The current Republican nomination contest has revealed serious confusion over the nature of our economic system. Very conservative candidates are attacking Governor Romney because his experience at Bain Capital involved buying companies with borrowed money, firing their employees, then selling them for a profit. Many, though not all, of these companies then went bankrupt, and Mr. Romney and his partners made millions. Sounding very much like Democrats, Mr. Romney's opponents are highly critical of this kind of capitalism.
Traditional capitalism was based on the idea that business people would invest money, usually borrowed, to establish a business, hire people, and make and sell things. Risk was involved, but jobs were created and profits were made. Traditional Republicans, including those now attacking Mr. Romney, still believe, as do most Americans, that this is the way our economic system should work.
The confusion within the ranks of capitalism is stimulated by the shift in our economy from making and selling things to manipulation of money. The rise of the money culture began a couple of decades or more ago and involves mergers and acquisitions, venture capitalism, leveraged buyouts, workouts and turnarounds, currency speculation, and arbitrage. While the money culture was booming, traditional capitalism based on manufacturing was declining. The national government had to intervene to save what was left of the American auto industry.
The money culture led directly to the housing bubble and subsequent economic collapse in 2008, from which we are still struggling to emerge. Unlike traditional capitalism, it is oriented toward the short term, not the long term, and toward quick profit, not productivity. If tens of millions of dollars can be made in bundling high-risk mortgages and collateralized debt obligations in a few months, why go to the trouble of building a factory, hiring and training workers, and producing a product that is competitive in world markets with profits emerging sometime down the road?
The Tea Party blames our government for this situation, and Occupy Wall Street focuses on the money culture (Wall Street). The government did not create the money culture. And public deficits, so much the focus of the Tea Party, arise from insufficient revenues to pay for the programs, including Social Security and Medicare, that most Americans, including Tea Party members, want. The money manipulators, now the focus of Republican candidates, manage to find intriguing ways, including off-shore bank accounts, to avoid paying fair taxes.
All of this is pretty well-known. What is surprising is that it is now being discovered and strongly criticized by Republican leaders who, up to now, have been silent on this transformation of American capitalism. While struggling to convince the American public that Barack Obama is a socialist, it is very easy to overlook the drift of our market economy away from its traditional roots into something resembling a high-risk, high-rollers', fast-shuffle casino that produces nothing except massive incomes for one-percent insiders. Republican leaders are now welcome to the struggle to return our market economy to its true purpose and original intent.
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On your appeal to China's Xi, I have some comment. I post it here and I wish you can read it.
The authorities in China is simply the enemy of human being. Any effort to admonish it to do some good thing will get nothing. If you believe it may be transformed, I would say bluntly: you are wrong. You don’t have enough facts in hand to understand its evil essence. For the issue of Iran nuclear weapons, I would say that the Iranian regime is a layer of the CCP’s skin and it doesn’t allow others to peel this skin. The right manner to deal with such evildoers is to destroy them. For doing this there is not only your power to use, the power of the people in these country is also long ready. Ignoring or underestimating this power isn’t the attitude of a great politician. The U.S. must undertake immediately to coordinate the two powers to start the greatest process in human history. Please give me a reply if this letter is worth an answer. I want to have the honour to discuss the specific tactics with you.
Yours sincerely
Zhao Ningkang from China
In the United States neither Liberals nor Progressives have been ":Anti Capitalist since the beginning of the New Deal. Both regulated capital AND labor. These both have been part of the solution that built us into a powerful and prosperous nation. The method of this hostile corporatist takeover has been to demonize both right and left and divide and distract us while our politicians and judges have been bought and our laws rewritten to make what we know is crime and corruption appear to be legitimate behavior. An unregulated corporation has the business model of a cancer, and "Free" Trade is unilateral disarmament in a very competitive world.
Okay, now I'm really confused. When did traditional capitalism begin. 1776? 1865? 1920? Capitalism has been, still is, and continues to be a system of exploitation. The capitalist has only one loyalty; profit. He will travel land and sea, put millions of unemployed into the street for the sake of profit. The notion that a few bad apples have gotten off track defies history and logic. Mitt Romney seems to understand what his role is better than those who are attacking him.
Culture isn't created by any single individual or group, it's created by an environment. While government didn't create the culture, it absolutely did create the environment that "is oriented toward the short term, not the long term" as you said very eloquently.
What did government do to create this environment? It created a Federal Reserve which artificially reduces the interest rate. This encourages loans to be taken out that aren't backed by real savings. The new money goes into bubbles in various sectors of the economy, and also appears as a gradual rise in the cost of goods.
These bubbles eventually burst leading to panics of different kinds and recessions if they are big enough. Due to these the government to the rescue in the form of bailouts. The problem is this creates moral hazard and a loop effect. Even if businesses know that they are doing risky things the system encourages them to do it.
Without the Fed, the ratings cartel (created by the NRSRO designation), regulations that made mortage-backed-securities the most attractive asset for banks to hold, and limited liability, this culture could not have developed in the way that it did.
There are six billon people on the planet looking for high paying jobs.
I don't need more than one TV.
Know how I can tell when a politican is lying, I can read you article.
Our biggest problem right now is investors are afraid to take risks. No investors, no capital, - no capital no new companies or projects. Than no new jobs.
"...confusion within the ranks of capitalism is stimulated by the shift in our economy from making and selling things to manipulation of money... While the money culture was booming, traditional capitalism based on manufacturing was declining."
You make one of the many mistakes common on the right: that "libs" - rich or otherwise - hate capitalism. What we hate are the damaging economic effects of its misuse.