JOBS: The Key to Capitalism’s Success

by John Brian Shannon

As we all know, several political/economic models are in use in the early 21st century. A little refresher for you first, if your high-school political science classes didn’t especially thrill you.

The capitalist system employed by the Western nations and some other nations, is often referred to as the Free Enterprise system, the Free Market system, Wealth Accumulation, Capital Accumulation or the Open Economic model – depending on the context of a conversation. Politics can vary within capitalist systems – which are often a variant of democracy (civil rights enshrined in a constitution, the right to vote, rights to property and person and freedom of expression) form part of this model. Socialist parties represent the “left wing” and conservative “right-wing” parties are represented along with independent candidates as elected by the registered voters.

In the capitalist system, greed is the primary agent of economic change. If you want to eat, you work for money to buy your food. If you would rather drive to work than walk, you work for money to buy a car and insurance. An individual “works” to earn “profit” to purchase goods or services. The underlying premise being, that if an individual has a decent education and works “smart” and “hard” you will accumulate wealth over time. Western corporations and governments operate in a similar fashion.

So, why isn’t it working?

“It IS working!” wealthy Western individuals emphatically state.

“It IS working!” Western corporations emphatically state.

“It IS working!” Western governments emphatically state.

And in those cases, it most emphatically IS working!

But the rest of us are not. Working, that is. You know… jobs, working, making a living, paying the bills, making the rent… and all the rest of it.

You will recall my words from a previous paragraph; “An individual “works” to earn “profit” to purchase goods or services. The underlying premise being, that if an individual has a decent education and works “smart” and “hard” you will accumulate wealth over time.”

All good there. Except what happens in the capitalist system when there aren’t enough jobs?

The short answer is; A failed economic system. Ever more wealth becomes concentrated in a ever smaller percentage of the general population. You guessed it — 1% of the Western population will always agree that the Open Economic system works well for them.

For Western nations it is death by a thousand cuts and only in the interests of economic survival will our present system evolve into something very unlike the present model and it may take as long as 50 years to do so.

Let me back up a bit.

I promised you a political science refresher and here is the other half of it. The Communist system, sometimes called the Statist model, the Centralized Economic model, or the Closed Economic model, does not employ greed as the primary driver of human activity. Profit, either at the individual or corporate level is unknown and all economic activity is considered the property of the state. The only things that really matter to a communist is the national GDP and the sovereignty of the country. Of course, civil rights and personal freedoms are enshrined in the constitutions of communist countries – although at the end of the day personal rights can be and often are subjugated in the best interests of the state.

For one example of this, in the former USSR alcoholism rates were astonishingly high. But this was never reported in the Soviet media as it was thought that publicizing this knowledge would emotionally depress workers across the nation – and thereby suppress economic output. Therefore and officially, in the former USSR there was no alcoholism – and hence, the government-owned hospitals failed to devise a treatment for a disease which only occurred in the decadent West! If a citizen of the former USSR arrived at a hospital or doctor’s office for treatment of his alcoholism, he was told that he suffered from “an imaginary disease” and was counseled to stop “trying to get attention” by emulating Western behaviors. And no doubt put on some sort of watch list for good measure.

Eventually the former USSR collapsed mainly due to internal forces. However, some communist nations remain and are thriving. China has surpassed India, France, the UK, Germany, Japan and every other country except for the United States in GDP and accumulated wealth – and has done so by employing the statist economic model. According to most economics Professors, China will surpass the United States GDP by 2040. That’s 28 years from now in case you are a Chinese economist counting the days.

The main reason for the dramatic growth-driven economic performance in China is that many Western corporations have chosen to do business in China rather than the West – due to lower land and construction costs, lower labour rates, the lower costs associated with a relaxed or non-existent regulatory environment (depending on the industry and region of the country) and other cost-lowering factors associated with operating a business in China.

Beginning about 1999, U.S. corporations especially, have embraced the opportunity to lower their costs by closing their North American factories and building brand-new factories in China – sometimes with significant communist Chinese government assistance! Other western corporations too, have been closing our factories by the thousands in America and Europe and relocating their manufacturing operations to China – and on account of this economic activity, the Western economies combined are at present, 150 million jobs short of full employment. This trend of creating jobs in communist China whilst simultaneously creating higher unemployment in the Western democracies will continue as long as Western voters don’t complain too much.

