Archives for posts with tag: capitalism.

Before proceeding any further, let me introduce you to two other, more distanced, cousins of ours. Gorilla and Orangutan.

Orangutan leads a semi-solitary life in the Bornean and Sumatran Jungle. They are fairly large animals, males tip the scales at 200 pounds or so, and need a lot of food. They eat mostly fruit and, in times of scarcity, bark, flowers, insects and eggs.
It was their ‘eating habits’ which had shaped their social lives:
Food is often scarce in the rain forest and that is why the orangutan is a semi-solitary creature. In times of great abundance of food, orangutans may use the opportunity to socialize and gather in small groups.
Because they live solitarily, the young siblings must on one hand learn ‘everything’ before starting their adult lives and they don’t have anybody to learn from but their mothers. Hence they stick around for longest. A baby orangutan will nurse until about six and continue to live with their mothers for a few more years. Two or three for the males, five or six for the females – on top of everything else the females have to learn “mothering skills” and for them the only way to do it is to watch their own mother taking care of the next sibling.
As a consequence of all this, the females give birth only once every 8 years, “the longest time between births of any mammal on earth. (This results in only 4 to 5 babies in her lifetime.)” Not a very efficient survival strategy, for the species I mean…

Gorilla has adopted a different feeding strategy.
This is actually a joke. It wasn’t ‘the gorilla’ which has ever adopted anything, least of all ‘a survival strategy’. The ‘adoption process’ had been fueled by chance, had been ‘censured’ by  the realities of their living places and was later labeled as “evolution” by Charles Darwin.
Coming back to our distant cousins, gorillas are even larger animals than orangutans.
300-400 pounds, for the males, versus 200. Hence they need even more food.
An adult Grauer’s gorilla male is estimated to eat 30 kg of plants every day, an adult female about 18 kg.” The difference being that gorillas eat a lot of leaves.
When they have the opportunity to choose, they will surely pick up fruit but they are much more adapted to eating leaves than orangutans are. As a consequence they do not need to ‘spread around’ as thinly as orangutans do, the young can also learn from the rest of the pack so females can give birth every 4 years instead of every 8.

Is there any link between all this babbling and the stated subject of your post?

Actually yes.

As gorillas and orangutans are teaching us, together is easier than each by its own.
Being able to give birth every 4 years is a huge evolutionary advantage over having to wait 8 years before becoming pregnant again.

But this is not all we can learn from our cousins.
Male gorillas, at 300 to 400 pounds, are formidable defenders. Their only enemies, except for humans, are the leopards.
Compare 350 pounds with less than 100 for a chimpanzee/bonobo male.
That would be a good starting point to figure out why silver-backs – mature male gorillas who despotically reign over their 1 to 5 females – can afford to drive out their sons after they become sexually mature while the chimpanzee alpha males, who lead troops of up to 50 members, will allow other mature males to live by – and to have intercourse with some of the females living in the same group.
The second reason being that gorillas eat, almost exclusively, plant matter, supplemented with some insects, while chimpanzees form hunting parties in order to catch, kill and eat other animals, including monkeys. And one can ‘graze’ by himself while hunting is way easier in cooperation with others.

Feeding habits can explain quite a lot, isn’t it?

Let’s make a step further and turn back, as I promised in my previous post, to the differences between chimps and bonobos.
Well, bonobos hunt, just as efficiently as the chimps do, only they are less inclined to murder their neighbors.
Just one suspected killing observed during “92 combined years of observation at four different sites“, for the bonobos. In the other camp, 152 killings, 58 directly observed and the rest “counted based on detective work“, gathered over “426 combined years of observation, across 18 different chimp communities“.
The second difference, that I find interesting in the context of ‘capitalism’, is the size of the ‘colonies’. Bonobos live in way bigger groups than the chimpanzees. 100 versus 40 to 60, I’m not sure whether this had any impact over the relative fate of chimps or bonobos but it is surely relevant for how capitalism works. Stick around.

One more ‘animal story’ and I’ll wrap everything up.

“We previously reported that chimpanzees were unable to optimally select the smaller of two candy arrays in order to receive a larger reward. When Arabic numerals were substituted for the candy arrays, animals who had had prior training with numerical symbols showed an immediate and significant improvement in performance and were able to select reliably the smaller numeric representation in order to obtain a larger reward. Poor performance with candy arrays was interpreted as reflecting a response bias toward the intrinsic incentive and/or perceptual features of the larger array. In contrast, the Arabic numerals represent numerosity symbolically and appear to promote response choice on the basis of abstract processing of numerosity, with minimal interference from the inherent properties of the choice stimuli. The present study tested the hypothesis that, for mixed symbol-candy choice pairs, the requisite processing of the abstract numeral may foster a mode of numerical judgment that diminishes the interfering incentive/perceptual effects of the candy stimuli. The results were consistent with this hypothesis. Whereas performance on candy-candy arrays was significantly below chance levels, performance on numeral-candy choice pairs was significantly above chance and comparable with performance on numeral-numeral pairs.”

OK, OK, don’t shoot the messenger… those guys were writing a scientific paper, not a blog post… let me ‘translate’ it in simpler words.

