‘Something seems to have broken with capitalism.’
‘Something seems to have broken with Albert Edwards.’
You can tell when we’re in an economic crisis. The influencers begin to tell us how ‘capitalism’ has failed…yes, the ‘system’ that made us so wealthy has now reached the end of the line…no more juice in that lemon, they say. Now, it’s time for the experts to take over. Here’s Futurism: ‘Economist Warns That Capitalism May Be Ending’:
‘The world is changing, and it’s getting more expensive — while wages, as most working people have witnessed in their own lives, have failed to keep up with the rising cost of pretty much everything. According to Albert Edwards, a global strategist at the 159-year-old bank Société Générale, this phenomenon is the result of what he calls “greedflation.”
‘“The latest release of US whole economy profits data delivered another shock to my weakening confidence that the capitalist system is working as it should,” the note continues. “Companies have used first the pandemic and then the war in Ukraine to ‘profiteer.’”
‘In other words, in Edwards’ eyes, the fact that Fortune 500 companies are raking in normal — if not record-breaking — profits in the wake of pandemic and war-induced geopolitical and economic stress, while price-gouging consumers as working-class wages stay the same, isn’t exactly a sustainable way for people to live…’
No! Unbelievable! Those greedy SOBs: they raise prices…when they can get away with it!
Lower salaries everyday
Well, thank God other segments of the population are more public spirited…more self-sacrificing…and more civic minded. You don’t see them trying to take advantage of a bad situation, do you?
Take the long-suffering consumer, for example. He realises that producers are always trapped between resource costs, labour, taxes, and interest rates. So, the consumer always wants to pay full price so that producers’ profit margins can be maintained, right? No discount shopping for him.
And what about laborers? Employees? You don’t see them asking for wage increases…just because they know there’s a shortage of skilled labour. Un un. They happily stick with their low salaries so employers can keep prices as low as possible for consumers.
But what’s this? Rutgers already charges out-of-state students US$33,963 per year. From Fortune: ‘Around 9,000 Rutgers employees are going on strike for the first time in 275 years’:
‘Classes were still being held at Rutgers as picket lines were set up at the school’s campuses in New Brunswick/Piscataway, Newark and Camden. Union officials had decided Sunday night to go on strike, citing a stalemate in contract talks that have been ongoing since July. Faculty members had voted overwhelmingly in favor of authorizing a strike last month.’
Guess tuition is going up.
Good for the goose
But if you’re looking for examples of civic virtue, you can’t ignore the public servants who never ask for anything save a little ‘thank you’, from time to time. Would they consider increases to their wages or the pensions…knowing that governments are already a little short of cash? Of course not.
Greed is uniquely concentrated in the corporate sector. And if businesses weren’t so greedy, prices would be much lower, right?
We have that on the authority of at least two of the peoples’ most selfless representatives: Bernie Sanders (net worth, US$3 million) and Elizabeth Warren (net worth US$67 million). Also, Jon Stewart (net worth, US$120 million) should be mentioned for his star performance in grilling ex-Treasury Secretary Larry Summers. All of them believe their own salaries and profits are merely reflections of their worth…they deserve the money. Amounts earned by corporate management and stockholders, on the other hand, are just evidence of ‘obscene greed’.
What troubles us is this:
Stewart, Sanders, and Warren are paid to act like fools, Albert Edwards is not. He’s a serious financial analyst. What’s gone wrong with him?
He must know that ‘capitalism’ is no ‘system’. It’s merely what happens when greedy people — consumers, workers and owners — work out whatever arrangements they can. It is infinitely adaptable. Workers and owners could agree to split whatever gains they get, for example, as we do with our sharecroppers. We provide the land, the tractors, the fuel, the fertiliser and the marketing…they provide the labour. We share the gains equally. Is that capitalism? Yes, of course it is.
Or a capitalist enterprise could perfectly well agree to pass part of its margins to shoppers — as some co-ops and consumer clubs do. That’s capitalism too. So, too, could a group of people get together and agree to live in tepees, to share wives and incomes, to make glass beads and sell them to tourists. That’s capitalism.
Capitalism doesn’t care how much things cost. It doesn’t care who works for whom…what they do…how they do it…or how they share the profits and losses. It only cares that, whatever they do, they do so voluntarily. That is really the only difference. Capitalism is win-win. Other ‘systems’ are win-lose, where one group uses its police power…or robbery…or treachery…to get what it wants.
And what about ‘employee-owned’ businesses? They’re capitalist too. And we presume that since employees are not greedy, they must offer the best products at the lowest possible margins. No price gouging from them! So, it’s just a matter of time until they have competed away exorbitant corporate profits…charmed customers with their lower prices…and become the dominant form of business in the US, right?
Wrong. All small, family businesses are ‘employee owned’. Many large businesses are employee-owned too. And they’re just as greedy as everyone else. Because we’re all subject to the same emotions and compulsions — greed, power, ambition, fame, vanity — workers, investors, managers, politicians, opinion mongers…everyone.
And ‘capitalism’ is just a word used to describe what happens when people — with all the faults and foibles — are left alone to get the job done. They work out all sorts of different arrangements. Some work better than others. But the alternatives — statism, central planning, various forms of State-sponsored collectivism — all require the use of force. They give the ‘experts’ more power and money.
But ‘The People’ are always poorer. On Monday we’ll look at what really went wrong with ‘capitalism’.
For The Daily Reckoning Australia