VOR’s Turn: We Have Great Resources Available To Us; But, Do We Know How To Use Them?

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When I argue that the American Business Model is fundamentally flawed, I don’t wish to imply that America does not possess incredible strengths. Instead, I’m arguing that a flawed business model means that we don’t know how to use them properly; and, above all, we don’t adequately respect our  greatest single resource which is the American people.

Hard to over-emphasize the importance of the next point: It concerns trust, the basis of all human co-operative activity. Few things are more important.

A major reason for this inability to make optimum use of the resources at our disposal is a pervasive lack of trust stemming from a long history of exploitation and greed run amuck. That, in turn, has led to excessive politicization which has the effect of being self-canceling at the expense of a vast amount of human effort. Way too many aspects of American life – like the judiciary and education – are politicized to no purpose. And, as a byproduct, are corrupt.

But assets are there nonetheless; so let me explore some of them.

1. We have a generally hard-working and resourceful population which is large enough to constitute an extraordinary internal market. Further, our demographics are favorable compared to many of our international competitors. Thanks to our immigration policies (imperfect though they are) our population is constantly being refreshed.

Unfortunately, we are poor at optimizing our human resources. Educational problems apart, whereas Europe mainly fosters cooperation between management and labor – and enshrines it into law - U.S. management remains authoritarian, and hostile to labor (which is one of the driving forces behind outsourcing); and the law is generally biased towards capital and management. The end result is a significant land pervasive lack of trust which has a profound effect on both productivity and quality of life. Our system also seems to actively encourage the expansion of an underclass as a way of beating down the price of labor, and, as a consequence – though there are other reasons as well - the diminishing of a well paid Middle Class. Meanwhile the Rich and Special Interests are grabbing all the marbles. That is not a sustainable situation.

2. Although our K-12 educational system leaves much to be desired, the basics are in place and are capable of vast improvement. Further, we already know how to make such improvements.

The above is true. Nonetheless, a combination of vested interests, politicization, ignorance, and inertia, seems to block substantive educational reform. An additional factor is that our consumer culture, heavily shaped by our media and commercial forces, is so dominant; and so effective at dumbing us down. The home apart, schools are not the only source of education. Culture has a major influence. Overall, our failure to optimize our human resources – both in educational terms and thereafter in work - represents our greatest strategic weakness as a nation.

3. Our best universities are the best in the world, and also have a formidable track record when it comes to fostering innovation. In addition., we have a college system which, at its best, is extremely effective.

There are several issues here. Firstly, although our best Third Level facilities are excellent, many others are not. Secondly, it is highly debatable whether launching most of our children with a major debt burden works to our best advantage – especially when jobs are in short supply. And, thirdly we seem to lack the kind of comprehensive training schemes in technical areas which produce the highly trained workers which make, for instance, the Germans and the Swiss so successful in international export markets. Further, we have a tendency to place far too much importance on credentialing at the expense of education. This is a form of qualification inflation which shuts many competent people out of jobs they could do easily; and which does not serve us well.

4. We have world class expertise in a large number of sectors; and dominate in many.

While this is a justifiable source of pride, the worrying fact is that we have been losing ground in sector after sector. A recent example is solar power, but there are many others including strategic areas like aircraft manufacture, aerospace and machine tools. There are a variety of reasons for this including the exporting of much of our manufacturing base (including vital technological expertise) by U.S. corporations; an excessive focus on short-term profits; a failure to invest adequately in research; and the rise of competitors such as China and India. Further, we continue to refuse to adopt any kind of national plan despite the fact that our competition have shown that such planning can work. Finally, we are faced with the fact that many of our largest corporations now consider themselves global entities, and do not have the National Interest at heart.  That has all kinds of implications we haven’t thought through adequately.

 5. We have marvelous natural resources such as coal, oil, natural gas, minerals, rare earths, and much more besides.

Yes, we do, but it is a regrettable fact that having natural resources can have several disadvantages as well. Firstly, extracting such resources can do terrible things to the environment; and often does. Secondly, there is a tendency to become complacent and not to invest in more environmentally friendly approaches. And thirdly, natural resources such as coal, oil, and gas in particular have a habit of fostering corruption. In contrast, it is noteworthy that many countries who have few natural resources – such as Japan or Switzerland or Israel – are forced to use their ingenuity, and do surprisingly well. It’s counter-intuitive, but it’s true that natural resources can be a mixed blessing; or worse.

