The Equanimist

Update

Posted in Uncategorized by equanimist on August 9, 2009

Dear Readers,

I have found much to rewrite in “Part I.” — Little to change, but much to elaborate upon and, in the course of things, I have embarked upon a total rewrite of same. So, “Part III.C.” &c. will have to wait a little while longer… I don’t think anybody is in a rush — we’re still deflecting blame, calling names, rousing rabble &c. Solution can wait 🙂 Which brings me to a point of order: The Equanimist has become, for me, a pretty serious place where I publish relatively well-formed ideas that I cannot or will not rush. That said, there are many worthy inchoate ideas that (every day) don’t make it up to the top of the list. And to that end, I may start putting them down at “Dog-Meat-Home Companion” where the Apocalypse is nigh and the dog meat is delicious! We’ll see how it goes.

First post here.

-Adam

REPOST: Part I. "It’s Just Business"

While I continue to conceive this ongoing untitled series (among other things) I think this — a week during which banks (e.g., Goldman Sachs and JPMorgan Chase) reported extraordinary profits while ordinary citizens, who footed the bill, are jobless and homeless — this is a perfect time to repost Part I. “It’s Just Business”.


How does a businessperson* (often a salesperson in this capacity) “make” money? In the simplest sense, s/he buys or finances or otherwise brings goods and services (that somebody/-ies designed/engineered/whathaveyou and produced or otherwise will either provide or facilitate – sometimes his or her own goods or services) to market where s/he peddles them to the consumer. To the extent that s/he profits off this ingenuity and productivity or other work s/he makes more or less money.

Of course, design/engineering/whathaveyou/production &c. cost money, and, materials have inherent cost. For the sake of argument, assume that the total cost of the product is its worth irrespective remuneration owed a businessperson (or businesspeople) in his or her (or their) managing/marketing/sales capacity. In a freemarket, to the extent that a businessperson can keep total production or service costs down, convince a consumer to pay a higher price above a product’s worth and to buy more of same s/he makes more money. That is, businesspeople (often paid bonuses/commissions/whathaveyou) are incentivized to devise techniques to sell products and services at increasingly high profit margins above their worth and to do so en masse whenever possible.

By nature, this system cannot make anybody rich if everybody does it so the rules are such that it is very difficult (generally impossible for most people) to pull off. (If, for example, few can understand codified techniques and fewer still can afford the training and fewer still will be able to do both and fewer still will be able to apply the training skillfully, we’ve already narrowed down the population of potential businesspeople a great deal; and, in this way, everybody cannot do it). Nor can it work if people are given to know that the worth of the products that some businessperson is peddling is less than the price that they are being asked to pay.

‘Transparency’ is, thus, the enemy of the businessperson, who is incentivized to misrepresent actual product worth and obfuscate his or her own share in the profits (and that of his or her employer where applicable). If s/he can swindle one percent (or two or even five percent) on a million cheap units at one (or two or even a dozen) times a year then swindling becomes so extremely advantageous that s/he lives like a god.

Language becomes a weapon! Jargon, jargon as far as the eye can see. “First-in, last-out” (sometimes, FILO) accounting, for example, what’s that? Imagine that you have a hundred identical widgets. The first one that you bought only cost you five dollars and the last one that you bought cost you one hundred dollars. Further, for the sake of simplicity, suppose that the cost of each successive widget is always (over some finite period) more than the last. You sell a widget. FILO allows you to claim that though you’ve got a hundred identical widgets in your stock that range in cost from five dollars to one hundred dollars, you kept the cheap widget and sold the most expensive one for a relatively small profit or even a loss. What a concept!

What’s a company’s profit margin? How many widgets at what profit margin does a company sell in a given period? How much does it make? What does it own? What does it owe? What’s it worth? What are you really getting when you buy a share of stock in some company? Financial widgets, shares of stock, for example, take the cake as far as widgets go.

A quick look at the “Financials” section of a stock listing from a free website like Google reveals a list of “Total Revenue”, “Gross Profit”, “Operating Income”, and “Net Income”; the “Balance Sheet” section lists “Total Current Assets”, “Total Assets”, “Total Current Liabilities”, “Total Liabilities”, and “Total Equity”; the “Cash Flow” section lists “Net Income/Starting Line”, “Cash from Operating Activities”, “Cash from Investing Activities”, “Cash from Financing Activities”, and “Net Change in Cash”. Have you got any idea what that means? Probably. But do you really know – to a certainty? Do you, for example, know how they account? Know how they report? Even the P/E varies from site to site.

Delving into a business report reveals a seemingly limitless array of terms each denoting a specific concept and probably connoting another (that even educated businesspeople and financial experts cannot be expected to fully understand) strung together in a sort of word soup. Delving into the fine print on a so-called “financial product” is somewhat less revealing. Are the terms useful? When people who know what they mean talk to each other and interact, sure; to everybody else, they’re worse than useless – not merely incomprehensible but misleading when incorrect meanings are inferred from context clues – misunderstandings that few people have energy, time, intellectual capacity and resources to clear up.

