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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?
- The entrepreneur in me likes Perfect Competition in a free market economy.
- 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.
by John Brian Shannon | April 15, 2016
A long time ago when there were unicorns, there was a justifiable need for international trade agreements in order to spur trade, increase movement of capital flows and to promote movement of labour — but mainly to gain access to potentially larger markets in both developed and developing nations.
International trade agreements like NAFTA and even today’s TPP are throwbacks to a day when we didn’t have all of that. Many global economies then were practically closed markets, with few exceptions.
It’s almost the opposite these days — globalization has certainly prevailed — and it’s the rare country that isn’t buying or selling wares from around the world on a daily basis.
North Korea is a closed market, so is Japan (although it is a huge exporter) and only a handful of other nations could be considered ‘closed markets’ in any substantive sense.
In your home country you can probably buy a car, a music player, clothing, food, and almost anything else — and it likely wasn’t built, created, or grown, in your country.
Globalization has succeeded wildly and we now live in a globalized world.
How’s it working?
For the people in developed nations it has meant 25-years of inexpensive goods on store shelves — goods that were either built, created, or grown, in developing nations, which has been a real bonus for developed world consumers — and it has also benefited workers in the developing world.
Unfortunately, it also led to many high-paying jobs being sent overseas, resulting in higher unemployment and worse social ills than that in some developed nations.
Liberalized international trade has become all that it could be
Which is fine. It’s served it’s purpose and we now have open markets around the world with levelization of trade, capital, knowledge, labour, and general market equilibrium — if not market symbiosis.
But there isn’t much more room for globalization to grow. Other than tidying-up some intellectual and property rights regulations we’ve arrived at our free trade destination. We’re already living in the globalized economy.
Where do we go from here?
There are a number of things that can strengthen our domestic economies without turning back the clock to the (almost) closed economics of the 1960’s.
Ten Ways to Make Our Country Better and Stronger – While Helping Citizens to Succeed and Live Happier Lives
The Ten Ways: Increasing Intellectual Property Rights, Increasing Government Revenue Streams, Preventing Obscene Government Debt, and Enhanced Government Services Designed to Move the Bottom Economic Quintiles Towards Middle Income Status
- We and our trade partners should sign a simple trade agreement to protect intellectual property rights, one that includes universal patent, trademark and copyright protections. The point is to get it done now while it is still relevant. If we wait, there’s no point in bothering with it, as all the secrets (the patents, trademarks and copyrights) will be ‘out of the box’ and in the general marketplace. (The rule must be that we don’t trade with nations that won’t sign and abide by those laws)
- We and every country we trade with should pass legislation to allow a simple 5% tariff on every imported and exported good — from supertankers full of oil, to consumer electronics, to clothing, to food, — in short, everything. This simple tariff would replace all other import and export taxes/tariffs/levies and related charges. Billions of dollars of goods are imported and exported every month and the tariff revenue stream can be used by the federal government; To improve productivity by funding R&D, and to improve government services and infrastructure — or used to raise national GDP and quality of life for citizens, by reducing unemployment and to lower taxes on the poor and working poor.
- We and our trade partners that don’t already have a national Goods and Services Tax (of 7% for example) on all retail goods, should implement one immediately. This revenue can contribute to the overall economy to improve services and infrastructure, reduce unemployment, and lower taxes on the poor and working poor, and should be shared 50/50 with states or provinces — who after all, would be the parties responsible for collecting it.
- We, and every country we trade with should pass legislation making deficits of more than 4% of GDP illegal, at the federal, state, and municipal level. This prevents obscene government spending and prevents the trap of eternal debt servicing costs, once interest rates rise. Which they always do.
- Our own country and every country that we trade with should no longer charge income tax on those who earn less than the equivalent of $25,000. per year.
