The Real Problem is Us. Really?

Today we read How Complainers Wreck the Economy by Rick Newman on the Daily Ticker. The article says this:

"     Something’s wrong with the U.S. economy. We all know that. But maybe the real problem is us. ...

"     It’s easy to disregard what’s going right and highlight nothing but the challenges we face—which seems to be a lot of people’s preference. ...

"     What’s missing in all of this gloom-mongering is the optimism and initiative we like to associate with America. ...

"     There are plenty of Americans, needless to say, who haven’t let a weak economy or a few disappointments slow them down. ... At some point, you either stop complaining and pick yourself up, or people stop hearing your complaints."

Oh? So now we are supposed to fear that "people" will stop hearing our complaints? Mr Newman, rich people already ignore our complaints. Or did you miss the Australian mining heiress Gina Rinehart, who gave us the uplifting advice to stop complaining and work harder?

Listen, Mr Newman.  Once we were optimistic. The market was going up up up! and we were buying real estate like crazy. We thought our investments were "safe as houses." Our leaders told us how smart and hard-working we were. No one was complaining then, not even about us.

Then the economic hammers started flying and we got hammered.  We lost our jobs. Our investments imploded. We were kicked out of our houses. Every time we optimistically picked ourselves up, we got hit by another hammer. A lot of us lost everything in spite of our optimism and initiative. Optimism and initiative were punished.

Meanwhile we saw the rich bailed out by doubling and more than doubling our national debt. We saw our "lawmakers" pass legislation they had not read. Is ignorance of the law an excuse now? For them maybe, but not for us. We are required to comply with regulations that are made up moment-by-moment. The regulations are constantly tinkered with because the regulators and legislators do not care to figure out the right things to do in the first place. They have just been throwing dog's dinners of policies into the legal system and then finding out which bits cause enough public outrage that they have to be withdrawn.  That is, they no longer even try to get it right, they just throw things out ("try and stop us!") and figure that if they tinker with a policy long enough, they can make it work eventually.

So Mr Newman, our complaints are not really for the ears of the rich, although they should pay attention. What is really happening is that we are still processing the fact that a crisis caused by rich screw-ups caused us to lose a lot of our money and opportunities. What does it mean for us to try to accumulate wealth when it is so easily taken from us? What does it mean that we have to clean up our balance sheets and pay off our debts, but our government is spending like a drunken sailor? Has the government not borrowed more dollars for us and on our backs than we have paid off for ourselves? Are we making any progress or are we still falling behind?

These questions started us thinking. What we are really thinking about, Mr Newman, are fundamental changes in the relationships between ourselves and the one percent (including the government). We do not trust them the same way we did before, yet we do not have the unity yet to hold them accountable. Despite ongoing proof of their incompetence, venality, and power-mongering, they still rule us. (Not lead, rule.)

What you see as complaints are really public discussions and analyses that will probably take years to work out. Very few realize that yet. Once the American people come to a consensus on the changes we need to make, then you will see less of what you call complaints and more initiative. Political gridlock will disappear.

Tosoc.org has taken the initiative to analyze the current situation in a new way and offer a truly original solution, one that has never been tried before because the technology was not available. We do not have to pick ourselves up, Mr Newman. We were never down in the gloomy way that you mean it. We are just trying not to be fooled again.  Instead of complaining about our complaining, you should help us. Support tosoc.org.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (admin@tosoc.org)

Copyright © 2013 TheOtherSideOfCapitalism

Human Resources

The question, always, is whether one is a human or a resource. A resource is a thing but a person is not. Dealing with a person is more expensive than dealing with a thing. In the interest of controlling costs, therefore, organizations are always tempted to treat most members as things rather than persons. This principle applies to the public sector just as much as to the private sector.

Take for example the medical professionals of Cuba who are sent overseas. The official explanation is that they are doing humanitarian work and at the same time, they earn hard currency or goods for their country. Yes, they do humanitarian work, but are they themselves being treated humanely?

Credible reports say that they are not. Take for example the Being Latino article Cuban Doctors. Is this Cuban practice equivalent to "modern-day slavery?" Decide for yourself. The medical professionals have no choice in the matter. They are not allowed to travel except by government order. They are overseen by Cuban "minders," the local police, or the local military, who use force to keep them in their roles. They are paid ten percent or less of the money they earn for their country. Regarding a recent deal with Venezuela, the article says

"Effectively, Cuban people were exchanged for oil."

