Capitalism, In Crisis?

Why working within a system designed for no-limits clashes with sustainability efforts

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David Harvey’s “Crisis of Capitalism” got the grey matter (stardust) between my ears going.  It really filled in some gaps in my thought processes that had been going full-throttle since entering Thomas H. Greco Jr.’s world of “New Money for Healthy Communities”.  (I read it in May.   Still filling in the blanks.   Should have a workable plan soon… if my stardust doesn’t blow away)

(I highly recommend viewing Mr. Harvey’s full lecture (31 minutes).  And don’t tell me you don’t have time…I Facebook – I know how much time you spend on reality TV and computer games… lol)

The material jam-packed into this little clip will get you from “Capitalism is Great!” to “Is It Sustainable?” in 11 minutes or less.

Now, before you fly into a tizzy of disbelief, please remember I’m not a socialist or communist or ….what have you.   But I am a firm believer that what we ARE doing is not working and is not sustainable.  Therefore, it’s time to look at why and can it be fixed, or do we need to start anew?

Some of Mr. Harvey’s observations on what is needed to make Capitalism (in its current form) a viable system are:

  1. Investment of capital needs to take place at precisely the right time, in the right area, in the right amount – everytime
  2. Investment must move continuously through geographical and industry sectors, in order to keep stability.
  3. We must realize at least 3% growth each year.

Investment of capital needs to take place at precisely the right time, in the right area, in the right amount

If it was possible to consistently invest in needed products and services, in the appropriate place and amount, at the right time, it wouldn’t be called gambling ( I mean Wall Street)  Therefore, I believe hoping for this to come true should be placed on the Utopian blueprint, for future reference.

Investment must move continuously through geographical and industry sectors, in order to keep stability.

This is just an educated and financial sounding way of saying, “Spread the Wealth.”   Again, historically, we are very piss-poor at doing this.   We also have natural forces to contend with.  For example, in order to move large amounts of people, goods and services to the Sahara, we need to wait for the next shift of the earth’s axis, guesstimate is 6,000 to 15,000 years from now (or in 2012, if you’re a doomsdayer…and if you are, you’re not reading this, cuz, hey! you only need enough money to last the next 26 months or so.)

So I think we can place “spreading the wealth” in the Kumbaya world too.

3% growth every year

That’s easy.   It’s called population growth.   New consumers are born every minute.

Until you realize that population growth peaked at 2.2% in 1963 and is now at about 1.1% growth, with a continued decline expected.  (Since most Americans don’t need all those extra hands for working a farm they don’t own  AND  a $40,000 college education is expected for each child unit, me thinks the decline will continue.)

(I know all you Ph.der’s out there wondering why I’m drawing a direct correlation between population growth and the needed 3% growth needed for capitalism to work.   I’m not going to explain, because this is really just an asinine way to draw attention to our propensity to expand unchecked in a variety of areas.)

So, just to be optimistic, let’s say that even-stevens, we get 1.1% of our needed growth from newborn consumers.   That leaves us with a 1.9% shortfall.

How much can you eat, wear, do, in a day?   C’mon people, 3% growth isn’t easy (unless it concerns my weight and waistline.)   In order for capitalism to work, we must all do our effort to consume 3% more of viable goods/services each year.

Let’s look at some of the creative ways we have realized gains in the past decades.

Technology

Technology has carried the ‘growth-load’ for some time.  Given Moore’s law of accurately predicting double the transistor capacity every 2 years or so, innovative folks  learned how to design new devices that weren’t even possible at the time they were brainstorming, but were by the time  manufacturing began.   The boosts to the advertising market is just icing on the cake. (I mean really, who would actually buy a Furby without their kids being blitzed by the media?)

But this trend will not continue – projections expect the peak around 2015 or so.  (I can’t wait!   I’m really tired of having to figure out how to work all the bells and whistles on a new phone, software or computer every year or so!  Remind me to tell you the story about converting from Access 2003 to 2007 in the middle of building a database sometime. User-friendly Ribbon Bars my arse…)

On the bright side, technology and space travel should continue to see some growth – we need to find a way to rocket off to the moon or Mars, once we’ve made Earth uninhabitable.  And there are those optimists who are working on space travel just in case we don’t destroy ourselves prior to the sun turning into a red giant.

Housing

My brother and I were raised in a five room home. (yes, we did have an indoor privvy…)  Neither of us joined gangs, went to wrack and ruin via drugs, alcohol, etc.   My family of 3 currently resides in a home nearly 5 times the square footage.  (I say we need to downgrade – males in the house like all the extra floor space to drop socks and set dirty dishes on…)

My dad, a plumber, said that in his experience, people who ‘added on’ to their house because their current one was overflowing with ‘stuff’ didn’t keep the nice, organized environment for long.   They just filled the new empty space with more stuff.   (See?  We are trained well to do our part in realizing 3% growth in spending every year.)

The ‘mortgage industry crisis’ is, in a word, funny.   No, not ha-ha-look-you’re-homeless funny, but how-did-they-think-loaning-more-than-a-house-is-worth-was-going-to-work funny.

Apparently, there wasn’t a dependable Moore’s Law for doubling of home value every 2 years or so.   And how much living space do we really need?   And if we have some extra space, does it just drive us to spend, spend, spend to fill it up?   And can we sustain both the increasing house payments and the decorating expenses non-stop on our current employment?