- We and our trade partners should pass legislation to the effect that every worker has the right to a minimum of 25 weeks of full-time employment, per year. Yes, it would require a job-sharing programme managed at the state level. Some workers may receive layoff notices in order to accommodate unemployed workers. On the positive side, long-term unemployed people could then contribute to the economy (and to their own personal income!) for a minimum of 25 weeks per year. In countries like Sweden, this is common in industries that can’t keep all of their workers employed, and it is normal for two workers to share the same job for many years (6 months ‘on’ and 6 months ‘off’) so that over the course of a year, every worker in the country will have worked a minimum of 6 months. Which keeps their skills sharp, makes them eligible for automatic unemployment insurance benefits during their layoff, and lowers the welfare rate to near-zero.
- Most government unemployment insurance programmes around the world pay 66% of a worker’s salary during periods of unemployment, often after a significant wait and a worker’s claim can be turned down for any number of strange reasons. It’s inhuman. Workers pay into unemployment insurance — it’s not their fault that there are millions more people looking for work than there are jobs available — because their jobs have been sent overseas since globalization began. In some countries, a brilliant solution exists whereby workers can opt to pay into a private unemployment insurance programme, one that can top-up their unemployment insurance payments to 99% of their normal salary for the equivalent of 1 or 2 cents per dollar earned. The employee merely indicates how much extra unemployment insurance coverage he or she wants to purchase, and the deductions are automatically made from their wages and directed to the private unemployment insurance company. The private insurer also begins paying unemployment benefits from the first day of a worker’s lay-off. Workers no longer need subsist on 66% of their normal income while unemployed. (Imagine working in the fast-food industry, living on subsistence wages, then getting laid off due to a slowing economy, and then having to exist on only 66% of your already subsistence-level wage!) NOTE: In Sweden, both the government-run unemployment insurance plan and the private unemployment insurance plan make a respectable profit, every year. That’s how easy it is to do, when it’s done properly.
- Every city, town, village or county in the country should have the option to receive a free website from the federal government for as long as certain information is continuously updated by the local jurisdiction. Simply by entering the name of a jurisdiction in Google Search, anyone should be able to find the local time, weather, federal, state, city, village or municipal phone numbers and addresses, emergency services and other essential services (like Hospitals and Veterinary Clinics) and employment information for that city, town, or region. Standardization is key so that workers looking for work, or visitors to a region can quickly navigate to and access important services without a frustrating search (or fruitless search, because not all jurisdictions have their own site or mobile-friendly site — but you don’t know that until you do an hour’s searching and discover that there isn’t one!) Quick access to important phone numbers and addresses can save lives and help to increase productivity.
- Streamlined government websites for self-employed people to set-up and begin working in one day with a minimum of confusion, stress and red-tape.
- Legislation to require internet service providers to provide basic internet plans of $10. per month with low entry barriers — enough to check emails, find a job, find rental accommodation, and perhaps practice the preferred local language in hopes of finding a job. The internet is an essential service in our era, and those entering the workforce or returning to work after illness, etc. need to be able to start somewhere.
It’s easy to look around the world to see what’s working well in other jurisdictions and write similar legislation.
Legislators in Sweden and Norway don’t have two brains nor any other super powers, that we know of. If they can manage to get these things done, so can we. And if we can’t, we’re not half as great as we imagine ourselves to be.
But we are! Therefore, all we lack is the will to act. So let us act, and help our country to leap forward by one order of magnitude.
- A Progressive Logic of Trade (Project Syndicate)
- The Secret of Norway’s Success (JohnBrianShannon)
- In Sweden: Nobody Sleeps in Dumpsters (JohnBrianShannon)
- The Silver Bullet for the Economy (JohnBrianShannon)
- The Most Profound Metric of All (JohnBrianShannon)
- Stephen Poloz calls for defence of free trade amid wave of protectionist talk (CBC)
by John Brian Shannon | January 3, 2016
The Economics of Empowerment
How We Could Add Unimaginable Wealth to Our Civilization by Adopting New Ways of Thinking
There’s a circle centred around a geographical point in Asia where 51% of the world’s people live. That’s 3.6 billion who live in an area only slightly larger than the United States (once you factor-in the land that humans can actually live on)
‘The Circle’ has perhaps the widest disparity levels in the world; While some of the people living within that circle have fabulous wealth, others live their entire lives at landfill sites sifting through the flotsam and jetsam in a desperate attempt to find items of value to sell on the street.