6. We have a vast, beautiful, and bountiful land.

We are much blessed in this regard, but we have also managed to pollute just about every square inch of it (literally); and much of the the surrounding oceans into the bargain. And we have also degraded much of our top soil, and contaminated much of our drinking water. Beyond that, we have allowed far too much of it to fall into the hands of a few, as opposed to being available to most of us. Private property is a fine thing; but, like anything, it can be carried to excess.

7. We are the most powerful country, militarily, in the world.

The trouble with having the most powerful military is that there is a great temptation to use it unnecessarily – especially now that Congress has abdicated its sole constitutional authority to declare war. Further, such a situation has brought with it a vast – and deeply corrupt -Military Industrial Congressional Complex which is focused on driving up the amount we spend on defense even where it is militarily unnecessary. Currently, we have forces in most countries in the world, and are spending more on National Security that the rest of the world put together. That makes no sense. We need strong defense forces but National Security should not just be concerned with military matters. It relates to the general wellbeing  of Americans as well, and includes such things as health care and the prevention of poverty and hunger. Right now, we are spending way too much on the military, and not nearly enough on the American people, and re-building this country. Contrary to what many argue, we do have the resources, but our politicians are repeatedly making the wrong choices. And, as is normal these days, they are not consulting us.

 8. We have a highly sophisticated, globally dominant, financial sector.

The Financial Sector was touted for years as being a superior replacement for manufacturing as a source of wealth creation. Centralization of this sector was advocated as being essential in the interests of efficiency. The results - as we have switched from an investment approach to banking to speculation - have been disastrous. Meanwhile, we have run down our manufacturing base, and left our small business sector under-financed. A small number of people have made a great deal of money out of financialization, but the country, as a whole has been seriously damaged. Worse still, the financial sector has had to be bailed out – yet again – by the taxpayer; there has been no accountability; and Wall Street has not changed its ways. This means yet another financial crisis is virtually certain. A further problem is that centralized finance tends to mean centralized Big Business which also means de facto monopolies in most market sectors. A byproduct is that local innovation is suppressed and small business is under-funded. That, in turn, means fewer jobs. We are currently experiencing the results of such developments and they are not pleasant. Nor are our future prospects without significant change.

 9. We symbolize freedom to the rest of the world.

This is a profoundly American notion, but it is highly questionable as to whether it is as true as it once was in the immediate post-war years. Partly it has to do with the fact that we have invaded, or otherwise interfered with, other countries rather too often. Partly, it is because more and more people are becoming aware that freedom in the U.S. is excessively dependent on your bank balance; and is circumscribed in many other ways as well. Still, for all our faults, we have much to be proud of in this area.

 

Do we have have other things to be proud of? Of course we do – and it is a long list - but my key point is that though we have superb resources, we are careless with them; and if the U.S. is going to be changed the way many think it should be, we’ll have to do better in that regard.

We have to change. The status quo is failing far too many Americans. Most of us in fact.

 

 

VOR’s Turn: When I Say There Is A Crisis Of American Capitalism, This Is What I Mean

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My thesis is that the current American Business Model (ABM) is fundamentally flawed and needs to be re-thought.

We like to think of it as the very manifestation of American freedom – as American as apple pie – but the truth is that our current version isn’t just stale. It’s rotten. It has has become corrupted. To call it crony capitalism, while accurate enough, is to be charitable. It has become sleazy into the bargain, and where the financial sector is concerned – which produced a staggering 40 percent of corporate profits up until the Great Recession – “rampantly greedy and crooked into the bargain” might describe it better.

Good grief! The damage to this country has been incalculable; and it continues. As for bank profits, if one made the banks fully accountable, and subtracted the real costs of supporting them – which has not been done – I suspect we would find that that these profits were illusory.

Yes, I know that is fighting talk, but bear with me. I’m not saying that that there are not great strengths in the ABM (though one has to look, and pause, and think). However, I am saying that it contains systemic weaknesses which we need to do something about.

Think in terms of a well built boat which is sinking because it has holes in it. Given that it is full of people, the first thing you do is patch the holes. Later, you may decide to buy a new boat, but it will still be broadly similar but may be significantly different in detail; and, as always, the devil is in the detail.