There is a relatively simple psychological test involving two bowls full of candy.
One of them containing more pieces than the other.
The test consists of a child being asked to choose between those two bowls, after being told that the candy from the chosen bowl will be given to somebody else and the candy from the second bowl, the unchosen one, will be given to the child. The test is repeated a number of times and most of the children, 4 year olds and above, learn quite quickly to point to the bowl containing the smaller number of candy.
If, instead of children, chimpanzees are asked to choose between the two bowls, they continue to point to the bigger number of candy, even after the umpteenth repetition.
Now here comes the really interesting part.
Dr. Boysen and other scientists from Ohio State University, had previously taught a chimp, Sheba, not only to count but also to read numbers. One digit numbers…
When Sheba was subjected to the test, using real candy, she had responded exactly as the other chimps had done before her. She was unable to wrap her head around the notion that she will get the candy from the OTHER bowl. But as soon as the researchers had replaced the actual candy with digits written on small cartons… bingo! Sheba had become a lot wiser and had very quickly figured out that choosing the bowl with the smaller number (of candy) was a far better option.

Let me put two and two together.

Our cousins, the great apes, have given us a valuable lesson about cooperation.
Orangutans have to raise their offspring as single mothers. A very time consuming process which limits the number of siblings to 4.
Silver-backs don’t need much help to defend their families. So they can afford to drive off any potential competition… but they cannot hunt. Or do anything else ‘in concert’ with their peers.
Chimpanzees have learned to tolerate each-other, to a degree. They can form larger communities and engage in cooperative endeavors. Hunting and warfare.
Bonobos have developed a very efficient method to quell tension which may appear among themselves and to subdue rogue members of the community, without actually killing them. With no apparent benefit… except for us…

History is telling us, shouting at us even, that authoritarian regimes are short lived. Shorter and shorter lived, as we come closer to the present day.
Ancient Rome had lasted for almost a 1000 years. 2000 if we take Byzantium into account.
The British Empire was de facto dissolved, more or less peacefully, after less than 500 years, along with the rest of the European colonial empires.
The Russian Czarist Empire had buckled under its own weight after some four centuries, reinvented itself as the Soviet Union and faltered again after less than a century.
The rest of the ‘modern’ dictatorships have crumbled even faster, with only two notable exceptions: North Korea and Cuba.

Mighty commercial ventures, which had seemed impregnable in their heydays, are now almost forgotten memories. From the British East India Company to the now infamous ENRON…

Yet humankind, as a whole, had fared better and better.
OK, we did bring a lot of ‘man made’ misfortune over our own, collective head.
Only every little piece of that misfortune had been produced and inflicted in an authoritarian setting.

From Alexander the Great (?!?) to Hitler, history is full of ‘leaders’ who had somehow convinced their subjects to foolishly follow orders. Eventually, everybody got killed in the process. The leaders as well as the hapless subjects…
From John Law – ‘the son of a Scottish banker, a gambler and playboy who had killed a man in a duel‘ before insinuating himself at the top of France’s financial establishment during the first part of the XVIII-th century, where he had orchestrated a “system” closely resembling a Ponzi scheme – to Bernard Madoff, the economic and financial history is full of ‘tycoons’ who have led their their subordinates, and a considerable portion of the financial markets, to utter disaster.

And some of us still consider that ‘greed is good’… Maybe they should read again about Sheba and the candy bowls…

I can hear some of them protesting: “In the real world, there is nobody to switch the bowls! ‘Finders keepers, losers weepers'”
Yeah, right… tell that to some of those who had won the lottery… “About 70 percent of people who suddenly receive a windfall of cash will lose it within a few years, according to the National Endowment for Financial Education.

Then why are we still so obsessed with money?
Like Sheba was with those candy?
Why do we collectively continue to behave like a bunch of three years olds?

Maybe because money have proved, over the centuries, to be very reliable tools?
Because profit has been a very good measure for a company’s ability to survive? If corroborated with other indicators, but that’s another story…

At some point I mentioned that capitalism only works if the market where its wares are traded is really free. Meaning that that market has to work under the rule of law and that nobody in that market should allowed to become so powerful as to dominate the others.

Well, that was a lie.
Actually, capitalism works anywhere.
Those running the late Soviet Union have tried to convince the rest of the world that monopolies might work.  Various ‘business men’, including some very successful ones, try to convince us of the same thing. “Competition is for losers” they say… OK, I can understand why they keep trying… That’s what the entrepreneurs are for! “To boldly go where no man has gone before.”
My point being that markets which are not presently free will become free with the passage of time. No matter what!
No political arrangement has ever been strong enough to contain a dysfunctional economy. That’s why the Soviet Union, and the rest of the communist camp, had crumbled. That’s why we have a crises every time the government, with the best intentions, abruptly intervenes in the economy. Or fails to do so and allows monopolies to exist for too long…

Capitalism actually works.
Look around us.
I could give you a myriad examples. I’ll settle for two.
Romania, which less than 30 years ago was struggling under the communist yoke, now has one of the fastest internet in the world.
Some 40 years ago, when my uncle had emigrated to America, long-distance  phone calls were so expensive that he barely afforded to call his mother more than twice a year… nowadays two people can chat for hours across the planet, for free, over the internet. With video…

How about we letting it do its magic without some of us trying to drain ‘undeserved advantages’ from the process?
And no, those trying to ‘drain undeserved advantages’ are not the real culprits for what is going on!
A really free market is not one where a big bully with a huge stick makes sure that nobody steals from its neighbor.
That would be the definition for a police state!
A free market is one where people organize themselves, hire a normal guy with a smallish stick to take care of thieves and then call him every-time when they see a robbery taking place.

Nowadays too many of us actually admire the thieves and try to bribe the guardian.
While the rest idly walk by, as if what’s going on under their own noses is not going to affect them in a very short while …

A huge, and growing, number of people, of all ages and from all social strata, are mad about capitalism.
They see it as the ultimate cause for the misery and unhappiness too many of  us seem unable to escape.
On the other hand, a very vocal and very influential group, most of its constituents belonging to the mature section of the society, keeps  saying that ‘greed is good’.

