-- Posted Tuesday, 7 March 2006 | Digg This Article
Tuesday, March 07, 2006
*** By permitting evolution, capitalism and democracy avoid revolution...
*** The best, the brightest and the fastest always rise to the top - don't they?
*** Where exactly did Washington go wrong?...capitalism with chains on its ankles and bribes in its pockets...and more!
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No guillotines, no purges, no gulags, no noisy ideologues, no sturm, no drang, no heavy-handed five-year economic plans, and no new calendars to figure out.
Capitalism and democracy are supposed to correct mistakes quickly and relatively painlessly. If the voters elect a fool, they boot him out in the next election. If entrepreneurs put up a bum company, it goes broke and along comes a new one with a better business model. By permitting evolution, capitalism and democracy avoid revolution.
So, goes the theory, when you finally get to our advanced level of civilization, history comes to an end. There is no more of it, because there are no more wars and no more uprisings for historians to talk about.
And now, with enlightened central bankers like Greenspan and Bernanke at the controls, there are no longer even the booms, busts, bubbles, and depressions that used to mark capitalist economies.
Instead, our modern, globalized American-style society merely grows, responds and adapts to the changing world around it - always getting bigger and better, richer and smarter. It is now one big, flat united Benettoned world - where we all wear the same clothes, think the same thoughts, and hold the same credit cards.
When we were about 10 years old - we recall it quite clearly - we took Thomas L. Friedman's point of view. Capitalism and democracy were systems based on merit, we thought. And since there were more and more people with more and more merits, it was a cinch that everything would get better.
Red-brick public schools would churn out more and more graduates. The best of them would show up at the top of the heap as tycoons of business and sage statesmen. Earnest voters, pouring over the Federalist Papers, would have more and better choices to pick. The halls of Congress would be studded with Hamiltons and Jays and Madisons. Natural competition in the economy would always throw up the best, the brightest, and the fastest to the surface...would it not?
At the callow age of 10, it was clear the whole world was bound for better things, and your author meant to keep up with it.
But, more than 45 winters later, when we tune in to find out what has happened, things look a tad different. We look first at our national leaders. Washington, recall, was one of the richest men of his generation, as well as an accomplished military hero. Adams was no slouch as a thinker and statesman. And Jefferson? He was a genius: a scientist, a great architect, a philosopher and an inventor. He designed a new plow, a coding system and even a macaroni machine. And these three people were selected out of a tiny population of just 2.5 million people. We hold our breath and imagine what kind of Newtons, Pericles and Catos would be thrown up, after more than 200 years of improvement, in a society of nearly 300 million! And then, we turn to Washington...and throw up!
What has gone wrong? We look in the White House; we look down both sides of the aisle in Congress and under the seats. What do we see? We see neither a Washington nor a Jefferson. We see not a speck of Adams.
Instead, it is a collection of hacks, "has-beens," "never-wases," and puffed-up no-accounts. Then, there is Hillary Clinton!
What could have gone wrong? Of course, we ask the question once more merely for rhetorical effect. We already have the answer. But before we get to it, we turn to our other perpetually self-improving system:
Here, we quote the learned Mr. Friedman's book, The World Is Flat: "The current debate about work going to India, China and Mexico is actually no different from the debate once held about submarine work leaving New London or shoe work leaving Massachusetts or textile work leaving North Carolina. Work gets done where it can be done most effectively and efficiently...it helps because it frees up people and capital to do different, more sophisticated work and it helps because it gives an opportunity to produce the end product more cheaply, benefiting customers even as it helps the corporation."
You see, dear reader, don't worry about the auto industry disappearing from America. Remember, the buggy whip business disappeared, too. Things just get better and better; we have so many more entrepreneurs. We have so much more capital and so much more technology. Of course, our great, dynamic system of capitalism will keep bringing the brightest and the best right up to the surface, right?
Well, then, we have a question: How come the brightest and best among the world's richest people cannot build an automobile at a profit? Oh, we know what you will say: that's old industry...that's a buggy-whip business.
Besides, there's no profit in it. But then, here's a question for you:
what sort of "more sophisticated" work did it free up the autoworkers to do?
Buggy whip manufacturers went out of business when people stopped using buggies. But look around and people are still driving around in automobiles. We look out our own window just to be sure. Yes, dear reader, the streets of London are buzzing with automobiles. From what we read, there are more automobiles on the road than ever before. Far from going out of business, automobile manufacturers are plunking out more automobiles than ever before. Demand for them is rising steeply, as Asians begin to be able to afford them.