In short, I’m not suggesting we give up capitalism and switch to sun worshipping or outright theft (A form of capitalism we made much use of where Native Americans are concerned). I am arguing that we should introduce some intelligence (and decency) into the system of capitalism we have now.

Others have, and it works for them. Why shouldn’t it work for us? Enter Intelligent Capitalism. What a novel concept! Let me list its requirements:

NOTE: ABM = American Business Model

1. The purpose of an economic system, such as the ABM, is to deliver an acceptable quality of life to the vast majority (and preferably all) of the population. At its core, a sound economic system is essentially a way of cooperating (believe it or not) to maximize resources; with rewards and competition providing the incentives, and regulations constituting the rules of the game. Here, we need a balance.

The ABM fails.

2. A viable economic system needs to be fair, and to be seen as fair. This is fundamental to human nature (flawed though it is). Lack of fairness invariable results in social unrest; or worse. Short of total oppression, there are really no exceptions to this principle. Massive income inequality is neither seen as fair, nor is it fair; and it has a disastrous effect on our well being in general.

The ABM fails.

3. A viable economic system needs to provide full employment at pay that allows for a reasonable lifestyle; and provided the economy with purchasing power. Lack of demand leads to unemployment.

The ABM fails.

4. A viable economic system should encourage, and achieve, productivity gains and steady growth.

The ABM fails.

5. A viable economic system should strike a healthy balance between work and one’s private life; and must include paid sick leave and several weeks of vacation. In short, people should be treated decently. They work better that way.

The ABM fails.

6. A viable economic system should provide both stability, and economic security. This requires a robust social safety net.

The ABM fails

7. A viable economic system should encourage both savings and investment.

The ABM fails

8. A viable economic system should fundamentally focus on the real economy, and not be overly focused on making money with money. It should add real value.

The ABM fails.

9. A viable economic system should not be overly centralized, but should function at local level as much as possible. This has numerous advantages ranging from the fact that most people prefer it, because it promotes personal relationships, to the fact that it foster small business, and thus unemployment. In addition, it promotes resilience.

The ABM fails.

10. A viable economic system should, more or less, be able to balance its budget and its trade. That means it must be internationally competitive, and be capable of producing goods people want.

The ABM fails.

11. A viable economic system should constantly be investing in the future, whether it be in infrastructure or capital equipment, or housing, or the public good in general. Lack of investment may go unnoticed in the short term, but has serious consequences.

The ABM fails.

12. A viable economic system be able to guarantee savers an adequate financial return, and, at the same time, be able to supply capital – particularly at local level – when needed.

The ABM fails.

13. A viable economic system needs to be able to cope with change in such a way that employees are paid until they find another job. and are retrained if necessary.

The ABM fails.

14. A viable economic system needs to encourage a well educated, well trained, healthy work force.

The ABM fails.

15. A viable economic system must be be environmentally aware, and not pollute, or otherwise degrade the environment.

The ABM fails.

16. A viable economic system should be based on the free market, and open competition, with monopolies and oligopolies being opposed.

The ABM fails.

17. A viable economic system should have a simple, fair, transparent tax system.

The ABM fails.

18. A viable economic system should encourage a wide variety of different enterprise structures and should not be overly dominated by corporations.

The ABM fails.

19. A viable economic system requires that capital and labor co-exist in reasonable harmony; and that there be a balance of power.

The ABM fails.

20. A viable economic system require a government which is responsive to the electorate as a whole, and not controlled near entirely by the Rich and Special Interests.

The ABM fails.

 

I don’t wish to cause you indigestion, but I would like to point out that the current American Business Model fails to meet any of the above criteria; none of which is unreasonable.

Worse still, the ABM isn’t proving to very effective. It is just not delivering what Americans need.

I submit the need for change is self evident, and have to wonder why President Obama has not articulated that fact.

I (temporarily) rest my case.

 

 

 

 

 

 

 

 

 

 

VOR’s Turn: The Current Crisis Of American Capitalism Is More Serious Than The Attack On Pearl Harbor; And Should Be Treated As Such.

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Despite extensive (albeit flawed) media coverage of the Great Recession, its causes and significance, I still get the impression that far too many of us don’t adequately appreciate, or care to grapple with, the sheer scale of the corruption emanating from our financial sector.

It represents a crisis of American Capitalism; and you file that sort of thing under the heading of ‘Existential Threat.’ That means, in effect, a threat to our very existence. It is that serious.