Is a person just a fingernail on the body of society? To be cut off and thrown away as needed? That seems to be the attitude of Cuba toward its doctors and nurses.

Tosoc.org believes that persons should never be treated as chattel. We believe that any economic "efficiencies" gained by slavery would be more than offset by the inefficiency of the "slave" attitude, or even the "serf" attititude. Since slaves and serfs have no voice and no choice, they will do the minimum necessary to avoid punishment. They can never develop fully as inspired and energetic individuals. To tosoc.org, setting up a system of stunted individuals is a gross failure of leadership.

However, the example of Cuba simply illustrates the common problem of universal healthcare systems. The basic problem is how to set up a competitive healthcare marketplace in which resources are available to all and affordable for all. The highly-tempting alternative is to use force (like Cuba) to make healthcare workers obey.

Tosoc.org has already touched on this issue in The Other Side of Healthcare, but we think the reason for the skewed distribution of healthcare "resources" in the US is more similar to the problem discussed in Take from the Poor. That is, in reality, resources tend to move from poor areas to rich areas in our current system. That includes healthcare professionals.

Basically, only a fraction of doctors are willing to give up the income, lifestyle, and professional opportunities available in the "big city" to practice in rural areas. The rural lifestyle has to appeal very strongly to them and their families to overcome all the other considerations. The actual behavior of doctors in our system demonstrates that the advantages of the rural lifestyle are not enough to attract an adequate supply of physicians to rural areas.

Another issue is that physician training generally takes place in an urban center with access to the best equipment and support. Expecting physicians trained in this way to want to adjust to rural medical limitations after finishing their training is not reasonable.

Third, physicians as they are selected and trained today are highly motivated and highly competitive. They are not inclined to settle for positions they consider appropriate for second- or third-rate physicians if they can avoid them. That is, rural healthcare is for second-raters. Prison healthcare is for third-raters.

Finally, each state enforces a single uniform marketplace for healthcare education and licensing despite the fact that the healthcare markets in any state are numerous and different from one another. We are suspicious of any attempt to enforce extreme uniformity, so we believe this is a problem for the healthcare market.

This is where tosoc.org's advocacy of multiple markets comes in. Training and and licensing of healthcare professionals could be different for the different markets. For example, an apprenticeship system might be more suitable for remote rural areas than sending trainees to study for years in big cities. Forcing trainees to adapt to the big city may ruin them for work "back home." The big city has become their home.

Multiple exclusive currencies and markets would allow healthcare professionals to do what they want to do, which is to make as much money as they can with their efforts, rather than attempting to make them do what they do not want to do via law and regulation. Rather than trying to restrict their rates, let them compete in separate markets that are suitable for each individual. It is dumping them all in the same market with a single currency that causes the problem. No amount of law and regulation can truly fix that.

That is why laws and regulations often fail. Laws and regulations that fight human nature are as unrealistic as ordering water to flow uphill. There will be limited success and ultimate failure. It is better to go with the downhill flow, redirecting it where possible.

Instead of hobbling the lives of healthcare professionals by telling them where to go and how much they can charge, let us set them free within a market that is suitable for them. Let us tell them that they can earn as much as they are able and that if they prove themselves, they can move "up" to a more-competitive market with a different currency. If they cannot do that, then they can only look to themselves for the reason. They will not resent the government for its interference. In the tosoc.org system, individuals will be encouraged to grow rather than deliberately stunted like the slave doctors of Cuba. Support tosoc.org.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (admin@tosoc.org)

Copyright © 2013 TheOtherSideOfCapitalism

How Many Have to Suffer?

Nobel Laureate economist Paul Krugman writes in his recent blog post on the New York Times (see Summers' Speech) regarding a presentation that former Fed Chair candidate Larry Summers recently gave before the IMF Research Conference. It seems that Summers had a unique take on current economic conditions. Quoting Krugman,

"     ...he [Larry Summers] works from the understanding that we are an economy in which monetary policy is de facto constrained by the zero lower bound [to interest rates] ..., and that this corresponds to a situation in which the “natural” rate of interest – the rate at which desired savings and desired investment would be equal at full employment – is negative.
"     And as he [Larry Summers] also notes, in this situation the normal rules of economic policy don’t apply. As I [Paul Krugman] like to put it, virtue becomes vice and prudence becomes folly. Saving hurts the economy – it even hurts investment, thanks to the paradox of thrift. Fixating on debt and deficits deepens the depression. And so on down the line."

