A New Theory of Socio-economics
by Robert DePaolo
While the current economic crisis is daunting it is not surprising. Whether you are the sole proprietor of a hardward store or the president of General Motors you will know that recessions happen every seven or eight years. They happen in all societies. They happen regardless of which political party is in office. They happen whether the economic emphasis is on Adam Smth (conservative) economics or Keynesian (liberal) economics.
In the U.S. they have occurred under Presidents Hoover, Roosevelt, Johnson, Nixon, Carter, Regan, Bush I and now Bush II. If one examines the financial history of this country it becomes clear that there is no direct correlation between economic philosophy and economic stability. Although liberal and conservative theorists tend to portray themselves as financial saviors during times of financial crisis - and often succeed - it usually turns out that their success is only temporary. Most of the ideas purveyed by Marx and Engles in Das Capital are foolish, but one that has stood the test of time is the notion that a capitalist system will tend to enter into a recession every decade or so.
A new administration is coming into power, and despite a "move to the center" soon-to-be president Obama will have to eventually settle in on an approach; one that differs substantially from that of his predecessor. Otherwise, aside from appearing disingenuous, he will have propagated the same policies that ostensibly led to the current crisis. In effect he has no choice other than to wax Keynesian.
He might well succeed. For example one could argue the wealth has become skewed in one direction over the past decade, leading to less disposable income for the lower middle class. The combination of less income and Smith's central contention that "man is an acquiistive, material creature" would naturally lead to consumers spending beyond their means. In that context, the current situation could aptly be called a credit-fueled crisis. The homeowners who could not pay their mortgages through Fannie Mae and Freddie Mac crashed. So did the automobile manufacturers, the lending corporations and the banks. All believed in the myth of endless prosperity; the notion that if one hangs in there long enough, the bills will somehow get paid. Such a belief is pandemic among young adults in particular, who grew up in a flimsy, self indulgent culture where using one credit card to pay off another...then another to pay of that one, was not only acceptable but de rigeur.
With that in mind, it might be time to create a new socioeconomic theory that can provide long term stability. One that is regulated instrinsically,that is, by virtue of its operative mechanisms. Before discsussing this idea a few items ned to be considered.
It was implied above that human behavior is what drives an economy. Socialism fails because it disregards completely the need for individuation in human development. A free market economy also rises and falls in accord with human nature. Smith was partially correct - indeed he was amazingly prescient about human nature for a pre-Freudian thinker. Man is material and acquisitive. Even the Neanderthals and early humans made, bought and traded amulets, ornaments and other products amongst each other. But there's more to us than that. We are materialistic for specific reasons. One has to do with an ancient phenomenon that precedes not only publication of the Wealth of Nations but the evolution of homo sapiens. It is the primate hierarchy, and it is founded on the idea that social status leads to enhanced mating opportunities as well as power and influence within the group.
That's where Smith fell short. His assumption was that companies competing in a free market environment would be forced to lower prices and produce better products in order to sell more goods. He also presumed that companies that did not do so would not, and should not survive. Underlying his theory was the premise that consumers would naturally be inclined to buy cheaper products or products of higher quality. His vision was of a consumer-regulated marketplace and like all aspects of politics in a democratic society, it depended - absolutely depended - on the common sense of the people.
With the advent of mass communication and advances in the advertising field, that notion has been largely dispelled - so too has Smithonian economic theory. Turns out poor people in the ghetto will find a way to purchase $90 basketball shoes for their kids, even if they can't pay the rent that month, even if there is no difference in quality or durability between that pair and one that costs $15, especially if a famous athlete endorses the shoe. The influence of television, radio and other media has refuted Smith's presumption of frugality.
His contention that comptetition would regulate markets hasn't fared very well either. The price of gas rarely differs from one establishment to another. With the exception of Wal-Mart, few companies even purport to compete. Many operate under the assumption that upscale products sell better - that image rather than budget drives consumer behavior. So companies grow, universities expand, franchises proliferate until one has what amounts to a series of deliterious industries, grown so large and influential over the economy that government cannot allow them to fail. That's neither Smithonian nor Keynesian. And as we've all seen it can be dangerous.
