AN
ANALYTICAL SKELETON IN 20 PARAGRAPHS…
1.
By virtue of its intrinsic logic, in particular the mechanism of
competition, the system has to grow and accumulate… Accumulate and
grow.
2.
The
engine and carrot of this intrinsic logic of the functioning of the
system (what makes entrepreneurs, top executive managers and
«investors» run…) is the obtaining of PROFIT.
3.
In
the control of the functioning of the system, the mechanism that
works like an «accelerator», a «brake» and as a «gear box», is
the indicator of the rate
of profit. This happens in different ways, according to the phases of
the evolutionary process of the system. It turns out that there is no
driver and that the evolution of rate of profit goes through periods
of growth, slowdown, stagnation and decline.
4.
Meanwhile…
the global amount of corporate profits is supposed to be divided
beteween
RENTs (payable
to “rentiers or «landlords”),
INTEREST (payable
to ‘banks’ or owners of ‘financial capital’ and
TAXES (payable
to the State in exchange for the provision of services essential to
the functioning of any economy (infrastructures… public sanitation…
justice… security …)
5.
When
the
RATE of profit begins
to fall, unless they manage to obtain a brutal reduction in overall
unit labour costs (including through delocalizations to «greener
pastures»…). business owners executives and their executive
managers begin a frantic search for other outlets for the surplus
funds accumulated, as well as for the not yet visible output of
potential reproductive investment. In other words, «investment
opportunities»…
6.
Thus, in that situation, when the RATE
of profit
begins to fall, in
order to keep the mass of profits intact,
owners of capital will also seek to reduce transfers to «rentiers»,
«banks» and the «State»…
7.
As the owners of Capital (through its owners and managers) combines
(interchanges…) easily with «rentiers» and «banks», the «costs»
of this reduction in transfers will always and eventually be left to
the Res
Publica,
ie the STATE.
8.
From
this «dodging» to bear the burden of that reduction in the overall
average rate of profit, has resulted the systematic demand from
«business» for a widespread and systematic reduction in corporate
tax rates and those tax rates that are applicable to the higher
echelons of personal income tax rates (owners and executives of
Capital); from progressive tax system to regressive tax systems. That
demand has led to generalised tax competition among states.
9.
Meanwhile… Through the normative activities of the IBSA
(«International Accouting Standards Board» – a private entity
sponsored by the largest international accounting and auditing
firms), large corporations have searched for, and achieved, the
manipulation, adjustments and control in the standards of
international business accounting, to facilitate the opacity in their
declaration of global income, rather than a transparent
«country-by-country» statement of accounts.
10.
At
about the same time… Auditing firms managed to obtain flexibility
of standards and legal framework of the audit activity by obtaining
(starting with the Isle of Jersey in 1997) the passing of new laws of
Limited Liability Partnerships which provided for limited an
individual responsibility of individual auditors, instead of the
previous law of joint and unlimited liability on audit firms. This
caused a general slackening of auditing practices and encouraged
malpractices in the management of many large corporations.
11.
The
liberalization of movements of financial capital and the creation of
the financial market called the «Euromarket» (not to be confused
with the «euro») has enabled an «exit option» out of any State
regulations. The «eurodollar» is an hybrid new currency that
corresponds to bank accounts designated in US dollars, that
are placed in banks outside the U.S.. As
a result these accounts are out of the reach of control or regulation
of any State authority and also free from the conventional standards
of prudent “fractional banking” (in very simple terms, «the
requirement for an approximate 10% ratio between the total amounts of
deposits and the total amounts of loans»).
12.
Meanwhile,
from the incessant and continued productivity gains in society as a
whole, come to result a natural corporate tendency for a «systemic
relative reduction of wages» and a concomitant growth in «systemic
unemployment»… This in turn reduces the purchasing power for the
bountifull amount of goods and services that are being produced
13.
Thus,
if the system reduces the purchasing power, there arises a systemic
need for the facilitation of access to credit. As noted by Financial
Times: «Debt,
is capitalism dirty litke secret»
(Ben Funnell – June 30 2009).
14.As
a result of the falling rate of profit (points 3, 4 and specially
point 13) there results a DOUBLE BIFURCATION in interest rates:
according to the «entities» and the «end use of credit». In the
case of interest rates charged by the central banks those interest
rates come close to zero (to make credit cheaper to businesses and so
encouraging business to borrow and invest …). In the case of
interest rates charged by commercial banks (consumer credit) rates
are free to rise and fall depending on the play of «supply» and
«demand» in conjunction with the banks’ need to sell credit.
15.
Relaxation
of usury laws (which restricted or limited the interest rates on
consumer credit …) and a decision by the U.S. Supreme Court has
allowed banks (and their credit card companies) to «export» higher
interest rates from some States to other States. From about 8% to
about 24% now… This practice (of easy but expensive credit…) came
naturally and logically to be generalized to the whole world. 1978
decision on Marquette National Bank of Minneapolis versus First of
Omaha Service Corp. (439 U.S. 299)
16.
Despite the increase in consumer interest rates, and through multiple
promotional campaigns, in the style of «buy now and pay later»
there came about an exponential increase in consumption on credit by
households. As a result there was also an exponential increase in the
overall private debt.
17.
Meanwhile, tax competition between national States would eventually
lead to a generalized reduction of corporate tax rates and a
reduction of marginal tax rates (whereby the rich are paying
relatively less…). From thence the result could only have been a
growing increase in budget deficits and public debt.
18.
Meanwhile,
the ineffectiveness of reducing interest rates as an incentive to
reproductive investment has become notorious. As already noted by
various scholars of the Keynesian approach, «you
cannot push a cart with a rope».
Whereby the «rope» is the monetary policy and the «cart» is the
productive economy of goods and services.
19.
In the particular case of the Eurozone and taking advantage of the
specific status of the ECB, Member States are required to fund
themselves by going to commercial banks rather then, as in the old
days, having recourse to the issue of national currency with each
national central bank. As a result of this, commercial banks in
Europe have taken to «refill» themselves with the ECB and then
profit from the financing of «public debt» of each European state…
20.
Considering
the following systemic features that are now prevailing in the world
economy, namely:
20.1
– Systemic
growth of unemployment resulting from overall productivity gains
20.2
– Fiscal
competition amongst sovereign States
20.3
– Lower
taxation for the largest corporations and the very rich
20.4
– Lax
or reduced supervision of banking activities
20.5
– Free
(or uncontrolled) creation of virtual money
20.6
– Free
(or uncontrolled) movement of financial capitals accross borders
20.7
– Relaxation
of usury laws and exponential growth of consumer credit
If
the operation of the system is to continue without a «pilot cum
driver»,
the only natural and logical result that must come from all this, is
a recessionary spiral and a natural tendency to instability, chaos
and the possibility of «wars» and the continued growth of social
anomie…
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