Enlightened Economics

Economics for an Enlightened Age

Posts Tagged ‘Obama’

• Free Markets Need Higher Consciousness of Participants

Posted by Ron Robins on October 20, 2012

By Ron Robins. Re-published October 20, 2012. First published March 3, 2011, in his weekly economics and finance column at alrroya.com

Governments are repeatedly asked to create laws and regulations to restrain ‘free’ markets. Of course the failure of free markets is not usually the markets themselves, but it is often the character, or lack of it, of the individuals participating in those markets.

Some individuals or companies having gained powerful monopolistic or oligopolistic market positions make unseemly profits by exploiting their market power. Sometimes using abhorrent methods, they drive out other market participants and/or create major obstacles to bar new market entrants. Looking to recent US experience concerning its financial markets is insightful. But what is revealed about the character of the market participants there is found to a lesser or greater degree in markets everywhere, and in every country.

The 2007-10 US financial crises epitomizes the fact that free markets often give rise to behaviours by individuals where, in the quest for financial gain, they lose any sense of moral direction or mental discipline. They display a disregard for ethics, honesty and integrity.

Confirming that widespread loss of ethics was at the heart of the US-based financial crises is a January 2011 report by the US government’s Financial Crisis Inquiry Commission. A central finding was that, “there was a systemic breakdown in accountability and ethics at all levels.” By ‘all levels,’ the Commission refers especially to US government regulatory oversight agencies as well as to the financial institutions.

However, for the roots of such poor ethics you need only look at the behaviour of students in the US school system. It seems that cheating by students has grown alarmingly in US schools, colleges and universities in recent decades. The highly respected US Educational Testing Service says that “while about 20 per cent of college students admitted to cheating in high school during the 1940s, today between 75 and 98 per cent of college students surveyed each year report having cheated in high school… [and the] profile of college students more likely to cheat: business or engineering majors [and] those whose future plans include business.”

Such high levels of cheating especially in US schools associated with business education appear to suggest the schools are relatively tolerant of it. Thus, the students probably infer that cheating might be worthwhile in their business careers too.

When so many people accept cheating and dishonesty as normal, problems can become huge in number. And in working out their problems Americans frequently resort to adversarial methods using lawyers to solve their issues. As a result, the US is the most litigious society on earth with one lawyer for every 265 people, compared to one lawyer for 400 to 1,400 people in most western European countries.

Thus, the full costs to US society of poor ethics and undisciplined behaviour are immense, though difficult to quantify. In particular, they include the costs of administering, policing, and complying with numberless laws and regulations at all levels that stifle economic and societal progress.

President Obama is presently campaigning to reduce the number of government regulations that impede business efficiency. Yet, while in office he has added an inordinate number of new laws and regulations, as much or more than any other US president. Consider the many, many thousands of new laws and regulations alone in the Dodd–Frank Wall Street Reform and Consumer Protection Act (to purportedly stop a repeat of the financial meltdown) and the Patient Protection and Affordable Care Act (a massive, complex restructuring of US healthcare).

However, there is a way in which the numberless laws and regulations can be reduced and thereby promotes freer markets and greater prosperity for all. It requires that the individual acts in ways that he or she knows are right and ethical first, and that the gain or loss of any action is secondary. Hence it is a matter of individual consciousness.

In most religious and cultural traditions, honesty, not wronging others, etc., are central tenets. Also, most religions proclaim that if you harm others, the harm comes back to you one away or another, thereby reducing the temptation of unethical activities. However, even people who are non-religious would generally subscribe to the ideas of honesty and not harming others. Such behavioural guideposts help form the foundation for any civilized society. Thus, individuals acting with a high degree of consciousness would make the need for many laws and regulations redundant.

Americans should realize that their systemic problems of debt, deficits, structural economic deficiencies and loss of world standing, are at least partly due to a breakdown in their own individual and collective consciousness. If the US wants to regain the promise that true free markets can offer—and with fewer laws and regulations—they must ensure that its citizens aim for a higher consciousness: one of ethics, honesty, integrity and mental discipline. Though the example depicted here is the US, similar circumstances exist in countries everywhere.

For the US and all countries, it is not that free markets are bad and must be regulated. Regulations can be much reduced or even eliminated, if the markets are populated with individuals of higher consciousness and disciplined minds. Then that ‘invisible hand’ which guides all free markets can work its magic in creating sustainable prosperity and economic equity for all.

Copyright alrroya.com

Posted in Consciousness/Psychology, Spiritual | Tagged: , , , , , , , | Leave a Comment »

• Americans Say it’s Still a Recession—or Worse!

