Archive for the ‘capitalism’ Category

Market Forces for Change

Or as Lenin is supposed to have said, “When we hang the capitalists, they will have sold us the rope.”

One of the things the right and Libertarians like to push is the free market system, which they don’t really like. They like it as long as they can control the rules making it into a game of Monopoly: where they win.

On the other hand, they run scared when their market share is threatened.

The real problem is that there isn’t really a “free market system” out there.  Governmental decisions can act as market forces even if they aren’t set forth as being economically based. For example, building highways rather than public transportation has effected US society in ways which have been detrimental to its interests (or “Detroit: the city that committed suicide by favouring one industry with a very limited lifespan”).

The reason I tossed gun control in here is if the trend for fewer people to want to own guns keeps up, we will have de facto gun control.  The NRA can loosen up laws all it wants, but that may end up backfiring for it as people begin to realise that there was a reason the NRA blocked the research showing gun ownership was detrimental.

The right can continue to try to use emotion to sway people to vote against their interests, but that cannot go on for very long once people realise they have been had. Once that happens not only will people’s economic decisions change, but so will their voting decisions.

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Sir John Rose, the Chairman of Rolls Royce, on the economy

This is a quotation from Sir John Rose, the Chairman of Rolls Royce, which is something that should be considered in light of the US budget debates.

We must be realistic about the state of the UK economy. A rebalancing is necessary and there will be no quick fix to restoring public finances to some sort of sustainable balance.

To draw an analogy, if the UK was a business, the shareholders would be asking serious questions. The current model appears to be that we can grow our business by growing overhead, by applying better terms and conditions to support functions than to wealth creators, and by paying dividends out of borrowings not all of which are recognised on the balance sheet.

We are also asked to believe that service levels will inevitably suffer if the costs of delivery are reduced. This need not be the case. As any business will confirm, service levels will reflect prioritisation, proper definition of desired outcomes, concentration on reducing waste and investment in productivity.

In the UK, the debate needs to focus on how to make the pie bigger, rather than how it is sliced. We must concentrate on creating an environment where the enablers of wealth creation, which government can influence, are world class. In defining the right policies, there are many examples against which we can assess ourselves, but we must measure honestly and then take the necessary actions to be competitive. Importantly, there must be the will to apply policy consistently and over the long term.

If we get wealth creation right, distribution and consumption will follow. It cannot be done in the reverse order.

Redistributing the wealth.

Top 12 countries-Total number of high net worth individuals in 2010

The Guardian has an article called “World’s wealthiest people now richer than before the credit crunch” which points out that while governments are cutting services around the world, the rich are getting richer.

The world’s richest people have now recovered the losses they suffered after the 2008 banking crisis. They are now richer than ever and there are more of them than before the recession struck: nearly 11 million. In the world of the well-heeled, the rich are referred to as “high net worth individuals” (HNWIs) and defined as people who have more than $1m (£620,000) of free cash. According to the annual world wealth report by Merrill Lynch and Capgemini, the category of “ultra-high net worth individuals”, the number of people with assets of at least $30m has climbed 10% to a total of 103,000, and the total value of their investments jumped by 11.5% to $15tn, demonstrating that even among the rich, the richest get richer quicker. Altogether they represent less than 1% of the world’s HNWIs, they own 36% of HNWI’s total wealth.