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Rodney's Ramblings: Unconstrained Capitalism

"Unconstrained Capitalism has proved itself a hopeless way to run national or worldwide economic affairs,'' writes Rodney Gascoyne.

Unconstrained Capitalism has proved itself a hopeless way to run national or worldwide economic affairs and almost a pyramid or ponzie scheme by definition. It has led to enormous waste and polarization of our populations, and to a need to keep chasing our own tails, to maintain ever increasing levels of consumption, based on ever deepening levels of borrowing and debt. It had to stop and now it seems we have hit the wall. It has now seriously reduced those in the middle classes but given very few immense wealth. There is no reasoning to continue down that path. We must find a better way.

Maggie Thatcher's moves to “privatization” helped us along that terrible road. Before that, many countries used a community based system for major utilities and services, like electricity, natural gas, water, telephones, railways and a few others, and this did work far more to our collective benefit.

Yes, its management could have been more efficient, but she threw the baby out with the bathwater. Her ideas increased the pain to us all, to the benefit of a select few, and far worse was still to come. I wrote in Bonzer! some years ago I blamed Maggie http://members.shaw.ca/GascoyneR/Maggie.htm for the seeds to much of the Global Financial Crisis. The problem was her devotion to the ideas of Perfect Market Forces and trust that capitalists could be trusted to properly run events to the benefit of all participants, under ideals of true, perfect competition. We all now know to our cost how naive and wrong she was, or maybe how she was rewarding her friends for their support, and funding of her causes for such unproven academic theories.

So where do we go from here to rid ourselves of the ridiculous excesses that have followed in Maggie’s wake?

I favour an investigation by academics and others to find a collective, co-operative, community based economic system, with checks and balances, that would more widely share the wealth we could generate, reward investment and endevour by individuals, but also support some baseline of providing for everyone's basic needs. Maybe a tall order and idealistic, but carrying on as before is not going to do anything but cause more harm and pain for most of us, as well as bankrupting many countries, and hence seriously diminish everyone's savings.

We also need to recognize to do what we can to make our economic existence more sustainable in the future. As for the possible approaching second round of global financial chaos, being led by the EU and the Euro zone, closely followed by the US, they seem to be setting matters up where their banks could be bailed out again. Whatever happened to the cry to make banks pay for their own misdeeds, to stop socializing their losses while allowing them to retain any profits they can make short term? We still have immense moral hazards and many financial institutions appear still too big to be allowed to fail. Heaven help us mere mortals! How and why did we elect all these idiots who are supposedly running matters?

Problem is that everyone works from a position of self interest - which I guess encapsulates the capitalist system. There is definitely a moral perspective to all the current economic mess but as long as excessive greed prevails and remains unaddressed or checked, we have little chance of affecting any sort of change. There needs to be a massive cultural shift in the way in which we operate as a society. I sometimes doubt we're capable, or smart enough, to undertake such a change. Personally I think we're at a major societal crossroads. Bit dramatic? Well, not really.

What we've been doing isn't or hasn't, worked. Yes, the few are growing extremely rich. Yet millions are still dying throughout the world due to disease, hunger or tribal disputes. Our priorities are all out of whack. Our caring about each other is most definitely selective.

And yes, who elected these idiots? But then if you look at the basic requirements for the election of any politician, it's no wonder. They need to look normal, with no record of abusing small animals or exposing themselves in public, but outside of that...? Their main pursuits and interests are heavily influenced by raising enough money to get re-elected, and so also pay the piper.

I am an alien in the modern world, raised as I was in austere times during and after WW2, where we became used to little and hoping for more was fruitless, so we substituted imagination. It did though, instill in me those epithets about the difference between want and need.

Much more recently I realized that this discipline has helped me through this chaos and turmoil of the latest years and I am better placed to cope with the changes than most. When I go shopping in strange places abroad, I see little that I need and therefore little that I want. I make things last and hate to throw things out. I now see this as a blessing as I adjust to changes forced more violently on others.

With younger members of my family and friends I have seen the influences on their lives, demanding they needed everything available and thus they want it all, under peer pressure. I am very lucky in my view I was relieved of that insistence, but I can understand how they have little choice in the matter. They are children of the modern age, and thus subject to the increased commercialism that has ruled life for some decades, but I would like to suggest there is a better way, but do not hold out much hope it is a message they want to receive. Need to, maybe.

Many of the severe problems for normal, honest shareholders, dished out by the Financial Services insiders and the markets themselves, have recently be offered a helping hand, let’s hope, by the Kay Review. We need to keep watching this to see if it works out for the good.

The UK Government recently released the Review and their responses, to concerns of disincentives in the stock and investment markets, reducing the longer term interests of ordinary shareholders, by the activities and rewards for asset managers, fund managers and other insiders in the operations of markets, by their concentration on short term competitive imperatives, and personal, selfish greed.

Use this site address to see full details http://www.bis.gov.uk/kayreview

The Kay Review followed on from the UK BIS Department’s call for evidence ‘A long-term focus for corporate Britain’ launched in October 2010, which explored issues of economic short-termism in the UK, and a number of broader corporate governance issues surrounding takeovers and executive pay.
The Review asked how well equity markets achieve their core purposes: to enhance the performance of UK companies and to enable savers to benefit, through returns to direct and indirect ownership of shares in UK companies.

The July 2012 final report detailed the findings. Overall it concluded short-termism is a problem in UK equity markets, and that the principal causes are the decline of trust and the misalignment of incentives throughout the equity investment chain. It sets out principles designed to provide a foundation for a long-term perspective in UK equity markets and describes the directions in which regulatory policy and market practice should move. The recommendations are aimed at providing the first steps towards the re-establishment of equity markets that work well for all their users, and the general public.

The above raises the thorny issue of different forms of Government and Control. Other systems like communism (or really Leninism), has been unable to prove themselves worthy. Dictatorships and authoritarian forms are equally ineffective. Capitalism is now showing severe strains. Maybe I can misquote Churchill, by claiming "... capitalism is the worst method for government except all the others that have been tried.”

Unbridled Capitalism has been shown to be unsustainable by recent crises, and so we have to think of some sensible restrictions and modifications to it, that can provide stability while ensuring a more shared and caring outcome. Maybe academics can think of that now, but for the rest of us, we need to get through the next crisis first. Unless most of our populations feel they have a place and can benefit from any newer form of government, can it long survive without revolution or crippling, endless strikes and major civil unrest?

It is the survival of society as we know it that is at stake. Either we find a better system or we continue down this path to the point of destruction of the whole edifice.

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