MORPHEAL'S COMMENTARY - January 28, 2009 (China's Economy, and Obama's Stimulus)
Robert Morpheal, Morphealism, Bob Ezergailis
The BBC reports that Premier Wen of the Peoples Republic of China said
that among the reasons behind the current global downturn were
"inappropriate macro economic policies in some economies,
characterized by [a] low savings rate and high consumption". He also
pointed to a "failure of financial supervision and regulation to keep
up with innovation which allowed financial derivatives to spread".
This assumes that Premier Wen remains convinced in following a failed
economic system and its principles into the same failures. The very
idea of “derivatives” and other similar paper instruments is the fact
that they have no real value, other than on paper. Real value remains
the material goods and real services that actually meet real human
needs and some reasonable wants.
Real value decreases as the need and want balance shifts towards more
want than need. Nevertheless we cannot expect human beings to live
like brute animals, without culture and the means to its enjoyment and
production. Humans have more needs than animals.
It is at best difficult to determine how much of the paper value, in
capitalist economics, actually relates to the real material goods and
services worth of the real economy. The value of that paper in terms
of currency equivalent at any moment in time, still poses much the
same question, until that currency is actually spent on those material
goods and services, being converted into actual material value. The
value of paper to buy flour is only value in flour when you have
flour. Then you can make bread. If there is no flour available when
you go to get it, the paper has no value in terms of flour. It might
also buy more or less flour based on the complexity of fluctuating
factors affecting availability and pricing of flour, largely in terms
of profits. In some places in the world, it is uncertain when you get
to market whether you will in fact have enough paper in hand to obtain
the flour you need. This is an increasing problem. In part that is due
to the lack of enough paper value having been gained by others in
order to grow grain effectively and to mill flour efficiently enough.
That or the more likely lack of government as to the existing paper
value not being available for the needs related to that purpose.
Irrigation has real value. The flour mill has real value. The
equipment for planting and harvest has real value. Paper has no value
in that process of production, if the labor and machinery for
production are not actually obtained. This often becoming the case,
because real value has not been pursued. Instead paper value has been
used to gain more paper value, and for purposes unrelated to the real
value of the needs of people.
It is not the question of whether there is profit in the production of
flour for bread that is important. All that is important is whether
there is enough flour being produced to meet the needs of people for
flour. That is real value. Paper value should have no effect on
meeting that need for the sake of all of the people who need flour.
Otherwise it is only a paper value, and untranslated into real value.
This is largely and increasingly the case nowadays in most of the
world. It does not matter whether it costs more or less paper value to
make a pound of flour if a pound of flour is needed. The paper value
cost is irrelevant. It also does not matter whether one pound in one
province costs ten times what it costs to make, in paper value, in
another province. The real value of that flour must remain the same to
each who needs it. In no case must the paper value of that flour stand
in opposition to the equal capabilities of a person in either
province, to obtain that same pound of flour’s real value, to make
bread. This logic then enables the production of sufficient flour for
all in the society. Paper value is disregarded. Only real value is
considered. Cost of production and profit are discarded in favor of
real value meeting real need.
What we must begin to realize is that the extent of the need that is
being met, inclusive of the importance of that need, defines true
value. As to “extent” we are referring to how well, how effectively,
the need is being met. It is a qualitative and a quantitative
evaluation. This must become fundamental to any good and true system
of economics. It is not the fact today in any existing system.
The fact is that a human being can die holding onto an infinite stack
of paper, which has no worth whatsoever in terms of human survival and
quality of life. In many nations today paper currency is approaching
that same fate. The game in which that paper is played, and the rules
of that game, ultimately have little, if anything, in common with
those real human needs actually being met, in the present and future
long term. Much less so in the long term. The system is biased to the
“here and now” of immediate paper profits. If you get more paper in
the immediate you win. If you get less paper you lose. That win and
lose is very separate from the needs and meeting of needs equation.
That fact is too often nowadays forgotten or ignored. It is all about
winners and losers of paper. It is rarely, if ever, about those real
needs on a global scale. Much less about long term needs.
When we begin to understand that distinction, and apply that rule of
real needs being met, to determination of value, some of the paper
can attain a true revaluation, and can represent real worth. Much of
it would lose its worth. Not until that revaluation actually occurs is
any of that paper truly trustworthy in terms of the real purpose of an
economy which always remains the meeting of real human needs, and some
reasonable wants when those needs are met. Paper values on the other
hand can lead to real needs being ignored, and the wants of those with
more paper value being catered to, in order to win the paper game.
More often than not that paper is traded to get more means to produce
more paper creating more paper winners, but in fact the obsessive
nature of the game takes over, and the common sense of actually
gaining sufficient material goods and services to meet the real human
needs of those with little or no paper value no longer seems to be
common sense. It is no longer profitable in paper terms. The whole
economy soon begins to revolve around the means to acquiring more
paper while continuing to fail to be able to do what is necessary for
the meeting of those real human needs, short and long term. At least
it does not meet them adequately, if at all. It might lead to offering
some charitable subsistence, but not to a truly good way of life and a
stable society. Paper value becomes the only value that gets any real
consideration.