I also find it entertaining how greatly house prices vary from different perspectives.   From an individual viewpoint, I’d be fine if the realtor and mortgage company of a potential buyer thought my house was worth what the county assessor and my insurance agent have valued it at.    Heck, I’d even be happy if what my insurance agent said I should insure it for was what the insurance adjustor states they will pay when I’m standing next to rubble.

Mr. Harvey states that capitalism is a never-ending race to get past ‘ceilings’ – it functions only in an environment of no limits.   Our recent housing and mortgage industry woes are excellent examples of what happens when we try building a stand-alone staircase to skirt the ceiling.

Financial Services

The financial services industry is, in a word, ludicrous.   That you need an entire industry to oversee and manage a symbol of actual goods and services seems ridiculous to me.    Bottom line, our Washingtons, Lincolns and Franklins are simply a symbol for goods and services which are either currently or shortly (about 60 days)  available for consumption.    (See Money, The Great Hoax, coming soon, for more on this topic.)

We have become so detached from what money actually is that we see It as a commodity.    And many an industry has been built on this commodity.

When you spend your money to make more money, then you are spending a symbol to make a symbol.  But what does it symbolize?   Gold?  Um, no.   Many of the world’s countries that were on a gold standard suspended it to finance wars and found out they couldn’t afford to re-instate it later (I reiterate, wars are pricey).    I also cannot resist adding that having a gold standard is silly.   If you’re hungry, you can’t eat gold.   I’d prefer to see food crops as the standard of money.   But, hey, what do I know?

The financial sector is big business.   Like politics, only those immersed knee deep in that world can actually keep a straight face while expounding on how the system works.   The day I found out that people can actually place bets (oops, sorry, “invest money” is what I should have said) on whether another person or company will actually pay off their loans, and those who bet against people making good made more money than the flip side, was the day I realized we’ve all gone insane.

Granted, I’m sure there are some who would be happy to loudly and aggressively explain to me how this betting (sorry, “investing”) works, why I’m naive and how I should learn more before downing the system.   In my defense, I do not enter the political or financial worlds often – I’m afraid if I read enough to learn all there is to know about them, I’ll become hypnotized into believing their dream world is a good reality.

**********

Now I’m going to go out on a limb and say I believe our most recent attempt to create 3% growth is in the Insurance industries.   Maybe it’s always been this way, but seems to me I see way more insurance commercials now than I used to.  I can insure my car, house, pet, computer, life, long-term care……..you name it, I can insure it.

There are several things about the insurance industry that bother me.    First, they are in the business to make a profit – just like casinos.   Making a profit means taking in less than you pay out.   Since they are both in the business of telling you what the value is when they are collecting the premiums and what the value is when they cut the check to replace/fix the insured item, or compensate for the loss, seems to me there is quite a bit of  space for the Company to make decisions in their financial favor.  Health insurance premiums vs. when they will release the money and to whom they will release it to for your well-being is a prime example.

Second, I’m required, by either law (car) or to make some purchases (financed home/car) to have.   Yet there doesn’t seem to be legislation in place to keep them from raking you over the coals any chance they get.

Car insurance is a good example.   Years ago, I  worked a short walk away from my lodgings.   Engine in my car blew and I thought, heck, why don’t I just walk for awhile?   So I canceled my insurance, since I no longer had a car to insure.

BIG Mistake!  Huge!   About 18 months later, when I decided get a car, off I went to visit my insurance agent (of course I went back to my old one, like a good neighbor, they are there?  right?)   Imagine my shock and surprise when I found out that although my driving record was even better than before (not driving greatly reduces the chances of speeding tickets!) my premium had almost tripled in size.  Why?   Well, because obviously, I was Uninsured for a reason and there are penalties for that.   (Not owning a car, is apparently, not a good reason.)

Third, most policies have an exclusion for ‘acts of god/nature’ – – if the industry gets into deep financial trouble, I’m thinking a deer running in front of my car or lightening striking my house can probably be placed under that exclusion, even though those scenarios are precisely why I got insurance in the first place.  Add to that the exclusion of life insurance payments, ‘during a time of war’ – and our current inability to solve differences peaceably, and you’ll see why I also place insurance in the ‘heavy house favor’ category of bets.

Fourth, when you take out insurance, you are actually placing a cover bet that something traumatic, devastating and catastrophic is going to happen to you.   The insurance company is betting it won’t.  In essence, you are betting against yourself.  I mean really, who wants to live with that world view?

But I’ll share with you the real (secret) reason why I’m not into insurance being our new way of gaining 3% growth.   On my dark days (yes, I have them often, can’t you tell?) I enter a Twilight Zone state where I’m pretty convinced we are wobbling towards total destruction.   Mother Earth shedding a few pounds, if you will.    And I ponder on who all Knows that’s what’s going to happen.   Just imagine raking in billions in premiums and there not being anyone left to pay out to…

That can finance a pretty good life for the short time we’ve got left. (if you believe it’s all going to end in 2012…)

**********

I’ll close with repeating the sentiments expressed by Mr. Harvey.   No, I don’t have the solution.

But I do think we can explore other ways to either A.)Move to a different system, or B.)Find better ways to realize our needed growth.

Given our history, we love to gamble.

Maybe we could open a chain of casino/spas.    Combine our love of wagering with the trend towards being healthier (reducing our need for health insurance).   Just think, acupuncture followed by blackjack.

Works for me.

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