walmart could get away with buying every single item sold in their stores, from China, they would. It’s the financial profit imperative gone mad.
A business entity that large and ubiquitous has a tremendous spiral effect on the rest of the economy, dragging many other businesses in its wake. While the middle class shoppers are loading up their carts with cheap merchandise from China in the Walmart superstore, the Koch brothers are in the “free” parking lot siphoning off the high priced fuel from their gas tanks!
In the case of Walmart, our example, greed for profits and the Invisible Hand work well for the company but to the detriment of the nation as a whole.
It looks gloomy. And that’s why Economics was labelled  the gloomy science. Ah, but there is Warren Buffet who reminds us as Garrison Keillor beautifully said: “Even in a time of elephantine vanity and greed, one never has to look far to see the campfires of gentle people”.
Having tried the pure models of both Socialism and Capitalist, what the world needs now is an economic system that has the basic machinery of Capitalism with the motivations of Socialism, combining as far as possible the virtues of both systems. The Soccap model will allow the entrepreneurial class, motivated by self-interest to generate economic wealth, while ensuring through joint Government and business intervention (regulation?), that the disadvantaged are fairly treated and rewarded.
That should meet the just demands of the occupiers of Wall Street around the globe!

Thursday, December 8, 2011

The Hand of God

                                        by Michael White
   Newt Gingrich is going to win the Republican nomination in an earth shattering victory. Hands down. His competitors will not even come close. He has all the qualities the plan requires. It is as we say, written in his stars; you see, it is a time of reckoning and retribution. The chickens must come home to roost.
Is God in it? Of course! There is never a moment in world history when God takes his hands off the controls. He sets up leaders and he brings them down as it suits his unerring plan for his creation. He is as aware of the mind and activities of Judas as he is of John the Baptist.
The Hand of God in the global political and economic arena in the “most powerful” nation on earth is evident. It may be hard to believe, but as God said to the doubters: “Look among the nations and watch - be utterly astounded (wonder marvellously)! For I will work a work in your days, which you would not believe, though it were told you” Habbukuk1:5.
The whole house of cards will be pulled down, with its sinister lies and devilish machinations.
It is amazing how religious and self-righteous these candidates and their right wing adherents appear to be, when so much of what they say and propose goes against everything the Gospel teaches. Think of the true meaning of Christianity and then think, at the same time, if you are capable of such mental gymnastics, of the likes of Rush Limbaugh and Mitch McConnell. What a contradiction! “Having a form of godliness, but denying the power thereof” 2 Timothy 3:5.
Michelle Bachman , Rick Perry and Herman Cain, all of whom were “told” by God that they were set aside for the Presidency of the US and world leadership, have already proven that God is not mocked, and have been swiftly diminished to clownish also rans.
The persistent president-elect aspirant and dreamer Mitt Romney, poor guy, is just wasting his time, not to mention his money, as he did four years ago. (I think that man’s father strongly impressed upon him that he has to be the President of the United States).
On the other hand, Gingrich’s ascendancy has been meteoric and astonishing even to Gingrich; in his grand self-deception and conceit, he thinks (and declares unabashedly) that it’s his talent and superiority that are propelling him along. The truth is far different. The path has been cleared for him. God has set up the scenario we are now witnessing. Gingrich is ordained to be Republican front runner. He is the ideal candidate. His nastiness is the embodiment of the bile that must be clinically expurgated from the bowels of the United States. His thirty pieces of silver cannot save him from his fate. Silver polish has to be applied to the shining city on the hill.
Gingrich is to Obama what God permitted Pharoah to be to Moses; and the more opposed to the will of God, obstinate, recalcitrant, and obdurate he becomes as God hardens his heart, the louder he will fall.
It is no accident that Donald Trump has successfully wiggled his way into the role of ringside coach and promoter of Gingrich; these men have identical personalities, interests and motivations; their hearts beat as one. Without batting an eyelid, they will say and do anything outlandish and sinister for publicity, money and prominence. How aptly this scripture applies to them both: “When he speaks kindly, do not believe him for there are seven abominations in his heart. Though his hatred is covered by deceit, his wickedness will be revealed before the assembly,” Proverbs 26:25-26. We all remember, of course, that in a previous incarnation Gingrich’s wickedness was already revealed to the assembly. This is his second time around with the same old tricks!
Gingrich and Trump, two of the most odious, obnoxious and Machiavellian political characters in the world today, barring none, will burn and crash together. Wait and see. “Pride goes before destruction and a haughty spirit before a fall” Proverbs 16:18.