Friday, May 3, 2013
Investing for a future with high inflation
USA
Here is a country that is the economic centre of the world. But its position is undermined by government debts that are so high it cannot be repaid. Dollar is the reserve currency, interest rates are so low, consumers still borrow like crazy and they don't make everything but can buy everything. This is because of the generosity of exporting countries like China who buys US government debt, effectively funding these borrowings. With the US Federal Reserve printing money like mad, it would make perfect sense for China to stop shipping monies to the USA and start their own consumption boom.
China
As China starts spending her large export surplus back home, the demand for raw materials will shoot skywards. They will buy car, houses, furniture and eat more meat, raising the demand for feedstock like corn.
Australia
China is buying what Australia has in abundance, raw materials. It also has a huge supply of natural gas. A good investment opportunity is the high interest rates Aussie dollar.
Singapore
She has a huge trade surplus because she is selling to the Asian region. The Singapore dollar and properties are good investments.
Hongkong
Half her exports goes to China as well as to large economies like Japan and USA.
NZ
As she moves from agriculture to manufacturing and as she increases her exports to China and Australia, it is poised to boom.
Swiss
She stayed true to her federal roots and is home to thriving sectors like banking, insurers, drugs and chemical.
Norway
She is a leading oil exporter and is also flushed with fish, forest and minerals.
Netherlands
She is the 3rd largest agricultural exporter and enjoys trade surplus.
Canada
Canada is still doing things the USA has shunned like mining, drilling, extraction, logging and manufacturing. Its banking system is also on sound footing.
Investment strategy:
1. Buy dividend paying stock whose customers are getting richer - like GM selling cars to the Chinese.
2. Buy foreign convertible bonds with good yield.
3. Buy gold and ming stocks
Sector to invest in for the long term: raw materials, energy, manufacturing, chemicals, agriculture, infrastructure, utilities and technology.
Friday, April 19, 2013
Economics outlook for 2013 & beyond by RD
During the fourth quarter of 2012, the combined GDP of the 34 member states of the Organization of Economic Co-operation and Development (OECD) shrank by 0.6%. This has only occurred in 12 other quarters during the last 50 years.
In the United States, total credit has expanded by only 3.2% (or by $1.7 trillion) since the first quarter of 2009 (the pre-contraction peak). During the 14 quarters between then and now, private sector debt in the US contracted by $2.7 trillion (or by 5.8%); but the debt of the federal government expanded by $4.5 trillion (or by 65%). That expansion of government debt prevented the global economy from collapsing into a new great depression; but the government did not spend in a way that would lay the foundations for sustainable growth. Rather than investing, it continued to spend on consumption and war.
Worse still, the United States has now begun to implement fiscal austerity through higher taxes and decreased government spending, an approach guaranteed to further weaken the economy and exacerbate unemployment. The US budget deficits were $1.3 trillion and $1.1 trillion in 2011 and 2012, respectively (considerably more than the Congressional Budget Office was projecting when this book first went to print). Now, however, the CBO forecasts a reduction in the deficit to $845 billion in 2013 and to $616 billion in 2014. Tragically, the US is not alone in doing the wrong thing at the wrong time. The European Union and the United Kingdom are also inflicting unnecessary damage on their economies through ill-timed government austerity.
Monetary policy alone is keeping the global economy afloat. The European Central Bank (ECB) adopted aggressive measures – and just in time – in December 2011. The European banking system – and, therefore the global banking system – was then verging on systemic collapse. Rumors of the imminent failure of large European banks were rife. Equity investors were near panic. The S&P index was rapidly moving down toward 1100. ECB President, Jean-Claude Trichet, had vowed that his institution would not resort to large-scale money creation as the Fed had done. Luckily, his successor, Mario Draghi, taking office on November 1, 2011, abandoned that position and, in an extraordinary reversal, made roughly Euro 1 trillion of new liquidity available as loans to European banks at very low interest rates for three years. That program, known as Long-Term Refinancing Operation (LTRO), occurred in two stages, in December 2011 and in February 2012. As a direct result, panic was averted, financial sector stability was restored and stock prices shot higher all around the world, which, in turn, created a wealth effect that supported consumption and global economic output.
When that stock market rally began to grow tired in the middle of the year, the US Federal Reserve let it be known that it might soon launch yet another round of Quantitative Easing. Stock prices took the hint and moved higher still. In September, the Fed launched QE 3 with the creation of $40 billion of new money each month. In December, the Fed doubled the dosage to $85 billion a month – an amount which, if annualized, amounts to more than $1 trillion a year.