But wait, maybe making autos is such a low-wage business that it cannot be done in North America. Well, if that were so, how come it is being done in Germany and Japan - two very high wage countries? And even if much of the production had to be outsourced to lower-cost areas, how come it was not American entrepreneurs who figured out how to do it? In other words, how come GM and Ford stocks are falling? And how come U.S. real wages are flat or falling?
When the buggy companies were replaced by the auto companies, wages soared. When New England's whale oil companies were replaced by the Pennsylvania and Texan crude oil companies, again, wages soared. When the workshop was replaced by the assembly line...when the teamsters switched from whipping their horses to double-clutching their engines...when the horse-drawn scythe was replaced by the tractor-drawn combine - each real innovation brought soaring wages.
Globalization also brings soaring wages - to India and China, where real wages have doubled in the last 10 years. In America, this new innovation brings lower wages.
What is going wrong?
More news Aussie Joel and The Rude Awakening...
Eric Fry, reporting from Wall Street:
"If you buy an ounce of gold today, you might regret it tomorrow. But if you don't buy an ounce of gold today, you might regret it two years from now...if not sooner."
For the rest of this story, and for more market insights, see today's issue of The Rude Awakening:
Let the Hoarding Begin
Bill Bonner, back in London with more views:
*** "Are you saying that capitalism doesn't work?" asked Henry. "Of course it works. If a business doesn't earn a profit, it goes out of business, doesn't it? So, if the automakers don't earn any money, they go out of business, too - don't they? And then, some other business comes along to take their place. Isn't that how it's supposed to work? What's wrong with that?"
"Nothing's wrong with that," we replied. "But that's not at all there is to the story. People think that capitalism is naturally self-correcting, self-improving, and self-healing. To some extent it is true, but there's no system of pure capitalism anywhere in the world - America included.
Instead, it is capitalism with chains on its ankles and bribes in its pockets. It works with a money system that is centrally controlled, and it must submit to thousands of rules and regulations.
"But there is something else going on, too, because all institutions degrade and degenerate over time. Just look at what has happened in the Washington. On paper, America has more or less the same government it had two centuries ago. The Constitution is still the law of the land. People still vote for their leaders and can throw them out of office any time they want. What is it that popular democracy actually produces? It produces scoundrels, scalawags and stone-headed mountebanks - all of who have learned to play the system for their own benefit.
"And that is true even in American capitalism. The small mutual fund holder imagines that he is a capitalist. He has no idea that Wall Street takes him for a chump. He puts in his money, but he has none of the control that a real capitalist would have. That's why executives can get away with these outrageous salaries. They've learned to play the system, and the system itself has become degenerate.
"And as an institution degenerates, so do the attitudes and habits of the people who run it. Investors, for example, come to think that they want companies to deliver 'shareholder value' - and deliver it right away. They want the easy money, the fast money. So, they only care about quarterly results and what happens to the share price. That's what those financial news programs on TV are all about. They report the latest quarterly results and then, they watch investors' reactions. If a company doesn't come up with good numbers, investors dump it. Is that capitalism? Well, maybe, but it's of a particular sort. It's a kind of casino capitalism where everyone hopes to get rich, but not by genuine work, investment or innovation.
"The managers - who are rarely real capitalists or real entrepreneurs themselves - have the same attitude. They want to get as much as they can out of the business for themselves and then move on. So, it's no wonder that no one wants to make the hard, long-term investments necessary in order to compete in the auto business. Everybody just wants something for nothing...as soon as possible. The unions want their health and retirement benefits. The executives want their golden parachutes. Investors want the share price to rise. Who really cares about the auto business? So, everyone borrows, spends, refinances; they watch stock prices and want to know how much the house down the street sold for. Save money? Invest for the long term? They wouldn't dream of it.
"And it gets worse. Gradually, the whole society becomes more and more corrupt - everyone has to lie and delude him or herself in order to keep up pretenses."
*** And so, the Exodus of power and money from West to East continues.
This from The Hindu:
"In less than a year, India and China have managed to confound analysts around the world by turning their much-vaunted rivalry for the acquisition of oil and gas assets in third countries into a nascent partnership that could alter the basic dynamics of the global energy market.
"At stake is not just the issue of joint acquisition, although the most important of the agreements signed in Beijing on January 12 during the visit of Petroleum and Natural Gas Minister Mani Shankar Aiyar envisages ONGC Videsh Ltd (OVL) and the China National Petroleum Corp. (CNPC) placing joint bids for promising projects elsewhere. Rather, the prospects for Sino-Indian cooperation across the length of the hydrocarbon chain could pave the way for the creation of an Asian energy market and architecture - an Asian axis of oil - with major geopolitical consequences for the United States."
