03/01/09 :: [Other] To Count or not To Count... [permalink]
I must admit that I have an odd political boundary. I could probably define myself as an ultra liberal (in the US sense, in France it means the opposite) true capitalist. In other words I believe in an innovative, service based, compassionate society. Innovative because innovation is what carried us where we are and will sustain us into the future. Service based because, unlike the alternative servant-based, it distills the best everyone has to give. Compassionate because everyone deserves to be free to be who they are, with the promise that if you contribute positively to society, society will not make it too hard to live a decent life. After all we have well enough food, lodging, healthcare and education for anyone, not to mention parks and libraries.
The role of government is to define policies that foster innovation with enough regulation to make it safe and sustainable, provide the infrastructure to support service orientation, provide some services such as justice, police, education,… and make sure the level of compassion is adequate and environmentally sustainable. Strangely enough, I believe that the best orientation for policies is to create maximum wealth, maximum wages, and maximum sizes for companies. I believe that small is better than big when it comes to sustainable capitalism. Imagine if we had only one farm to feed everyone and that farm would go out of business… Capitalism is not about employing as little people as possible, Capitalism is about driving people’s activities to meet the needs of the people.
The engine behind capitalism is innovation. There might be a time when we won’t have much to innovate, but I hope I would long be dead by then.
President Obama released his budget yesterday and I must admit I read accounts of it with horror. Most people could have thought that I would be happy to see all the additional taxes on the wealthy, oil & gas companies and what not, but that budget looks more like a scapegoat hunt than a budget that will restore, innovation, service orientation and compassion. The problem is less to limit the concentration of capital but rather make sure that the people that hold the capital use it to spur innovation and service orientation in a compassionate way. In the last 15 years the people that concentrated the capital used it to build useless structures (mansions, yachts, jets and fast cars) supported by a servant-based economy while paving the path of “least innovation”, crippling R&D expenses compounded with very high level of “me-too” R&D projects.
Niall Ferguson seems to go at the heart of the problem:
There is something desperate about the way people on both sides of the Atlantic are clinging to their dog-eared copies of Keynes's General Theory. Uneasily aware that their discipline almost entirely failed to anticipate the crisis, economists seem to be regressing to macro-economic childhood, clutching the multiplier like an old teddy bear.
Let’s be very clear, we reached a point of absolute absurdity where pretty much every entity in the world is in debt, massive debt (people, cities, counties, states, countries…). Adding more debt is not going to help, western countries have been walking on their heads for at least the last 30 years: they replaced inflation with debt and shun via their ability to create policies that killed innovation. They both have their source in the inability to establish a fair price to a given transaction.
Bill Burke asks us to give President Obama a chance, and nothing would make me happier than his success. But how can you expect to change anything when all the people that drove us where we are, are still at large and are just as ready to ride an economic recovery again by pumping commodity prices as hard as they can. I mean come on, people are now storing oil in super tankers with the hope that oil will rise again… Additional taxes on the wealthy may look popular (and could result in smaller mansions and more schools) but the key is not to level field by the bottom, this is what socialism and communism have done and we know where that goes. The key is to drive capital away from short term profits, specially when it involve commodities such as energy and food, and into the creation of jobs, i.e. in the hands of true entrepreneurs, not the one that are running after a quick buck, fast cars and big houses. The biggest failure of capitalism has been the creation of “Billionaires” which created role models across the world that pumped pretty much any human activity into their personal high/bio tech boom. Does it really make any sense that Michael Heisner, former CEO of Disney, was making close to $1M per business day. What activity could he possibly be doing that would mandate such an hourly wage?
Let’s admit that leverage generated tremendous accounting errors, errors that are impossible to fix across the globe without a massive debt forgiven initiative or hyperinflation. Let’s admit that the money exchanged most deals is not proportional to the activity being performed: when Sun buys MySQL for $1B, it is buying 16,000 man years of work at the average US salary. Does it make any sense? Who will pay the difference? If banks’ leverage let everyone make the same kind of “error”, who will ever repay that debt? When two dentists that I use for myself and my children work only 3 days per week, I think that they could work 5 days and lower the cost of care by 40%. Only a system anchored in a fair exchange of activity to meet the needs of people can work, nothing else.
America’s greatness came each time she put their people first ahead of special interests (and the government). Today is no different, the government alone even backed by insipid TV ads cannot return America to where it once was, only its people can, if only the “top” would let us do our job. I’ll never say it enough there is enough food, lodging, healthcare and education available to meet the (reasonable) needs of anyone, the only reason why it is not possible is because the people that manage the capital manages it to fuel their lifestyle, and nothing other than their lifestyle. And frankly, as humans, we don’t want any charity from them.