The end of the free market system

Posted 5 years, 7 months ago (Saturday, February 7th, 2009 at 9:30 am) by jwsmith

By J.W. Smith

Predicting history in advance challenges one’s credibility. But, if the current collapse in Japan is a foretaste, the coming worldwide collapse spells “doom’ for free market capitalism.

Japan’s production collapsing 25% in three months

People must eat, be clothed, stay dry and warm, and they must socialize. If Japan’s economy continues its rapid collapse and the rest of the world follows suit, those needs can only be attained by local regional decisions replacing free market decisions.

Japan’s economic crash is currently 10 to 12 times more rapid than the collapse of America and Europe as they spiraled down into the Great Depression 77 years ago.

Industrial production fell 10% in December, 9% in January, and February is anticipated to drop another 5%. That is an accumulative industrial decline of 25% within three months.

Studying the crisis closely, Bank of Japan’s Governor, Masaki Shirakawa, warned, “The outlook for the Japanese economy has deteriorated dramatically and there is a high probability it will continue to do so.”

Stopping a financial-economic crash in its tracks

We won’t speculate on what will happen. We will simply lay out how this Worldwide crash can be stopped in its tracks, the collapsed monopoly system replaced by honest capitalism, and each citizen can be leading a quality life on half the labors and resources as within this inefficient system.

Production technologies are highly efficient and are becoming more so every day. It is Inequalities in world trade and inequalities in property rights law which is at the heart of the world’s crisis.

Over half that industrial capacity is wasted through social inefficiencies. This discussion will be on how to make social structures over twice as efficient as they are today.

If developed world farmers were undersold by subsidized agricultural surpluses from another society, their farmers could not sell their crops. They would go bankrupt, the tractor and machinery companies would go bankrupt, the millions of people depending on these jobs would be without work, resources and production of remaining industries would have to be sold to other societies to pay the import food bill, and the developed world would quickly become impoverished.

If countries not yet industrialized are sold “cheap” food, their natural resources must be sold to pay for that and the consumer products from the industrialized world. Debt traps are then put in place to maintain that dependency.

Once that monopolization process is in place, “free trade” becomes a method to siphon the wealth of the periphery, or even defeated powerful nations, to the victorious imperial centers of capital.

Witness what happened to the former Soviet federation when “free” grain poured into the Ukraine. The farmers in that “bread basket of Europe” could not sell their grain, did not plant the next year, the entire economy collapsed, and hunger was widespread.

After years of hunger, Malawi realized cheap imported food was the heart of their problem, subsidized their agriculture so they could compete and soon they were food exporters.

Not only can every country in the world feed themselves, if given the tools and financing their entire economy will become more productive.

In a reversal of the destruction of economies as addressed above, the money paid local farmers is spent for needed products and services and the people providing those services and products spend their “earnings” for their needs.

Known as the “multiplier factor,” this is the health of any economy. This natural efficiency was denied the developing world after colonialism supposedly collapsed. For the past two decades, this author has termed such undercover colonialism as “plunder by trade.”

To prevent future hunger due to loss of their topsoils, as has destroyed prosperous societies for millenniums, these collapsed nations or regions must turn to permaculture. This will build their soils even as far more food per acre is produced.

Under current economic rules of instant and high profits, this appears inefficient. But that is only because individual short term profits are considered, not community, regional, national, and world long term profits.

As we will be discussing, those short term profits are largely unearned while long-term profits sustain high quality lives for centuries or even forever.

A world trading currency protecting the value of all regional currencies

For each economically viable region to develop that balanced economy, a world trading currency must be developed for the specific purpose of protecting currency values within those regions. Economically viable regions can then safely print their own currency spendable only within their borders.

With their currency protected, and by trading access to resources for access to technology and training, nations and regions can print money to build local and regional industry.

Again, because they are protected by an honest world trading currency whose primary purpose is to protect all currency values, the wealth produced backs the value of the money created.

Rental values of natural resources, both from resources exported and those consumed internally, provide much of the funding as created currency circulates within that economically viable nation or region.

There is one irrevocable rule to efficient economies, production and consumption must balance. Under economic rules designed to channel massive wealth into the vaults of monopolists, ships, trains, and trucks passing in the night hauling the same products and commodities thousands of miles in opposite directions is economic insanity.

Attaining that balance once a world trading currency and locally created currencies are in place is rather simple. Massive surplus labor within every region can be mobilized by being apprentices collectively learning every job skill starting with the basics, food, fiber, and shelter.

Rapid training of skilled labor, rapid regional development

Apprentice permaculturists, homebuilders, and cloth producers work with master craftsmen as they ply their trade. Once trained they return to their communities as master craftsmen where they train others as they operate permaculture farms, build homes, and produce clothing.