By 2030, the Western democracies will be much-weakened in comparison to a still-booming China and the other Asian nations. At that time, Asia will be supplying almost all the manufactured goods for the Western economies which will by then, have lost 300 million jobs to Asia.

Also by 2030, perhaps as many as 700 million Westerners will be retired persons receiving some form of Social Security – while millions of younger people won’t be old enough to join the workforce. It will be a time when less than half of the West’s population will be employed and able to support the Western economies. From the Western point of view, this trend gets worse until 2060 when economic performance is expected to plateau in Asia.

A paradigm-shift has been taking place right under our Western noses for three decades now and we have just now begun to notice. China will soon be the dominant world power – and we handed it to them in exchange for higher profits for Western corporations.

It’s said; “He who has the gold makes the rules” – and it is shaping up to be a very different world indeed.

Follow John Brian Shannon on Twitter: https://twitter.com/#!/JBSCanada

Foreign Policy Magazine’s “A Kremlin Made of Sand” – MY COMMENT

Russian President Vlad Putin was the man who brought in 2-consecutive-term limits for the office of Russian President and without any complaining when the time arrived he did exactly as the Russian constitution required – he stepped down from Presidential office. All in all, pretty democratic of him.

Under his leadership and under the leadership of Dmitry Medvedev, the Russian economy has never been better – and yes, just like all economies these days a slip-up could prove costly. It’s the same everywhere it seems!

If the oil price happens to slip below $115. per barrel, I’m certain the Russian’s can simply defer some of their spending programs, until the oil price picks up again. Having hit ‘peak oil’ a few years back, I doubt prices will be dropping much, nor for long – as demand is still growing as the world economy returns to normal.

Paragraphs 3 and 4 (impressively and highly annotated) from Wikipedia — attest to Vlad Putin’s management successes during his first two terms as President and one term as Prime Minister. This information is widely accepted as factual and without contest.

“Putin has overseen a return of political stability and economic progress to Russia, ending the crisis of the 1990s.[4][5]
During his presidency, the Russian economy grew for nine straight years, seeing GDP increase by 72% in PPP (sixfold in nominal),[6][7] poverty decrease by more than 50%,[8][9] and average monthly salaries increase from $80 to $640.[6][10]
These achievements have been ascribed by analysts to strong macroeconomic management, important fiscal policy reforms, surging capital inflows, access to low-cost external financing and a several fold increase in price of oil and gas.[11][12][13]
The fast formation of the modern middle class in the country, the 2.3 times increase in real incomes between 2000-2011 as well as improvements in healthcare and public order allowed Russia to achieve the highest level of life expectancy in its history.[14]

As Russia’s President, Putin passed into law a flat income tax of 13%, a reduced profits tax, and new land and legal codes.[12][15]

As Prime Minister, Putin oversaw large scale military reform and police reform. His energy policy has affirmed Russia’s position as an energy superpower.[16][17]
Putin established a number of national champions, i.e. state corporations which oversaw the restoration of high-tech industries in the country (such as nuclear industry and defence industry).
Significant rise in foreign investments[18] contributed to the boom in such sectors as automotive industry.

Economic megaprojects which Putin endorsed have included the construction of major export pipelines (notably ESPO, Nord Stream and BPS-2), the restoration of the global satellite navigation system GLONASS, and the building of infrastructure for top level international events held in Russia (2006 G8 Summit, APEC 2012, and multiple sporting events).”

http://en.wikipedia.org/wiki/Vladimir_Putin

As a person widely-known to not like surprises, he welcomes any opportunity for communication with world leaders, which makes them feel quite comfortable enough to pick up the phone to discuss any matter at all with him — oh, how unlike the Soviet era of leadership!

We in the West don’t fully appreciate how fortunate we are to have Vlad Putin holding the position of the President of Russia.

Follow John Brian Shannon on Twitter: https://twitter.com/@JBSCanada