Economic Policy: Birds are starving feed horses more oats

Economics is one of several domains of knowledge for which I have an aversion. I did take a course in economics in college many years ago and it dealt a heavy blow to my grade-point average.

This fact may be evident by my question; isn’t there a better economic policy than feeding the birds by giving the horses more oats?

killing the birds?

Economic Policy: Birds are starving feed horses more oats

Economics is one of several domains of knowledge for which I have an aversion. I did take a course in economics in college many years ago and it dealt a heavy blow to my grade-point average.

This fact may be evident by my question; isn’t there a better economic policy than feeding the birds by giving the horses more oats?

Oats opposed to what? Grass? Bird food? Where did this come from?

The birds are indignant over pitiless protocol.

Have you never seen birds feeding on the undigested oats in horse droppings? Analyze the economic policy of capitalism in America. An example might be when we pay CEOs 600 times what we pay the average worker; or when we cut the taxes for the wealthy so that they can build more factories.

Some might call this a trickle-down economy.

Analyze the economic policy of capitalism in America.As I have explained many times, it is almost impossible to analyze the impact of capitalism separately from the impact of corporations. It is important to understand that these are two separate things. A capitalist economy can exist without corporations and corporations exist in China.

Indeed, most of the criticisms of capitalist economies are actually criticisms of the behavior and culture of corporations, not of capitalism itself.

The corporation is an artificial construct, created by governments, to take the place of the aristocracy of the pre-industrial era. It insulates business leaders from the legal and financial liabilities incurred by their practices, and very closely takes the place of aristocrats in the old days.

"Capital" is simply another word for "surplus," which is a phenomenon of all post-Mesolithic societies, which because of division of labor and economies of scale are able to produce more goods and services than their people require for basic survival. Some of this surplus is dissipated on beer and chocolate, but as efficiency increases much of it is invested in education, art, better housing and clothing, roads, churches, security, and finally tools for producing future goods and services (including the rather complicated tools for making beer and chocolate :)).

"Capitalism" is simply a system of decentralized ownership and management of surplus capital, ideally by the people who produce the surplus. As opposed to socialism, which centralizes much of the control and some of the ownership of surplus capital, and communism, which centralizes most of the control and virtually all of the ownership.

The corporation was created ostensibly as a mechanism for creating huge concentrations of capital for the massive projects of industrialization such as railroads and steel mills. To be fair it is difficult to imagine how traditional partnerships of entrepreneurs, borrowing money from banks with their personal property as collateral, could have launched these projects. The clever legal invention of "stock," which distributes the ownership of the enterprise and the risk of the project over a large number of people, while leaving control and much of the profit in the hands of the entrepreneurs, solved this problem but created many new ones.

To return to the topic, none of this is intrinsic to capitalism as an economic system. In fact Adam Smith envisioned a free market of buyers and sellers of relatively equal power, and would throw up at the concept of a "holding company" with as much money as Liechtenstein, controlling a pyramid of corporations and competing with individual working people.

I have predicted that as the Paradigm Shift to a post-industrial economy continues, the corporation as an artifact will become largely irrelevant. We already see Information Age software houses being founded in Estonia by Americans with nothing more than their life savings as capital, and craftsmen in Uruguay dealing directly with boutiques in Manhattan via the internet without the need for corporate warehouses and middlemen. A few corporations that power this new economy, like Microsoft and FedEx, will survive, but many others have already degenerated from producers to scavengers, buying up the dying hulks of other corporations on their way to their own graveyard.

So I recommend that you look to the future for the plight of the horses and birds, rather than to the obsolete past. And if you can see precisely what the future holds in store and you can tell us how to protect ourselves against the new barriers the governments will throw up against our prosperity once corporations are no longer a threat, please tell us. :)An example might be when we pay CEOs 600 times what we pay the average worker; or when we cut the taxes for the wealthy so that they can build more factories.It has been postulated that the vast majority of people are content and feel that life is fair if the difference between the highest and lowest salary in a company is no more than a factor of ten. These days I would suggest twenty, but that is a small quibble and it comes nowhere near the actual factor of more than one thousand in many companies.