Krugman goes on to say that under these conditions, any kind of spending is better than none. Productive spending or wasteful spending. However, he says, "... a lot of people hate, just hate, this kind of logic – they want economics to be a morality play, and they don’t care how many people have to suffer in the process."

This comment is a bit rich coming from a man who modestly titled his blog The Conscience of a Liberal. He is nothing in his blog if he is not all about making economics into a morality play rather than a science, so what is the real difference between him and those he disparages? Presumably that his conscience and his morality are superior to theirs. He cares how many have to suffer while they do not.

We bring this up not so much to ding Krugman but to use him as an example of what happens when one is firmly stuck on the the "wrong" side of capitalism, as we believe Krugman is. What happens is that one's proposed solutions become more and more peculiar because, as tosoc.org has pointed out, there are no solutions on the "wrong" side of capitalism. There are only temporary and ultimately unsatisfactory policies that just "kick the can down the road." As a result, Krugman's suggestions are very peculiar indeed, as we shall see in a moment. (And if you need another example, google the phrase 'krugman trillion dollar coin'.)

Krugman has a lot of sympathy for Summers' point of view regarding the possibility that we are in a permanent state of secular stagnation. Tosoc.org does, too, but we see it very differently than Krugman or Summers. Before we get into that, however, let us continue with how Krugman would approach permanent secular stagnation. Despite his dislike of austerity policies and concern for suffering, Krugman suggests a form of austerity. (At tosoc.org, we always translate "austerity" as "poverty" or "increased poverty," because that is what it means for the poor.) Krugman says,

"     One way to get there [to the potential salvation of strongly negative interest rates] would be to reconstruct our whole monetary system – say, eliminate paper money and pay negative interest rates on deposits. ...
"     Any such suggestions are, of course, met with outrage. How dare anyone suggest that virtuous individuals, people who are prudent and save for the future, face expropriation? How can you suggest steadily eroding their savings either through inflation or through negative interest rates? ...
"     But in a liquidity trap saving may be a personal virtue, but it’s a social vice. And in an economy facing secular stagnation, this isn’t just a temporary state of affairs, it’s the norm. Assuring people that they can get a positive rate of return on safe assets means promising them something the market doesn’t want to deliver – it’s like farm price supports, except for rentiers."

With this Krugman has entered a topsy-turvy, head-in-the-clouds academic world where virtue becomes vice and right becomes wrong. If virtue is variable, what meaning is there to it? If virtue is variable, there is really no such thing as virtue. There is really only cold, calculated policy that is adjusted moment-by-moment. The negative interest rate policy is one that would cause suffering because it would take money away from the poor as well as the rich. This is really what makes the suggestion peculiar, coming from Krugman.

Krugman's problem, as tosoc.org sees it, is that he is stuck with trying to implement policies through only one currency. For example, he suggests negative interest rates and inflation in order to encourage corporations to put their "hoards" of money to work. (Presumably hiring more people at the same time.) Unfortunately, because there is only one currency, he cannot take from the rich without also taking from the poor. There can be only one interest rate policy for one currency, and it affects everyone who uses that currency. This applies to inflation, too. Inflation for the rich would also impose inflation on the poor.

The better alternative, of course, is tosoc.org's multiple exclusive currencies and markets. Our original blog post On the Other Side of Capitalism is probably still the best single introduction to these ideas. With separate currencies and markets for the poor, Krugman's plan could be implemented in the wealthy markets without making the poor suffer, too. The way we see it, Krugman's suggestion only makes sense in a tosoc.org world.

It is worth noting that it is one thing to have austerity suggested by laissez faire, Ayn-Randian types like Harry Binswanger (see our post Thanking the One Percent). It is quite another for a pedigreed liberal like Paul Krugman to do so. Krugman's covert defection to a form of austerity is why tosoc.org is concerned that perhaps all sides now seem to agree that some form of poverty is in our future. Granted, Krugman might deny that any significant poverty would result from his plan because of full employment and because he would make up any losses to the poor with tax credits and handouts. This ignores the time difference between losing the money (immediately) and getting a check from the government (pie in the sky bye and bye, with a ton of paperwork). First you hurt them and then you fix it? Why not just keep from hurting them in the first place? Also, if Krugman's form of capitalism is so great, why would it need permanent government policy patches to make up the money taken from the poor? A truly excellent implementation of capitalism would not need all that government fiddling to make it work.