Meanwhile rhe liberal approach offers one incredibly flawed and dangerous premise - the govenment should, for the sake and safety of the people, control more ot the wealth, including spending it in targeted areas to prop up the poor. It is a humanistic idea but its downside can be captured in three words - declining human motivation. Even a freshman psychology student knows that when the reinforcer is taken away the behavior tends to extinguish. Taking away reinforcers from the producers of jobs and goods will inhibit production. hiring, expansion and ultimately end up hurting th every people government purports to help.
For those reasons it could be argued that neither system works, certainly not over an extender period of time. The question is what to do about it. If all we have are two options the flaws of both will recur every decade or so. Unless people come to anticipate this and "store nuts" in the interim - a practice now discouraged, because spending stimulates the economy whereas saving money detracts from it - the same old problems will crop up..
It is difficult to get off a roller coaster while it's moving but not impossible. It simply takes some innovative thinking.The innovation here is based on a new approach called parallelism.
The current socio-economic menu features socialism, capitalism smd communism. One could argue that these are forms of goverment rather than economic systems but in fact the main principle inherent in any political theory is the alotment and regulation of property. Parallelism is offered here a new item on the menu. It differs from the other formats in the following way. Capitalism entails a clear separation between government and business. Othe than the Fed, anti- trust laws and some internal requirements for corporations such as limits of practice. independent board members and stockholder rights and privileges, corporations are free to operate on their own. Socialism involves government regulation - based on the idea that since the market affects people and nations it cannot be allowed to operate freely. The former costs government less - theoretically maximizing its revenues via less involvement and spending in business affairs and ultimately more tax revenues from growing companies. The problem is that its relatively laissez fair approach leads to monopolistic practices, higher prices, inlflation and excesssive and potentially destructive consumer behavior.
Socialism involves spending a lot of money on various public projects and social support programs but diminishes entrepreneurial motivation so that ultimately revenues decline and the ranks of the "needy and helpless" increase.
In contrast, parallelism involves the government actually going into business to compete with companies - primarily as a means of maintaining Smithonian consumer frugality, but also to offer a system of costs, product availability that is always in line with the cost of living. In addition, its advertising standards would be concrete and definitive - in each case, and for each product, the list would include the exact materials used, the cost of production and the profit margin - all for the consumer's perusal.
Now, as in geometry, parallel lines do not by definition intersect. That means the government companies would not influence or regulate private businesses. There would be no capital gains tax, low corporate taxes per se and in general a hands-of style. he government would not over- regulate and it would not ignore - it would compete.
The government company would have a flexible hiring format for the unemployed and/ or indigent so that welfare support and unemployment benefits would be less necessary and costly than now. Worklng out of the home would be one option.
Parallelism offers another perk - the government would be making money rather than merely spending it by virtue of its various enterprises. It would not offer the same wages as a corporation, nor should it, because the point is not to outcompete private companies. It would adhere to a cost of living standard in its prices, its wages and its benefits so that no one who works there, whether by choice or necessity should expect to become well off. It would be a productive and regulatory means of survival for people in financial difficulty.
The obvious question becomes, what if private companies can't compete and go belly up in droves? There are two answers to that question, both consistent with conservative economic theory. The first is that private companies would have to either contain costs and/or develop better products than the government company. That would keep them smaller so that A. their failure would not jeopardize the economy per se and B. as a result of being small more companies would crop up to compete, which would lead to more jobs in more locations around the country, with fewer pocket recessions resulting, as seen in recent times in the middle American states.
Other safeguards could be put in play. For example very flexible standards for declaring bankruptcy, grant monies for companies on the rebound could provided by government company assets and other sources.This could make for a more flexible fail-and-rebound process, as well as rescuing the unemployed, lowering the cost of health case, fuels, and other goods while freeing up well run companies to (in paraphrase of Jefferson's theory of the natural aristocracy) succeed in proportion to their talents and motivations).
About the Author:
MS Clinical-Neuropsychology. Thirty years experience in fields of neuro/clinical and school psychology. Professor New Hsmpshire University System for twenty years. Currently working as school psychologist. Author of four books, several plays and president of film making company Media Milestones.
Article Source: ArticlesBase.com - A New Theory of Socioeconomics
Posts
