Free Markets, Free People

Davos


Davos elite: Capitalism is the problem

That is certainly the premise at work in Davos as “political and economic elite”, who’ve served us so well to this point, meet to plot discuss modifications to capitalism.

Economic and political elites meeting this week at the Swiss resort of Davos will be asked to urgently find ways to reform a capitalist system that has been described as "outdated and crumbling."

"We have a general morality gap, we are over-leveraged, we have neglected to invest in the future, we have undermined social coherence, and we are in danger of completely losing the confidence of future generations," said Klaus Schwab, host and founder of the annual World Economic Forum.

"Solving problems in the context of outdated and crumbling models will only dig us deeper into the hole.

"We are in an era of profound change that urgently requires new ways of thinking instead of more business-as-usual," the 73-year-old said, adding that "capitalism in its current form, has no place in the world around us."

Show me “capitalism” at work somewhere, please?  Social welfare, in its current form, driven by high taxation and deficit government spending, is what “has no place in the world around us”.

The dirty little secret these “elite” won’t admit was that their premise that capitalism could forever fund their social welfare states is absolutely wrong and failing.  They’ve killed the goose that laid the golden capitalistic eggs.  It isn’t “capitalism” that is failing.  It is their social welfare system that is “outdated and crumbling”.

These are just the same people who got us into this mess trying to shift the blame from unsustainable policies founded in socialism to something which has kept their socialist utopias functioning for more years than they would have had it not been there.

And we should also be precise about what it is that has kept them stumbling along this long … a mixed economy, not capitalism.  A mixed economy which has featured less and less capitalism as the years have gone by.  Capitalism in its defined form exists in few, if any places in this world.

Margret Thatcher’s warning that the only thing wrong with socialism is you eventually run out of other people’s money has come true … again.  The agony was only prolonged because some free market mechanisms were left to at least partially function over all these decades that the Europeans (and now Americans) were constructing their little social welfare houses of cards.  The elite simply refuse to see that reality and now seek another target to which they can shift the blame.  The ultimate in “can kicking”. 

The eurozone’s failure to get a grip on its debt crisis and the spectre this is casting over the global economy will dominate discussions.

"The main issue would be the preoccupation with the global economy. There will be relatively less conversation about social responsibility and environment issues — those tend to come to the fore when the economy is doing well," John Quelch, dean of the China European International Business School, told AFP.

"The main conversation will be about a deficit of leadership in Europe as a prime problem," he added.

The deficit in leadership isn’t just found in Europe.  It is found worldwide.   And it isn’t a deficit of leadership from capitalists, but instead a deficit of leadership within the ranks of the political elite.  They continue to do or try to do the same things that have gotten us into this mess and expect different outcome.   We all know how Einstein defined such activity.

It is interesting to note, too, that the Euro elite are now ready to pitch “social responsibility (however they define that – does that mean the welfare state?) and environmental issues” over the side.

But, in fact, it is more than just that which they should be considering abandoning.  The problems they face do not find their root in a capitalist system or within capitalism itself.   In fact, capitalism could be their savior, if they only gave it an opportunity.

However, they’d also have to abandon most of the social welfare state to do so.

No, their primary problem is to be found with the institution that has attempted to control their economies and which constantly gets in the way of any capitalistic successes in the name of social justice. 

Government.   And more to the point, government spending driven by high taxes and borrowing.  It requires a deficit in intelligence not to understand that.

In essence Davos will be the elite – the social welfare elite – trying their hardest to shift blame on a system they’ve done the most to try to kill over the decades (even while using it to extend the life of their social welfare states).

Controlling government, taxation that provides disincentives to business, labor rules that prohibit firing bad employees, mandated early retirement and generous welfare benefits are not the problem of capitalism.

They are the problem of large, intrusive and socialist leaning governments.

But, apparently, that won’t be a part of the discussion in Davos.