Jargon makes it impossible for most people to understand what a widget is actually worth. And, it is generally impossible to uncover what a businessperson is actually “making”. This is by design – even when the intent of the information provider may be to provide good intel. A small few will have a pretty good idea. But why wouldn’t they play it close to the vest? They’re out to make money – especially if they’ve put the time and energy into understanding it all. And, everybody can’t make money because, all else being equal, if everybody made money then there’d be smaller shares for the few, and, they could not live like gods.

Businesspeople know that they thrive at the expense of the many – that somebody actually starves so that they might live in greater luxury. And, that’s why they give meaningless, obtuse and arcane answers to even simple questions: they wield deceit to their advantage at others’ expense. Even otherwise respectable men and women who drive innovation and get it to the marketplace, get rich organizing a salesforce (or otherwise act as such) in order to swindle more money out of consumers’ pockets than “their” goods and services are worth and to persuade “willing” investors to capitalize them.

But, when a businessperson can control the laborforce, too, profit climbs even higher. So, the same logic undergirds many hiring processes and pay packages. The savvy businessman or -woman attempts to hire people at some price below their worth, and so forth, in order to maximize his or her own profits. They despise the unions for this reason.

Academic institutions (businesses themselves, just ask the head coach of a good college football team) furnish a particularly elegant and relatively uniform example with which the author is intimately familiar. Colleges and universities generally offer new hires just a little less than somebody who has already worked at same for some short time, like a year. H.R. people either tell the candidate that they will make some salary toward the bottom of a range because they’re new (inexperienced in some way or an unproven commodity) or they leave it to the candidate to infer. Then, when the time arrives for a raise, it turns out that the institutions give only cost-of-living increases. In other words, new hires don’t make less because they’re ‘junior’ but because they haven’t yet received cost-of-living increases. That is, by their logic and practice, a new hire should get what the oldest hire at the same tier is being paid because the old hire is not getting a cent for performance or experience – just cost-of-living.

Savvy businesspeople get it at both ends: charging exorbitant fees (see the escalating cost of tuition for example) and ‘keeping costs down’. This is the freemarket. “It’s just business.”

Is it too much to expect that businesspeople should understand why a civilized society must curtail their prowess? We don’t let physically superior people run rough shod over their weaker cousins. We don’t let large men, for example, beat smaller women or take from them what they want. We make them conform to the requirements of a civil society. (But we let shrewd crafty people give weaker people the business.) We must curtail even the aptitude of all people who would run rough shod over our civil society and we know this.

For some time businesspeople have either shrugged or otherwise kept our laws off their bodies by convincing people that capitalism is equal to democracy, that patriotism is equal to rabid individualism. But, we know that capitalism and democracy are not part in parcel. And, patriotism is antithetical to rabid individualism. Patriotism is knowing and doing (and, to some extent, feeling) what’s best for your country, your state, your community, your home – because “charity begins at home;” n’est-ce pas?

So, what is the businessperson worth? What’s s/he earned? Now may be one of those rare opportunities when you get to ask and be heard to answer. Let me suggest that we start by asking what we’re worth – what are you worth? – because what you pay him or her will bear directly on the value of what you earn.

Would you pay a businessperson a million dollar salary/”pay package”/whathaveyou – how’s about ten million dollars – or a hundred million dollars – when you make twenty-five or fifty or a hundred thousand? If s/he had to come to you for it, would you authorize it? The answer is probably, “No.”

Even when we assume “freewill” – when we say, “Biology, Chemistry and Physics are crap” – when we say stupid things like “anybody can achieve the American dream” (while we know full-well that many just don’t have the intellectual wherewithal to succeed) – even when we allow all “men” are “created” equal to mean that everybody is just as capable as everybody else, how much remuneration does a salesperson, a marketer, a swindler deserve? What should we incentivize? Do we want the ‘best and the brightest’ people to go into business?

It’s not just business. It never was.


______________________________________________________


*Definitions

Business (n.): (1) “widgets for money;” an exchange of widgets (final products) and other services accompanied by terms and conditions that adequately (if incomprehensibly) describe same (such as they are) for money (an abstract representation of work – buffer between work and remuneration) (as in, We do business on four continents); (2) organization of the production or provision of same widgets and services (as in, She manages a small business, and, He generates a lot of business for the company); (3) organization of the production or provision of same widgets or services for the purpose of (1, above) (as in, That’s no way to run a business); (4) the hierarchy within which widgets and services are made or otherwise provided and sold (as in, That’s the business); (5) a beating (as in, I gave him the business.)


Businessperson (n.): (1) somebody who does, generates or conducts (runs) exchanges of widgets and other services accompanied by terms and conditions that adequately describe same for money; (2) a facilitator of same (e.g., a regulator or policy maker); (3) a gangster (as in, I’m a businessman).