At its current rate of economic growth, China will be the world's No. 1 consumer of oil in just 20 years. And it's likely to have the highest GDP long before that. Imagine what America's bargaining power among oil-producing nations will be once we're no longer the world's only economic (and military) superpower - when we have to wait in line behind China.
[Ed. Note: Talk about a major chokepoint in the flow of U.S. crude...but how do you play this Asian demand boom for maximum financial gains even as the United States loses big? Find out here:
Exploding Asian Demandhttp://www1.youreletters.com/t/341560/4459110/783731/0/
**** And, finally, a dear reader with a comment:
"I'm starting a company that converts granite countertops into gravestones. May I send you a prospectus?"
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The Daily Reckoning PRESENTS: Bill makes a point to read Thomas Friedman's NY Times column, and now Friedman's latest book - not because agrees with the imperial columnist's musings...but because he finds that that Friedman's "hollow thoughts" always seem to brighten his day in their absurdity...
SOMETHING WICKED THIS WAY COMES
by Bill Bonner
The force of a correction is equal and opposite to the deception and delusion that preceded it. Alan Greenspan, George W. Bush, and all the great nabobs of positivism assure us that there is nothing to fear. Our favorite imperial columnist, Thomas L. Friedman of the New York Times, explained, "the next big thing almost always comes out of America . . .
[because] . . . America allows you to explore your own mind."
Friedman believes the world would be a better place if America were more aggressive about "empowering women" and "building democracies." He also thinks that technical innovations give America a permanent advantage.
Americans are always innovating, always figuring things out. Heck, we even invented outsourcing, says Friedman:
"This is America's real edge. Sure Bangalore has a lot of engineering schools, but the local government is rife with corruption; half the city has no sidewalks; there are constant electricity blackouts; the rivers are choked with pollution; the public school system is dysfunctional; beggars dart in and out of the traffic...and so forth.
Among the things Mr. Friedman seems to lack is a feeling for verb tenses.
He goes to Bangalore and notices that it is backward. His conclusion is that it will always be so. "Is" is forever in Friedman's mind. "Will be" has no place. It is as if he looked at the stock market in 1982. "Stocks are cheap," he might have said. "Stocks elsewhere are expensive," he might have added, without it ever occurring to him that they might change places.
And yet, why else would anyone outsource work from Baltimore to Bangalore unless Bangalore was relatively, though not necessarily permanently, cheaper? Let us imagine that Bangalore had no electricity blackouts or pollution or beggars. Let us imagine that it was like Beverly Hills or Boca Raton. We might just as well imagine that stocks were expensive in 1982. Of course, if they had been, there never would have been the bull market of 1982 to 2000. It is only because they were cheap in the past that they had the potential to be expensive in the future. And it is only because Bangalore is a Third World hellhole that it is cheap enough to take work away from overpaid Americans 10,000 miles away.
Whether it will, neither Friedman nor we can know.
We always try to get our day off on the right foot by reading Friedman's column before breakfast. There is something so gloriously naïve and clumsy in the man's pensée, it never fails to brighten our mornings. It refreshes our faith in our fellow men; they are not evil, just mindless. We have never met the man, but we imagine Friedman as a high school teacher, warping young minds with drippy thoughts. But to say his ideas are sophomoric or juvenile merely libels young people, most of whom have far more cleverly nuanced opinions than the columnist. You might criticize the man by saying his work is without merit, but too that would be flattery.
His work has negative merit. Every column subtracts from the sum of human knowledge in the way a broken pipe drains the town's water tower.
Not that Mr. Friedman's ideas are uniquely bad. Many people have similarly puerile, insipid notions in their heads. But Friedman expresses his hollow thoughts with such heavy-handed earnestness, it often makes us laugh. He seems completely unaware that he is a simpleton. That, of course, is a charm; he is so dense you can laugh at him without hurting his feelings.
Friedman writes regularly and voluminously. But thinking must be painful to him; he shows no evidence of it. Instead, he just writes down whatever humbug appeals to him at the moment, as unquestioningly as a mule goes for water.
One of the things Friedman worries about is that America will "go dark."