What’s going on here?

Human minds, yours and mine, have to deal with information belonging to two, actually three, categories. I’ll leave aside the third one – ‘details’ concerning the innards of our bodies.
We have to deal with facts and with impressions/opinions/sentiments.
The facts happen or are ‘perpetrated’ and impressions/opinions/sentiments are felt and/or expressed.
We find out – or are told – about both facts and impressions/opinions/sentiments
Simultaneously, what’s going on around us elicits an emotional response from us, drives us to formulate impressions/opinions and, sometimes, to react. A.k.a, to commit other facts.

In fact, our present situation is the consequence of the accumulated facts ‘perpetrated’ by our predecessors. And, to a smaller but significant degree, by us.

This whole introduction was meant to explain the fact that we are here as a consequence of what we did during our earthly existence, including under ‘capitalism’, and that our impression/opinion/sentiment about capitalism will shape our future. And that of our children.
I’ll make a small intermezzo here and address myself to those of you who believe that our fate is determined by ‘God’.  “No one has ever seen God; if we love one another, God abides in us and his love is perfected in us.” 1 John 4:12

Now please let me make a very short recap of how we got here.

I’ll be using ‘scientific’ information. I know that some of you will find it ‘unreliable’.
The following questions are meant to help you decide ‘on whose side are you’.
Did you ever travel in a plane?
Were you, or a family member, ever saved by modern medicine?
Do you use the internet?
Are you aware that planes, medicine and internet have been brought to us by ‘science and technology’?
I agree with you that individual scientists are prone to making mistakes but will you agree with me that planes most often than not reaching their destination, medicine not killing all its patients and internet being used by so many of us are strong indications that science and technology, on the whole, are ‘right’?

Let me go on.

We, Homo Sapiens, have two close cousins. Pan Troglodytes and Pan Paniscus.
The common and the pygmy chimpanzee. The latter also known as ‘bonobo’.

The differences between the regular chimpanzee and the bonobo are very important for those studying ‘capitalism’.
You see, both are social animals which live in close groups – like us, humans.
Chimpanzees are ‘authoritarians’ by definition. They follow a strict hierarchy – as long as the alpha male is able to impose it – and the leader harshly punishes any misdemeanor. Fights between chimpanzees are rather common and sometimes they end up with the death of one of the opponents.
Sex has a strict reproductive function and the dominant male sometimes discourages ‘his’ male ‘subjects’ from copulating with ‘his’ females.
Bonobos are democrats by excellence. When a male becomes too aggressive a few females – who are individually smaller and weaker than the males – band together and ‘knock some sense into his head’. But this instances are rare, more often any disputes are solved through sex. Yes, sex. The bonobos share our ‘ability’ to have sex, homosexual sex even,  “in a social context, with the same benefits as humans, such as stronger bonding and social hierarchies. It also has been seen to maintain a more peaceful environment amongst their community as aggression amongst the males can be vented through sexual acts.

What both chimpanzees and bonobos have in common is the fact that they have multiple sexual partners – which makes it impossible to know, bar a DNA analysis, who is the father of a certain baby.

I’ll come back to this in a short while.

After coming down from the trees of our early childhood and after having learned to run – as a manner to chase pray and to escape danger – we ‘discovered’ our ‘free’ hands.
And started doing things with them.

One other small thing was ‘the cherry on the cake’. Our ability to articulate sounds.

I don’t know when our brains had started to grow. Before or after we had started to hunt cooperatively, using weapons and verbal coordination. Does it really matter for the problem at hand?

Fact is that at some point in our history we were in possession of certain attributes and certain abilities. Big and flexible brains, the ability to walk using only two limbs – freeing the rest for other uses, the ability to communicate meaningfully with the rest of the gang and the ability to vent our frustrations through sex.

From here, our evolution has been very fast. Determined exclusively by the geography of the places where we happened to live. In the prairies we learned to raise animals and became herders, near rivers we learned to till,  seed and harvest while in the Arctic and in the jungle we remained hunter-gatherers.

The herders and the agriculturalists developed in two different directions.
The herders adopted – unwittingly – what is now called ‘the extensive way of development’ – by increasing the size of their herds – while the agriculturalists have tried to maximize the output of their limited plots of land.
The herders – being on constant move – have coalesced later into states, or never, while the agriculturalists had done it earlier. For reasons pertaining to labor productivity and the administration of justice.
In a herding environment there is no ‘police’ to turn to so individuals tend to fend for themselves. Some coalitions of tribes did organize annual meetings – Loya jirga  and Kurultai being but two examples – where ‘things’ could be discussed and settled but it was more often that people had resorted to a vendetta like justice.
In an agricultural environment things are more stable and a different set of demands have to be met.
Herders have very few property other than their stock and relatively little trade is exchanged among the members of the community.
Agricultural economy works differently. Higher productivity means the division of work is way deeper so trade is a lot more intense in this environment. This calls for ‘police protection’ which, in turn, calls for a relatively stronger state. Anyway, a stronger state was already needed since a richer, and sedentary, agricultural community is way more attractive for ‘thieves’ than a constantly traveling band of herdsmen.

