Growth Model Capitalism

The most important argument against pure capitalism would be that there would not be enough money available to cover for profits. For example, pretend for a moment we have one Global Economy with five or six major corporations. Each of these corporations have hired on their due percentage of the Global Population and what they pay out wages is basically the World’s Income – the money available for Consumerism. These Global Workers had received their wage in return for producing a product, but we can be sure that the Corporations figured that their pricing schedules would exceed their wage outputs. We all understand without having to be told that any profits would have to be in excess of what was paid out in wages. Okay, but in the Model just presented, where are the profits supposed to come from. The workers only have what they were paid. They can pay what they earned and not a penny more. So the only place where profits can come from is from the Wages paid out from the other Corporations, but only if their Products do not sell. In Pure Capitalism the Profits of some Companies equals the Losses to others. The Margin cuts both ways. In Pure Capitalism for there to be Winners there must also be Losers. Now, many would accept this in their stride, thinking that this is always how it has worked. Indeed, they might think that this is exactly how it DOES work. But not really. Not since a long time.

Long ago the Banks got very tired of 6 to 10 percent of business loans defaulting every quarter. The inherent losses built into Pure Capitalism were simply too difficult to clean up after. Dead bodies can be so messy and stinky. So the Banks did away with the Gold and Silver Standards where the amount of World Currency would be for the most part fixed at a given amount, and they set up Monetary Systems that were designed around mechanisms for injecting new currency into the Global Money Supply steadily and constantly. Every Corporation could make six percent profits every quarter because the money supply was being pumped up by six percent over the same time period. Yes, Corporations could still run into Losses, but not simply because of the inexorable Math of Pure Capitalism.

Oh, how would such money enter into the Money Supply? Typically all this extra money flows into the Economy from Projects funded by Corporate, Private or Government Debt. Here we can see that America’s Trade and Governmental Deficits are therefore somewhat Institutionalized. Governments and Economies that are not running Deficits are basically relying upon their Trade Exports to Countries that do.

But it does get complicated. There is Inflation to consider. Banks hate Inflation. Dear Money is paid back in Cheap Money. Inflation occurs when an increased money supply bumps up against a level supply of goods and services – prices go up. Production must increase along with the money supply in order to establish a non-inflationary equilibrium.

Traditionally an increase in productivity could be achieved by increasing the work force. Nations encourage their birth rate or set in place policies friendly toward legal or even illegal immigration, which are equally beneficial as far as businesses are concerned. However, recently we have seen in all of the Advanced Economies that production can be increased by deploying the use of Automated Processes – Automated Robotics in the factories and Digital Intelligence in the Service Industries. Labor is being replaced by Capital Resources. I have read books that compare Automated Process to the way Free Labor had been replaced by Slave Labor in the Ancient World… just before the Collapse of Civilization.

It is almost completely certain, thought, that we will see the increasing use of Automated Processes in our Future. As every Region in the Global Economy becomes Advanced, as they call it, the Population Growth Rates will drop… it seems to be some kind of Law. What happens is that in Advanced Economies Women enter the Work Force in ever greater proportions, and apparently they feel they can work more comfortably if they are not pregnant or taking care of squalling infants. So Working Women stop giving birth, or at least fall short of numbers sufficient to generate Growth.

So it is that Female Labor presents this strange paradox to the Global Economy. It offered a huge boon to the Corporations at first, as women piled into the Work Force the Real Price of Labor plummeted, which in part explains why many Regions of the World may be a bit shy in endorsing Female Labor. If only giving Equal Rights to Women did not involve the effective cutting of Male Pay by 40%. But once Women have been thoroughly integrated into the Work Force they become just like men… demanding Living Wages (that they themselves were instrumental in depressing) and not having Babies, that is, drying up the Supply of future Cheap Labor.

Anyway, as the Price of Labor rises due to its contracting supply, the more it will be worth the expense of replacing that Labor with Automated Process. Then we need to consider that the cost of Automated Process decreases almost exponentially over time. As the Price of Labor goes up, the Cost of Process goes down. This transformation is now devolving in Japan, which at the moment has a more serious shortage of labor than anywhere else in the World, the highest wages, the strongest traditions of Industrialization, and the most serious prejudices against importing foreign labor to ease the strain of its inherent Labor Shortages. And perhaps most significantly, more than any other economy, they are extremely comfortable with digital technology. If anybody can design cheap and effective Automated Industrial and Service Processes, it is Japan. As Japan implements this Revolutionary Business Model of Replacing People with Machines, allowing them to totally reschedule their Costs and Pricing, then this very serious Competition will force every other economy in the World to follow suit. Even though these other economies may still have abundant Labor, still once the ‘tipping point’ has been crossed in regards to the Cost Effectiveness of Automated Process, then no Labor will be able to effectively compete, as even Subsistence Wages – just the bare minimum that could cover for an individual’s simplest food and shelter expenses – would amount to more than the Cost of the Process Machinery it would take to replace them.

At this point the Growth Model of Capitalism would no longer make much sense. Up to this point the growth in the Money Supply to provide profits was folded into the proportional growth in population. And even there the increase in Population needed to translate into there being more Workers and more Consumers. But if this Growth were to be cut short, then, well, Growth Capitalism becomes dysfunctional… unworkable.