~McQ

Twitter: @McQandO


Welcome to "Backwardland" – political elite get it wrong … again

You’ve heard of "Flatland"? Well in Davos, we have "Backwardland", where elite politicians are talking about what ails the world. And you’re probably not going to be too surprised by this, but they’ve got it entirely backward.

Poverty and unemployment reared their heads at the World Economic Forum on Thursday, with speakers urging the elite audience to bridge a growing gap between booming multinationals and the jobless poor.

Greek Prime Minister George Papandreou, who also chairs the Socialist International group of center-left parties, said the global crisis had led to an "unsustainable" race to the bottom in labor standards and social protection in developed nations.

"Politically, I believe we are at a turning point where… there are signs in Europe of more nationalism, more racism, anti-Muslim, anti-Semitism, fundamentalisms of all types," he said. "We need to look to a different model."

Maurice Levy, chairman and chief executive of French advertising giant Publicis, said there was "a huge suspicion about CEOs, bankers, corporations."

"People do not understand that these large corporations are doing extremely well, while their lives have not improved and without the support of the people, there is no way we will be able to grow," he told a panel discussion.

"We have been led by greed. We have been led by only the bottom line, the profit and we have sacrificed the workers in order to please the stockholders."

If you’ve wondered why Greece is in the shape it’s in and France isn’t far behind, read this nonsense.  Greece didn’t get in the shape it is in because of corporations.  It is there because the government overspent on generous benefits such as early retirement and the like.   The financial situation of nations isn’t the result of corporate greed or income inequality – it’s because they’ve spent more than they take in, entitlements are out of control, and they’ve provided decades of disincentives to work.

And the nonsense wasn’t confined to Europeans:

Former U.S. President Bill Clinton said tackling income inequalities was essential to future growth and needed to be part of the core of doing business in the 21st century.

The core of doing business in the 21st century is no different than it was in the 17th century.  Good product, affordable price, satisfied customers.  What Clinton is really saying is that the left intends to use the excuse of “income inequalities” to clamp down on corporations, extort more in taxes (we’ve already discussed who really pays those taxes and how regressive that is, not to mention the fact that at some point, when those taxes can’t be passed along, the corporation goes location shopping or dumps jobs) and generally kill the goose that laid the golden egg.

U.S. economist Nouriel Roubini predicted a backlash against budget cuts in Europe if there was no rapid return to economic growth.

Well yes, but again, with the plan that seems to be afoot, that’s almost assured, isn’t it?  What this is, again, is a different approach to collectivizing corporate earnings.  Terms like “income inequality” and “social justice” creep into the conversation.  And “share” – you remember “share” as in “share your toys, little Johnny”.  Well now it is time, say the elites, to “share” what hasn’t been earned by those receiving the “share”.

With unrest in Tunisia and Egypt a major talking point in Davos, Mthuli Ncube, the Tunis-based Chief Economist for the African Development Bank, predicted more trouble ahead if the fruits of growth were not shared more evenly:

"If you are not even creating jobs, not even sharing the economic growth that is coming through, then there will be push-back," he said. "It’s one thing to get good growth going. It is another to share that."

It is indeed – but here’s something that has worked throughout economic history: get good growth going, create jobs with profits and suddenly it is being “shared”.  Tax the crap out of anyone or anything that looks like it is making money and you won’t get growth, you won’t create jobs because the profits won’t be there to support either.

Of course what Mthuli Ncube is talking about is “sharing” through government – they’ll take it and dole it out.  Oh, and by the way, the unrest in Tunisia wasn’t driven by a backlash to “corporate greed”, it had to do with government greed and oppression.

This is the not so new approach by the left to use the financial crisis as an opportunity to loot corporations and support the welfare states that are in big trouble.  Demonization is right around the corner.  The real cause of the unrest among those the leftist elite like to use as their pawns has little if anything to do with corporations and a lot to do with the governments most of these boobs represent.

~McQ