Wednesday, September 17, 2014

Should We Go or Should We Stay Now: Can Scotland Escape the Status Quo Trap?


Two days to go before the Scots will decide in a referendum whether to create their own independent country or to continue as part of the United Kingdom.
Apparently, the upcoming result is too close to call.  Although the "No" side had a substantial lead six months ago, the "Yes" vote has increased substantially as the date of the referendum approaches.

But is it enough?

I'm very sad to say that I don't think so.

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The arguments to create a new independent country free from the dysfunctional governance of Westminster and the City couldn't be clearer.  I would highly recommend George Monbiot's excellent op-ed piece, "A yes vote would unleash the most dangerous thing of all -- hope".

But these reasons to vote yes are not sufficient to carry the day.  Unfortunately, there exists in Scotland a large bias towards the status quo that is simply part of human nature.

In short, better the devil you know than the devil you don't.

It's that simple.

Forget the value of the oil in the North Sea, whether an independent Scotland could continue to use the pound, and what happens to Scotland's share of the UK's accumulated debt.

The real ballot box question is whether independence is worth the bother.

If the Scots decide yes, they'll have to deal with a lot of shit that is now being decided for them at Westminster and in the City.  Certainly, things will become a lot riskier for the Scots and there are no guarantees that life will become better.

So, given the uncertainty, why not let the status quo remain?  Life ain't all that bad.  Have a cuppa and watch a wee bit of what's showin on the tele.

Robbie Burns must be rolling in his grave.







Wednesday, September 10, 2014

The American Rentier Economy: Has the US Become a Failed Nation?



 
When I first started to write this blog five years ago, to make the point about how the concept of the economy is used to the detriment of the vast majority of the population I distinguished between the real economy and the zombie economy.  Essentially, those who derive their wealth from non-productive financial practices prey upon the living who exchange real goods and services in the real economy.
 
To be more precise, I now prefer to use the term rentier economy because although the practice of wealth extraction is still the same, the term rentier has been used for a great many years in traditional economic discourse.

In a great article posted on the web, The Age of Rentier Capitalism, Guy Standing asserts:

Rental income enables people to make money simply through the possession of scarce assets. Sometimes assets may be “naturally” scarce: if fertile land is owned by a few landlords, they need not work themselves but can rent it out to others for a high price. This income is rent, not profits from a productive activity, as the landlords do nothing to earn it aside from owning the land.

These days, rental income is mainly derived from “contrived scarcity.” This is explained by the Lauderdale Paradox, named after the eighth Earl of Lauderdale, who in 1804 observed that as private riches grew, public wealth fell. This is because the more the rich own, the more they can limit the availability for others, driving up the price. Today, such contrived scarcity has become pervasive and global, which is paradoxical, since globalization should have resulted in a surge of extra goods and services.

While there are indeed more goods and services than ever, the means of obtaining rental income have multiplied. They include control of natural resources by a few corporations and plutocrats, a new intellectual property regime, a system of state subsidies that go to asset holders, and myriad mechanisms that entrap people in debt.

Importantly, today there is a greater return on investment from seeking rents and the exchange of financial securities than from the profits generated from the exchange of goods and services.  This means that there is less money that gets invested into economic activities that require human labour.

 
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For instance, entrepreneurs who become billionaires as a result of their business acumen no longer need to maintain their entrepreneurial skills once their accumulated financial assets generate more profits than their businesses. 
 
Once this happens they can successfully cash in their chips by selling off their shares in their business adventures and live in extreme comfort from the rents that their financial portfolios generate.

Moreover, the CEOs of America's biggest corporations earn more from their stock options and their subsequent manipulations than they do from salaries generated from the profitable management of real assets in the real economy.

As a result, corporations now imitate the members of the rentier class.  Just as the
ultra-rich transfer their financial assets to offshore tax havens to avoid paying taxes in the countries where they reside, corporations now transfer the location of where they are legally incorporated, moving the legal entity offshore to as well avoid paying taxes in the countries where they first prospered.

Like rentiers, American corporations are now sitting on huge piles of cash, estimated at more than two trillion dollars, with no intention of investing in real economic activity, which has effectively reduced the cash flow into investments that would generate jobs.

The economic term that describes this state affairs is "secular stagnation",  a condition of negligible or no economic growth in a market-based economy, a term, in my opinion, as hollow as "collateral damage" which is used to describe the unintended civilian casualties caused by a military operation.

In this case, the civilian casualties are those unlucky enough to be living and working in the real economy.  The damage inflicted upon their lives results from the unbridled greed of those who profit from the machinations of the rentier economy, which, however, is anything but unintended.

Given this state of affairs, it makes me wonder whether the US is heading down the road to become a failed nation, one in which extractive economic practice overwhelms any attempt to bring about inclusive economic policy.

I don't think that it would take much to convince the estimated 46 million people living on food stamps in the US that the nation has already failed them.