But was ‘Growth’ ever really essential? Wasn’t pumping up the money supply was just a mechanism for assuring that everybody would effectively break even anyway? The System was created to give every Corporation a likely chance of a Pay Day without quite so many Bankruptcies along the way. Taxes were paid and Retirements were being funded. That is what Capitalism was achieving with its Growth Model. But, really, the same could be done with Break Even Planned Capitalism.

The advantage of Break Even Capitalism is that the World Population could be allowed to decline without creating the catastrophe that it would for the Growth Model of Capitalism. There are books being published nearly every day now by Economists who are intellectually stuck in the Last Century… the last Millennium … who are fretting about how to increase population and immigration even while the World’s resources are being pressed rather critically. How can we seriously plan for Growth when there is a shortage of nearly Everything. Every single one of the World’s Other Problems is screaming for Smaller, for Less, not for Growth, not for the traditional More More More. When dealing with all the horrible consequences of Global Warming, we need to build contraction into our Models. Growth would become just another word for Failure, for Doom. The sooner we implement Break Even Capitalism the better.

And it would not be very difficult. Already economists have grown rather comfortable with their ability to exactly manipulate the Money Supply. Branching out to controlling the other variables of the Economy would not be much of a practical or ethical leap for them to make. In for a penny, in for a pound. They are already doing the Job. They just need to do more of it.

Oh, there would be a problem with Distribution of Wealth throughout the World Economies. With Labor being replaced by Automated Process, what would be the mechanism used for providing people with their subsistence goods and services. We just can’t allow Billions of people to starve to death. Well, yes we could, but they would likely riot first. The lesson of History tells us that People do not go quietly into that Dark Night. If there cannot be Paychecks then there must be the “Bread and Circuses” made famous by the Policy Makers of Ancient Rome (who had replaced Free Labor by Slave Labor, if we will remember). Well, if people will not be given out their Money in exchange for Labor, then they must be given their Money for something. Why not give out Pay Checks in return for Social Compliance – for being Good. If People refrain from causing trouble, do what they are told, and follow all the Rules, well, they should be paid for it. For instance, on the news I had heard one expert explain that at least 60% of the Insurgents in Iraq and Afghanistan would go back home and bother their wives if only they had even a modest Pay Check. Sooner or later the Policy Makers of the World will see the Wisdom behind Universal Paychecks, and that Crime and Terror have not really been much more filling the Gap presented by chronic Under-Employment.

Yes, those wed to the notions of Traditional Capitalism will see it as a huge waste – Universal Paychecks and Pay for Compliance. They will argue that if people do not ‘comply’ then simply toss them into jail, as has been done, well, since the emergence of Capitalism, as a matter of fact. Before Capitalism, prisons had not been such an essential social institution. I suppose Capitalism needed Prisons as a contrast to the Factories… the factories only had to be just slightly better than the Prisons in order for the comparison to work. Capitalism’s ‘Carrot and the Stick’. So, today they would insist this same policy continue. Why spend money on ‘carrots’, that is, giving everybody a Check, when the same ‘stick’ as before can still be used to beat them – just wait for the disenfranchised workers to break some Property Crime and then toss their asses into Prison. Well, there are practical problems with such a System, as Criminals become hardened and more difficult over time, and costs rise as more and more Lawyers learn to feed off the System.

But perhaps the best argument for Pay for Compliance is that we effectively have about the same thing now, though on a smaller scale then we will soon enough require. We already have money being pushed out into the economy in exchange for virtually nothing. It is Defense Spending. We are building Billion Dollar Submarines and Mach 3 Fighter Planes to fight a War against Goat Herders in Afghanistan. That can’t be for real, can it? It can not be justified in any other way then by supposing that it is all a kind of Busy Work, a way of handing out Pay Checks. And it is a kind of Pay for Compliance in the sense that no segment of the Population is better behaved than the Defense Workers – those dedicated to the creation of Weapons of Mass Destruction… another one of Life’s little paradoxes.

But we need to keep in mind that Weapons are potentially dangerous. I read a book last week by this little old man who actually believes that all these Weapons should be used so that America can do the only Logical Thing, and that is to Conquer the World. Bomb all the Capitals while we still have the means! Do unto Them before they do unto Us! Its all rather Nineteenth Century, and we could call it stupid except that it is being taken quite seriously in some quarters. And we need to remember that if America had elected George Bush Yesterday, who might they elect Tomorrow? The Danger of some Great Nut getting his hands on a virtually unlimited stockpile of Weapons of Mass Destruction is very real. And America has demonstrated that their Constitutionally configured Government is almost completely unable to block their President once Militarism and War is invoked. For Bush’s second term in Office, he was up against a Congress that was controlled by his Opposition. But it slowed him down not in the least! Yes, the Congress controls the Budget, but Weapons in a Stockpile have already been paid for. The Order to Launch is Free.

So Pay for Compliance would definitely be healthier and far less scary than ‘Pay for Useless but Dangerous Weapons that we all hope some other Future Nut from Texas won’t unleash upon the World”.

However, there might turn out to be some Industries which by their very nature do not lend themselves so much to Automated Process, where Labor could still play a role. Certainly Health Care can be expanded.