The broken capitalist economic engine

When there are widespread economic and related financial insecurity and anxiety, the majority of the working class is too deprived, distracted, detached, disenfranchised and/or disillusioned to pay attention, and more importantly, feels too powerless to deal with important problems afflicting our society, including climate change.  Therefore, it is paramount that we relieve our collective economic stress first.

We all know that our economy is sick.  The current economic diagnosis is weak economic growth accompanied by rampant underemployment. One symptom is proliferation of non-living wage jobs, expanding the working poor population and dampening overall consumer demand.  One cause is Artificial Intelligence and robots replacing human labor.  But the major cause is massive income inequality with newly created wealth disproportionately flowing to the rich minority, exacerbating the vicious cycle of diminishing money multiplier effect.

The success of capitalism predicates on a money-churning machine, working with the four prerequisites of the economy: demand, supply, market and exchange medium (money).  Money has to be fed continuously into the capitalist economy machine to produce more money by churning over and over again so as to keep it going.  When money investment goes into the machine, it jumpstarts the exchanges between demand and supply.  The more exchanges there are in the free market, the more money will be created by the money multiplier effect.  If the newly generated money keeps going back into the machine, it can theoretically keep going and even keep growing.

However, this capitalist money-churning machine has its constraints.  Just like any machine, it has to be calibrated exactly in order to work smoothly and satisfactorily.  The previous successful run was during the Post-World War II economic boom, known as the Golden Age of Capitalism in the U.S.  When public investments from the government poured into the economy, spurring the demand and supply of everything under the sun during that time, most people got a job and a decent paycheck to go on a spending spree, thereby fueling the capitalist money-churning machine, under a stable political, social, economical and natural climate, with much lower income inequality.

Back to the present, there are multiple factors preventing the machine from working properly.  The most obvious and damaging impediment is the growing income inequality gap.  With the rich taking the majority of the money gains from the machine and stashing them away in secret offshore accounts or in investments like expensive art collections, luxury goods and services, etc that do not spread wide, it slows down the machine.  When there is less money around, demand automatically goes down and thus supply.  The less exchanges there are, the less money will be churned and created by the money multiplier effect.  Inevitably, the money-churning machine will sputter and possibly stall altogether.

Unfortunately, that is only one of many ailments that afflicts the machine.  Many ingredients are needed to match the demand and supply properly to facilitate the exchanges.  On the demand side, human physical needs are much easier to manage than human wants.  Humans need food.  We know what humans will eat and like to eat.  Therefore, we know what to supply accordingly.  But human physical needs are finite, so we turn to the infinite human wants to boost the exchanges in the machine.  Currently, humans do not need iPhones, but a lot of them want iPhones.  Therefore, Apple supplies accordingly and does well.  But nobody knows for sure what most humans want or demand next.  So the suppliers who guess right will survive and those who guess wrong will suffer and fail.  For those who fail, they are faced with a phenomenon called creative destruction, which inflicts a lot of collateral damages in the process without remediation, and therefore harms the money-churning machine.  The rate of creative destruction is higher when the economy or the money machine is slowing than when it is speeding up.

On the supply side, there are many additional challenges to overcome on top of unpredictable human wants.  Money is the first resource input for a supplier so that it can afford to start the process.  Natural resources are needed to provide materials for physical goods.  Technical resources are needed to operate machinery, equipment, technology, etc.  Human resources are needed to manage and execute the required processes.  Logistical resources are needed to bring goods to the market. Any deficiency or shortfall of the aforementioned can cause a supplier to fail and join the line of creative destruction.

Lately, multiple resource fronts have been facing headwinds.  Finite natural resources are continuously being depleted and contaminated, thereby harder and more expensive to source.  Technological advances and automation may increase productivity but replace workers and reduce their wages, thereby displacing the money flow for the money machine.  The labor force is not educated enough and skilled enough to take on newly created technical jobs, thereby is stuck being unemployed or underemployed, especially without adequate public investment in education and job training.  Logistical advances, like drone delivery, self-driving cars and trucks, online shopping and delivery, sharing economy, etc are disrupting traditional industries and speeding up the process of creative destruction.

