March 8, 2011
Corporations based upon shares of stock were a part of modern finance, in which securities, shares and credit allows for risk reduction. With easily disposable paper claims in shares that can be bought and sold with ease risk of failure is replaced by selling decline stock and purchase of shares in a more profitable enterprise. With wealth being transferable output and financial assets are separated. Quarterly earnings replace long-term financing. With this concern for short term commitment to the craft becomes secondary. The short term needs to meet the demands of investors competes with the need for continuing requirement for internal reinvestments. Investors being predisposed to sell weak stock and replace it with more profitable stock. Speculation on paper claims to wealth means Keynes was right that capitalists avoid risk, long term commitment, and follow quick profits mean capitalism left alone soon runs out, that bursting investment bubbles follow one after another.
The financial systems are in need of a ready source of cash flow for continual profits. This expanding income becomes the reason for living of capitalism system as a whole.
By expansion of debt and speculation becomes the first defense against economic collapse.
In good times there is a tendency toward overproduction or over extension of capital, leading to the need to devalue capital in attempt to reestablish profitability on adding to the problem of overextension.
In the early days the individual capitalist increased profits by lowering wages to his employees. Yet all capitalist as a class needs workers to spend their wage on what the capitalist system produces to sell on the market. Credit enters as an unstable way of resolving this contradiction.
Growth begins to slow; it takes more and more investments, to make the same profits. This leads to increasingly to shortages of new profitable of profitable investments. As capitalism evolves it moves from youth, to maturity, to stagnation. As industry develops home markets become glutted leads to increasing need to expand markets abroad. This is not enough there arise a necessity to invest directly overseas. Following this pattern is military intervention, manipulation of politics of local politics around the world.
With markets glutted at home, and investment opportunities closing off rapidly control of foreign markets becomes a necessity. At the regional and local level around the world the close supervision of the more powerful nations becomes the norm.
Government of powerful nations intervene directly into the affairs of other nations in order to tightly control the economies of the weaker nations for the benefits of the transnational corporations. The history US foreign policy can now be understood.
In the past corporation were national in origin but international in context. Today, however, corporations ate transnational all the way, yet the US government is the political center of the global empire. As with all empires of the past overtime new challenges to its dominance continue to develop a new.
Control of markets and investments around the world opens new investment opportunities. This leads a stronger economy for investors at home for the short and medium run.
Capital is exported to develop modern industry abroad, yet it is still controlled by the corporations of the powerful nations.
Capital is exported from powerful nations to the less developed nations to create modern industry. Profits generated there are reinvested in those poorer nations. Yet because control over development rests with the international corporation and the governments of the powerful nations the people in weaker nations establish a very small elite and a small professional and labor aristocracies of modest comfort and for the majority the people become poorer and poorer. The governments of these poor nations become dependent on rich nations’ governments. Overtime domination becomes a death trap strangling any hope of economic independence.
With increasing poverty everywhere in the world consumer demand becomes increasingly dependent on limits of the global middle class. Third world governments become a front for a welfare system in which those employed in the governments and the few higher paying employees in private sector in these poor countries become a petty aristocracy totally dependent on the robbery of their own, countries. The government leaders of those nations willingly control any and all dissent, driving the desperate to rebel, only to be murdered or re-enslaved. The US government and its friends in the less developed nations cooperate in maintaining this empire at all coasts. It is only when local controls fail tat the military intervention of more powerful nations becomes necessary.
Big government is a necessity for capitalism of any kind. Bureaucracy grows with a market economy. The necessity for cheap labor requires expanded role of police, international politics, military conflict and intervention, tax supported welfare and many other roles were either where in the pre-capitalist governments played a smaller role or these functions were taken care of by family, church or community.
At the same time government protects contracts of big business. Ensuring an environment attractive to investments.
March 9, 2011
Law protects the professional middle class and their professional organizations. Being hard to replace strengthens their relationship to other classes.
International trade agreements allow for the flow of manufactured goods, and easily available opportunities for foreign investors to invest in local industry. This effect means low wage areas win out by cutting labor costs. At the same time trade agreements fail to undermine professional organizations. Professionals have more bargaining power than industrial workers.
Unlike labor Unions which are seen as a threat to the economy, protection for the better off professionals are seen as necessary to protect the quality of the services provided by the highly educated.
March 11, 2011
To barrow money to buy something gives the person selling the item money in the short run. Those who make the product and transport the product also make money. The financial institutions loaning the money charges enough interest to ensure profits on the loan and cover possible default by other barrowers.
Corporations also barrow, but to invest in a way tat will increase productivity and therefore profits. Loans are paid back giving the banks a profit. Corporations grow and expand and as long as markets hold profits increase, but with too much capital being reinvested sooner or later markets become glutted. Industry, merchants, transporters, and most of the financial enterprises see a down turn in profits this are a crisis.
Financial institutions accumulate debt, not profit, in times of crisis.
Because of pressure from shareholders for larger than reasonable dividends corporations barrow ever-larger amounts, leading to leveraged buy-outs and acquisitions and rising capital expenditures.
Capitalism run toward stagnation with Overproduction and Under-consumption is normal leading to shortages of profitable investment opportunities. This trend is always undermining production, but does not exhaust the problems of capitalism.
Government is directly involved at every level to keep the world safe for corporate investments.