What is especially galling is that many of the men (and yes they are almost always men) who "earn" these huge salaries and even huger bonuses have not only produced nothing of value to the economy, but have actually presided over the demise of their companies. It's hard not to regard them as parasites, sucking the blood out of a dying company as its creditors are left unpaid and its employees lose not only their livelihood but their pensions.

Just remember: This is not the fault of capitalism. It is the fault of government for inventing corporations, which create loopholes in capitalism. Keep your eye on government as the source of evil.

But how is the government to blame for corporations? Don't people make corporations in order to consolidate capital and power to make big things happen as you say?

But how is the government to blame for corporations?The government had to enact a law before corporations could even exist. Remember that a share of stock is basically a share of ownership in the company.

Yet "ownership," as defined in the original version of the law, mandated that any debts incurred by the company were secured by the assets of the owner. If General Motors had existed 500 years ago and the business failed, all the creditors could seize the assets of all of the owners: the stockholders! The employees could collect their past-due wages and their pension funds from the stockholders!

The government actually had to pass a new body of laws allowing people to share ownership of a business without sharing the liability for its debts. The term "limited liability corporation" was coined for this, and some companies still use the abbreviation LLC instead of INC. In America (and perhaps other English-speaking countries) the corporation is defined by law as an "artificial person." This abstraction, this legal fiction, that was invented as a clever trick for people to avoid paying their debts, is actually awarded some of the rights of human beings! A corporation can sue in court, can collect damages, can even sue for defamation of character.

ALL of this is the direct doing of national governments!Don't people make corporations in order to consolidate capital and power to make big things happen as you say?Yes, but just because they want to do that doesn't mean they should have the right to do so, in a way that is detrimental to other people in the economy. This is how corporations--artificial persons--end up with more power than private citizens. As I said, some of them have more power than small countries!

And remember, "people make corporations," yes. But the only reason they can do that is because the government gave them special permission to do something unfair. I repeat: the corporation is nothing more than the modern equivalent of the aristocracy. Lots of power, lots of money, but no accountability, no responsibility. You can't put them in jail, you can't execute them. And they're so rich and powerful that--just like the aristocracy--they support the politicians so the politicians let them get away with whatever they want.

ALL of this is the direct doing of national governments!Yes, but just because they want to do that doesn't mean they should have the right to do so, in a way that is detrimental to other people in the economy. This is how corporations--artificial persons--end up with more power than private citizens. As I said, some of them have more power than small countries!
Yes, corporations are an evil, and have a strong record of being evil, but weren't they an integral part of the industrialization of the world? Haven't they done more good than bad? I think the answer is yes. Could we have all of this without corporations? Would you rather live in a preindustrial era? I wouldn't. Though I'd say it's an interesting and exciting thought that the next era might not need them.

Yes, look at Fidel Castro as he goes all over the world on his vacations and steals all the money for himself and other of his military to live high on the hog as his fellow citizens are told to eat dirt for the country. He doesn't even trust his own doctors in Cuba and goes to France to have their doctors take care of him! He is the horse and his Cuban population are the birds in this example I have given.:(

"Capitalism" is simply a system of decentralized ownership and management of surplus capital, ideally by the people who produce the surplus. As opposed to socialism, which centralizes much of the control and some of the ownership of surplus capital, and communism, which centralizes most of the control and virtually all of the ownership. I don't think centralization is a necessary feature of communism or socialism either.

All forms of economic organization are vulnerable to bad centralization and its effects. As we see.

The difference is in the approach to remedy of excessive centralization - decentralization of a road system to small individual ownership increases the bureaucracy of maintenance and destroys much of the value of the road system, impoverishing the community. Decentralization of the farming system to small individual land ownership does not necessarily have those kinds of effects.

Any economy is a mixture of things that go better centralized - in some fashion - and things (the vast majority) that go better managed in small pieces. Capitalism is perhaps better at keeping this balance than other systems - but not much, and not without clearheaded political effort.