This is only one simple snapshot out of all the challenges for the proper running of the money-churning machine, considering all the other problems under capitalism.  All the above can be considered the internal factors.  The external factors, which include the prevalent political, social, economical and natural climate, are no less daunting.  Just the increasing income inequality alone has directly and indirectly caused the destabilization of the political, social and economical norms around the world in recent years.  Of course, the elephant in the room is climate change, which poses our biggest existential threat, including the money-churning machine.

When we think about or talk about fixing the capitalist economy or its money-churning machine, there are just too many moving parts that have become harder and harder to calibrate and synchronize to work properly, especially when the plutocrats have been messing with it and sabotaging it for such a long time.  Take higher tax rate for the rich.  If they can write off most of their wealth with fancy accounting gimmicks or hide their income in secretive offshore accounts, that money cannot be taxed.  Take closing the trillion-dollar-plus infrastructure investment gap or any other major public investment projects.  The federal gas tax has not been increased since 1993 thanks to the Republican deficit hawks and whatever amount, if any, may be allocated by the government will be underwhelming to make a difference. Take universal basic income.  It will never happen in the U.S., especially with the Republican Party contingent.  Even if it does hypothetically, the U.S. budget cannot afford a significant amount and it is not a permanent or even effective solution.

Universal Basic Income (UBI) has been hailed as the remedy for income inequality and may help in the short term by injecting money into the economy quickly but does not change the long term economic calculus.  Purely from the money-churning machine viewpoint, unless the total UBI is coming from the wealth skimmed off by the rich and matches an equivalent amount, there will not be a net increase of money inflow into the machine.  Absent other structural changes, UBI is just an illusion of hope.  Besides, it will completely dismantle the work ethic.  When you pay people money without demanding them to work, there will eventually be class warfare between the workers and non-workers.  Inevitably, people with UBI will also be reluctant to sign up for the essential but menial and back-breaking jobs with low pay, e.g. farm workers, trash collectors, janitors, etc., and robots will not and cannot replace all such jobs.  The smarter, more sensible and more responsible alternative is to give everyone a job and enforce job rotation so that he/she can earn his/her livelihood and also contribute to the society with a sense of worth and purpose.

Such a holistic cure would involve re-engineering economically self-sufficient, sustainable and resilient communities anchored by local need-based and non- or low-profit economic entities that provide critical and essential goods and services, like food, water, shelter, energy, healthcare, security, transportation, communication, education, etc.  All their proceeds will be used to offer universal lifetime employment with a standard living wage to local residents who will now have economic security and will financially sustain the local economies and governments.  Such local arrangement will also have additional benefits of worldwide application and built-in resilience and protection against other external threats like climate change disruptions, etc.

The major flaw of the capitalist economy and its money-churning machine is being unsustainable.  That is why the NATORZ economy is structured differently to avoid all these problems and with built-in sustainability.  The NATORZ economic model does not rely on the money-churning machine, except initially, to wrestle and secure the resources from the existing economy to jumpstart the NATORZ economic base.  When NATORZ forgoes the want-based industries in the capitalist economy, there will be extra human, material and financial resources for its need-based industries, to make them G.R.E.E.N. (Good for the human Race, Environment, Economy and Needy), sustainable and climate change friendly, or in our word, ‘natorized.’  When NATORZ socializes all the economic costs and economic gains, there is no need to grow its economy, making it truly sustainable, self-sufficient and resilient. This leads to the birth of Natoronomics.

Natoronomics is the branch of knowledge that underpins and directs all NATORZ economic activities and goals pursued by the Nature Order Zociety and its members, by adhering to the NATORZ Doctrine, and by aiming at making all aspects of the NATORZ economy become ‘natorized,’ meaning being G.R.E.E.N. (Good for the human Race, Environment, Economy and Needy), sustainable and climate change friendly.  Natoronomics promotes the NATORZ ethos of ‘work to live’ which will replace the capitalist ethos of ‘live to work.’

 

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