The results have been just as the Fed had hoped. The S&P index is now flirting with new all time highs and is more than 33% above where it stood just before LTRO was launched. Even US property prices now appear to have bottomed and to have begun to move higher. The net effect is that household net worth in the US has risen to $65 trillion, up $14 trillion from its crisis low point of $51 trillion and only $2 trillion below the all time high it reached in 2007. This rebound in net worth has helped underpin the economy by encouraging consumption. Despite all this, there is still very little core inflation in the United States. The Consumer Price Index ex-food and energy rose only 1.9% in December 2012.
The duration of the earlier rounds of Quantitative Easing was delineated from the outset. This time, however, the Fed announced that this round will continue until it works, by which they mean until the unemployment rate in the US drops substantially (from 7.9% currently). In consequence, some commentators have begun to refer to this round as “QE infinity”. With austerity beginning to bite, unemployment in the US is more likely to rise than to fall during 2013. Therefore, there is no obvious end in sight for Quantitative Easing. Furthermore, the Bank of England and, most recently, the Bank of Japan are also aggressively expanding their balance sheets by creating fiat money.
So, while fiscal austerity threatens to sink the global economy, monetary policy is doing all that it can to keep it above the waves. This aggressive money creation should continue to support asset prices. The danger is that it may also drive food prices much higher, too. If drought conditions in the United States persist, reduced crop production combined with robust money creation could create a very dire environment for the world’s poor. If so, hunger-inspired uprisings could once again undermine geopolitical stability in the developing world.
Meanwhile, in the economically advanced nations, a political backlash against fiscal austerity seems to already be underway. In December 2012, Japanese voters elected Shinzo Abe as Prime Minister on the back of his promise to stimulate Japan’s moribund economy with aggressive fiscal and monetary measures – despite the fact that the ratio of Japanese government debt to GDP is already 240%. Then, in late February 2013, Italian voters rejected a continuation of austerity in their country by strongly supporting the anti-establishment, anti-austerity 5-Star Movement in parliamentary elections. These election results in Japan and Italy suggest that a Democracy will not long tolerate austerity. The Conservative Party in the UK and the Republican Party in the United States should take note. They may be next to suffer from the public’s refusal to tolerate austerity during a depression.
The outlook for 2013 and 2014 is deeply disturbing. Unless the United States enters a new war, credit in that country will not expand enough to drive economic growth – there or elsewhere around the world. Super-aggressive monetary policy may prevent the bottom from dropping out from under the global economy, but it threatens to produce another spike in food prices which would inflict suffering on the two billion people on earth who live on less than $2 a day. Meanwhile, the political atmosphere in the developed world could easily become much nastier. Political gridlock in Washington seems set to make a bad economic environment there much worse. And, in Europe, with unemployment at 11.9% and rising (and with youth unemployment at 24%), the situation is potentially explosive.
Let us hope that reason prevails and that the public rejection of austerity that has begun in Japan and Italy quickly takes hold throughout the rest of the OECD countries. This is the time for governments to invest in the future.
Thursday, February 16, 2012
Greece matters because banks are stuck with their bonds
Article by Constantin Gurdgiev, lecturer in finance at Trinity College
So, the Greece Deal is done – at least mostly done – following riots and Parliamentary approval. What now?
Well, nothing.
First, Germany, the Netherlands and Finland - the only three still fully solvent economies of the euro area - will huff and puff through the next week or so, in the end approving the new deal. The final tally for this latest bailout, to be set by the euro group, will come in at €130-billion. Or, or it might come in at €145-billion to account for deterioration in the Greek economy from last July through December, 2011. It might even include few billion more to cover losses on continued recession, plus riots, since the New Year. Very close to the March deadline, Greece will receive the vital €14.5-billion in funds needed to repay its bondholders, thus averting or delaying the immediate threat of default.
The only big uncertain is the Finnish insistence on collateral for lending to Greece – the insistence on which can still ignite a race to seniority amongst other net lending countries contributing to the Bailout-2. But in the end, the Finns will be forced to accept a compromise.
Following the finalization of the deal, the Troika (the IMF will find it very difficult to resist the temptation to partake take EU money to finance lending to Greece as the new funds will only expand the IMF’s mandate) will promise to keep a hawkish eye on the dovish Greece. The bond yields across Europe will come down a bit more. ECB’s injection of some €600-billion worth of new money into the banks will help even further. Few European banks are in any position to lend into the real economy, so the LTRO-2 will go, once again, to prop up sovereign bonds prices.