Part III.B. Fleshing out the Case for Determined Will; (also, "You" are not the "you" you think you are.)

Posted in Philosophy, Political Philosophy, Public Policy, Untitled Work Number I by equanimist on June 17, 2009

B. Fleshing out the Case for Determined Will (also, “You” are not the “you” you think you are.)


The universe came into being. Very probably (it seems) there was a “big bang” at which time individuality first became possible. Expansion. Expansion. Expansion. Accretion. Collisions. &c. Many of us have seen “The Universe”. Some of us have even had a little science. Billions of years of evolution.

Either that or God created the world in seven days. It doesn’t matter how it happened per se – as long as we accept the following: For every action an equal and opposite reaction occurred in the past, and, it’s the same now. Thus, history looks to us a seamless web of causes and effects thereof.

As such, it cannot but be clear that a person (the phenotype, or the product of gene X environment interactions – i.e., not the literal translation of genetic material into a human creature but the imperfect translation of environmentally-modified genetic material into a real organism), a person is (like everything under the sun) the product of interactions.

That is, even when we assume a very proximal beginning, it is perfectly clear that genetic information, which codes the individual, must be beyond the control of same; that “random” protein production as a result of the environment of the womb is entirely beyond the control of a fetus; — that the plans upon which a human (or any other organism) is based, the oven in which it is baked and the product itself are beyond its purview.

But, then, neither can a mind choose what it will be taught (i.e., conditioned to understand – and the reactions attendant. Do not confuse what it will be taught with what it will know. I know many things I do not believe. You likewise. It is correct, here, to understand “what I have been taught” as “what I have been led to believe and do believe and act upon” – to interpret belief as rule – the very complicated rubric that guides decision-making.) The mind can only reason what it knows by what it believes. Yet an organism can neither choose its characteristics nor its upbringing.

Still, would you assert that it is in control of itself? When do Biology, Chemistry and Physics – a history of causes and effects thereof (entirely beyond the control of the individual that is shaped) – when does it all turn to rot? When does magic take over? How? And, wherewithal?

Some say, there is a soul and that the soul is neither earthly nor bound by earthly laws. Yet, even if there is a soul existing discreetly, it does not seem to effect that which is contrary to physical laws and would seem (like the capability of the body) subject to physical limitations. Even those of us who believe in miracles do not suppose that they happen at every waking moment! Do we?

It is as ignorant to say the mind can effect that which is not possible as it is to say that the body can – that when I flap my arms, I will fly! Though it seems the most natural thing in the world to assume that I am master of my own mind and body, I cannot be. (Ironically, however, “I” – body and mind – not sentience – am more or less efficacious master of everything I survey. That is, while I cannot be my own cause, I can be somebody else’s!)

A passenger – experiencing the perceptions to be afforded by a machine built and refined to a purpose – interacting with the universe, and, though the machine may effect changes in both itself and its surroundings by choice (i.e., deliberation, decision and action) the manner of action is necessarily beyond the capacity of the inhabitant (you or I – sentience) to control.

Reduced to a sentience that inhabits a biological machine (entirely the subject of, never master over, Physics and subject to exigencies at all times, how can I be either blame- or praise-worthy? Let us hold that thought.

Part III.A. Mutual Exclusivity

A. Mutual Exclusivity


Like “everything”, belief in freewill – the singular ability (generally attributed to “higher” animals and their familiars) to think, decide and act irrespective some inexorable extra-personal causative agent or agents (i.e., responsibly) – belief in freewill is over-determined.

It just seems right; does it not? I think, decide, act and can “observe” myself as I do so. Intuited, as it were, observations of freewill originate within me. Why question it?

Further, the concept of “personal responsibility” (i.e., the concept that I am master of my body and, therefore, uniquely accountable for its actions) is deeply ingrained and, generally, “works”. Application of the concept of freewill to life’s problems can and frequently does produce desired results.

Yet, the concept is integral to western justice systems, which are (almost universally and in toto) justified by freewill, or, “personal responsibility”. The “justice system” is supposed to “hold” individuals “responsible” and “punish” them for their bad actions. (Not so “capitalism”, a justice system, itself, which does not seek to “hold” individuals “responsible” and “reward” them for their good actions but as aforementioned in Part I.) Henceforward, it would seem, to extirpate the concept could turn justice on its head.

Moreover, it is often argued that, personal responsibility is the one best rational justification for productivity. And, this may be closest to home for many “successful” people [who (as it happens) either are or are not endowed by their creator with certain gifts] both social stratification and capitalism are virtually predicated upon freewill, without which (it seems) the socioeconomy could be imperiled.

Besides, when we assume determined will, many of us reach distasteful conclusions. Do we disavow determined will on that basis?

Some will understand “determinism” to mean that it doesn’t matter what a body does. This is patently absurd. Still, when we assume determined will the individual is reduced to a sentience, which can be neither more nor less blame- (or praise-) worthy than another – making the human experience just that.

