Capitalism requires growth to function. One has to make more tomorrow to pay back those who provided the capital for the enterprise. Even non-democratic states like China have become capitalistic, at least for most products and services not needed to directly support the regime.
Iraq is a good example. The US invaded and attempted to impose a privatized economy even thought the oil industry (and several other sectors) had been state run before.
Since growth is an unacknowledged axiom any discussions by economists, political leaders or press pundits are constrained to the well worn paths of improving efficiency and modest conservation.
Only the ecological economists are willing to discuss the inevitable results of continued growth. Nobody listens to them and they, themselves, are weak on proposing concrete goals and how to reach them.
The human race is not good at anticipating disasters, even when they are obvious. The recent examples of HIV and regional flooding are perfect illustrations.
I don't have a solution, there are no leaders with vision and the willingness to explain the type of sacrifice that will be needed. Everyone is standing around and waiting for Harry Potter to come down and wave his magic wand. Ain't gonna happen... Policies not Politics ---- Daily Landscape
But Capitalism per se does not.
If a Society decides to "invest" in a "productive" asset which has a value in use (whether or not that use value has a "price" or monetary value) then while that asset may need to be maintained, and/or replaced, there is no reason on God's Earth why the Capital need be repaid.
Land does not depreciate, and nor does knowledge, so why should investment in it be repaid?
The trouble is that "investment" can only take place "privately", so that "ownership" is transferred into private hands using the vehicle of that sociopathic legal form, the "Joint Stock Limited Liability Company".
So by DEFINITION, the Public sector can only borrow to invest, because the only permissible form of investment is to "Privatise".
Complete Bollocks.
Assets may be maintained in public ownership, or in trust on behalf of the public, and revenues or production may be unitised in "trusts", in LLP's or LLC's or in Limited Partnerships yada, yada.
Just look how one of the chief "locusts" - Blackstone - in their so-called IPO did not sell shares in a corporation, but units in a limited partnership, thereby flogging off revenues but keeping control.
So if we get it right, and the tools are already here AND BEING USED - the entire Canadian capital market is evidence of that, where units in Income Trusts are listed alongside the shares of the Companies whose gross profits are essentially being pre-sold - then a system without the growth imperative is entirely possible.
Asset Finance without debt, and "enclosure": "Open" Capitalism, I call it.
There have been societies which weren't based upon capitalism (mostly pre-industrial, subsistence), but I think their trade was based upon barter. Could we devise an economic system not based upon capitalism? That's the question I keep asking.
There is a tendency to equate centralized control with failed models like communism and socialism, but China and Singapore have shown that centralization and entrepreneurship can co-exist. Whether this is "optimal" is an open question.
I'm in favor of relatively unfettered entrepreneurship and democratic political stuctures. I think industrial capitalism and its modern variants can no longer address the more complex issues facing the globe. Policies not Politics ---- Daily Landscape
Within a partnership there is no "profit" and no "loss", but there IS a creation and exchange of "value" in all of its forms, probably by reference to a "Value Unit".
And note here that bank-created money is not a form of Value but its antithesis, because it is a claim over value or "anti-Value"
Value or "money's worth" may be tangible, or intangible. And when intangible it may be definable (ie intellectual property) or indefinable - "spiritual" or "emotional/ sentimental" value.
In the Open Source model and in a charitable transaction there is still an exchange - except that the giver of "value" is getting something intangible and indefinable in exchange, eg a nice warm feeling, or "bragging rights" down the pub......
As I said, I believe that the model now emerging is an "open" form of capital, without a return in "Money" to "rentier" investors.
Return will be in "money's worth" - particularly land/property rentals (domestically) and energy units (internationally).
Creditary Economics
Discussion re Final Demand Inflation
I'm interested in it, too, and you'll find me alongside Gunnar and others among the "People" on the above site because I am a frequent contributor to the Gang8 Yahoo list and have been admitted to the inner sanctum. (albeit I do not have the understanding of Economics these guys do...)
I think they are partly right in their "creditary" critique of conventional Economics, but tend to ignore the role of property rights and investment, as opposed to credit.
The following is an interesting quote.