I always took capitalism to mean that you could earn money throught capital rather than labor. That this process was made central and formal in the economy. Banks for instance being allowed to loan money out and invest the same sum - doubling their use of it. The entire stock market system seems to be a way to create middlemen who do not need to work - even if each of via pension funds or whatever ends up being part of this income without labor project. There is something of a pyramid company aspect to all this. I do not know enough about economics to prove this, but that has been my sense. Someone has to be losing out. Or rather some number for each one who gains.

Yes, look at Fidel Castro as he goes all over the world on his vacations and steals all the money for himself and other of his military to live high on the hog as his fellow citizens are told to eat dirt for the country. He doesn't even trust his own doctors in Cuba and goes to France to have their doctors take care of him! He is the horse and his Cuban population are the birds in this example I have given.:(

I'm no fan of what Castro became, but the isolation of Cuba economically by the US was a major source of the poverty there. And the US was quite happy with the dictator that Castro overthrew who was also rich and taking from the poor. The difference: that dictator welcomed US corporations to get in on the exploitation. US treatment of Cuba has been hypocrisy for 50 years. And we all did not get to see what would have happened if a small socialist country with some decent resources was allowed to thrive.

I have little knowledge in economics and have no specific proposal to make things better. However, like all ideologies capitalism has deluged us with a constant refrain that for the good of society we must have very rich people so that they can create jobs for the rest of us. I think that it is important for the rest of us to occasionally peek behind the curtain and then critically examine the policies that sometimes serve a good purpose but in other times the purpose served is more that of self-interest for those making the policy.

Yes, corporations are an evil, and have a strong record of being evil, but weren't they an integral part of the industrialization of the world? Haven't they done more good than bad? I think the answer is yes. Could we have all of this without corporations?Perhaps. Government stepped in and created the corporation because the people who stood to profit from its existence were already powerful and influential. It's difficult to imagine what other kind of economic artifact could have been created--or evolved naturally--that might have accomplished the same thing with a different set of second-order effects. I.e., less evil or simply a different type of evil. :)Would you rather live in a preindustrial era? I wouldn't.That's a loaded question, since it implies that we could not have had industrialization without corporations. This premise has not been proven.Though I'd say it's an interesting and exciting thought that the next era might not need them.Well then grab a beer because if you're substantially younger than me you might get to see it happen.I always took capitalism to mean that you could earn money through capital rather than labor.Yes, to the extent that capital is owned and controlled by the people who create it. In a collectivist economy ownership and control are more concentrated in the hands of the ruling class or their bureaucratic servants. The problem with the system of corporate capitalism that we have in the West is that although ownership (and the right to at least a reasonable share of its earnings) rests to a large extent with the people who create capital, control is concentrated among a new class of elite: the corporate executives. The underlying theory of course is that these people with their greater experience, their broader view of the economy and their own industry, and their full-time specialization, are qualified to manage capital more wisely, productively and equitably than a democratic hodgepodge of individual producers of surplus capital. This theory has always seemed incontrovertibly true to those elite because they watched their projects succeed and drive a tremendous expansion of the industrial economy, with a concomitant tenfold (I'm not going to look this figure up so it's a guesstimate) increase in the per capita GDP in nations that were already pretty prosperous by historical standards.

But the theory has been just as roundly criticized by a large portion of the workforce who saw the railroads and steel mills and skyscrapers come into being but didn't find their own family's share of that huge GDP to be anywhere close to a straightforward arithmetic distribution.

And this is directly due to the artifact of the corporation, which was created specifically to facilitate the concentration of capital. The purpose of this concentration was to concentrate the control of the capital in the hands of the wise business leaders and fund the projects in question, but the second-order effect (perhaps the first-order effect from the standpoint of its beneficiaries) was to also concentrate the ownership of the capital in their hands.