Paradoxically, it is only when we assume determined will that we have control over the universe: I must be causative to be cause.

Personal and extra-personal control are mutually exclusive possibilities (as with black and white, up and down, left and right, ability and disability.) If we accept the former we disavow the latter and the converse.

Part II. Worth

“You say it is the good cause that hallows even war. I say unto you: It is the good war that hallows any cause.” – Nietzsche

Here, I would like (desperately) to write something else; that a man or woman is worth some moral equivalent in dollars; or, at least, that human dignity is valuable and productivity still more so. Peace costs. Loyalty costs. High living standards cost.

But this is not the place to argue that everybody is created equal – for better or worse – equally incapable of self-control; that freewill is an unsupportable postulate accepted by ignorants and promoted by spin doctors; that “you” are not the “you” you think yourself to be.

I will write these things – elsewhere – in some other ‘Part’.

The trouble is that these arguments against unmitigated avarice and megalomania break down when opponents deny reason (when no rational moral argument can stand up, and, we are debased). (Religious doctrine accomplished what reason seems inadequate to do. The fear of God served a purpose after all!)

When push comes to shove, a person is worth what s/he can and will take and defend. And, nothing can be taken that is not sacrificed (except in death).

Capitalism has so debased us. It is a “survival of the fittest” – a constant contest, which does not generally mean a triumph of the “best” but, specifically, some fruitful advantage (whether it be defined as child-bearing or wealth-consolidation – or betterment, but let us save that discussion for some other place).

In a freemarket, I am worth what I can and will take [from you] by force (intellectual or, now more rarely, physical) and am then willing and able to protect. [It’s extraordinarily counterproductive! How much work, for example, is just contest? And how much productivity is sapped by same? And how do our lives suffer as a result?]

We (people) are not (intrinsically) adversaries at a zero-sum game, but Capitalism makes us so. Ergo, it behooves me to be confident; to deny you; and to take some prize. I should think myself better and belittle you; I should value my assets and disparage yours; demand everything and leave nothing; have everything because having is triumph, and, triumph is controlling influence, and, controlling influence rules – not the best – but triumph.

To wit, capital is squandered.

When credit (not synonymous with but equivalent to effective triumph) is controlling influence – credit is everything! So, we contest for credit. “Good” and “bad” notwithstanding, when opposing forces meet, a slim “edge” wins, and, the “loser” is overcome – effectively negated in a binary capitalist system. But, how else can it be when triumph is everything (and everything else, perforce, is nothing)?

Worse, however, opposing forces are susceptible to “other” forces. Some of these other forces will favor one or another of two dueling bodies; some will come at odd angles. – An arch is “strong” not because it fights itself but because it supports itself and so distributes forces so as to maintain the integrity of its shape.

Society that fights at itself is inherently vulnerable. Locked in mortal combat, one with another, US citizens make themselves prey – needlessly, because US resources are suited to the task of cooperation.

This, however, is the reality. We have come down to agree that you are only worth what you can wrest from somebody else. Why? Because we are not a country – not a community – but three hundred million individuals loosely associated into real physical and ideological fractions. The enemy is your own spouse – or maybe not your spouse but the opposite “sex”; your neighbor – or maybe not your neighbor but somebody down the street – in the next state – half way across the continent – on the other side of the world. We’re “male” and “female” and “transgendered” – “straight”, “homosexual” and “bisexual” – “pants-wearers” and “pansies” and “housewives” (oh, my!) – “socialists”, “liberals”, “moderates”, “conservatives”, “fascists”, whathaveyou – “Christians”, “Muslims”, “Jewish”, and etcetera – “African Americans”, “Mexican Americans”, “Italian Americans”, “Europeans” and so forth – “Pennsylvanians” and “New Jerseyans”, for example – “Philadelphians”, “Princetonians”, “Trentonians” – “Smiths”, “Jonses”, and “Rodriguezes” – “fathers” and “mothers” – “sons” and “daughters” – “black sheep” and “good children”.

What are you worth but what you can wrest from another? Nothing.

The “American Dream” has gone up in a puff of Capitalism – not socialism, or republicanism or democracy, but capitalism.

REWRITE: This is a private drive. No trespassing. (Update 3)

Posted in Economy, Political Economy, Public Policy, Socioeconomy by equanimist on April 7, 2009

Originally published here, at the Equanimist, 17 Sept 2008. Rewritten and reposted in response to continued deterioration of the US labor market (another 600+k jobs lost in March) and other recent news, including (but in no way limited to) this debacle covered by the Christian Science Monitor related to ‘contaminated’ Chinese drywall.

Developed economies will be made solvent or reposition on the broad socioeconomic continuum. History makes the latter almost unthinkable.

Continued bailouts will only put “recovery” off. Systemic injury must be sustained. Loss ought, therefore, be distributed among financially responsible parties to stop “bleeding” the real economy.

