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The 1 Percent are ‘In’ and for Obvious Reasons

by John Brian Shannon | June 16, 2016

The 1 percent are already ‘In’ and for obvious reasons. Now, what about the 99 percent?

The 1 percent

In 2016, the richest 1 percent will have more wealth than the rest of humanity combined. Image courtesy of Oxfam International

Widespread dissatisfaction among very large numbers of people is manifesting itself in various ways around the world.

We’ve seen it in regards to the Occupy Wall Street protests, the Scottish referendum, Arab Spring, Syrian uprising, in the deepening distrust of globalization and free-trade agreements, lower voter turnouts, and most recently, in the potential for Grexit and Brexit from the European Union.

But it wasn’t always that way. In the postwar world, people from all walks of life and in every country ‘pulled together’ towards a common and better future. Sure, the Cold War interrupted that mood. But if anything, and in the broadest possible context, the Cold War served to sharpen competition and increase the overall flow towards a better civilization.

When the Cold War ended, Earth’s then-population of 6 billion took a collective deep breath and said; “Now we can get somewhere!” — in regards to creating the kind of world anyone would be proud to live in.

But 26 years on, we have fallen massively short of those aspirations. And it’s becoming more apparent and it is grating on people, moreso with each passing year.

Instead of a giant leap forward for the human race, we had trillion dollar wars in Iraq and Afghanistan that were based on falsehood (the U.S. Iraq Study Group said so) a major recession caused by the unethical and perhaps illegal actions of ‘too big to fail’ financial institutions (but only one person has gone to prison) we had democratic voices being dragged away from peaceful and legal #OWS rallies, we have dangerous people trying to re-ignite the Cold War because it used to be good for the military-industrial-complex economy (so why not try that again?) we suddenly have a 1 percent cohort that owns more than HALF of the world’s wealth (by 2030 they will own 76% of the world’s wealth if measures aren’t taken) we have more outsourcing of jobs (and therefore a larger proportion of low-paying jobs) and we have unelected, elitist, bureaucrats in Europe telling the rest of the continent where to go and what to do.

And that isn’t the half of it.

“It is time for the global leaders of modern capitalism, in addition to our politicians, to work to change the system to make it more inclusive, more equitable and more sustainable.  

Extreme inequality isn’t just a moral wrong. It undermines economic growth and it threatens the private sector’s bottom line.  All those gathering at Davos who want a stable and prosperous world should make tackling inequality a top priority.” 

Lady Lynn Forester de Rothschild, Chief Executive Officer of E.L. Rothschild and chairman of the Coalition for Inclusive Capitalism, who spoke at a joint Oxfam-University of Oxford event on inequality in 2015

(So far, not a single recommendation has been implemented)

Consequently millions of people are losing faith in and blaming globalization when in fact globalization isn’t the problem.

Twenty-six years after the Cold War has ended, our civilization is so much less than it could be that it boggles the mind.

The 1 percenters and their acolytes can’t understand what all the fuss is about.

And I understand that! Their lives are so far removed from reality that; Let the peasants eat cake.” doesn’t begin to describe the disconnect they have with the other 7.2 billion people on the planet.

(For the record, none of it was caused by the 1 percent — they are merely the beneficiaries of the trickle-up economy — therefore, we can never blame them for the problems of the 99 percent)

Ongoing troubles with Russia, China, #OWS, the global economy, Brexit, etc. are just the beginning of our problems. Five years out and ten years out, we will look back longingly to the 2010-2016 timeframe where we had these relatively minor problems to contend with!

We need a new global vision, one that is orders of magnitude better than the present mediocre vision, so that 7.2 billion people will say to themselves, Now this, I can support and work diligently towards.”

The present vision of; Let’s keep making corporations and the 1 percent richer and richer at our expense, getting into conflicts with Russia and China for no reason good enough to justify the risks involved, and unelected and elitist technocrats ruling the Earth (seems to be a growing trend) all so that we can feel grateful to have a low-paying job and a declining middle class?

That’s not a vision! That’s the path to economic suicide!

While there won’t be revolutions there is likely to be widespread voter dissatisfaction and a much lower level of ‘buy-in’ to our civilization from everyday citizens. That alone, is enough to cause irreparable damage to our world.

Everyone has a different idea about why the former Soviet Union failed;

Some say it was the sudden drop in oil prices (not really, that was merely the straw that broke the camel’s back) some say it was Western plots (slight attribution there, IMHO) while some said its fall was due to their failure in Afghanistan (embarrassing, but not Warsaw Pact demolishing by any standard) or by other, unspecified means.

But no, the real reason for the failure of the former Soviet Union was passive defiance by Soviet workers, whose favorite (quietly-spoken) saying was;

“As long as they pretend to pay us, we will pretend to work.”

And that is everything!

Once it became obvious to Soviet workers that the Soviet Union was ‘no longer working’ for their best interests, they employed a sort of ‘passive defiance’ in return for the crass neglect they felt they had endured, which lowered the USSR’s productivity to such an extent that all it took was a few months of low oil prices and some sniping from U.S. politicians for the whole thing to implode.

Now, 26 years after the fall of the Soviet Union, Western workers are beginning to think in terms of ‘passive defiance’ and may soon follow the path of those Soviet workers.