Of course, there are disparities all over the Earth but nowhere else are there 3.6 billion people living in relative proximity to each other, some of whom may drive a different Lamborghini each day of the week and fly their personal jets at the weekend to the many exotic resorts in that part of the world, while others live in squalid tents with no water supply nor electricity their entire lives.
If ever there was a region of the Earth where investors might find the most highly motivated workers and many natural resources available to create huge returns on investment, this has got to be it!
In the West where I live, we are beset by ‘First World Problems’ — it’s a family emergency when little Jimmy doesn’t get EXACTLY the tablet computer he desired for Christmas, or when the delivery driver is 20 minutes late with our pizza. Even more serious is getting stuck in a traffic jam when we’re on our way home from work.
Very. Serious. Problems.
In The Circle, a ‘serious problem’ is when a venomous cobra has killed five people in your tent-city neighbourhood overnight, or when the water supply that is required to sustain human life is suddenly cut off by the authorities or farmers upstream, or when the river disappears due to drought.
In some areas of The Circle, once a criminal gang begins operating in your region, your life begins to change on that very day and whatever they decide to do with you, that will be your fate for the rest of your life…
Like the lions of Africa, life is ‘day-to-day’ for alarmingly large numbers of humans caught inside this sometimes cruel circle. At any given moment, a lion in Africa may get killed by hunters/poachers, by competing lions, by a pack of hyenas, or by a stealthy underwater crocodile at the old watering-hole, or any number of other reasons. Shockingly few lions make it to middle age.
And so it is with people who live within most of The Circle. Life is cheap there. You live ‘day-to-day’. If you can’t find a way to make yourself useful or even better, indispensable to someone wealthy — you’re gone.
As I’ve said, it’s a region with highly motivated people and under-developed resources.
Even investors with the worst track record in history should be able to strike it rich almost anywhere within The Circle
If the 20th-Century was ‘all about The Baby Boomers’ and ‘enabling’ their generation to add huge wealth to the Western nation economies by virtue of their buying power (called ‘Disposable Income’ by economists) — we in the 21st-Century might do as well by empowering the people in The Circle to become all that they can and should be…
We’re looking at nothing less than the greatest opportunity to create wealth in the history of the planet — an order of magnitude larger than the baby boomer wealth-creation paradigm
And in so doing, we’ll lift billions of people out of poverty, creating trillions of dollars of new wealth for corporations and dramatically increasing revenue to government coffers, and provide opportunities for ‘Circler’s’ to earn life-changing disposable income.
Instead of the one success story that we hear endlessly trumpeted on headlines everywhere; Apple Computer now worth $1 Trillion Dollars (by virtue of Apple’s decision to choose low-cost manufacturing in China and sales to EVERYWHERE on Earth) we could have dozens or hundreds of similar success stories (and not only in regards to personal electronics, but in many segments of the economy)
As a civilization we can choose to drop this ball or we can choose to make it work for us
The people who live within The Circle are highly motivated to do their part.
All it will take to add trillions of dollars of wealth to the global economy is the empowerment of an already motivated people via the implementation of a more detailed version of this vision, along with courageous political leadership to see it through to its best destiny — a destiny that works for everyone on the planet.
(Or, we could allow mediocrity to rule the day allowing the region to deteriorate, becoming the largest breeding ground for terrorism that the world has ever seen with enough terrorist numbers to seriously impact life on planet Earth — as compared to the relatively minor bits of terrorism we’ve seen emanating from other impoverished regions, thus far)
The West became incredibly rich by empowering the Baby Boomers in the 1945-2000 timeframe and the ‘Boomers’ responded by creating unprecedented wealth and a better standard of life for billions of people.
It’s high time for us to empower The Circle so that they can add their wealth-creation and better-standard-of-life contribution to our shared civilization.
The best time to do that was 20-years ago. The second-best time is now.