As I have already noted, this concentration of control could have theoretically been accomplished with the traditional techniques of partnership and moneylending, while avoiding the concentration of ownership. Many problems had to be overcome to make this practical. But there might have been a way to overcome them without throwing our hands up in the air and saying oh hell let's just let them incorporate.That this process was made central and formal in the economy. Banks for instance being allowed to loan money out and invest the same sum - doubling their use of it.The multiplier effect is a key mechanism that makes a monetary economy efficient and responsive to trends. In and of itself it is morality-neutral. Sure it enriches the bankers but that's a minor wrinkle in the economy compared to the enrichment of corporate leaders.The entire stock market system seems to be a way to create middlemen who do not need to work - even if each of via pension funds or whatever ends up being part of this income without labor project.Exactly, and that brings us full circle back to the very artifact of the corporation. The stock market is a manifestation of the ability to incorporate, because by definition corporations sell stock with limited liability as their way of acquiring control over capital, rather than the traditional unlimited-liability way of forming a partnership and borrowing money using the personal assets of all partners as collateral. There is something of a pyramid company aspect to all this. I do not know enough about economics to prove this, but that has been my sense.Even a single corporation has a bit of the pyramid about it. Its managers can lose all the money of every stockholder without having to repay it out of their own kids' college funds or the equity in their own mansions. The corporation can even fail while owing money to suppliers and while owing both salaries and pensions to employees, and still these people are barred from taking away their yachts and Swiss villas and selling them to split the proceeds. This in effect concentrates the ownership of wealth in the hands of the managers because once they get their hands on it it's very difficult to wrest it away from them. It's a one-way voyage for the money: Upward toward the apex of the pyramid.

But the pyramid can become far worse than that from the standpoint of this discussion, because of the artifact that would not only make Adam Smith turn over in his grave but rise up out of it and barf: the holding company.

One corporation can buy a controlling interest in another corporation. This does not always have to be 51%, since many stockholders don't bother voting and others pledge their loyalty to certain key directors. With as little as 10% ownership of the actual stock, the managers of the holding company can have 100% control over the subordinate corporation. This "pyramid" can have more than one level, as the one subordinate corporation itself holds the stock of yet another. As a result a kid with little real-life experience and the ink barely dried on his MBA (and don't get me started on the real-life value of an MBA) can control the fate of a dozen corporations including their entire workforce, without even knowing what goods or services they produce!

As I've said before, in today's economy, with the sun setting on the Industrial Era, many corporations are in effect scavengers rather than producers. They don't make any goods or provide any services. They just buy up the dying hulks of other corporations and sell off their assets at a profit, putting their employees out of work.Someone has to be losing out. Or rather some number for each one who gains.Well despite the grim picture I painted in my previous sentence, what you say is not necessarily true. The economy of a civilized society creates a surplus by definition, and a well-run capitalist economy creates a huge surplus. It is not a zero-sum game. It is quite possible for everybody to win, or at least almost everybody since no system is completely devoid of anomalies. My thesis is that an economy based on corporate capitalism distorts the distribution of profits so that there are not as many winners as the arithmetic says there should be. Again, it must be stressed that this is the fault of the corporation and the inept, easily corruptible, short-sighted governments that create it. Not of capitalism itself.I'm no fan of what Castro became. . . . And we all did not get to see what would have happened if a small socialist country with some decent resources was allowed to thrive.Worse yet, we did not even get to see a BIG socialist country with some decent resources thrive. IIRC the USSR was putting more than half of its GDP into the military. Having started out near bankruptcy, inheriting the pitiful surplus wealth of an economy that was not only feudal but corrupt and perhaps even clinically insane, it could not afford to do this. Its leaders are obviously to blame because their aggressive evangelism of international communism, at a time when they should have been concentrating on taking care of business at home, rightfully antagonized the West. Still, many of us think the USA overreacted to a somewhat empty threat. Both sides felt compelled to invest heavily in the military. Of course we could afford it and in fact it boosted our economy artificially for decades. The Soviets could not afford it and their people lived in what most of us would call squalor as they plundered the surplus wealth of their satellite countries to cover the negative surplus of their own strangled economy.

However one feels about Soviet-style communism, a case can be made for the premise that it was never really given an honest chance to succeed.