Posted by Ron Robins on June 21, 2011

By Ron Robins. First published June 1, 2011, in his weekly economics and finance column at alrroya.com

Why don’t Americans believe Mr. Ben Bernanke, the chairman of the US Federal Reserve, that the economy is growing and getting better? Americans are right not to believe him and the Obama administration that the economy is on the verge of significant and sustained growth. Past predictions by these parties have either been flat out wrong or overly optimistic. Hence, Americans are not fooled and their own experience tells them that the US economy is still in recession—or worse.

They see the reality every day of joblessness and increasing poverty, and hear about out of control government deficits and debt. They know that massive deficits and debt can only mean belt tightening and increasing taxation ahead—resulting in even higher joblessness.

In a Gallup poll published April 28, Gallup found that, “more than half of Americans (55%) describe the U.S. economy as being in a recession or depression… Nor does it seem likely that — given surging gas and food prices — most would agree with the Committee [the Federal Reserve’s Open Market Committee] that ‘longer-term inflation expectations have remained stable and measures of underlying inflation are subdued.’”

And Americans are not convinced that cutting the federal government’s deficit will create jobs. A New York Times/CBS News poll on April 21 reported that, “for all the talk from Congressional Republicans and Mr. Obama of cutting the deficit as a way to improve the economy, only 29 percent of respondents said it would create more jobs. Twenty-seven percent said it would have no effect on the employment outlook, and 29 percent said it would cost jobs…”

Most Americans are also beginning to understand that despite the huge growth of corporate profits and executive pay in recent decades, their pay has been left far, far behind. And this adds to their belief that the economy for most Americans is one of continuing and growing recession.

On March 16 Yahoo Finance noted that, “since 1973, the median take home pay of full-time workers is virtually unchanged on an inflation-adjusted basis. [That] the top 11,000 households in America have more income than the bottom 25 million. [And] since 1976, 58% of real income growth has gone to the top 1% of Americans… ” Jeffrey Sachs, professor of economics at Columbia University, says in the article that, “we’ve reached the greatest income [and] wealth inequality in history… the people at the top buy the politicians… All of them – all parties. Everyone is in the hands of the super wealthy.’”

However, the above inflation adjusted median take home pay situation of full-time workers is probably even far worse than depicted. Unfortunately, the take home pay data above is discounted by US government inflation statistics which have had numerous ‘modifications’ over the years that cumulatively, effectively, and dramatically, have lowered the inflation rate from what it would otherwise have been. With a higher inflation rate, the real take home pay in the above analysis becomes almost miniscule.

For many years now, the current US consumer price index (CPI) no longer measures the prices of a fixed basket of goods and services. To understand what the CPI really is, see my post, Unethical Statistics Lead us Astray. Shadowstats.com has created their SGS Alternate CPI which they say is a true “measure of the cost of living needed to maintain a constant standard of living,” and it is now running about 10 per cent higher than a year ago. That compares with nominal wages increasing only around 2 per cent over the same period, according to the US Bureau of Labor. No wonder that Americans feel they are still in a recession—or a depression.

Adding to Americans’ sense of economic distress is that the US job market is becoming one of lower paying jobs. In 1980, the US had a plethora of middle income jobs—about 75 per cent more than low income jobs. However, by 2010, the number of middle and low income jobs were almost even at just over 40 per cent each of America’s job market, as reported by Sherle R. Schwenninger and Samuel Sherraden in, “The American Middle Class Under Stress,” released by the New America Foundation on April 27.

Schwenninger and Sherraden also report that, “wages and salaries have fallen from 60% of personal income in 1980 to 51% in 2010. Government transfers have risen from 11.7% of personal income in 1980 to 18.4% in 2010, a post-War high… [and] America’s social wage has been eroded by the rising cost of health care and education. Health care spending increased from 9.5% of personal consumption in 1980 to 16.3% in 2010… The average cost of one year of college… after adjusting for inflation… has risen 72% since 1990… ”

They continue that, “household net worth declined from $65.7 trillion in the second quarter of 2007 to $56.8 trillion in the fourth quarter of 2010… At the end of 2010, 23.1% of all residential properties with a mortgage were underwater [home value being less than the principal left on the mortgage]… Over the past three decades, household debt as a share of disposable income increased from 68% to 116%.”

The data is irrefutable that Americans are suffering financially in ways they never before imagined. While the rich get richer, they get relatively poorer and ever more dependent on debt and government handouts. No press conferences like the one on April 27 by Mr. Bernanke, or government propaganda, will convince suffering Americans that the ‘system’ has not been rigged against them, or that there is the possibility for any substantive improvement ahead. It is no wonder that most Americans believe that the US is still in recession—or worse!

Copyright alrroya.com

Posted in Economics, Labour Issues | Tagged: , , , , , , , , , , , , , , | Leave a Comment »

 
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