Here, I would like to refer you back to a paper buried in a link within my first post below (December 2007) and to elaborate on certain of its conclusions.

Illiquidity (resulting in catastrophic losses) in the financial markets is only symptomatic. Typically, people don’t pay their debts when they don’t have money with which to do so. More than bad banking practices, four decades of increasing income inequality and overdependence upon the US lie behind the extraordinary decline in the value of such products as mortgage backed securities and collateralized debt obligations. US citizens have gone broke making rich despotic foreigners and domestic stewards (who fail utterly to recognize themselves as such) capitalizing on low foreign socioeconomic status.

If developed democracies are to “recover” then bad actors (viz., Chinese, Indian, Mexican, middle-eastern and Russian stewards, who have over-relied upon developed democracies to care for their large populations) must take responsibility for their own people or now learn to play by the rules (i.e., take bold and immediate steps to raise their domestic living standards).

In the meantime, developed democracies’ middle classes must be furnished real money with which to make real “domestic” purchases – more money in countries like the US, where the middle class has been trampled under foot by a flood of cheap labor far in excess of that inherent in legal immigration, and less in countries, esp. certain European countries, where the adverse effects of income inequality are largely corrected by social programs.

Is it time for closer ties between special, aligned democracies such as Australia, Canada, Europe, Japan and the US?

Through new cooperation and closer ties forged between same – beyond cooperative financial regulation to include “special” trading status through cooperative regulation of products and industries and similarly high commitment to national security – we might band together and so defend ourselves from the scourge of high income inequality and low living standards that once seemed a thing of the past. We will not lift “them” up (bad actors) who will not act for themselves.

Outsourcing to and insourcing from bad actors (e.g., China, India, Mexico, the middle-east and Russia) must be dissuaded. Though there may be myriad ways to do so, ensuring the reliability of shipments and adherence to strict migration policies seem the most reasonable methods. Broadly, check every “foreign” container and the actual contents thereof to ascertain with certainty whether or not those contents conform with strict regulations, which (as evidenced by ongoing troubles) is not done “abroad”; shore up porous borders; and describe means by which to repatriate as many illegal aliens as practicable.

This plan neither bars “foreign” investment in developed democracies nor unfairly taxes anybody in order to socialize profits (something extremely distasteful in the mouths of the US “right”) but provides an adequate framework within the spirit of our shared traditions to protect developed democracy from detractors. Simultaneously, this should create strong incentives to produce goods “domestically” (e.g. within the developed democratic world) – ergo, increase the number of “domestic” jobs out of all proportion to the worker pool – a step that should then increase wages and restore socioeconomic status from the bottom up. Moreover, this might provide strong incentive to “foreign” stewards to act in ways that will bring them closer to us so that they might participate in our economy and enjoy our high standards of living.

It would be nice if we could save everyone – but the global will does not seem to exist. Responsible “foreign” parties refuse to take an interest in their own well-being. No minority “domestic” group of nations will effect higher living standards by force. This race to the bottom helps no one. Let us lead by example.

Riding the rally

Posted in Economics, Economy, Political Economy, Public Policy by equanimist on March 24, 2009

While others seem very suddenly and insanely positive (see, for example, Jim Cramer’s change of heart), I remain unconvinced.


Economic fundamentals are largely unchanged. Transparency is still a pipe dream. The “solution” to mark-to-market accounting may be a good broom (with which to sweep the mess under a rug). Credit can get as cheap as dirt, but, borrowers remain broke and unworthy.

Some of the brightest minds in the world see a very hard road ahead. According to the BBC, the IMF predicts that the world economy will contract in 2009 (for the first time in 60 years). According to the Associated Press, Sen. Arlen Specter recently remarked, “[The nation is on the] brink of a depression“. Chairman of the Federal Reserve, Ben Bernanke told the Council on Foreign Relations on 10 Mar 2009, “The world is suffering through the worst financial crisis since the 1930s…“. And, on 22 Mar 2009, Paul Krugman wrote of the Geithner Plan in a piece entitled, “Financial Policy Despair“:

If the reports are correct, Tim Geithner, the Treasury secretary, has persuaded President Obama to recycle the Bush administration policy — specifically, the “cash for trash” plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson.

This is more than disappointing. In fact, it fills me with a sense of despair.

Worse, “China’s Premier Wen [Is] ‘Worried’ on Safety of Treasuries,” according to Bloomberg. And, Avinash Persaud, Chairman of Intelligence Capital and a member of the UN Commission of Experts on Financial Reform, recently revealed that among the commission’s recommendations is a “new global reserve currency” to replace the USD.

