I have read in this (publication) a letter berating the general concern for our high national unemployment rate and at the same time suggests that corporations have no problem with the high unemployment rate and actually favor it for the cheap labor pool it produces.
The writer obviously has no concept as to the workings of capitalism. Actually, it is quite simple, and it works — to the benefit of everyone. Best of all, it is self-sustaining if not crippled by over-taxation and over-regulation which increases cost to the customer and prices the business out of the market.
Corporations are in business to make money. Contrary to the belief of some, this is beneficial to all of us. To make money, they must have customers. As they acquire more customers, they must hire more and more workers to supply the demand.
As workers are drawn from the labor pool, the corporations must pay higher wages because workers with the skills they need are continuing to deplete and are harder to find. This is a plus for everyone — the workers, because they are employed making more money, and the companies, because they are selling more products or services.
Whether we like to admit it or not, business is the glue that holds societies together. Without business, there would be no government because there would be no source of revenue. If business doesn’t thrive, no one thrives.
Gene Flatt
Mesa
sockratties posted at 1:18 pm on Fri, Sep 14, 2012.
Gene…
Your description of capitalism is essentially correct and is based on the production of goods or performance of services. If those were the only components involved there would be enough gross income to also pay for community services and infrastructure via taxation. Unfortunately the financial industry has become an entity unto its own.
In the system you describe banks act kind of like a reservoir, gaining capital from earnings and providing capital for growth. Banks finance new business when demand for goods is greater than supply and finance purchasing through mortgages and loans to sustain demand. Their profit is from interest and fees and is reinvested in secured loans and services.
Huge institutions that produce nothing and only “underwrite,” guarantee and speculate without injecting real cash into the commercial cycle have drained the system. Real money no longer exists. A thousand dollars can represent collateral for hundreds of thousands of dollars in loans without injecting any real value into the system. This is essentially the same as “printing” money by creating a loan and effects inflation in the same way.
You go to the bank and take out a $1000 loan on a car. The bank will use your car as 10% collateral to borrow $10,000 dollars which they loan to a start-up business allegedly worth $100,000. That $100,000 will become the collateral for investing in a $1,000,000 strip mall. Since the only value here is your car that is now only worth $500 depreciated, all the value is paper speculation with nothing being produced except debt. A million dollars has been taken out of the economy and only the value of a depreciating car has been put in. This represents a shift in wealth from main street and the small bank to wall street and the investment speculator. Those who got the $1,000,000 loan can take the money and run, just as did the developers who built all the houses that are now in foreclosure. Those who signed the notes along the way will have to pay the bills unless the government bails them out. The government, aka Freddie Mac and Fannie Mae, is you and me.
Speculators should not be in the banking business and banks should not be in the speculating business. This part of the equation needs to be removed from the system. If institutions want to speculate they need to do so with money provided by speculators, not government guaranteed loans and savings.
Arizona Willie posted at 1:25 pm on Fri, Sep 14, 2012.
Mr. Flatt ... keep in mind that Capitalism is merely an economic system --- not a religion.
There is NOTHING sacred about it.
Capitalism if a good system AS LONG AS IT IS TIGHTLY REGULATED.
Unregulated capitalism is terrible.
Even WITH some regulations ( which they constantly complain about ) we have often found companies guilty of cheating and producing dangerous products.
The meat packing industry is notorious for it's violations of labor laws and safety conditions, and often, for putting out contaminated products and shipping them knowing they were contaminated.
The clothing industry often gets caught using sweat shops with illegal workers.
The construction industry has several deaths every year because of contractors who don't want to spend the time and money to properly shore up ditches and they collapse on the workers and bury them.
Just about any industry / company has been caught cutting corners at some point.
And that is WITH regulations.
When you take the regulations away you get situations like the meltdown of the financial industry because the Wall St. people were stealing everything that wasn't nailed down and that they couldn't pry loose.
ALL economic systems have their problems.
Capitalism IS one of the better systems == but it isn't perfect and it DOES require close regulation and monitoring.
Cerulean posted at 2:26 pm on Fri, Sep 14, 2012.
Candidate Romney tells us that corporations are people. They are people that should not be taxed, should not be regulated or governed, or financed by government if they are a clean energy corporation (however nuclear is good to finance).
Gene said, “As workers are drawn from the labor pool, the corporations must pay higher wages because workers with the skills they need are continuing to deplete and are harder to find.”
Gene, what happens when there are more skilled workers than there are positions to fill? I think that is the scenario many ‘real’ people find themselves today and also is the point of Brook’s letter. Which means, don't expect anything to change soon because if corporations do not have to pay a higher wage, why would they?
Cerulean posted at 5:02 pm on Fri, Sep 14, 2012.
Sockratties, You have provided a good description of how financial institutions generate collateral to loan money. To add, banks then put the car loan that was in default, into a portfolio and sold it with other junky assets to clients who thought they could earn a return. The bank however knew that portfolio was full of junk and they ‘hedged’ a bet that their clients portfolio would fail. By hedging, the bank earned more phony money on their own loss. (I think that’s how it works?)
I know that President Obama signed into law in 2010 many Acts intended to stabilize the financial industry and protect consumers. It is my understanding that the Volcker Rule (similar to Glass Steagall) prohibits an institution from participating in proprietary trading which makes ‘hedging’ on a bank’s own assets more difficult. It remains to be seen if these efforts will suffice.
redsox420 posted at 5:38 pm on Fri, Sep 14, 2012.
sokratties, Apple is a prime example. They actually do NOT produce anything. They are merely a super large design firm. Their software is not tangible. Their computers, Iphonies aren't made by apple, but by a myriad of companies that puts a brand on it.