We can see some countries shipping massive amounts of what to them are
essentially worthless material goods, in exchange for paper value, so
they can attain the means to make and ship more of the same, to get
more of that paper value. There is little real value with in the
system, but increasing dependency on external sources for some needs
no longer met locally. The quality of life, short and long term, does
not really improve. In the long term it suffers and becomes worse.
Dependence on paper value increases. When the demand for those goods
and the flow of paper ceases, even if for a relatively short time,
despair and terror result among the people. The paper cost of meeting
needs has greatly risen but means to attaining that paper value has
been taken away. There are no immediate solutions for the people
affected except to suffer deprivation.
The other criticism is the fact that if artificially determined values
are applied in terms of a limited supply of paper currency and other
paper instruments representing currency, to the material goods and
services that are needed to meet real human needs, such that those
needs can no longer be effectively met, the problem that then needs to
be resolved is systemic. The system is causing false values that then
impede effective and necessary economic activity, rather than
supporting that activity.
Strict government controls can be effected to alleviate that problem,
but that is no longer a Capitalist system. That is in fact a form of
communism. The economy is then regulated so that wages for needed work
are limited to the amounts needed to obtain needed goods and services,
where the prices of those goods and services are strictly regulated by
the government. In a capitalist free enterprise system the value of
paper gains control over what can be accomplished. In a communist
system, price and wages government regulated, paper potentially has a
constant value in terms of the goods and services that that paper
currency can buy, and the amount of paper that is distributed into the
system is strictly controlled in terms of meeting real human needs
both in terms of enabling the population to work, and providing for
the economic rewards of that work. Both of the latter factors are
assured, without any fear or doubt, removing the terrorism of
unemployment, wage competition, and rising prices. Stability is as
assured as is real progress. Progress means that everyone in the
society profits from it. It is no longer paper progress, but real
progress. As more needs are better met, more reasonable wants can also
be accommodated, but again regulation is a necessity, or human greed
will ravage society and destroy its very fabric of relationships as it
has increasingly done in the western world. Social fabric has become
strained to the point where the social fabric itself is now in
question. In part this is due to paper value, and the brutal
competition for it, dictating and dominating nearly all types of human
relations. This is again the question of values, and real versus paper
value.
Clearly the fallacy as to savings is now evident. Savings will be
consumed by market prices and market wage competition, as well as
cyclical unemployment. When wages and prices are regulated, assuring
stability, the government is doing the saving. There is no more reason
to rely on the inadequate and invariably failing strategy of leaving
it to the members of the society. Too many pressures are exerted upon
individuals, both legal and illegal pressures, in a free economy, such
that the individual’s ability to save is severely compromised on an
almost routine basis. Savings in effect get stolen by the economic
system’s uncertainties and by its poorly regulated or unregulated
competitive practices. People are not all equally capable of avoiding
the pitfalls, and particularly the actions of clever bankers and
criminals seeking to gain paper value by any means that they can gain
paper value. Most people have too much to do in their lives to even
become expert enough in those pitfalls, in all the complexity, so as
to know them and know how to avoid them. This relates to the
skyrocketing rise of fraud worldwide. The rules of the paper game tend
to be as complicated as is possible. That is part of paper value
winners and losers. It is not easy to win, due to the ever increasing
complexity of the often ever changing rules.
China must surely have learned, by now, that they need to establish
their own economic system, rather than following the mistakes of
others who have clearly failed and are continuing to fail to find ways
to do the necessary, while constantly adding to the list of world
problems. China needs to lead the world to provision of a new system
that actually can tackle large problems effectively. China needs to
build the new wonders of the world. China needs to do what other
nations now say is impossible. It needs to do that before it is too
late, because in a strictly capitalist free enterprise economy none of
that will ever be possible again until the system itself is changed.
That could sacrifice many generations of people to an immense
suffering, largely unimaginable in its implications to most living
today.
It is impossible for other nations because of their false beliefs in
utterly failed economic principles of free enterprise capitalism being
capable of doing what is right and good, without strict and constant
government scrutiny in every and all areas of its activities.
Government micro management of corporations can lead to what is
necessary, but that is no longer free market capitalism. What China
must realize is that there is no other way to a progressive future
than to go a different road to get there.
The world’s hopes are with The People’s Republic of China. And in
that light....
OBAMA AND THE 825BN ECONOMIC PACKAGE:
The plan does offer some help, but appears to fail to recognize that
the help is relatively short term. The money spent at the bottom will
continue to float to the top of the pond and get skimmed off by those
who need it the least. Unless you tax it back from the top, and stop
it from leaving the country, it dissipates across the distant and
increasingly foggy horizon of globalization. In the long term it
cannot solve the fundamental problems of the economic system. It is
also far from adequate means for a true renaissance of scientific and
technical innovation, and it remains far short of the housing,
infrastructure, conservation, energy, agricultural and regulatory
needs of the United States of America. It is more than a band-aid, but
the patient is still bleeding and is still slowly dying. Whether
further life saving treatment will be applied to the American economy,
with sufficiently radical economic changes being initiated, remains to
be seen. Something is better than nothing, in the immediate. It
certainly is something, and a lot of it will not float to the top of
the pond, to be skimmed off, for at least a while. Time to give some
further thought to the problem and to find new ways to do the more
necessary.
Robert Morpheal