Moreover, companies, like AIG and Washington Mutual, and people, like Vikram Pandit and Ken Lewis, just don’t seem to get it. While the public fumes over bonuses paid to AIG’s financial products division, the New York Times reports that AIG is suing the US government (its largest shareholder after several bailouts), and, Reuters reports that Washington Mutual is suing the FDIC for US$13bln. In response to the ‘bonus tax’ (a hasty and possibly unconstitutional response by the House of Representatives to public outrage over the AIG bonuses) Ken Lewis, CEO of Bank of America, recently wrote a memo in which he attacked the proposed ‘bonus tax’ as ‘unfair’; it is! And, he should keep his damn mouth shut about it. But, finally, Vikram Pandit is hiding behind his contract, taking a US$10.8mln bonus for 2008 (a year in which Citigroup lost many billions of dollars; as you may have heard, he is also remodelling his office).

The market is rallying in the face of a lot of mediocre and downright bad news. And, the data isn’t much better, (despite that some have taken to talking about bad data as if it were good; see, for example, two very different takes on the Feb housing data
here and here).

Nothing goes straight down. The “crash” in 1929 paled in comparisson to subequent market deterioration (see charts here, for example). And, the same traders effected some of the greatest rallies.

As of now, there is little reason to believe the pundits who prognosticate (with impunity) a “‘major’ bull market”. There is little reason to believe them because we have not yet begun to address the single most important cause of the financial crisis.

Much is now being written about “global imbalances” (see, for example, the Council on Foreign Relation’s Special Report, “Global Imbalances Must Be Reduced to Prevent Another Economic Crisis, Warns New CFR Report,“). This tells an interesting and important part of the story from a height of about thirty-thousand feet. Back on earth, the fact remains, radical redistribution of wealth away from economic growth and social stability — i.e., the engine of growth (the middle class, esp. the US middle class) and the infrastructure that otherwise supports it — has not reversed, and, I haven’t read of any plan to reverse it. In fact, just the opposite.

Prelude to Part II in mixed metaphor, "On Natural Rights" (Update 1)

Posted in *HIGHLIGHTS, Economy, Philosophy, Poetry, Public Policy, Socioeconomy, Untitled Work Number I by equanimist on March 21, 2009
The natural world!
O, to be better by fine margins!
How will we know who is best?
We will fight. Winner, take all.


Drop what you are doing for the competition. The first place finisher will get a gold medal ($953/oz.); second place, a silver medal ($13.73/oz.); third place, bronze (something greater than zero/oz.). Never mind how impossibly small the difference between first and third might be.

Everybody else is worthless. Finito, Benito!

It is the natural prerogative of winners to dispense with losers. But, winners cannot expect to lord it over losers when they are better by fine margins.

Sayeth the businessman, son of steel workers, “This country – to which I owe everything – this, my country that raised me and made possible the extraordinary life that I lead, having taken everything, I will burn her tits. I will raze her to the ground under me! To whom do I owe my allegiance? I owe nothing! I earned this right. And, I will take my business elsewhere.”

And, they band together to defeat winners.

An endless cycle of winners and losers.

O, to exist in the natural state!

Let us not accomplish anything at all. Why should we when we can ravage the cupboard?

We will wear our balls hanging out and the women folk gather fruits and nuts; and, we will hunt within our domains.

Part I. "It’s Just Business" (Update 1)

How does a businessperson* (often a salesperson in this capacity) “make” money? In the simplest sense, s/he buys or finances or otherwise brings goods and services (that somebody/-ies designed/engineered/whathaveyou and produced or otherwise will either provide or facilitate – sometimes his or her own goods or services) to market where s/he peddles them to the consumer. To the extent that s/he profits off this ingenuity and productivity or other work s/he makes more or less money.

Of course, design/engineering/whathaveyou/production &c. cost money, and, materials have inherent cost. For the sake of argument, assume that the total cost of the product is its worth irrespective remuneration owed a businessperson (or businesspeople) in his or her (or their) managing/marketing/sales capacity. In a freemarket, to the extent that a businessperson can keep total production or service costs down, convince a consumer to pay a higher price above a product’s worth, and buy more of same s/he makes more money. That is, businesspeople (often paid bonuses/commissions/whathaveyou) are incentivized to devise techniques to sell products and services at increasingly high profit margins above their worth and to do so en masse whenever possible.

By nature, this system cannot make anybody rich if everybody does it so the rules are such that it is very difficult (generally impossible for most people) to pull off. (If, for example, few can understand codified techniques and fewer still can afford the training and fewer still will be able to do both and fewer still will be able to apply the training skillfully, we’ve already narrowed down the population of potential businesspeople a great deal; and, in this way, everybody cannot do it). Nor can it work if people are given to know that the worth of the products that some businessperson is peddling is less than the price that they are being asked to pay.

‘Transparency’ is, thus, the enemy of the businessperson, who is incentivized to misrepresent actual product worth and obfuscate his or her own share in the profits (and that of his or her employer where applicable). If s/he can swindle one percent (or two or even five percent) on a million cheap units at one (or two or even a dozen) times a year then swindling becomes so extremely advantageous that s/he lives like a god.