Yet apple gets massive tax breaks and is now sitting on Hundreds of Billions in cash. Same with most corps who got tax breaks 3 times under Bush. There is NO incentive for anyone of wealth to create a job if given a tax cut.. Thats free cash, and no need to buy an employee with that.
The GOP love tax breaks. Tax breaks have all but destroyed this nation. And will continue to do so, until nothing else is coming in, except pittance for wars.
onerebel posted at 7:58 pm on Fri, Sep 14, 2012.
Wow, if you Liberals really think capitism is THAT bad may I suggest Cuba !
Abstract01 posted at 8:08 pm on Fri, Sep 14, 2012.
I think I figured something out. All you need to do to give AZ the willies is say the word "religion".
What else can I suppose, when the discussion is about unemployment and capitalism, and he injects his favorite "whipping boy"?
tease, tease!
sockratties posted at 6:15 am on Sat, Sep 15, 2012.
reb… a major stumbling block in solving problems such as the debt, unemployment, shift of wealth and financial stimulus is individuals deciding that there is no answer and suggesting that those who would like to find one move to another country. It’s interesting that you suggest Cuba. Perhaps it’s because you have already placed yourself on an island of single minded, myopic self appointed pundits.
As those of us who are able to discuss issues without resorting to labeling and name calling know, the first step to solving a problem is to analyze it. Next, one looks at suggestions and history to find possible alternatives. If those, such as yourself, decide that listing alternatives indicates a position on the political spectrum and throw a little tantrum about it, the discussion is weakened and distracted. Perhaps you should go to Washington where naysayers are high jacking the political system already. You would fit right in.
sockratties posted at 6:46 am on Sat, Sep 15, 2012.
redsox… Many companies who produce products don’t actually do the manufacturing. Look at the food industry, medical equipment, and the auto and housing industries. Much is done by contractors and sub-contractors. It’s where those contractors actually do the work that matters.
In an interview a short time after Steve Jobs passed away the CFO of Apple was asked if Apple would manufacture any of the up-coming products he was describing in the U.S. He said that although he had no problem with doing so, there were no manufacturers in America that had the equipment or workforce required.
That’s a sad comment about investment and education in America. There’s plenty of blame to go around and much of it is on government, financial greed, unions, and lack of political will.
bubba posted at 11:13 am on Tue, Sep 18, 2012.
Unregulated capitalism is like an Indy car with no rev limiter. It'll produce a lot of power for a very short while, but will never go the distance.
bubba posted at 11:27 am on Tue, Sep 18, 2012.
Gene Flatt
Your check from the Koch Brothers is in the mail.[wink]
VofReason posted at 12:29 pm on Tue, Sep 18, 2012.
But bloated Government that creates "jobs" and racks up 16+ trillion in debt is a long term solution?
My Take posted at 1:17 pm on Tue, Sep 18, 2012.
I understand capitalism, to say that there is good capitalism and there is bad capitalism. What this letter says is right on, but the business culture today and what Mitt Romney embraces is they don't want to pay people higher wages. They want cheap labor. There are many companies that do well here with American labor and are making profits. So there is no credible excuse to off shore those very same jobs, except for greed. That is where the problem is.
Mitt Romney lives by this idea that if you work hard you can be successful. Well doesn't that count for employees of companies as well. He embraces business owners, entrepreneurship, but doesn't say much about the employees of those very same businesses.
That man or woman employee who has worked hard all there life..gets to a point in their career where they are making a middle class income. Then along comes people like Romney who say "I don't want to pay them that salary anymore" and ships their job to China or India. .
This contradicts Romney's whole platform about working hard and is why I don't trust him. Off shoring jobs is stabbing employees in the back and stepping on their livlihoods. Until we slow down this business culture we will continue to struggle.
sockratties posted at 6:56 am on Wed, Sep 19, 2012.
What is any president expected to do about the job problem? Did we see "Buy American" in any of the party platforms. Did we see anything about having all government purchases have to be at least 50% American made? No, because people would rather pay lower prices than create American jobs.
A common perception is that jobs and corporations are a direct ratio; that if we buy something from XYZ Corporation, that corporation will hire employees to manufacture a few thousand of them, thus jobs have been created. We also assume that if XYZ manufactures them in China, XYZ must have a Chinese manufacturing plant in which they can manufacture the same items.
A more realistic view is that if Sale-Mart wants a few thousand doo-dads they will buy them from a company that makes doo-dads. Not usually. Sale-Mart will only do that when they already have a relationship with a company such as say, Joe’s Plastics. They will ask Joe’s Plastics for a bid. Joe’s will provide a bid to Sale-Mart. Sale-Mart will also submit the request to brokers who will shop other sources for competing bids. Sale-Mart will use competing bids to “squeeze” Joe’s Plastics for the lowest price. If Joe’s gets the bid it will be because Joe’s is able to pay absolute minimum wage and overhead. Otherwise Joe’s won’t be able to compete with oversea competition.
That’s why you can find so many goods with the same brand name manufactured in many different countries. A typical shirt or pair of pants may be cut in Malaysia, dyed in Singapore, sewn in China and ironed and packaged in Mexico; all under different bids. American companies can’t compete in these labor intensive markets and as mentioned before, there are no manufacturers in the U.S. who have the equipment or workforce available to manufacture and assemble a new Apple I phone! And who can make such an investment if they have to get each job based on submitting the lowest bid?
It’s difficult to blame companies for buying goods and services from overseas contractors when it’s the
American buyer who demands lower prices. American auto manufacturers tried to complete and lost the edge by cutting quality and innovation as part of cost reduction, coupled with the squeeze of union demands. People are quick to say “buy American” but when they actually purchase, the lowest price wins.