It has already overtaken our political and legal processes, and continues to spread like an aggressive cancer throughout virtually every aspect of the American Way of Life. We already know that our politicians have been bought. Now everyone, and everything else, is being bought also.

This Crisis of American Capitalism (capitalism comes in many flavors – and some work well) is an issue with such catastrophic implications that it should dominate public discourse; yet, palpably it doesn’t. It’s almost as if the attack on Pearl Harbor had been relegated to the status of a regrettable event – perhaps akin to Katrina - which might require a few reforms, but which otherwise could be substantially ignored. Such a reaction, back in 1941, would, quite rightly, have generated total outrage throughout the land.

Fortunately, it was not required. FDR rose to the occasion, made a magnificent speech, unified all Americans to a common purpose, refocused the entire economy to achieve that purpose, and then won the war. The effort almost certainly cost him his life, but it was the very personification of leadership.

President Obama has shown no such leadership. There have been no major speeches focusing the nation on the threat emanating from the financial sector, and no major efforts initiated to defeat such a threat.

Instead, he has concentrated on shoring up the status quo, together with the very people who helped to cause this crisis, to the tune of over $16 trillion; and has made no effort at all to either break up the big banks, or prosecute those responsible. It is almost as if he is complicit; and perhaps he is.

The financial sector is still being propped up by the Fed. His supporters are having a hard time making sense of this; and this level of subsidy to the financial sector certainly does not match any form of capitalism yet invented except what is pejoratively called “crony capitalism.” The suspicion is that Obama is so dependent on Wall Street for financial support, for his reelection campaign, that his obligations as president come second. And one can add in the fact that he seems remarkably reluctant to articulate clear Democratic principles; or to stand and fight for his beliefs. But what are his beliefs? 

President Obama’s depressing behavior apart, let me explore some of the other reasons why public indignation is so muted:

Media Failure: Although media coverage has been extensive, taken as a whole, it hasn’t been nearly as clear and focused as it might have been. It’s as if we weren’t quite sure who had attacked Pearl Harbor. Perhaps it was the Japanese, but it could have been the Soviets. Perhaps a volcano had erupted or there had been a giant gas explosion. Bottom line: the issues have been blurred. Given who owns the media, we shouldn’t be surprised by this. Big business can’t become big without being in bed with the financial sector; and our main media is owned by Big Business.

An Apathetic (and frequently ignorant) Public: I have no desire to be critical of the American public, but it is hard not to be concerned when one examines the data available. Let me quote a neighbor (a fireman) instead: “Thanks to TV, fast food and drugs – mainly legal – we’ve turned into a bunch of flaccid couch potatoes; and we deserve what we get.” Hmm! Not sure I would go that far, but about 30% seem to be totally deaf to any form of reasoned argument about any issue; and the thought that half of the rest are permanently drugged (legal drugs are still drugs – and not all are legal) is not reassuring. Also, many work for corporations who do not take kindly to political activism, and who have the power to fire people whose politics they disapprove of; which they use. The reality of freedom is way different from the propaganda.

The Extraordinary & Unrelenting Efforts of the Republicans To Blur the Issue: We should scarcely be surprised at this, given that the Republican Party is so clearly in the hands of the Rich and Corporate Interests these days, but one might have hoped that there would have been a few Republicans left who would have considered the Public Good, the National Interest or even the ethic of the situation. Clearly not; and to a disturbing extent, the Democrats have been complicit. So much for Congress.

The Equally Extraordinary & Unrelenting Efforts of the The Financial Sector (and Big Business in general) To Manipulate Public Opinion and Game The System: There is a tendency to refer to the Financial Sector – Wall Street or the Big Banks – as if they existed in isolation. Clearly they do not, but it is rather more important to be aware that the interests of the Financial Sector and Big Business in general are frequently one and the same. That represents an extraordinary nexus of resources compared to the ballot box. And the Rich and Corporate Interests have not hesitated to use such resources to the fullest extent necessary.

It says a great deal about the current state of this Great Nation that the only people who seem to be prepared to do the right thing are those involved in the Occupy Movement. And now winter is coming.

We all need to get involved. This used to be a pretty good country. Seems a pity to have it stolen away from us. Our own interests apart, much of the rest of the world needs us too; even likes us. And we need them.

Perhaps we need a different graphic.

‘A’ for ACTION comes to mind. By ‘U.S.’

Those were the days.