The EU elites and national governments will proclaim that the rescue package was a sign of Europe’s ability to deal with the crisis, the evidence of viability of the euro and will move on to draft more daft high-sounding ineffective programs for the social-knowledge economy, driven by wind-powered nanotechnologies.
By mid-April, however, tired of ECB-sponsored margin arbitrage scheme, investors worldwide will take a look once again at the peripheral states’ fundamentals. By then, Q4 2011 – Q1 2012 recessions will be fully apparent. Rising unemployment and collapsing domestic economies will push deficits off targets and debt dynamics will show a renewed upward momentum, while political pressures on governments in Italy, Spain, Portugal and the perpetually ungoverned Belgium will become more pronounced. Spotting new shorting opportunities, the markets will be back at pressuring peripheral yields up.
Greece will remain the core driver of uncertainty and risks both in the short term and over the long run. Having satiated itself with the rescue funds for the moment, the Greek government will do what it does best – shirk from any substantive change. In April, a set of new reforms measures will be deployed, starting with tightening of some high profile (aka blatant) tax non-compliance. Woefully inadequate, these measures will be followed by deeper cuts percolating into the pay packets and employment numbers of public servants. Mild as these effects likely to be at the start, they will trigger new riots. A new block of disillusioned and recently expelled lawmakers will take a populist stand against the government.
Across the periphery, the extreme and populist leftist parties will gain prominence not because they represent a viable alternative to the status quo, but because after three years of continued crisis, no single mainstream party will be left unscarred by complicity with the EU/ECB/IMF policies.
By mid-May or early June, Greeks will post new data showing catastrophic contraction in growth, continued rises in unemployment and poor targets performance on the fiscal side. The crisis will be back. Greece will be hurtling toward elections.
The reality of the Greek situation is very simple, and extremely grave. The country will not deliver on the vast majority of its promises. Frankly speaking, it never did deliver anything real or sustainable in terms of growth and competitiveness in the past and it is not about to start doing this in the near future. The only uncertain part of this equation is just how long will it take the markets to realize that the Greek economic recovery arithmetic is simply bogus, computed not to reflect the reality of rising debt, falling tax revenues, collapsing economy and destabilized society, but to fit the Brussels-Frankfurt objective of pretending that debt to GDP ratio of 120 per cent is sustainable, lest admitting otherwise would trigger a run on Italy. My guess, about two-three months will do. Possibly six. Thereafter, the full-blown crisis will be back.
So, the Greece Deal is done – at least mostly done – following riots and Parliamentary approval. What now?
Well, nothing.
First, Germany, the Netherlands and Finland - the only three still fully solvent economies of the euro area - will huff and puff through the next week or so, in the end approving the new deal. The final tally for this latest bailout, to be set by the euro group, will come in at €130-billion. Or, or it might come in at €145-billion to account for deterioration in the Greek economy from last July through December, 2011. It might even include few billion more to cover losses on continued recession, plus riots, since the New Year. Very close to the March deadline, Greece will receive the vital €14.5-billion in funds needed to repay its bondholders, thus averting or delaying the immediate threat of default.
The only big uncertain is the Finnish insistence on collateral for lending to Greece – the insistence on which can still ignite a race to seniority amongst other net lending countries contributing to the Bailout-2. But in the end, the Finns will be forced to accept a compromise.
Following the finalization of the deal, the Troika (the IMF will find it very difficult to resist the temptation to partake take EU money to finance lending to Greece as the new funds will only expand the IMF’s mandate) will promise to keep a hawkish eye on the dovish Greece. The bond yields across Europe will come down a bit more. ECB’s injection of some €600-billion worth of new money into the banks will help even further. Few European banks are in any position to lend into the real economy, so the LTRO-2 will go, once again, to prop up sovereign bonds prices.
The EU elites and national governments will proclaim that the rescue package was a sign of Europe’s ability to deal with the crisis, the evidence of viability of the euro and will move on to draft more daft high-sounding ineffective programs for the social-knowledge economy, driven by wind-powered nanotechnologies.