Long story short; There are very real reasons for the growing dissatisfaction and the disconnect between 7.2 billion people on the one hand — and the 1 percent, their acolytes, and the elitist technocrats that serve them, on the other hand.

The grievances of that many people can’t simply be waved away in a ‘Let them eat cake’ kind of way.

We need a grand and new vision, one that is orders of magnitude better than the present non-vision, and one that 7.2 billion people will urgently wish to support.

Anyone up for that?

If not, we’re already on the path to lose everything we’ve built.

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Regionalism: The Next Step for Globalization

by John Brian Shannon | June 7, 2016

Globalization was inevitable. Both the positives and negatives of globalization were inevitable. And we’re now moving into a more mature phase of globalization — a phase where common sense plays a much larger role.

After all, does it make more sense to import onions from thousands of miles away in Chile or Indonesia for example, or to grow them on the rooftop of your local big box grocery store?

Think of the CO2 emission savings alone as one way of many to demonstrate how unrestricted globalization works against our common good.

Globalization 3.0

Globalization 3.0 began around the year 2000 (with internet connectivity for large numbers of people and businesses) Image courtesy of www.intechopen.com Creative Commons Attribution License

For years I’ve talked-up the benefits of ‘Regionalism‘ where the largest share of goods and services are provided to consumers and business by producers and manufacturers within that economic or geographic region.

It’s not only in regards to fresh produce. With 3D printing and a regional facility ‘the latest thing’ can be manufactured in minutes, regionally, although the online order may have been received thousands of miles away — resulting in faster shipping and larger numbers of (regional) jobs, as opposed to the One Big Factory model, building ‘the latest thing’ in Shenzhen, China.

Of course it works both ways.

For Chinese consumers who want the latest Ford F-150 pickup truck, does it make sense to have one shipped from thousands of miles away in North America, or does it make more sense that Ford builds an assembly plant in China (and hires local workers) and fills orders from there?

I think there is still more growth to be milked out of globalization, but the next logical step is Regionalism which will cut costs, improve profits, and give consumers and business more and better choices. In high unemployment jurisdictions I would expect to see rates fall — perhaps dramatically, while low unemployment jurisdictions may see tiny improvements.

Although I agree with international trade agreements in principle, TPP seems excessively weighted toward corporate interests and not toward consumers or national sovereignty. For that reason I’m against it. The cloud of secrecy surrounding TPP certainly hasn’t helped. And the fact that someone of the rare and high calibre of Elizabeth Warren has doubts about it, tells me everything that I need to know about it. Full stop.

However, any trade agreement that enhances trade flows while enhancing national sovereignty and can show a distinct benefit to consumers and business alike should be aggressively pursued.

For me it isn’t about abandoning globalization, it’s about globalization reaching its full potential without destroying sovereignty, consumer trust, and entire segments of the economy.

It’s more about continuing to grow globalization (whenever that makes sense) and adding regionalism to the mix (wherever that makes more sense) and enhancing national sovereignty.

The day that Apple Computer is building iPhones in factories in every region of the world, that Ford Motor Company has assembly plants in every second country, every piece of clothing is manufactured regionally to the designer’s exact specifications, and most fresh produce is grown within 100 miles of its target consumer, that’s when we will see the maximum benefit from our investment in globalization.

We are where we are in regards to globalization and it has been a qualified success. But the potential of globalization + regionalism is one whole order of magnitude greater.

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Free Market Economy, Monopolies, or Both?

by John Brian Shannon | May 13, 2016

Should developed nations favour a free market economy? Monopolies?
Or a
regulatory framework that strengthens the macro economy?

  1. The entrepreneur in me likes Perfect Competition in a free market economy.
  2. The businessman in me likes Monopoly because of the opportunities afforded by economies of scale.

Monopolistic economies of scale allow corporations to:
[a] provide more services or products for the same cost,
[b] provide the same services or products for less cost,
[c] provide decreasing services or products to improve the corporate bottom line.

Unfortunately, monopolies are becoming the norm in America these days and one of the reasons for this is due to the emergence of the activist shareholder who demands higher dividends — no matter the burden this places on the corporation.

Eventually it ruins the corporation as higher profits (gained by cost-cutting and lowering standards in the rush to keep shareholders happy) are directed up and out of the corporation, and sometimes out of the country.

In simple terms, today’s activist and powerful shareholders are taking huge corporate fortunes and creating small fortunes out of them — in exchange for higher personal returns.

When they bleed one corporation dry they simply migrate to the next corporation. That’s not the way to build a strong country.

How to Strengthen the Macro Economy via new Corporate Ownership Regulations

The regulation we need is that no more than 50% of any corporation’s total value should be available to shareholders.

By law, the other 50% would always remain founder-owned or corporation-owned shares.

This would prevent the most egregious profit-taking damage to corporations — and C-suite executives could then lead the corporation according to what works best to gain higher customer approval ratings and improved market share — instead of what works best to meet shareholder demands.

By keeping 50% of the value of the corporation within any combination of the corporation or its founder(s) it helps to prevent excessive profit-syphoning to shareholders and it allows for rock-solid collateral when (re)capitalizing the corporation during expansion, for example.

One immediate bonus would be a much larger investment pool available to corporations that are looking to offer up to 50% of their value to shareholders.

I’d expect a NASDAQ boom if such a regulation were passed. A small and mid-cap renaissance would finance a new bull market from one profound regulatory change.

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