A community which has a powerful group of professional fighters – ‘police’ and/or ‘army’ – is prone to become, sooner rather than later, an authoritarian regime. Where the ruler imposes his will over the entire community.
If we look closely this is what had happened all along human history. All states which depended heavily on agriculture had become authoritarian regimes. From Ancient Egypt and Sparta to the Medieval France and from the Aztec and Inca empires to China, on either side of the globe.
The problem with authoritarian regimes being that they inevitably fail. History doesn’t offer us a single example of an authoritarian regime which had been able to survive his own increasing weight. Rome was crumbling long before it was finally sacked by Odoacer, the American empires so easily conquered by the Spaniards were riddled by superstitions and by individual people being unable to think for themselves – living under terror tends to have that effect on those who survive – and there are countless more examples.

On the other hand, herders and those who trade in wares  made by others tend to behave ‘democratically’. Simply because herding and trading asks for a more individualistic and quicker thinking person. Compare Ancient Athens to Sparta, Medieval England and her Viking traditions to Medieval France and her Romanic reminiscences.
And also the democratic precursors I’ve already mentioned. The Mongols had their Kurultai, the Afghans their Loya Jirga.

By looking closely at all these examples I’ve reached the conclusion that people ‘yield’ better results whenever they enjoy as much individual autonomy as possible in a given situation.

The authoritarian Sparta had time and time again been beaten by the democratic Athens.
Athens had been destroyed as soon as it had lost her democratic status – Pericles was a dictator, you know…
The Roman Empire had been build as a democratic Republic and had started to crumble as soon as it was run as a dictatorship.
Slavery used to be a just as widely spread institution in Europe as it was in Asia at a time when Europe was extremely backward compared to Asia. Slavery had remained widely spread in Asia until recently while in Europe it had almost but disappeared since the VI-th century. Now consider the differences which existed between Europe and Asia around 1900…

The Soviet Union had crumbled under the combined weight of the apparatchiks while the US had become, for a while at least, the sole hegemon.

Now some people want to give up capitalism!
And replace it with what?

But what exactly is capitalism?

We currently use the history as it had been ‘layered’ by Marx.
He had done that using his preferred criterion: ‘who owned the “means of production”‘.
According to him we had three main historical stages and one bright future.
‘Slavery’, ‘Feudalism’, ‘Capitalism’ and ‘Communism’.
We already know that Communism has failed, abysmally, so let’s see what Marx might have overlooked.

‘Slavery’ means that the owner has every right over his possessions, even when those possessions are other human beings, while the ‘possessed’ individuals have absolutely none. A slave had no more rights than a modern day hammer. I can do whatever I want with my hammer – except using it to kill someone – just as I could have done with a slave in Ancient Rome. Including burning both of them, alive!
Can we speak of any autonomy being enjoyed by the slaves? Other than that extended, ‘haphazardly’, by the owners?
And you know what? The people were OK with all that. They simply thought that ‘that was how it was meant to be’. Until Spartacus had a different opinion…

‘Feudalism’ means that the king has every right over everything under his domain, including that of burning alive any of his subjects. But he was the only one to enjoy such  rights. A marked improvement over slavery!
The lords acted as the trustees of the king. They were given certain pieces of land, or other ‘perks’ – to collect a tax at a river crossing, for example – but not the right to dispose at their will of those living on the land at their disposal. And, at first at least, the lords were not entitled to sell those lands – only to bequeath them to their children, or other relatives, and even that was subjected to royal approvement.
A marked improvement – individual autonomy wise – from what was going on when Slavery was in full swing, at least for the commoners, but still far from what we have today. Ordinary people could not own much of anything, usually they could not live where they chose or exert the ‘profession’ they  liked without somebody allowing them to, etc., etc.,… Trade was also tightly ‘regulated’, whenever some merchandise was traveling from one place to another a lot of ‘right of way taxes’ had to be forked out towards various landlords.
The landlords, and the king, were also the ‘keepers of justice’. OK, they usually followed the ‘rule of the land’ but they were also able to ‘bend’ it to suit their will.

Not quite harsh as ‘slavery’ but still a very authoritarian regime, right?
Remember what I said about authoritarian regimes? That they tend to buckle under their own weight? As the French Monarchy did during the Revolution?

Now, who would initiate anything while living under an authoritarian regime? Where everything has to be ‘approved from above’? Specially when that ‘anything’ was an untried novelty or, God forbid, something that might have produced the slightest controversy?
Well this is exactly why authoritarian regimes have very little ability to innovate/adjust to external change.

Now that we’ve learned how authoritarian regimes dig their own graves – by insisting that there is only one correct way – ‘theirs’ – and that nobody may cross certain limits – those that have been drawn by ‘them’ – let’s examine what ‘capitalism’ looks like.

People usually associate capitalism with ‘money’.
Not even Marx had made that mistake. In his view ‘capital’ was everything that could be used to produce something: land, tools and raw materials and capitalists were those who owned that ‘everything’.
What Marx had forgotten to mention – or to understand – was that ‘merely’ owning something was never enough.
In order for ‘something’ to be truly ‘productive’ somebody must use it.
And in order for somebody to embark on an enterprise more complex than his ‘cooking his next dinner’ that somebody must be reasonably convinced of two things. That nobody would try to rob him of whatever he was going to do and that he will be able to trade the results of his work for anything he might covet.

See what I mean? For capitalism to flourish it is not enough for people to own things. People must be able to freely transform those things, according to their skills and abilities, and to trade them at their will.
In this sense capitalism needs to happen under the rule of law and its wares must be traded on the free market.

Then what went wrong? According to what I have written until now, everything couldn’t be better.  A considerable number of us do live under the rule of law, the markets are reasonably free in a considerable number of states… then why is so much unhappiness oozing from almost everywhere?
And how long are we going to remain steeped in it? To what consequences?

To be continued.