By mid-April, however, tired of ECB-sponsored margin arbitrage scheme, investors worldwide will take a look once again at the peripheral states’ fundamentals. By then, Q4 2011 – Q1 2012 recessions will be fully apparent. Rising unemployment and collapsing domestic economies will push deficits off targets and debt dynamics will show a renewed upward momentum, while political pressures on governments in Italy, Spain, Portugal and the perpetually ungoverned Belgium will become more pronounced. Spotting new shorting opportunities, the markets will be back at pressuring peripheral yields up.
Greece will remain the core driver of uncertainty and risks both in the short term and over the long run. Having satiated itself with the rescue funds for the moment, the Greek government will do what it does best – shirk from any substantive change. In April, a set of new reforms measures will be deployed, starting with tightening of some high profile (aka blatant) tax non-compliance. Woefully inadequate, these measures will be followed by deeper cuts percolating into the pay packets and employment numbers of public servants. Mild as these effects likely to be at the start, they will trigger new riots. A new block of disillusioned and recently expelled lawmakers will take a populist stand against the government.
Across the periphery, the extreme and populist leftist parties will gain prominence not because they represent a viable alternative to the status quo, but because after three years of continued crisis, no single mainstream party will be left unscarred by complicity with the EU/ECB/IMF policies.
By mid-May or early June, Greeks will post new data showing catastrophic contraction in growth, continued rises in unemployment and poor targets performance on the fiscal side. The crisis will be back. Greece will be hurtling toward elections.
The reality of the Greek situation is very simple, and extremely grave. The country will not deliver on the vast majority of its promises. Frankly speaking, it never did deliver anything real or sustainable in terms of growth and competitiveness in the past and it is not about to start doing this in the near future. The only uncertain part of this equation is just how long will it take the markets to realize that the Greek economic recovery arithmetic is simply bogus, computed not to reflect the reality of rising debt, falling tax revenues, collapsing economy and destabilized society, but to fit the Brussels-Frankfurt objective of pretending that debt to GDP ratio of 120 per cent is sustainable, lest admitting otherwise would trigger a run on Italy. My guess, about two-three months will do. Possibly six. Thereafter, the full-blown crisis will be back.
Friday, September 2, 2011
The transformation of capitalism
Capitalism is like an computer operating system for mankind that evolves as the society changes.
Capitalism 1.0 was the start, beginning with Adam Smith and the Declaration of Independence. Smith's famous 'invincible hand' meant economics and democratic politics are utterly separate and politicians didn't meddle much, because that wasn't their role.
Capitalism 2.0 took over during the Great Depression with the New Deal and the widespread abandonment of gold. The John Maynard Keynes-cum-FDR stage now got the politicians involved because they believed only the state, its elected leaders and their academic advisers, could provide the conditions for business recovery.
1979 till 2008 was the period of Capitalism 3.0 when Mrs Thatcher and Ronald Reagan came to lead, after a period of economic stagnation. Politicians now skipped to the sidelines, and the much of the public sector was privatised and leaving monetarism and market forces to do the job. After the oil crisis in 1979, global GDP growth took off as oil prices drop, helping both inflation & interest rates to come off from double digit levels. The world economy “never had it so good” when it comes to growth rates
Capitalism 4.0 began with “The econonomic consequences of Mr Paulson in 2008”. Here, Mr Kaletsky attacks Hank Paulson for almost destroying the global financial system. He claims that by nationalizing Fannie Mae and Freddie Mac and letting private shareholders evaporate Paulson effectively made it impossible for investors to buy shares in financial institutions. Hank Paulson for almost destroying the global financial system. He claims that by nationalizing Fannie Mae and Freddie Mac and letting private shareholders evaporate Paulson effectively made it impossible for investors to buy shares in financial institutions. Speculators selling short financial firm stocks then took over and brought the system to the point where Lehman collapsed and a bank-run of institutional investors set in, demanding their money back from other financial intermediators. Since Paulson did not want to use government powers (money) to bail out these institutions, the credit markets froze. Free market fundamentalism almost brought down the global economy, and that only when the British showed to the US what must be done with the TARP money the US was able to return markets to more tranquil waters.
Now in version 4.0, we must all be more pragmatic, more watchful, more engaged, less didactic, less blinkered, less wedded to theories that can't always work. Along this path, there is no set of laws, no neat package of theories, that can do the job for us. Success in key stage 4.0 demands brains constantly engaged, logic relentlessly applied. Financial markets are likely to be a lot more volatile and growth could come in spurts.