Language becomes a weapon! Jargon, jargon as far as the eye can see. “First-in, last-out” (sometimes, FILO) accounting, for example, what’s that? Imagine that you have a hundred identical widgets. The first one that you bought only cost you five dollars and the last one that you bought cost you one hundred dollars. Further, for the sake of simplicity, suppose that the cost of each successive widget is always (over some finite period) more than the last. You sell a widget. FILO allows you to claim that though you’ve got a hundred identical widgets in your stock that range in cost from five dollars to one hundred dollars, you kept the cheap widget and sold the most expensive one for a relatively small profit or even a loss. What a concept!

What’s a company’s profit margin? How many widgets at what profit margin does a company sell in a given period? How much does it make? What does it own? What does it owe? What’s it worth? What are you really getting when you buy a share of stock in some company? Financial widgets, shares of stock, for example, take the cake as far as widgets go.

A quick look at the “Financials” section of a stock listing from a free website like Google reveals a list of “Total Revenue”, “Gross Profit”, “Operating Income”, and “Net Income”; the “Balance Sheet” section lists “Total Current Assets”, “Total Assets”, “Total Current Liabilities”, “Total Liabilities”, and “Total Equity”; the “Cash Flow” section lists “Net Income/Starting Line”, “Cash from Operating Activities”, “Cash from Investing Activities”, “Cash from Financing Activities”, and “Net Change in Cash”. Have you got any idea what that means? Probably. But do you really know – to a certainty? Do you, for example, know how they account? Know how they report? Even the P/E varies from site to site.

Delving into a business report reveals a seemingly limitless array of terms each denoting a specific concept and probably connoting another (that even educated businesspeople and financial experts cannot be expected to fully understand) strung together in a sort of word soup. Delving into the fine print on a so-called “financial product” is somewhat less revealing. Are the terms useful? When people who know what they mean talk to each other and interact, sure; to everybody else, they’re worse than useless – not merely incomprehensible but misleading when incorrect meanings are inferred from context clues – misunderstandings that few people have energy, time, intellectual capacity and resources to clear up.

Jargon makes it impossible for most people to understand what a widget is actually worth. And, it is generally impossible to uncover what a businessperson is actually “making”. This is by design – even when the intent of the information provider may be to provide good intel. A small few will have a pretty good idea. But why wouldn’t they play it close to the vest? They’re out to make money – especially if they’ve put the time and energy into understanding it all. And, everybody can’t make money because, all else being equal, if everybody made money then there’d be smaller shares for the few, and, they could not live like gods.

Businesspeople know that they thrive at the expense of the many – that somebody actually starves so that they might live in greater luxury. And, that’s why they give meaningless, obtuse and arcane answers to even simple questions: they wield deceit to their advantage at others’ expense. Even otherwise respectable men and women who drive innovation and get it to the marketplace, get rich organizing a salesforce (or otherwise act as such) in order to swindle more money out of consumers’ pockets than “their” goods and services are worth and to persuade “willing” investors to capitalize them.

But, when a businessperson can control the laborforce, too, profit climbs even higher. So, the same logic undergirds many hiring processes and pay packages. The savvy businessman or -woman attempts to hire people at some price below their worth, and so forth, in order to maximize his or her own profits. They despise the unions for this reason.

Academic institutions (businesses themselves, just ask the head coach of a good college football team) furnish a particularly elegant and relatively uniform example with which the author is intimately familiar. Colleges and universities generally offer new hires just a little less than somebody who has already worked at same for some short time, like a year. H.R. people either tell the candidate that they will make some salary toward the bottom of a range because they’re new (inexperienced in some way or an unproven commodity) or they leave it to the candidate to infer. Then, when the time arrives for a raise, it turns out that the institutions give only cost-of-living increases. In other words, new hires don’t make less because they’re ‘junior’ but because they haven’t yet received cost-of-living increases. That is, by their logic and practice, a new hire should get what the oldest hire at the same tier is being paid because the old hire is not getting a cent for performance or experience – just cost-of-living.

Savvy businesspeople get it at both ends: charging exorbitant fees (see the escalating cost of tuition for example) and ‘keeping costs down’. This is the freemarket. “It’s just business.”

Is it too much to expect that businesspeople should understand why a civilized society must curtail their prowess? We don’t let physically superior people run rough shod over their weaker cousins. We don’t let large men, for example, beat smaller women or take from them what they want. We make them conform to the requirements of a civil society. (But we let shrewd crafty people give weaker people the business.) We must curtail even the aptitude of all people who would run rough shod over our civil society and we know this.

For some time businesspeople have either shrugged or otherwise kept our laws off their bodies by convincing people that capitalism is equal to democracy, that patriotism is equal to rabid individualism. But, we know that capitalism and democracy are not part in parcel. And, patriotism is antithetical to rabid individualism. Patriotism is knowing and doing (and, to some extent, feeling) what’s best for your country, your state, your community, your home – because “charity begins at home;” n’est-ce pas?

