What’s Happened!??!

Can anybody tell me what the hell has happened to capitalism?

Over the course of the 20th century, our market-led capitalist leaders made billions, trillions and maybe even gazillions, selling stuff to we, the consumer, without a second thought from either party. They supplied a good/service, we paid for said good/service. Money changed hands, profits were made, dividends were returned to shareholders every quarter. It was a simple formula. The consumer demanded things, and the suppliers supplied. The model was tinkered with from time to time (For example, if the quarterly dividend started to fall, then corporate leaders would out-source particular parts of their workings, such as call centres, customer service, manufacturing, design and development, cleaning, maintenance, and so on, to third world labour factories run and manned (or kidded?) by children, and, as a result of their excellent decision making, leaders would receive bonuses rivalled only by the cost of purchasing several new Airbus A380s, even if their decisions ended up losing companies millions, billions or even gazillions) but ultimately the capitalist model held firm.

The model held firm because it was a good model. Capitalism central, or the United States of America (corporate, not regular types like Joe the Plumber), led the charge. What corporate America said went for the rest of the world. When they demanded low, low, low taxes at bargain basement prices, the rest of the world followed. Why pay tax, they said. Tax is for people who use government services such as health-care, education and social welfare. We don’t use those things, they said. We shouldn’t pay for them. And how right they were. Never in my time as a teacher have I seen a corporate leader enter a school, hospital or food-bank, or indeed express any views about any of those things, or the people involved. If they are not going to use the service, why should they pay?? That is an absolutely fair question, that needs to be answered with a ‘no they shouldn’t’. And so they didn’t. People didn’t expect corporations to pay tax, because they didn’t use services. Individuals paid the tax instead. We are the ones who get sick, or start off stupid, or lose our jobs to when corporates outsource to our subcontinental friends. We should be the ones to pay.

Then in the 80s, our brilliant market leaders began the utterance that would define them as pure capitalists. “Let the market provide!” Oh yes. The collective monetary climax of a million Thatcherites rings as true today as it did back in ’81. Their argument, quite rightly too, was if the market would provide in all areas of our lives. It’s simple idea talked about as far back as the 18th century by the likes of Adam Smith. If there is a demand for something, the market will make it to on-sell to the consumer. Political leaders adopted this idiology quicker than a fat guy making his way to a pie eating competition. Before we knew it, all government systems – health, education, social welfare, utilities – were being run under this commercial model. How absolutely brilliant! Of course the market will provide! Why wouldn’t it? It knows everything about education. If a school is no good there will be no demand for its services, and people will take the very easy option of selling their house in that school zone and moving their entire family to an area where there is a school offering top quality educational solutions for the up and coming young capitalist.

Privatise everything. Pure capitalism. If there is no demand, why should the government provide. Why should they indeed!!???! Actually, it’s not quite “no demand” is it? We should say, “little or no demand”, because, let’s face it, we’re talking about profit here. If there is no profit to be made, there is no point in the market providing. And if the market, and in this case, the market includes the government, doesn’t need to provide a service because there is no (sorry, little or no) demand, then why should they? If the government don’t need to provide, then the demand on the taxpayer falls and we all win by paying lower levels of income tax. The only people that might lose out of this might be the very occasional poor person, who may have been demanding this service, but not enough to contribute payment of any kind. How can you make a profit if someone isn’t willing to pay! And any capitalist will tell you, low taxes mean that people will spend their money in shops, or online on all those goods/services we talked about earlier.

Oh, but hang on… I saw on the news last month that some of the bankings giants in the US were asking for a bit of government help… Oh God, no!! Because the banks have no money, they can’t swing any our way. By ‘our way’ I mean consumers and companies wanting to work the market. What’s more, some of the banks stopped working and went bankrupt. Shite! What’s happening? I still need banking services. I get paid every fortnight. My money needs to go somewhere. A bank is the obvious choice. Banks – I demand your service, therefore you must provide. After reading a bit about the problems, it seems that maybe there may have been a false market… What’s a false market? Well, sometimes in capitalism (and when I say sometimes, I mean only very occasionally, like, maybe, once or twice a month, perhaps), if companies make lots of profit on something, they want to keep making the profit, so they create conditions that will keep a declining market going. In the US, banks wanted to keep lending to people because mortgages & debt make a lot of money for them. Over the course of a 30 year mortgage, banks can make a very tidy profit on a household mortgage. So why not keep this market going??? After all, profits are really important to companies like banks.

Unfortunately, and it wasn’t the bank’s fault – rememember, they only lent the money to the people, it was the people who couldn’t afford to pay the debt. American people who dream of owning their own home in which to raise their children can choose to borrow money at any time, but it’s THEIR choice. They shouldn’t really be borrowing if they can’t afford to pay it back. That’s just silly. Ask any capitalist. Companies NEVER, EVER borrow if they can’t afford to pay it back. Anyway, so many American families could no longer afford to service their mortgages, and the banks started forclosing. As a result, there is now a massive slump in the US real estate market. Currently the banks own a lot of worthless property or family housing that nobody wants to buy. How selfish of the American families for not thinking of the banks before they borrowed their hundreds of thousands of dollars to live the American dream…

The Domino Effect: whereby you hit one domino in a row of dominoes and as it falls it causes all of the other dominoes to fall after it.

As the banks started to run out of money, so did many, many other companis. This month the big three Detroit car companies GM, Ford and Chrysler have run out of money. Having seen the demand for tax-payer funded federal money being met by the US government, a most gracious benefactor in these troubled times, the automobile industry has started asking for extra money. Flying to Washington in their private jets (to, quite sensibly, avoid the stress of domestic air travel one would think), they petitioned Congress for some of the juicy bailout billions. There has been a demand created, therefore the government must supply. It wasn’t the car companies fault that they have been misreading the market for years. How could they possibly be expected to foresee a time when crude oil prices would skyrocket because supplies were running out? How could they possibly be expected to see this. They are in the business of making cars, not, and I repeat, NOT in the business of predicting when the world oil supply may or may not run out. How could the car companies possibly be expected to understand about the international oil market. Their products only run on oil-based fuel. They aren’t made from any products that are refined from crude oil – none at all – except maybe for some of the plasticy bits. Car companies are car companies. They make cars, not oil. How could they possibly be expected to foresee world oil prices rising astronomically. Particularly in these troubled times when the Middle East oil supply is threatened by Al-Qaida and Somali pirates. How could they possibly be expected to foresee the future. They are not soothsayers. They are just car makers. Just car makers.

Sorry for 1500 words of sarcasm, but really, what do they expect? Any system is only as good as the people who run it. Communism is a great idea. Everyone shares everything and everyone contributes to the wellness of society. Sounds pretty sweet to me. But then you get idiots like Stalin and Mao running the show and it turns into opression central. It’s the same with capitalism. The problem with capitalism, with the commercial market model, is the people running it. As long as they focus on maximising profits, they are never, ever, ever, in a million, billion, gazillion years going to adapt to anything that is beyond the next quarter. Profits is profits. Dividends need to be returned to shareholders. That’s all that the corporate world care about. They can’t care about the people who work for them, the customers that buy from them, all of the millions of people around the world who are domiciled to use their goods/services. It is the shareholder that rules.

The greed of shareholders and the greed of the corporate elite will foreever be the downfall of the capitalist market model.

As New Zealand Green Party co-leader Jeanette FitzSimons put it so eloquently after election night a few weeks back…

Will we look back 20 years from now and think, “I’m really glad I voted for tax cuts rather than the future of our children”

Boon x

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