Capitalism 1.0 was the start, beginning with Adam Smith and the Declaration of Independence. Smith's famous 'invincible hand' meant economics and democratic politics are utterly separate and politicians didn't meddle much, because that wasn't their role.
Capitalism 2.0 took over during the Great Depression with the New Deal and the widespread abandonment of gold. The John Maynard Keynes-cum-FDR stage now got the politicians involved because they believed only the state, its elected leaders and their academic advisers, could provide the conditions for business recovery.
1979 till 2008 was the period of Capitalism 3.0 when Mrs Thatcher and Ronald Reagan came to lead, after a period of economic stagnation. Politicians now skipped to the sidelines, and the much of the public sector was privatised and leaving monetarism and market forces to do the job. After the oil crisis in 1979, global GDP growth took off as oil prices drop, helping both inflation & interest rates to come off from double digit levels. The world economy “never had it so good” when it comes to growth rates
Capitalism 4.0 began with “The econonomic consequences of Mr Paulson in 2008”. Here, Mr Kaletsky attacks Hank Paulson for almost destroying the global financial system. He claims that by nationalizing Fannie Mae and Freddie Mac and letting private shareholders evaporate Paulson effectively made it impossible for investors to buy shares in financial institutions. Hank Paulson for almost destroying the global financial system. He claims that by nationalizing Fannie Mae and Freddie Mac and letting private shareholders evaporate Paulson effectively made it impossible for investors to buy shares in financial institutions. Speculators selling short financial firm stocks then took over and brought the system to the point where Lehman collapsed and a bank-run of institutional investors set in, demanding their money back from other financial intermediators. Since Paulson did not want to use government powers (money) to bail out these institutions, the credit markets froze. Free market fundamentalism almost brought down the global economy, and that only when the British showed to the US what must be done with the TARP money the US was able to return markets to more tranquil waters.
Now in version 4.0, we must all be more pragmatic, more watchful, more engaged, less didactic, less blinkered, less wedded to theories that can't always work. Along this path, there is no set of laws, no neat package of theories, that can do the job for us. Success in key stage 4.0 demands brains constantly engaged, logic relentlessly applied. Financial markets are likely to be a lot more volatile and growth could come in spurts.
What is happening at the euro zone?
Why the current account mattered in the case of first private sector, then sovereign debt crisis. The answer goes something like this. A country that has its own currency is not really in risk of sovereign default. It can “print” its currency to pay off debt, which will worsen the exchange rate but solve the debt problem. Creditors get their money back, but bear the whole exchange rate risk. Also, the public sector can bail out the private sector to full extent if a real estate boom has caused hundreds of billions of loans to turn sour/toxic. Now, the euro zone is a different beast.
In the euro zone, countries cannot “print” their own money. Their debt is nominated in euros, which is equivalent to a foreign currency. In order to bail-out the financial sector sovereign debt has to be emitted in foreign currency and cannot be absorbed by domestic central bank operations. Of course, the ECB can act as a lender of last resort and give liquid funds for financial assets that are “distressed” – there is no buyer at all, or not enough buyers, or the price is too low, or all of these. In order to help the economy repay euro-denominated (foreign) debts, a positive current account would be important to secure an inflows of euros above what is needed to pay the import bill. That is why, in short, the current account matters in the euro zone’s indebted nations.
If the ECB would guarantee to provide (unlimited) funding for all euro zone governments, the financial troubles would go away.
In the euro zone, countries cannot “print” their own money. Their debt is nominated in euros, which is equivalent to a foreign currency. In order to bail-out the financial sector sovereign debt has to be emitted in foreign currency and cannot be absorbed by domestic central bank operations. Of course, the ECB can act as a lender of last resort and give liquid funds for financial assets that are “distressed” – there is no buyer at all, or not enough buyers, or the price is too low, or all of these. In order to help the economy repay euro-denominated (foreign) debts, a positive current account would be important to secure an inflows of euros above what is needed to pay the import bill. That is why, in short, the current account matters in the euro zone’s indebted nations.
If the ECB would guarantee to provide (unlimited) funding for all euro zone governments, the financial troubles would go away.
Tuesday, August 30, 2011
Gross National Happiness
by Jeffrey Sachs, a 'reformed' or 'transformed' economist
We live in a time of high anxiety. Despite the world’s unprecedented total wealth, there is vast insecurity, unrest, and dissatisfaction. In the United States, a large majority of Americans believe that the country is “on the wrong track.” Pessimism has soared. The same is true in many other places.