So, what is the businessperson worth? What’s s/he earned? Now may be one of those rare opportunities when you get to ask and be heard to answer. Let me suggest that we start by asking what we’re worth – what are you worth? – because what you pay him or her will bear directly on the value of what you earn.

Would you pay a businessperson a million dollar salary/”pay package”/whathaveyou – how’s about ten million dollars – or a hundred million dollars – when your make twenty-five or fifty or a hundred thousand? If s/he had to come to you for it, would you authorize it? The answer is probably, “No.”

Even when we assume “freewill” – when we say, “Biology, Chemistry and Physics are crap” – when we say stupid things like “anybody can achieve the American dream” (while we know full-well that many just don’t have the intellectual wherewithal to succeed) – even when we allow that all “men” are “created” equal to mean that everybody is just as capable as everybody else, how much remuneration does a salesperson, a marketer, a swindler deserve? What should we incentivize? Do we want the ‘best and the brightest’ people to go into business?

It’s not just business. It never was.


______________________________________________________


*Definitions

Business (n.): (1) “widgets for money;” an exchange of widgets (final products) and other services accompanied by terms and conditions that adequately (if incomprehensibly) describe same (such as they are) for money (an abstract representation of work – buffer between work and remuneration) (as in, We do business on four continents); (2) organization of the production or provision of same widgets and services (as in, She manages a small business, and, He generates a lot of business for the company); (3) organization of the production or provision of same widgets or services for the purpose of (1, above) (as in, That’s no way to run a business); (4) the hierarchy within which widgets and services are made or otherwise provided and sold (as in, That’s the business); (5) a beating (as in, I gave him the business.)


Businessperson (n.): (1) somebody who does, generates or conducts (runs) exchanges of widgets and other services accompanied by terms and conditions that adequately describe same for money; (2) a facilitator of same (e.g., a regulator or policy maker); (3) a gangster (as in, I’m a businessman).

return to top

Foray into the post-787-Billion-Dollar-Stimulus-Plan World

Posted in Economy, National Security, Socioeconomy by equanimist on February 14, 2009

In 2007 “people” (increasingly) stopped making mortgage payments, and, by the end of the year, the economy was entering recession. So, before the US had lost 3.6 million jobs, there wasn’t enough money cycling through the economy to drive it. Thus, it stands to reason, the US need not only replace 3.6 million jobs lost but do more (the status quo wasn’t working).

Beyond the obvious (i.e., the US must jumpstart its economy – to overcome inertia) the US must create jobs that pay better than those lost (income was insufficient even to support the economy). Will the $787,000,000,000US plan do that? Does it replace with “money-cycling-through-the-economy” all of the money that would be cycling through the economy had not those jobs been lost plus “more-money” that was clearly necessary but not being provided?

US GDP is presently contracting at about 4% per annum (or more; the Philly Fed recently predicted 5.2% contraction in the first quarter of 2009). If we assume that every single penny in the package will add to GDP (and, by definition, that does not appear to be the case) then, $787 billion USD kicking in over three years is about $262 billion USD per annum – less than 2% of US GDP. (US GDP is approx. equal to $14 trillion USD). Right now, the US needs an annualized rate of GDP-subsidy equivalent to approx. $560 billion USD (or more); that is, baring further losses, losses sustained in Q4 2008 and expected in Q1 2009 should require about $280 billion US. This bill does not provide that sum in all of 2009 much less immediately. So, less than providing enough money to overcome inertia, this package does not even seem to meet the failed status quo.

In the near term, this bill may stop the US socioeconomy from falling off a cliff – keeping people from starving, for example. But, it should not be expected to stimulate (jumpstart) the economy.

If you took my advice and bought gold at the end of October 2008 (≤$750US/oz.), you’ve made money on your investment by now. You might sell it or you might not. Can the price of gold continue to go up? That depends upon factors some of which are shrouded in mystery.

Gold is – obviously – something that an individual or organization can sell to raise cash, so, I expected that the price would come down for a while longer before it rebounded. That notwithstanding (and I do think that there should be a dip) there is good reason to suspect that the price of gold will continue to rise: (1) gold has been a very good investment at almost every time in the last 10 years; (2) gold has held its value even over the last year; (3) in inflation-adjusted terms gold is still very cheap relative to its peak in the early 1980s; and (4) it is either a very misleading advertisement or the US mint is hawking gold – suggesting that the price could go to $2000 per ounce.

More importantly, brace for the worst… The US is not magic. The US is not great because it is the US. Rather, the US has been great because US citizens made it so. Should the topmost tier fail to recognize the error of its ways and make restitution then two strong possibilities present, either (1) the US people will calmly and coolly accept dramatically diminished status and standard of living, or, (2) US citizens will not rest and, as is the wont expressed by immigrants hereunto, will re-wrest power. The US government is preparing for the latter.