The 100%: Letter 1 Page 1

"Monaterist Capitalism, the financial model we use in the west, is dying."  

If you click on the link you will see that I don't use the term Monetarist in a pejorative way but in the correct manner: pertaining to the supply and scarcity of paper money as a means to control inflation or the fluctuation of price of goods and services.

I assert that this system is now akin to adjusting the deck chairs on the Titanic.  Adjusting the supply or otherwise of paper money is not dealing with the central problem of consumerism not replenishing the environment it exists in. The reason I assert that  Monaterist Capitalism is dying is because it has nowhere else to go when money itself devalues or is attacked by outside Markets.  The Eurozone 'crisis' is just such an attack upon a currency representing a large market in highly developed countries with excellent educational standards and advanced infrastructures.

How can such a collection of prosperous and productive populations be 'in crisis'?

According to the IMF and the World Bank, these countries are in various stages of debt.  The debt has been generated by the governments of these countries selling bonds or promissory notes based on the prosperity of their national economies.  What is occurring now is that the Markets where national governments go to raise capital are demanding more and more interest on their loans.  Certain countries, adjudged by these experts not to be able to expand sufficiently quickly have to pay higher interest on their loans than others.

Why are governments selling their sovereignty to a privately run crap game in the first place?
Aren't taxes enough?  If not, why not?

The answer varies depending on to whom you put that question.  One school of thought is that governments are spending too much on their social infrastructure (Schools, hospitals, parks, etc.) and are expanding beyond their means.  Thus they are using the extra capital (and it is capital, not income) to bridge the divide between what they have and what they can afford to have.  Certainly this appears to have been the case in Ireland during the Celtic Tiger phase.  The other and opposite school of thought argues that tax has become a political issue with the electorate and the large middle class demand less and less taxation from their governments. So governments, in order to gain power, have effectively mortgaged off the existing social and economic infrastructure and gambled shamelessly on the open market hoping to make a killing, much like people in poverty spend more of their income on scratch cards and lottery tickets than people in financial comfort.

Oddly enough: Both seemingly divergent opinions are absolutely true and agree on the same thing.  The wealth and the potential work force of the population has been placed as security on a bet.  That's it.  It's a bet.

The criterion under which the International Bond Markets give capital to governments is exclusively their ability to expand economically.  Clearly, this is a nonsense as nations can only expand economically by either exploiting and depleting what resides within their borders or exploiting and depleting what resides without their borders.

There are a few ways they can achieve the latter:
Colonialism which is effectively enslaving less developed peoples so that  the governments can take the resources they need (19th Century solution), Warfare which is the more drastic measure of killing less developed peoples so that the governments can take the resources they need (20th Century Solution) or Globalization which is controlling the less developed peoples to manufacture at source so that only the finished product gets shipped (21st Century solution).

Now, Globalisation appears on the surface to be the least harmful of the three classic strategies but this ignores the violence done to the population back home.  Their work and their income has been shipped abroad.  Yes, it was work and income they should never have had in the first place. Ethically speaking, their raw materials came to them by slavery or genocide but that doesn't undo the fact that they have been taken out of meaningful life and dumped into a limbo they have no means of escaping.  Once proud people are now as helpless as medieval serfs.

The middle class, that traditional source of innovation and expansion ,are themselves feeling powerless and frustrated with a system that seems to punish their effort to generate capital rather than foster it. The standards required of a business in a boom time remain the standards expected in a bust.  So less people have to work harder to hit the target and they resent the hell out of this.

How will printing more Euros or Dollars or Yuan deal with this?  It won't.  Deck chairs.  Titanic.

This is the tipping point: even Yemen has an army.  We cannot exploit our neighbor anymore.  Whatever expansion we achieve from here on in cannot be exploitative and resource wasteful.  Sadly, our current science of economics is still working to a model that was first developed in 1915 when consumerism was devised. We are still expected to behave like good consumers in an unthinking and destructive manner for our economies to thrive.  Clearly this problem needs an immediate but long lasting solution

We have already come up with one half of our solution but that causes another, bigger problem.

We have built machines to do the most degrading part of the work necessary to produce goods and they have turned out to be ultra reliable, efficient, productive and better than people on all fronts.  The only problem is, it takes but one worker to supervise five machines where once it took a room full of workers to do the work of one machine.  Along with our jobs, we are also now exporting this level of automation to the developing economies and within the next twenty years, they will find themselves in the same quandary as we in the west find ourselves in now.

Ask any economist of any persuasion what solution he or she can offer to this reductive cul de sac and you will probably hear much jargon and citations but I doubt very much if you will hear a solution.  Our current standard of economics cannot adapt to this problem because economics in the general sense is inherently blind to this reality.  Economics doesn't factor in the finiteness of our resource pile. We will be counting on rare earths to power our mobile phones in ten years' time, even though they are called rare earths.

The hint is in the name: they will be depleted.  Phones need to seek the same functionality by other means.

Consumerism must end. Its time has passed we are now too many and too culturally advanced to settle for a mud-hut dwelling, self sufficient lifestyle en masse. The death of consumerism is happening right now.  This death is not being caused by the anti capitalist graffiti, nor is it the work of anarchists, nor is it the effect of the street protests of 2011; consumerism is being strangled by the twin hands of resource scarcity and mass unemployment.

In the past, people who were unemployed didn't expect a certain level of lifestyle. You had to work to eat, own your home and send your kids to school. If you lost your job, you went out and got another job as quickly as you could.  This no longer works because there are fewer jobs and even if you are in employment the cost of things is inevitably going to rise. You can start a business or work for cash if you like but unless you are offering a faddish range of products (see Apple Inc.) or have an effective monopoly (See Microsoft) the chances are you'll get eaten up by the bigger fish who are starving for any income stream they can source.

Part of this problem was the fact that there are big fish in this small pool in the first place.

The impetus for all this corporate giantism comes from the buying and selling of shares. In a bubble of their own making companies discovered, to their joy, that useless bits of paper that were promissory notes on their economic performance called 'shares' could grow in value the more traders believed in the company's potential for economic expansion. When these traders judge that the company cannot expand economically anymore the price of the share drops. None of this is real money it is just an estimate of of a company's earning potential but try telling that to the thousands of employees hired and fired just to play the market.

Shares and bonds rise and fall under the same criterion: Economic expansion.  They are the same product in two different markets.  Those markets, in a desperate attempt to derive more profit will inevitably blend with disastrous effect.  How do you fire a citizen?  With a bullet.

Corporate structures rely upon a supporting market to take their end product in exchange for cash, credit or kind.  If consumerism is not adjusted to factor in an understanding of our current physical reality (that resources are depleting and cannot be replaced) then I would not be very surprised to hear about the Burkina Faso / Rio Tinto War within about ten years. Scarier still would be the Rio Tinto / Mittal Steel War.  Nothing in our current model of civilisation (Monatarist Capitalism) can deal with this situation.  Nothing.

Does any of this sound familiar?  Aren't private corporations approaching the same situation countries found themselves in at the start of the 20th Century?  Isn't playing the market something that ultimately causes harm in both private industry and in nations?

It's not a pleasant thing to say but I believe that war is looming and if you cannot work to eat you may have to fight to eat.  Our civilisation will inevitably change, it is up to us to champion the change that doesn't kill us.