Against this backdrop, the time has come to reconsider the basic sources of happiness in our economic life. The relentless pursuit of higher income is leading to unprecedented inequality and anxiety, rather than to greater happiness and life satisfaction. Economic progress is important and can greatly improve the quality of life, but only if it is pursued in line with other goals.
In this respect, the Kingdom of Bhutan made a remarkable choice: Bhutan should pursue “gross national happiness” rather than gross national product. Since then, the country has been experimenting with an alternative, holistic approach to development that emphasizes not only economic growth, but also culture, mental health, compassion, and community.
The question we examined is how to achieve happiness in a world that is characterized by rapid urbanization, mass media, global capitalism, and environmental degradation. How can our economic life be re-ordered to recreate a sense of community, trust, and environmental sustainability?
Here are some of the initial conclusions. First, we should not denigrate the value of economic progress. When people are hungry, deprived of basic needs such as clean water, health care, and education, and without meaningful employment, they suffer. Economic development that alleviates poverty is a vital step in boosting happiness.
Second, relentless pursuit of GNP to the exclusion of other goals is also no path to happiness. In the US, GNP has risen sharply in the past 40 years, but happiness has not. Instead, single-minded pursuit of GNP has led to great inequalities of wealth and power, fueled the growth of a vast underclass and caused serious environmental degradation.
Third, happiness is achieved through a balanced approach to life by both individuals and societies. As individuals, we are unhappy if we are denied our basic material needs, but we are also unhappy if the pursuit of higher incomes replaces our focus on family, friends, community, compassion, and maintaining internal balance. As a society, it is one thing to organize economic policies to keep living standards on the rise, but quite another to subordinate all of society’s values to the pursuit of profit.
Yet politics in the US has increasingly allowed corporate profits to dominate all other aspirations: fairness, justice, trust, physical and mental health, and environmental sustainability. Corporate campaign contributions increasingly undermine the democratic process, with the blessing of the US Supreme Court.
Fourth, global capitalism presents many direct threats to happiness. It is destroying the natural environment through climate change and other kinds of pollution, while a relentless stream of oil-industry propaganda keeps many people ignorant of this. It is weakening social trust and mental stability, with the prevalence of clinical depression apparently on the rise. The mass media have become outlets for corporate “messaging,” much of it overtly anti-scientific, and Americans suffer from an increasing range of consumer addictions.
Consider how the fast-food industry uses oils, fats, sugar, and other addictive ingredients to create unhealthy dependency on foods that contribute to obesity. One-third of all Americans are now obese. Mass advertising is contributing to many other consumer addictions that imply large public-health costs, including excessive TV watching, gambling, drug use, cigarette smoking, and alcoholism.
Fifth, to promote happiness, we must identify the many factors other than GNP that can raise or lower society’s well-being. Most countries invest to measure GNP, but spend little to identify the sources of poor health (like fast foods and excessive TV watching), declining social trust, and environmental degradation. Once we understand these factors, we can act.
The mad pursuit of corporate profits is threatening us all. To be sure, we should support economic growth and development, but only in a broader context: one that promotes environmental sustainability and the values of compassion and honesty that are required for social trust.
We live in a time of high anxiety. Despite the world’s unprecedented total wealth, there is vast insecurity, unrest, and dissatisfaction. In the United States, a large majority of Americans believe that the country is “on the wrong track.” Pessimism has soared. The same is true in many other places.
Against this backdrop, the time has come to reconsider the basic sources of happiness in our economic life. The relentless pursuit of higher income is leading to unprecedented inequality and anxiety, rather than to greater happiness and life satisfaction. Economic progress is important and can greatly improve the quality of life, but only if it is pursued in line with other goals.
In this respect, the Kingdom of Bhutan made a remarkable choice: Bhutan should pursue “gross national happiness” rather than gross national product. Since then, the country has been experimenting with an alternative, holistic approach to development that emphasizes not only economic growth, but also culture, mental health, compassion, and community.
The question we examined is how to achieve happiness in a world that is characterized by rapid urbanization, mass media, global capitalism, and environmental degradation. How can our economic life be re-ordered to recreate a sense of community, trust, and environmental sustainability?
Here are some of the initial conclusions. First, we should not denigrate the value of economic progress. When people are hungry, deprived of basic needs such as clean water, health care, and education, and without meaningful employment, they suffer. Economic development that alleviates poverty is a vital step in boosting happiness.