Plants providing thread for cloth, such as flax or six-foot-high hemp, are among the most prolific in the world. So permaculture is a part of production of cloth and cheap exotic threads made from oil or coal will not be expensive nor will their use in such small quantities threaten the environment.

Houses for suburbs and outlying areas built from rammed earth, brick, or rock with ceramic interiors that will last for centuries are just as much local industries as farming and cloth production.

Skilled labor for high rise buildings within city centers has already been trained in all emerging countries. One need only apply the apprentice trainee principle to rapidly further expand that labor force and national or regional production.

Above outlines the essentials of a secure society—food, fiber, shelter, city centers and industries.

Labor to produce those essentials are trained locally and most production is local. Once regional infrastructure and economies are fully devleoped, modern technology is so productive that each worker need be employed only two to three days per week.

This outlines the essentials for a quality life for all, regional industrial production providing food, fiber, shelter, and recreation.

Today’s conspicuous Consumption is a carbon copy of aristocratic conspicuous consumption

Where all the resources and labors of the wealthy world goes now stands out clearly, primarily to maintain the “freedoms to travel” and being entertained once they arrive.

Those within the wealthy world run uptown for hamburgers, shop till they drop, have houses full of clothes, shoes that are seldom–or never–worn, their kids have closets stuffed with toys they never play with, there are trips overseas, cruises, annual vacations, and on and on.

The list of what a modern society is titillated with is endless. This is nothing more than Aristocratic conspicuous consumption functioning within modern economies with the spendthrift citizenry unaware that a large share of their wealth is just as unearned as was aristocracy’s wealth 200 to 800 years ago.

That massive unearned wealth unbalancing the world’s economies is the cause of today’s worldwide financial collapse.

Elimination of conspicuous consumption even as use of those “toys” increases and resource depletion decreases

When monopolization is eliminated and each equally and fairly paid for equally-productive labor, conspicuous consumption disappears but those toys—yachts, overseas vacations, etc, do not disappear.

They consolidate into the most pleasurable and cost effective items which are then shared by all. Under the principles of full and equal rights which includes equal pay for equally productive labor instead of one family having a yacht for year round use, 20 families will each have its use for one to three weeks of the year.

Going to fine restaurants and other entertainments are great but the costs to society for building those fine businesses and traveling to and from them is high. Instead, modern communications can bring movies and other entertainments into your living room while neighbors and friends can come over for dinner for a fraction of what it will cost society for eating out.

Those conspicuous consumption costs represent labor expended and resources consumed. Thus the savings possible translate into shorter workweeks, greater free time, and more socialization even as pressure is taken off of resources and the environment.

Communal recreation centers must form to maintain the interaction between all citizens as is already well developed within retirement or communitarian communities.

The equality goals of socialist or communitarian philosophy are attained and all while retaining the efficiencies of honest capitalism.

The simple history of how our unequal property rights laws evolved

For 20 years we in the Institute for Economic Democracy have been documenting the massive inefficiency and waste of labor and resources within the aristocratically structured American economy.

How did such an inefficient economy evolve? Visualize a fertile valley 10,000 years ago with fruits, nuts and vegetables growing wild along with lush thatch for building shelters.

The new settlers have only to pick their food, build their thatch homes, and, once that home is built, relax most of every day.

A cunning cabal form and each lay claim to a part of the land. They make a pact with toughies that they will share the spoils if they protect their unequal and unjust “property rights.’

The primary cause of poverty among plenty has just been established. The meek, mild, and law abiding now have to share the food they pick with those “owners,” have to build their houses, have to entertain them, and on and on.

Those first unjust claims to nature’s wealth is the foundation of today’s conspicuous consumption within what are termed the middle to upper class today.

Those cunning and now powerful continually expanding their claims to unearned wealth through custom and law became the “property rights laws, as applied to nature’s resources and technologies, denying others their rightful share of what nature offers to all for free,” that is in place today.

It is specifically those unequal property rights laws which create massive wealth for the few and massive poverty for the many today.

The large middle classes sitting between the wealthy and the impoverished give the illusion of an efficient economy. But that is only chance and distinctly an illusion. Massive wealth is ground up within the superstructure of those many monopolies.

Eliminate them, share the remaining productive jobs (roughly half as many hours worked as within today’s monopolized and aristocratically structured economies) and employed labor hours drop by half or more even as all are provided a quality life.

Your property rights laws today, as applied to nature’s resources and technologies, are nothing more than aristocracy’s property rights law, exclusive title to nature’s wealth which she offers to all for free.

We are not talking about personal property built by labor which is properly exclusively owned. We are talking about the wealth of nature which was not produced by labor and should be shared relatively equally by everybody.

Inequality within property rights law motivates privatization

This alerts us as to why the powerstructure is privatizing everything in sight and why costs rise rapidly (frequently doubling) each time a piece of nature or a part of the infrastructure of the economy, such as a highway or bridge, is privatized.