As near as we can tell, he means that the many changes wrought after 9/11 are changing the character of the nation, so that "our DNA as a nation...has become badly deformed or mutated." In classic Friedman style, he proposes something that any 12-year-old would recognize as preposterous: another national commission! "America urgently needs a national commission to look at all the little changes that were made in response to 9/11,"three he writes. If a nation had DNA and if it could be mutated, we still are left with the enormous wonder: What difference would a national commission make? Wouldn't the members have the national DNA? Or should we pack the commission with people from other countries to get an objective opinion - a U.N. panel and a few illiterate tribesman-and achieve cultural diversity?
But this is what is so jaw-dropping about Friedman's ideas: Even mules and teenagers have more complex views. His work is a long series of "we should do this" and "they should do that." Never for a moment does he stop to wonder why people actually do what they do. Nor has the thought crossed his mind that other people might have their own ideas about they should do and no particular reason to think Mr. Friedman's ideas are any better.
There is no trace of modesty in his writing-no skepticism, no cynicism, no irony, no suspicion lurking in the corner of his brain that he might be a jackass. Of course, there is nothing false about him either; he is not capable of either false modesty or falsetto principles. With Friedman, it is all alarmingly real. Nor is there any hesitation or bewilderment in his opinions; that would require circumspection, a quality he completely lacks.
Friedman fears he may not approve of all the post-9/11 changes. But so what? Why would the entire world "go dark" just because America stoops to empire? The idea is nothing more than a silly imperial conceit. America is not the light of the world. Friedman can stop worrying. The sun shone before the United States existed. It will shine long after she exists no more. But, without realizing it, imperial conceits are what Mr. Friedman offers, one after another. He knows what is best for everyone, all the time.
But even at his specialty, Friedman is second-rate. It is not that his proposals are much dumber than anyone else's, but he offers them in a dumber way. He sets them up like a TV newscaster, unaware that they mean anything, not knowing whether to smile or weep, out of any context other than the desire to make himself look good. He does not seem to notice that his own DNA has mutated along with the nation's institutions . . . and that he does nothing more than amplify the vanities and prejudices that pass for the evening's news. Is there trouble in Palestine? Well, the Palestinians should have done what we told them. Have peace and democracy come to Iraq? If so, it is thanks to the brave efforts of our own troops.
Is the price of oil going up? Well, of course it is; the United States has not yet taken up the comprehensive energy policy he proposed for it.
Friedman's world is so neat. So simple. There must be nothing but right angles. And no problem that doesn't have a commission waiting to solve it.
It must be unfathomable to such a man that the world could work in ways that surpass his understanding. In our experience, any man who understands even his own thoughts must have few of them. And those he has must be simpleminded.
But we enjoy Friedman's insipid commentaries. The man is too clumsy to hide or disguise the awkward imbecility of his own line of thinking. The silliness of it is right out in the open, where we can laugh at it. His whole oeuvre can be reduced to the proposition that Arabs ought to shape up and start acting more like New Yorkers. If they don't want to do it on their own, we can give them some help. He says we can send "caring" and "nurturing" troops to "build democracies" in these places and "protect the rights of women." But he doesn't understand how armies, empires, politics, or markets really work. American troops can give help, but it is the kind of help that Scipio gave Carthageor Sherman gave Atlanta. Armies are a blunt instrument, not a precision tool.
Friedman urged the Bush administration to attack Iraq. But the man has a solution for every problem he causes. "So how do we get the Sunni Arab village to de-legitimize [we love these big words - every one of them hides a whole dictionary of lies, fibs, prevarications, malentendus, misapprehensions, miscalculations, guesswork, hallucination, conceit, and mendacity] suicide bombers?"
Simple. Propaganda! "The Bush team needs to be forcefully demanding that Saudi Arabia and other key Arab allies use their news media, government, and religious systems to denounce and de-legitimize the despicable murder of Muslims by Muslims in Iraq."
That ought to do it. What is wrong with the Bush team? Why didn't they think of that? "Forcefully demand" that the Arab states do more propaganda. Yes, problem solved.
By the way, your authors have no position on foreign policy. We only notice that the people who do have them are idiots.
The Daily Reckoning
Editor's Note: Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of The Wall Street Journal best seller Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (John Wiley & Sons).
In Bonner and Wiggin's follow-up book, Empire of Debt: The Rise of an Epic Financial Crisis, they wield their sardonic brand of humor to expose the nation for what it really is - an empire built on delusions. Daily Reckoning readers can buy their copy of Empire of Debt at a discount - just click on the link below:
"Now Perhaps Someone Will Listen!"http://dailyreckoning.com/EmpireDebt.html
-- Posted Tuesday, 7 March 2006 | Digg This Article
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