Capitalismul nu are nici o legatura cu goana dupa profit…
Capitalismul este un sistem economic care se bazeaza pe incredere si respect reciproc intre partile contractuale iar goana dupa profit este o aberatie aparuta atunci cand prea multi dintre cei aflati in piata isi pierd busola.
In capitalismul autentic profitul este unul dintre indicatorii ca o ‘intreprindere’ se afla pe drumul cel bun.
In cazul ‘goanei dupa profit’, acesta devine unicul tel urmarit de ‘alergatori’.
Diferenta dintre cele doua situatii este data de atitudinea dominanta in piata, la un moment dat.
Sa nu cumva sa le confundam intre ele. Asemanarea este doar iluzorie.
In cazul unui organism biologic, placerea resimtita de acesta este un semnal ca lucrurile sunt pe calea cea buna.
Hrana este cea potrivita, temperatura ambianta este buna, tocmai si-a potolit setea… Orgasmul, placerea suprema, este ‘rasplata’ pentru perpetuarea speciei…
Pe de alta parte, indivizii care ‘vaneaza’ placerea cu orice pret incep sa experimenteze consecinte neplacute. Obezitate, cheltuieli exagerate la bordel, par in palma, consum de droguri…

I keep hearing about capitalism having failed us.

I’m afraid this is not possible.

Capitalism cannot fail, simply because it is nothing but a human concept.

It is us who are failing.
It was us who had identified the concept, used it properly for a while and then replaced it, tacitly, with another.

‘Capitalism’ worked wonders, as long as we applied it ‘as advertised’, while ‘monetarism’ – the surrogate we allowed to creep in where capitalism used to stand proudly, has started to unveil its ugly face.

You see, capitalism used to be about ‘faith’. We trusted that ‘the other’ would honestly attempt to meet his end of the bargain. That trust convinced us to close, and take to fruition, business deals which were designed (a.k.a. negotiated) to meet our respective needs. We were doing that simply because we had understood that a good deal today – good for both of us, that was, would mean at least another good deal tomorrow.

For some reason – bad money drives out good, capitalism is being replaced, slowly but too fast, by ‘monetarism’.

Too many of us start ‘businesses’ with the sole goal of ripping their ‘business partners’, a.k.a. clients,  of as much money as they possibly can. Legally or otherwise.

Without understanding – or caring, even, that they are actually slaughtering the goose with the golden eggs. Capitalism itself.

“Why should the European taxpayers bail out the profligate Greeks?”

That’s the mantra I’ve been hearing for some time now, even though a way bigger, and darker, cloud slowly builds up on the other side of the world.

As almost all mantras there is a small nugget of truth in here, even if things are not at all as some want us to believe. wrote this almost prophetic article for Reuters, more than two years ago.

So?

First of all I’d like to quote the definition proposed by Investopedia.com for ‘moral hazard’:

“The risk that a party to a transaction has not entered into the contract in good faith, has provided misleading information about its assets, liabilities or credit capacity, or has an incentive to take unusual risks in a desperate attempt to earn a profit before the contract settles.
Moral hazard can be present any time two parties come into agreement with one another. Each party in a contract may have the opportunity to gain from acting contrary to the principles laid out by the agreement…..
.
.
.
Moral hazard can be somewhat reduced by the placing of responsibilities on both parties of a contract….”

The way I understand this definition is that it is the job of both parties who enter into a contract to perform every diligence they see fit before committing to that contract  and to assume the responsibility afterwards.
Let’s see if this definition sheds any light on today’s subject.
The Western World tends to act as if all countries were functioning as communities. If we don’t like what Putin does in Ukraine we impose sanctions that hurt the entire Russia in the hope that people will do something about the situation. That tactic works very rarely – see what happens in N. Korea and in Iran. Even more, sometimes it even backfires. Look at how popular Putin has become after the sanctions have been put in place.
Coming back to Greece we have become fed up with the shenanigans of the Greek politicians – right, left and middle – and now we insist on harsh ‘austerity measures’ in the hope that the Greek voters will somehow find among themselves an honest knight in a shinning armor that will appear from somewhere and teach them to pay their taxes – and by doing so they’ll dully repay the entire debt that has accrued over the time.
After all it’s their responsibility, isn’t it?
It was them, the Greek voters, that have elected the corrupt politicians in the first place. It was them, the Greek voters, that didn’t do anything when they noticed that their Government was corrupt. Even more, some of the ordinary Greeks must have helped the corrupt politicians – nobody can be corrupt by it’s own, somebody must be at the other side of the deal. On top of that dodging taxes was, and still is, a national sport in Greece – well, that’s actually a rational thing to do: ‘who in it’s right mind would willingly pay his taxes, knowing that most of the money would be squandered away’?
Does that mean that the Greeks should be made to reimburse, in integrum, what their creditors demand of them?
OK, lets forget for one moment that this not possible and that if Greece defaults not only the Greek people will have to endure harsh conditions for a while but also the creditors will loose a considerable amount of what they are due.
Let’s presume that a completely different Tsipras somehow convinces the Greek people to accept pension cuts, tax hikes and, lo and behold, to pay their taxes in an honest way.

