Tuesday, August 28, 2012

The Continuing Saga of Very Basic Economics...

Capitalism's roots extend back to a Scottish economist and enlightenment philosopher named Adam Smith. Smith's hypothesis on economics, the economics of his time were driven by the mechanisms of imperial and mercantile systems, emphasized the underlying motivation of self-interest driven business markets. The theory was specified in the classic tome: Wealth of Nations; first published in the mid eighteenth century and revised, by Smith, in multiple follow-up editions.

As an enlightened thinker Mr. Smith waxed philosophically about the potential for use and abuse of self-interest driven markets by various characteristics of human nature; outlined extensively in the companion tome: The Theory of Moral Sentiments; also published in the mid eighteenth century and followed by Smith's multiple revised editions.

The potential benefits and reservations about self-interest driven economics are, simply put: enlightened and unenlightened, respectively, self-interest. This post will deal with three aspects of unenlightened self-interest: deregulation, monopolies and private equity.


In a deregulated market the potential to manipulate prices, via supply and demand calculations, can spur companies to take capacity off-line for increased profitability. That's why deregulation appeals to product or service vendors while delivering few, if any, oft promised benefits to the consumer (see also, Wikipedia articles on: deregulation and Enron).


A monopoly is when a single company has 70%, or more, of the market for any product or service. A monopoly position allows a company to thwart competition by driving prices lower. This tactic does not allow a perspective competitor the kind of profit necessary to ramp up their own product in a new market. As soon as the competitor is believed on the edge of failing out of said market prices will return to, or rise above, previous levels. Monopolies are not pursued for the customer's benefit, without regard for any promise to the contrary (see also, Wikipedia articles on: monopoly and Microsoft).

Private Equity

Private equity (PE) exists to make money for its executives and their investors, in that order. You can, and private equity does, make money finding companies that are going to be most profitable as scrapped and salvaged entities. If you're on the receiving end of this trade, employed by or purchasing after, the process may seem more like plunder and pillage.

It is important to remember that there is nothing about job creation in the definition of PE. While scrap and salvage is often the fastest way for PE to make money, it is not the only way. Employees of a PE owned business will continue to have a job only if their function can not be outsourced to a least-cost (read: low wage with a flexible regulatory environment) country; often mainland, communist, China.

Anybody who buys a company from PE needs to be aware that the company will be stripped down and all the short term profit will have been taken out pre – PE – voiusly (see also, Wikipedia articles on: Private equity firm, Bain Capital and Albert J. Dunlap).

None of the three forms of unenlightened capitalism are intentionally vicious to any party, nor are they illegal, but they do add significant emphasis to the old adage, “Caveat emptor (buyer beware).”

Monday, August 27, 2012

What of Medicare and Social Security?

What becomes of Medicare?

My plan for health care is Medicare for all (a.k.a., Single Payer Health Care) because it eliminates the for profit insurance companies from the health care loop. This is important because the primary concern of a profitable insurance company is growing profitability, not caring for the customers. Medicare has been very efficient at providing for services to seniors, because service is its primary reason to exist. I will propose extending that kind of service to everybody.

Keeping Medicare a program for seniors only, and privatizing it, is bad policy because seniors are prone to becoming increasingly expensive customers; not the people a profitable company can afford to serve. My wife and I both have, “pre-existing conditions,” so we peg the expense meter on insurance companies' actuarial charts. We are far from alone.  Many folks (young, old and in between) have one condition or another making them all expensive to insure, so privatizing (giving Medicare to for profit insurance companies) does not register as a good idea with my campaign.

What about Social Security?

Social security will come under tremendous fiscal pressure as my generation (74 million Baby Boomers) retire. That was actually anticipated in the Reagan administration; payroll tax rates were increased and more money than needed was collected. The excess money was not put into a safe place and was instead borrowed by the legislature, special treasury notes (the Congressional Budget Office refers to them as, "permission to spend money") were issued.

Some have said that the solution is to privatize (give to for profit companies) the entire Social Security program; how much of the, "permission to spend," would be paid out is never mentioned. Private companies would supposedly invest the money in the market and pay out from the returns on said investments. Individual savings and 401k monies are already invested in said markets, and o'er the last 30 years have grown and shrunk in a recurring series of economic cycles that cause a roller coaster to pale by comparison. I don't think putting Social Security funds on that same private ride is anything but a really bad idea.

Wednesday, August 22, 2012

Partial History of the First Term...

The constant theme of the Republicans running for government office is that the economy is bad, and that President Obama has done nothing to improve the situation.

Well, let’s review a bit of history (courtesy of Politico):

Here’s John Boehner, the likely speaker if Republicans take the House, offering his plans for Obama’s agenda: “We're going to do everything — and I mean everything we can do — to kill it, stop it, slow it down, whatever we can.”

Senate Minority Leader Mitch McConnell summed up his plan to National Journal: “The single most important thing we want to achieve is for President Obama to be a one-term president.”

Remember, that our federal government's power is divided into three separate branches (executive, legislative and judicial), so that no one of them can do much on its own.

The Republican policy is known as self-fulfilling prophecy.