Second, relentless pursuit of GNP to the exclusion of other goals is also no path to happiness. In the US, GNP has risen sharply in the past 40 years, but happiness has not. Instead, single-minded pursuit of GNP has led to great inequalities of wealth and power, fueled the growth of a vast underclass and caused serious environmental degradation.
Third, happiness is achieved through a balanced approach to life by both individuals and societies. As individuals, we are unhappy if we are denied our basic material needs, but we are also unhappy if the pursuit of higher incomes replaces our focus on family, friends, community, compassion, and maintaining internal balance. As a society, it is one thing to organize economic policies to keep living standards on the rise, but quite another to subordinate all of society’s values to the pursuit of profit.
Yet politics in the US has increasingly allowed corporate profits to dominate all other aspirations: fairness, justice, trust, physical and mental health, and environmental sustainability. Corporate campaign contributions increasingly undermine the democratic process, with the blessing of the US Supreme Court.
Fourth, global capitalism presents many direct threats to happiness. It is destroying the natural environment through climate change and other kinds of pollution, while a relentless stream of oil-industry propaganda keeps many people ignorant of this. It is weakening social trust and mental stability, with the prevalence of clinical depression apparently on the rise. The mass media have become outlets for corporate “messaging,” much of it overtly anti-scientific, and Americans suffer from an increasing range of consumer addictions.
Consider how the fast-food industry uses oils, fats, sugar, and other addictive ingredients to create unhealthy dependency on foods that contribute to obesity. One-third of all Americans are now obese. Mass advertising is contributing to many other consumer addictions that imply large public-health costs, including excessive TV watching, gambling, drug use, cigarette smoking, and alcoholism.
Fifth, to promote happiness, we must identify the many factors other than GNP that can raise or lower society’s well-being. Most countries invest to measure GNP, but spend little to identify the sources of poor health (like fast foods and excessive TV watching), declining social trust, and environmental degradation. Once we understand these factors, we can act.
The mad pursuit of corporate profits is threatening us all. To be sure, we should support economic growth and development, but only in a broader context: one that promotes environmental sustainability and the values of compassion and honesty that are required for social trust.
Building a new sustainable capitalism model before it is too late
by John Perkins
From the book "Hoodwinked",
'Only about 3% of people are sociopaths of which about 1% has a college education and a tinier fraction understands how business works. Thus, there is a shortage of such talents who can run modern monopolistic, destructive companies that shareholders have to pay them millions in salaries. And being sociopaths, they gladly take the money without any thoughts of its social consequences.'
Examples he quotes include Jack Welch, the Fortune 500 magazine celebrity who happened to get to the top of General Electric in mid-70s because he negotiated a mere $3m in liability for GE who polluted the Hudson River with toxic PCB where it cost the government $460m to clean up. Also known as Neutron Jack for the way he ruthlessly reduce his staff from 410,000 to 299,000, while his own income and bonus soared.
Is this current form of capitalism sustainable [where the top management get paid millions while the workers get laid]? Let's study a bit of history before we answer this question.
The roots of capitalism started when the British & Dutch trading companies were granted monopolistic powers to go global to buy cheap goods to sell to Europe at high profits. This form of capitalism is called mercantilism. Then Adam Smith during the Industrial Revolution expounded the benefits of a free market as the most efficient method of maximising benefits. However, in reality, exploitation of workers with long hours, low pay & sometimes dangerous work were the norm. Such abuses prompted Ka rl Ma rx to advocate a classless socioeconomic structure based on common state ownership of property and production. The struggle between Ma rx ideas as practised by Sovi et Unnion and capitalism as practised by USA followed and ended with Reagan trumping with the Union colapse. Today's form of capitalism came from Milton Friedman who favored deregulations and privatisation of government assets as he believed that the private sector serve the public interests better than government. Reagan and Magaret Thatcher in UK and some Asian countries practise Friedman ideas to the letter and there were large transfer of public to private ownership, dissolution of laws that protect consumers and investors. Looking back at the 1990s to the great recession of 2008, this era was characterised by greed, obsession with materialism, excessive debts, large conglomerates, and the type of corruptions as symbolised by Enron and Wall Street banks and rating agencies and the housing bubbles and collaterlised debt obligation (CDO), which Warren Buffet called weapons of mass destruction. In this form of capitalism, just 5% of the global people consume 25% of the globe resources, and half the people are still starving......billionaires run corporations whose sales are larger than the GDP of most countries.