Then we’ll still have a fine example of ‘moral hazard’.
We have just established that in a democracy the voters have the final responsibility for the actions of those elected/hired into meaningful positions.
And what did the elected officials, from Brussels as well as those from the rest of the EU capitals? Turned a blind eye when Greek politicians ‘cooked the books’ before Greece was admitted into the EU and, after that, into the Euro zone? Then, when the private banks that had unwisely extended credit to the profligate Greeks had troubles recouping their money, the same elected officials said nothing while Jean Claude Trichet, the then president of the ECB, helped transfer the entire burden – mind you, no ‘haircuts’, unto the ‘wider’ shoulders of the European tax-payer? Who said absolutely nothing!
Only now some of the elected politicians, afraid that their constituents might finally protest, have started to notice the irresponsible attitude of Greece, to demand harsh austerity measures and to refuse even the idea of any debt relief.
So how come we can speak of moral hazard when we describe what the Greeks (governments, tax dodgers and general public) did but never mention in this context the lack of financial responsibility displayed by the investment bankers that helped the Greek governments cover up their shenanigans, the European officials who turned a blind eye to what was going on and the wide European public who didn’t care about what was done with their money by those hired to take good care of the European finances?
What is going to happen from now on?
Before trying to gouge that we need to understand what sets Greece apart from the countries that have dragged themselves out of the worst phases of the latest crises – Ireland, Spain and Portugal: Greece is a country deeply divided by rampart corruption.
In most of Europe corruption is a cancer that reaches across the entire social organism, in Greece it divides the population in two almost equal parts: those who work for or do business with the Government and all the rest.
The situation is made worse by the fact that Greece has become independent rather lately, specially compared with the Western Europe. Furthermore, the process was a lengthy one, it started in 1821 and ended right after WWI, only to recommence during WWII. Add to that the long list of authoritarian leaders and you’ll understand the deep mistrust between the people and the Government – which is not at all ‘their’, despite Greece calling itself a democracy. I have a distinct impression that even those who work for or do business with the Government doesn’t really trust it – they know too much about what is going on there. Small wonder, in these conditions, that dodging taxes is a national sport…
What we have now is, on one side, some European leaders who were elected on a conservative/popular ticked and who have already introduced some austerity at home and, on the other side, a leader who has promised to end austerity.
For these people to reach an agreement both sides have to admit failure: the European leaders must accept the past errors and take responsibility for them and Tsipras must convince his constituents that they need to change their attitude. Completely.
Does any of this have any chance to come true?

Au trecut 5 luni de când explozia cursului de schimb leu-franc a scos, încă o dată, la iveală faptul că sistemul bancar a lansat pe piaţă un produs toxic din dorinţa de a acumula profit maxim de pe urma cetăţenilor, în ciuda riscurilor pe care acest produs le presupunea. Deşi riscurile au fost cunoscute de către instituţiile bancare şi BNR, deşi sunt vinovate de dezinformarea în masă a clienţilor, băncile sunt în continuare protejate de asumarea oricărei responsabilităţi, timp în care client, îi suportă toate costurile lăcomiei sistemului bancar: dobânzi majorate, rate dublate de evoluţia agresivă a cursului valutar, comisioane abuzive de risc valutar sau de administrare’, notează organizatorii protestului, într-un comunicat de presă.

Chestia asta seamăna foarte bine cu ‘eu sunt mic, nu știu nimic, tata-n pod belește oaia!’

Organizatorii protestului vor să ne convingă de „inocența” celor care s-au „aruncat” la oferta, aparent irezistibilă, făcută de bănci – cărora li se reproșează „dezinformarea în masă a clienților”.

În realitate problema e ușor mai nuanțată.

În primul rând Isărescu a repetat până la saturație „luați credite în moneda în care aveți veniturile!”
Unii clienți au ales să le ia în franci elvețieni.

Aceștia pot fi împărțiți în două categorii.
Unii știau bine ce fac. Creditele în CHF erau oferite la o dobândă mult mai mică decât cele în Eur. Dacă respectivul client negocia un comision suficient de mic pentru restituirea anticipată și avea grijă să nu plătească comisioane enorme de administrare și de acordare a creditului afacerea ar fi putut fi una benefică pentru ambele părți.
A doua categorie a fost reprezentată mai ales de clienți relativ naivi și/sau lacomi. Voiau să ia un credit mai mare decât le-ar fi permite veniturile – ratele ieșeau prea mari dacă creditul ar fi fost exprimat în Eur iar dobânzile la lei erau enorme – așă că au acceptat ofertele făcute băncile care nu s-au gândit ce se vor face dacă rata de schimb va crește atât de mult în defavoarea clienților încât aceștia nu vor mai putea să plătească.
Și pentru că tot i-au prins la cotitură și au văzut cât de „disperați” erau clienții lor să-și cumpere „casele visurilor lor” atunci i-au împovărat și cu o droaie de comisioane enorme. Din nou, fără să se gândească deloc la „nu omorî găina cu oua de aur”!

Ce nu prea iau în calcul „analiștii” fenomenului – sau cel puțin nu prea vorbesc despre asta – este ce se întâmplă dacă cineva are un credit cu garanție imobiliară și nu mai poate plăti.
În America banca îți ia casa, o vinde, își oprește câți bani are de luat de la tine, îți dă restul – dacă mai rămâne ceva, și „la revedere”. Iar dacă între timp valoarea caselor a scăzut foarte mult și banca nu-și poate acoperi paguba… ghinion. Clientul nu mai are nici o treabă cu chestia asta.
La noi situația e alta. Dacă banca nu își acoperă ce are de luat prin executarea garanției atunci se întoarce înapoi la client și continua să îi ceară restul de bani.
Exact această situație a indus în conducătorii băncilor sentimentul de siguranță că lor nu li se poate întâmpla nimic. O dată semnat contractul clientul nu mai are scăpare. Acesta este și motivul pentru care băncilor le este groază de ideea introducerii conceptului de faliment personal.