Under the tosoc.org system, full employment plus protection and support for the poor is not a patch, it is built in. But despite his liberal conscience, it is not built into Paul Krugman's economic models. He is a one-percenter, after all, and his supply/demand curves, IS curves, and equilibria do not tell him how to protect the poor. In his world, no matter how important it is, morality is still an afterthought. We would rather have it built in.

Finally, tosoc.org finds it disturbing that our world economic system is so fragile that it could be brought to its knees by the failure of one firm, Lehman Brothers. Would we truly have crashed the system and starved perhaps billions of people just because banks stopped trusting each other and credit froze up? Are we so perverse that we would stop doing the things that we all know we need to do to survive just because of the numbers on bank balance sheets? As it turned out, we did not starve, but the price charged by the rich was high. Take the Great Recession as a warning. We need a system that is reliable and robust so that we are not put in that position again. Support tosoc.org.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (admin@tosoc.org)

Copyright © 2013 TheOtherSideOfCapitalism

Thanking the One Percent

OK. We will do it, Harry Binswanger! Here goes: Thanks so very, very, very much, you awesome and magnificent One Percenters!!! Was that humble enough? Are you happy now, Harry? Do you think the One Percenters are happy now?

As if thanks and praise from us, the 99%, means anything—we who without the One Percent would starve in our "hopeless ineptitude," to paraphrase John Galt in Ayn Rand's Atlas Shrugged. (Quoted in Harry Binswanger's comments at this Forbes magazine link: It's Time for the 99% to Give Back to the 1%.)

On The Daily Ticker at The 99 Percent Owe a Debt of Gratitude to the One Pecent, Dr Binswanger also says:

"The point I was making with the tax [exemption for the rich] is that we owe a debt of gratitude. We of the 99% owe a debt of gratitude, and I mean a humble moral gratitude. Thank you, thank you! Steve Jobs. Thank you! Warren Buffett. Thank you! Bill Gates. Thank you! Henry Ford. These are the people who lifted us out of the cave and gave us our standard of living. So as a symbolic gesture I want them to be exempt—the really great achievers, to be exempted from all taxes. And I propose that the highest earner each year be given the Congressional Medal of Honor."

There has been a rash of these kinds of comments lately in reaction to the Occupy Wall Street movement. Harry Binswanger, Ph.D. is a philosopher who worked with Ayn Rand and is a professor at the Objectivist Academic Center of the Ayn Rand Institute. He is also on the board of directors of the Institute.

We also see the following from Alex Epstein on FoxNews.com: Let's Give Thanks for the One Percent. Mr Epstein says:

"Look at the industries that have dramatically improved over the past several decades, and you’ll see a pattern: certain super-productive individuals have led the way. These individuals invariably fall under the 1% of income earners--often the 1% of the 1%. "

One problem here is that if all the rest of us are chopped liver compared to the One Percent, then our opinions do not mean anything, anyway. At best our praise is schlock if not kitsch. Best we keep our mouths shut, really.

Another problem is that maybe the One Percent do not need our thanks and praise. They might consider it a loss of their own time and a waste to listen to choirs of angels singing their praises. Also, those angels might be better off spending their time working.

These obsequious attitudes are in line with economist Tyler Cowan's comments that we (tosoc.org) mentioned in our post That Sounds Pretty Bad. To quote Dr Cowan again, 

"... making high earners feel better in just about every part of their lives will be a major source of job growth in the future. ... Better about the world. Better about themselves. Better about what they have achieved."

That looks like a pretty ugly and demeaning future to tosoc.org. Are the 99% not to have any dignity remaining at all? Are we all supposed to become lickspittles like Harry Binswanger, Alex Epstein, and Tyler Cowan?

Tosoc.org says that we all have value and should demand to be treated with dignity no matter how much more productive some of the One Percenters might be. It is also a good idea not to forget that some of them, maybe most of them, did not even earn their wealth, but inherited it like mining heiress Gina Rinehart of Australia. (Who has made disparaging comments about the rest of us. See our post No Sauce For The Gander.)