This mutated form of capitalism is clearly not sustainable. For example, big American agribusiness use lots of fertilisers in Nicaragua, maximising profits for themselves at the expense of the country's environment. The soil becomes infertile and water polluted. This form of farming were not allowed in USA. After decades of abuse by American businesses through the help of their allies like the CIA and powerful locals, South Americans have awoken with a new form of wisdom. They have elected governments who now recognise the value of their resources and now seek responsible ways to save them for future generations. These leaders encourage companies to change their profit maximising goals and change to something that is more sustainable for future generations and the environment. Some NGOs have sprung up to encourage companies to mend their destructive ways. For example, Rainforest Action Network has convinced companies like Bank of America, Home Depot, Staples to change their policies to save from over-cutting trees.
Hopefully, a sustainable form of capitalism can eventually evolve and this will require enlighten citizens to lobby local businesses and politicians to wake up before it is too late. More work needs to be done. Already, human being have put record amounts of CO2 into the atmosphere and global warming is now widely accepted and the trend is that we humans might be the ones to go extinct due to our own actions.
From the book "Hoodwinked",
'Only about 3% of people are sociopaths of which about 1% has a college education and a tinier fraction understands how business works. Thus, there is a shortage of such talents who can run modern monopolistic, destructive companies that shareholders have to pay them millions in salaries. And being sociopaths, they gladly take the money without any thoughts of its social consequences.'
Examples he quotes include Jack Welch, the Fortune 500 magazine celebrity who happened to get to the top of General Electric in mid-70s because he negotiated a mere $3m in liability for GE who polluted the Hudson River with toxic PCB where it cost the government $460m to clean up. Also known as Neutron Jack for the way he ruthlessly reduce his staff from 410,000 to 299,000, while his own income and bonus soared.
Is this current form of capitalism sustainable [where the top management get paid millions while the workers get laid]? Let's study a bit of history before we answer this question.
The roots of capitalism started when the British & Dutch trading companies were granted monopolistic powers to go global to buy cheap goods to sell to Europe at high profits. This form of capitalism is called mercantilism. Then Adam Smith during the Industrial Revolution expounded the benefits of a free market as the most efficient method of maximising benefits. However, in reality, exploitation of workers with long hours, low pay & sometimes dangerous work were the norm. Such abuses prompted Ka rl Ma rx to advocate a classless socioeconomic structure based on common state ownership of property and production. The struggle between Ma rx ideas as practised by Sovi et Unnion and capitalism as practised by USA followed and ended with Reagan trumping with the Union colapse. Today's form of capitalism came from Milton Friedman who favored deregulations and privatisation of government assets as he believed that the private sector serve the public interests better than government. Reagan and Magaret Thatcher in UK and some Asian countries practise Friedman ideas to the letter and there were large transfer of public to private ownership, dissolution of laws that protect consumers and investors. Looking back at the 1990s to the great recession of 2008, this era was characterised by greed, obsession with materialism, excessive debts, large conglomerates, and the type of corruptions as symbolised by Enron and Wall Street banks and rating agencies and the housing bubbles and collaterlised debt obligation (CDO), which Warren Buffet called weapons of mass destruction. In this form of capitalism, just 5% of the global people consume 25% of the globe resources, and half the people are still starving......billionaires run corporations whose sales are larger than the GDP of most countries.
This mutated form of capitalism is clearly not sustainable. For example, big American agribusiness use lots of fertilisers in Nicaragua, maximising profits for themselves at the expense of the country's environment. The soil becomes infertile and water polluted. This form of farming were not allowed in USA. After decades of abuse by American businesses through the help of their allies like the CIA and powerful locals, South Americans have awoken with a new form of wisdom. They have elected governments who now recognise the value of their resources and now seek responsible ways to save them for future generations. These leaders encourage companies to change their profit maximising goals and change to something that is more sustainable for future generations and the environment. Some NGOs have sprung up to encourage companies to mend their destructive ways. For example, Rainforest Action Network has convinced companies like Bank of America, Home Depot, Staples to change their policies to save from over-cutting trees.
Hopefully, a sustainable form of capitalism can eventually evolve and this will require enlighten citizens to lobby local businesses and politicians to wake up before it is too late. More work needs to be done. Already, human being have put record amounts of CO2 into the atmosphere and global warming is now widely accepted and the trend is that we humans might be the ones to go extinct due to our own actions.
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