In the context of Say's Law, Profit is always and necessarily the product of Final Demand Inflation whereby the banking system creates New Credit (of, say, 10) for loan-financing of Final Demand for Goods and Services whose Factor Supply Cost is 100. With Final Demand at 110, Entrepreneurs would be left with Profit of 10 after repaying the original Production Credit of 100. In the accounts of the "banking" system, this would show up as Entrepreneurial Deposits in the amount of 10 and Outstanding Final Demand Credit of 10. [Gunnar Tomasson]
With Final Demand at 110, Entrepreneurs would be left with Profit of 10 after repaying the original Production Credit of 100. In the accounts of the "banking" system, this would show up as Entrepreneurial Deposits in the amount of 10 and Outstanding Final Demand Credit of 10.
[Gunnar Tomasson]
You won't currently find Creditary Economics on Wikipedia, not sure why it's been taken down twice, but it does rather tend to debunk the accepted orthodoxy.
Gunnar's run in with Samuelson, and his take on the insubstantial nature of the foundations of neoCon Economics are fascinating. Much good stuff in the Gang8 archives.
Oh. And what is Profit, indeed? It's all relative...
Are the Gang8 supply-siders, then? That quotation doesn't seen like a critique of Say's law. Can the last politician to go out the revolving door please turn the lights off?
There are some polymaths there for sure...
BTW, is Gunnar Tomasson the same person that wrote this? And the dean of Engineering at Reykjavik? Can the last politician to go out the revolving door please turn the lights off?
As for Financial Engineering, that might be right up your street!
I think it does occasionally get above 10 degrees in Reykjavik....
Statement on Creditary Principles The differentiation of human labour made a credit system essential for the free exchange of goods and services. A direct barter system was inadequate for the fullest possible development of the potential of human industry. The most potent form of credit was trade credit advanced by one supplier in the chain of production to the next in line. The debts created by the granting of trade credit are monetised, that is they become a means of exchange. The bill of exchange in all its forms has throughout human history and pre-history been the way of achieving this object, converting a trade debt into a negotiable instrument which is usable as money. All money is debt, but not all debt is money, though all debts have the capability of becoming money, a means of exchange, by being made assignable. Money therefore consists of assignable debts, whether it is being used as a medium of exchange or as store of claims on value. Money is therefore created by the granting and drawing down of loans. When a bank allows a loan to be drawn down, at the same time the credit balance to finance the loan is automatically created somewhere in the banking system. Savings are retained financial assets, though the period of retention may be brief or long. As all financial assets are forms of credit/debt, savings automatically come into existence when a new loan is drawn down. One of the purposes for which a loan may be granted is real investment, that is the creation of new productive assets. It follows that the savings to finance real investment must be created automatically by the spending of a loan to create a new productive asset. Savings = borrowings (The definition of borrowing in this context includes equity finance). The encouragement of saving automatically encourages an equal amount of borrowing. There is no reason at all why the borrowing should be solely for the purpose of real investment. Among the many assets it may finance are debtors, work in progress, stocks, or consumer credit. The only way to promote real investment is to create a favourable environment for it.
The definition of borrowing in this context includes equity finance
which defines chalk as cheese, but it's an interesting take on Economics.
You/I could perhaps invite (via the Gang 8 list) one of the proponents to make a debut/ guest diary on ET?
I found the "Privilege" Diary - by one of the noted proponents of Georgism - absolutely excellent in terms of the debate it stimulated.
And thanks for the steer re Wikipedia. You certainly tell it like it is, Don Migeru!
It's best for you (as I can't post diaries from work) to post a diary with either the list of principles or the list of tasks, see what sort of discussion thread develops, and then for you (as you know these people) invite the Gang8 people to read the comment thread once it's developed. Can the last politician to go out the revolving door please turn the lights off?
But before I post a Diary, I'll see which of them is prepared to wade into this nest of pinko subversives...
You don't DO patience do you Mig?
Ignoring "externalities" is the problem.
The day emitting CO2 has a cost to be paid by the producer of CO2, fossil fuels will be on their way out very quickly. The day oil companies need to pay themselves for the military defense of their supplies, they'll phase out oil and find something else to do.
But for that, you need a liberal democracy as opposed to a plutocratic oligarchy.
If the market is well regulated -- including capturing the costs of the 'free ride' impacts -- I do not see why one can not be driving the economy to an ever lower carbon load, even while operating within capitalism.
In any event, there is no such thing as a "pure capitalist" economy in the globe, question is what is balance and how is it regulated. Blogging regularly at Get Energy Smart. NOW!!!
But at the moment the financial system is cancerous, and out of control - a parasite destroying the host.
And yes, the solutions ARE "simple". But no-one paid by the hour rather than the outcome is interested in simplicity.