The fact is that the One Percent have had their reward already. They dispose of enormous resources and are able to jerk other people's lives around pretty much as they wish. They do not need the praise of those they may see as lower forms of life, like us 99 Percenters, unless it is a megalomaniacal whim. In which case, perhaps they should see a psychiatrist. Such whims seem crazy to tosoc.org.

Even if the One Percent do not have an insane desire for unending praise in surround sound, they may want a less expensive and more obedient 99 Percent. Tosoc.org sees no reason for that. The One Percenters dominate more than enough already. This might be resisted by adopting "rugged individualism," but that seems impossible. We all rely on society too much to be truly individualistic, and many of us are not very rugged. Rather we might adopt the attitude of what might be called "free-range humanity," where we refuse to cage our minds as Binswanger, Epstein, and Cowan apparently have done.

Unfortunately, the corporate-government combination may have the power to overcome this sort of inner resistance by individuals. Tosoc.org thinks we need more than that. We believe that the 99 Percent need collective action to resist these pressures. The form of that action should be multiple exclusive currencies and markets so that we can "firewall" the One Percent away from the 99 Percent. Read the other tosoc.org postings for more details. Support tosoc.org.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (admin@tosoc.org)

Copyright © 2013 TheOtherSideOfCapitalism

Take from the Poor

Buy low, sell high. This age-old advice is as good now as ever. It is as easy as letting water flow downhill. The trick is that you have to take what you bought in the cheap market and sell it in the expensive market. That is called "arbitrage." It takes long arms to reach from one market to another like that. That is one of the advantages of the rich – they have the long arms to make it work.

Michael B. Sauter and others reporting on 247wallst.com recently listed the U.S. states in order by median household income. See Richest and Poorest States. The richest state by median household income is Maryland at $71,122 per year. The poorest state is Mississippi at $37,095. The difference is $34,027. Quite a difference. Median Marylanders earn close to twice as much as median Mississippians.

Some might say that this difference is unfair; that it is an injustice. The cost of living may be lower in Mississippi, but for many things Mississippians must pay the same global prices in the global markets that the rest of us do. They also pay the same percentage of their earned income for Social Security and Medicare taxes that Marylanders do. That means that most Mississippians have to do the opposite of good sense. They have to buy high and sell low. (That is, they have to sell their labor low in the local markets but then pay national or global prices for what they need.) The poor pay a price for not having the reach of the rich.

Mississippi does receive some compensation from the federal government because its poverty rate is over 24%. However, this is offset by the fact that income inequality in Mississippi is very high, ranking third in the nation. That is behind only New York and Connecticut. What this all means is that neither the "free market" nor government programs are working very well for Mississippi. The fact that non-capitalist transfer payments are required just to keep Mississippi in the national economy demonstrates how our allegedly-capitalist system has broken down.

Free flow of capital is supposed to be a good thing because capital is supposed to flow to places where it will do the most good (from an economic standpoint). One might therefore be deceived into thinking that money will flow from the places where it is concentrated to places where there is less of it, like Mississippi. That is, one might think that money will move from high-cost locations to low-cost locations. The example of Mississippi compared to Maryland or New York shows that that is clearly not true. Money does not work that way. The truth is that in unrestrained capitalist systems, money becomes more and more concentrated. What arbitrage really seems to do is take from the poor and give to the rich.

It should be obvious at this point that the markets in Mississippi are already quite different from those in Maryland. It should also be obvious that the main reason why capital leaves poor Mississippi to go to rich Maryland is that the currency is the same. The capital flows freely. With exclusive currencies, the markets would really be separated and the capital flow could be controlled. The earnings of the poor would not so easily be transferred into the pockets of the rich.

If we really want to do something about poverty, we need to build up capital in the poor markets. That means that we have to do something about capital flowing away from the poor and concentrating too much in the pockets of the rich. If the rich cannot own the currency of the poor, then the capital flows can be controlled. That is a major part of the tosoc.org program. For more information, read tosoc.org.

The way capitalism should be.

Socialism for the socialists and capitalism for the capitalists.

TheOtherSideOfCapitalism (admin@tosoc.org)

Copyright © 2013 TheOtherSideOfCapitalism