Pe de altă parte și solicitările celor care nu mai pot efectiv răsufla de sub povara ratelor sunt cel puțin excesive. Dorința lor ca statul să legifereze conversia forțată la un curs ales de legiuitor – în favoarea clienților, bineînțeles – este contrară celor mai elementare precepte ale pieței libere… Dacă nu te-ai gândit bine înainte de a intra într-un contract n-ai decât să tragi consecințele…

OK, și atunci?

În orice piață funcțională există regula negocierii. Când apare o problemă care pune în pericol continuarea colaborării părțile caută să renegocieze clauzele înțelegerii iar arbitrul pieței, de obicei statul, are grijă ca situația să nu intre în blocaj.
În momentul de față este clar ca o mare parte dintre clienți sunt de-a dreptul disperați și că mare parte dintre bănci încă nu au înțeles gravitatea fenomenului. Sau că nu le pasă.

Și ce ar putea face statul? Mai ales după ce am sugerat ca a legifera conversia forțată este contrar preceptelor pieței libere.

Ei bine, ar putea legifera altceva.
Orice contract de bun simț presupune împărțirea atât a riscurilor cât și a beneficiilor. Dacă acest lucru nu se întâmplă atunci putem bănui partea care se bucură doar de beneficii fără a-și fi asumat și o parte din riscuri că a făcut abuz de puterea sa sau că a avut parte de „informații privilegiate”. Ori exact asta este treaba statului, să se asigure că cei puternici nu abuzează de forța lor în detrimentul oamenilor de pe stradă. Așa se justifică, de altfel, și intervenția justiției în cazul comisioanelor considerate a fi fost abuzive.
Făcand analiza risc/beneficii constatăm că clienții și-au asumat, implicit sau explicit, volatilitatea cursului valutar, a ratelor dobânzilor cât și volatilitatea prețurilor de pe piața imobiliară în timp ce băncile doar pe primele două.
Cu toate că băncile își trimit experții evaluatori înainte de a acorda orice credit cu garanții imobiliare și apoi aplică niște corecții zdravene asupra „valorii de piață” înainte de a accepta un imobil ca garanție pentru un credit ele nu își asumă nici o responsabilitate în această privință. Clientul n-are decât să plătească cât s-a angajat cu toate că obiectul în sine n-ar mai merita să fie scos de sub gaj pe când banca nu-și asumă în nici un fel posibilitatea ca obiectul acceptat ca garanție să fi suferit o depreciere în timp.

Ei bine exact aici ar putea interveni legiuitorul.
Ideea falimentului personal e bună dar s-ar putea să fie prea devreme pentru România zilelor noastre.
În schimb ar putea fi introdusă regula că băncile nu mai pot urmări debitorii pentru sumele rămase restante după executarea și valorificarea garanțiilor imobiliare.

Să vezi atunci flexibilitate din partea băncilor în privința renegocierii condițiilor creditului dar și grija lor atunci când vine vorba despre valorificarea cât mai buna a imobilelor preluate de la datornici.

Government officials throwing self serving smoke screens.
Everything here is true except for the last sentence.
As long as CEO’s, the rich and the corporations don’t understand this simple economic principle no amount of legislation will achieve much, except for further de-balancing the economy.
In fact minimum wage encourages employers to pay as low as possible instead of letting them pay so low as to see their working force disappearing in the dark.
The fact is that by setting this minimum wage the government suggests to the employers that: ‘it’s OK for you to try to pay as low as possible but you cannot over do it and we’ll tell you where to stop.’ That’s why the employers no longer compete among themselves to get the best available workforce – which, if well managed, produces excellent long term results. The competition on the labor market has been ‘degraded’ to ‘who is able to have the lowest labor costs’ only this policy sometimes generates good enough results on the short term but never fails to lead to disastrous results on longer term. The work force is demoralized, no longer cares to improve its qualifications and aggregate consumption goes down for  lack of solvable demand.

This concentration on costs instead on overall efficiency is malignant. Offering employees  a living wage and decent working conditions vastly improves efficiency and, ultimately, bottom line results. Henry Ford had understood that more than 100 years ago. How come we have already forgotten?

The Story of Henry Ford’s $5 a Day Wages: It’s Not What You Think:

http://www.forbes.com/sites/timworstall/2012/03/04/the-story-of-henry-fords-5-a-day-wages-its-not-what-you-think/

I started to comment on “The reason the economy crashed and has been slow to rebound is because of government intervention, not the market mechanism” by Nick Sorrentino and got carried away. So I transformed the comment into a post of my own.

I fully agree with your conclusion “I prefer an open sourced economy to one which is manipulated by programmers writing in a language which is full of bugs and which brings the system down periodically.” but I find your initial assumption to be too vague.
The current situation was indeed heavily influenced by government decisions. And yes, they were completely out of touch with reality – central planning never works.
But here is where our ways depart.
The solution for the current situation is not at all ‘less’ government. Or, god forbid, ‘no government’!.
Free market is the most efficient way of running an economy only it has two limitations. It is populated by people and the total amount of trade-able goods is limited. Hence the market is never really free. We do need a free market only the natural evolution of any limited system is to gradually loose it’s freedom. So it is us who have to guard the freedom of the market.
And this is what ‘government’ business should really be. Not to tell us what to do – to plan for all of us – but to make sure that nobody becomes so powerful as to be able to dictate to others what to do.