The massive unearned wealth that can be accumulated is the reason efforts are underway to privatize the wealth of nature all over the world as well as highways, other social services and, in America, even Social Security.

When Bolivia’s water system was privatized, costs tripled as services went down. The citizenry revolted, physically took back their water system, prices dropped, services rose rapidly, and the legal structure had to recognize and legitimize that recovery of society’s basic right to water.

Our legal structure developed in various stages the past 800 years and aristocracy proper, the ancestors of current property rights law, developed throughout the previous many millenniums.

But the inequalities within current law, in many forms and in many societies, all go back to a claim to some form of title to nature’s wealth centuries ago. After all, all wealth is processed from nature’s wealth which she offers to all for free.

We are told that monopolies do not exist in the current capitalist market system. That they do exist all around us can be proven by the simplicity of their elimination with the resultant drop in price even as the quality of consumer services and products rise.

Inequality within property rights law is eliminated through a citizenry paying resource (land) rents and bank profits to themselves.

Economic inefficiency and inequality begins with the monopolization (privatization) of nature’s wealth. As these “resources” are offered for free, each is entitled to his or her share.

Efficiency and equality is accomplished by a citizenry paying those rental values to themselves. Those socially-collected funds go right back to the citizenry to operate governments; build highways, water and sewer systems, electric power stations and grids, communication systems, and all other natural monopolies such as railroads.

Along with banking profits (which is also unearned money and discussed next), there are enough socially-collected funds to finance education, health care, and retirements.

The waste within a monopoly capitalist system and the efficiency gains from their elimination already stand out clearly when one realizes these massive unearned funds are available for social needs once society pays those rental values and profits of nature’s wealth to themselves.

All other monopolies within capitalism’s current monopoly structure, including banking, are copies of the principles of exclusive titles to land (nature’s resources).

Like land (resources), money and banking are social technologies understood for centuries. The only labor-created values are a small amount of brick, mortar, and furniture.

Scottish bankers established the cost of banking as covered by one percent interest on loans. Costs of computerized banking are covered by one-half of one percent interest.

When banks go bankrupt, as they are doing today all over the world, the standard procedure is to nationalize them, nurse them back to health, and sell them back to the private sector.

The very act of bankrupt banking systems being consistently healable under social ownership proves that private banking is many times more inefficient than socially-owned and operated banking.

Those efficiency gains within banking, along with that from socially-collected resource rents, provide the funds for operating governments, building infrastructure, funding health care and retirement, and for all other natural monopoly social services as discussed above.

Within other sectors of the economy, our wealth is never taken from us in the first place if monopolization is eliminated

Mechanical and chemical technologies are also a part of nature just waiting to be discovered. Those monopoly profits are collected through stock markets.

By paying inventors well and placing those technologies in the public domain, 85% of the stock markets disappear and those social savings are realized through a 50%, or greater, drop in the price of consumer products.

Organization of health care is a social technology which utilizes mechanical, electrical, and chemical technologies.

Britain’s single-payer health care provides quality care to all its citizens for 43% the per capita cost as in America which has 46 million essentially without health care. The monopolized health care in America stands exposed by those statistics.

Liability insurance on cars is required by law and loans on homes, businesses, and cars require insurance. Within a monopolized market economy, selling insurance, premium collection, and servicing consumes close to 50% of each premium dollar.

Retirement insurance premiums are collected through payroll deductions. Social Security, which is insurance, is provided at a cost of ½ of 1% of premiums paid.

Simply establish a central collection center for all insurance as is done for Social Security and, as proven by that being the cost of group insurance today, operating costs drop to roughly 6% of premiums paid.

The unnecessary cost and waste of the former monopolized market structure stands clearly exposed as the insurance offices all over town are replaced by a central premium-collection and servicing center.

The private collection of unearned resource (land) rents, private banks, 85% of the activities of stock markets, half the charges within the health care industry, and the insurance offices and labor that disappears within the insurance industry, are superstructures of monopolies siphoning massive unearned wealth to monopolists and grinding up roughly 55% of the wealth of a nation in the process.

By restructuring to honest capitalism, that waste disappears and all the world’s citizens can live a life of leisure and pleasure. Thank you.

Respectfully

J. W. Smith

Those crucial 170 words describing an honest, efficient, capitalist economy.Does Anyone have the Ear of President Barack Obama’s Economic Recovery Team?

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One Response to “The end of the free market system”

  1. On April 25th, 2009 at 7:00 pm, This said :

    This…

    Have you been blogging long? Japan Economy Officially In Recession is a great blog, you have a great writing style too. Found this post last Saturday and i’ve been reading your blog since. I’ve subscribed to your RSS feed and I am excited for more …

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