Some of you might wonder “Why should we not accept any monopoly if it has been ‘lifted to power by the free market'”?
I mentioned earlier that there is no such thing as a really free market.
OK, you might disagree with that, after all we both advocate freedom and I’ll use a reason we both agree upon: “central planning doesn’t work“. Ever! So why do you think that a private monopoly would be able to function any better than a public one? Just because it’s private? I assure you that Lenin saw the entire Russia as his back yard and that didn’t stop him from messing that country so big that it’s still reeling under the consequences. King George saw the American colonies as his private possessions and that didn’t make the early Americans any happier.
So what we have to implement is a completely different kind of government, not a weaker one. Blaming ‘the (notion of) government’ instead of specific government decisions only induces the impression that ‘government’ as a whole is useless/despicable and that drives people away from (the concept of) government.

What we really need, that different kind of government I was speaking about, is a government that is closely watched by the people and who jealously defends both the political and economic freedom of the individuals, not either notion of ‘central planning’ or ‘vested interests’ – which, in the end, are uncannily similar.

http://www.againstcronycapitalism.org/2015/01/the-reason-the-economy-crashed-and-has-been-slow-to-rebound-is-because-of-government-intervention-not-the-market-mechanism/

‘We already know that, why are you bothering us?’

“labour-power can appear upon the market as a commodity, only if, and so far as, its possessor, the individual whose labour-power it is, offers it for sale, or sells it, as a commodity”

“labour is not a commodity”

OK, reconcile these two declarations… The first belongs to Marx himself while the second is an integral part of the 1944 Philadelphia Declaration made by the International Labor Organization… And if any of you has any doubts about the ILO thinking not being heavily tainted by Marxism please check this out: “the war against want requires to be carried on with unrelenting vigour within each nation, and by continuous and concerted international effort in which the representatives of workers and employers, enjoying equal status with those of governments, join with them in free discussion and democratic decision with a view to the promotion of the common welfare.” Not exactly the Communist Manifesto itself but too close to it for my comfort.

So is it or is it not?

No it isn’t. Not even Marx ever thought it was.

When Marx speaks of labor power as a commodity he only wants to demonstrate the need for the worker to be free in order for the system to function. For him this is the difference between feudalism – when the peasant (the worker of those times) was heavily dependent on the land owner – and capitalism – where the possesor of the labour power is free to sell ‘his commodity’ to the higher bider – is the existence of the free market where commodities – including ‘labour power’, which is traded as if it was a commodity – are exchanged. And the fact that the market is free also determines individual freedom of both the worker and the capitalist, seller and buyer of the labour power.

But this trading of labour power as if it was a commodity doesn’t transform it into a real commodity.

In fact labour is more a form of communication than anything else.
By labouring the worker transforms something into something else, usually in a way that is not so easily reproduced, not even for low skilled jobs. Had it been possible to automate the working process we would have used exclusively robots or morons. Do you really think a robot or a moron could flip burghers at McDonald’s? Are you sure you’d like that to happen?

Confused?
It’s not that complicated. Marx had an insight – that human history is nothing but the story of the individual man enjoing more and more autonomy – and then blew it. He took it upon himself not only to speed up the history of the mankind but also to lead us (even against our will) where he thought that we should finally arrive (communism). Rather arrogant, don’t you thing?
In time that arrogance seems to have mellowed somewhat (or became more conceited?) but it is still very much alive: ‘the war against want requires to be carried…to the promotion of the common welfare’….

What is that ‘the common welfare’? Can something like that ever be determined? Even in a ‘democratic’ way?!?

Had Marx refrained himself at studying the effects of increased individual autonomy on the workings of the human society he would have been considered the undisputed thinker of the second millennium and we’d have been sparred from witnessing (or experiencing) the horrors of communism…  I know, I know, counter-factual history is not acceptable… just saying…

Scriind comentariul precedent despre evolutia de la stadiul de tara ‘bananiera’, care se bazeaza in principal pe exploatarea resurselor naturale,  la cel de economie industrializata care isi valorifica cat mai bine potentialul uman, mi-am adus aminte de ‘nu ne vindem tara’.

Lasa ca in loc sa o vindem am lasat sa fie pradata…din pacate semnificatia ‘strigaturii’ e chiar mai adanca!
Poate ca initiatorii ei, ‘raspandaci’ care aveau ca misiune crearea unui etos care sa permita ramanerea la putere a ‘esalonului 2’, erau ‘sinceri’ in sensul ca le era intr-adevar frica ca daca ar fi venit niste investitori seriosi ar fi cerut instaurarea unei ordini firesti…cam asa cum cere acum Dacia sa fie construita autostrada Pitesti-Sibiu…

Problema este insa ca zicala a prins la public ori asta inseamna ca publicul respectiv nu trecuse inca de etapa de dezvoltare a organismului social in care identitatea proprietarului este mai importanta decat efectul folosirii proprietatii. Bineinteles ca acestea doua sunt strans legate numai ca orice exagerare, in oricare dintre directii, duce la izbirea oistei de gard sau chiar mai rau.

Pai daca societatea romaneasca, populatie + guvernanti, ar fi reusit sa gaseasca o cale de a conduce eficient economia pe vremea cand toate erau ‘proprietatea intregului popor’ s-ar mai fi prabusit vreodata comunismul? Si atunci de ce am insistat sa lasam friele in mana acelorasi oameni care le tinusera si pana atunci? De ce ne-a fost frica de venirea unora care sa ne invete un nou model?

Bine, asta nu inseamna adoptarea necritica de comportamente doar pentru ca acestea provin ‘din afara’, acest lucru ar fi cel putin la fel de daunator ca refuzul aprioric de a intra macar in contact cu ele, din simpla frica de contaminare. Intotdeauna oamenii sunt cei chemati sa fie masura tuturor lucrurilor precum si motorul evolutiilor sociale.

Atunci nu ne-am ridicat la inaltimea provocarilor. Acum insa se pare ca avem parte de un nou start.

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