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Capitalists seem uninterested in capitalism—in supporting the development of market-creating innovations.

- Clayton M. Christensen and Derek van Bever,  The Capitalist’s Dilemma, Harvard Business Review, June, 2014

Fourteen years ago, the 1% got the tax breaks and regulatory rollbacks which they had repeatedly assured us would usher in an era of boundless prosperity. What was ushered in instead was the worst economic disaster since the Great Depression - an ongoing disaster that is exacerbated by the austerity-mongering neoliberal vampires who still control our economy.

Now, even the Harvard Business Review is calling out the neoliberal nonsense about "entreprenuers", pointing out that the short-term view of the financial markets values "disruptive innovation" less than "efficiency innovation" (i.e., cutting jobs).

When the man who invented the term "disruptive innovation" (Clayton Christensen) says captialism does not value his brainchild, you know that Wall St. has jumped the shark.

Now, Christensen did not discover innovation. He merely named a certain variety of it, prevalent in the Silicon Valley companies he studied in his landmark book, The Innovator's Dilemma.

Christensen is a good teacher. Unlike most business school writers, he actually clarifies the topic he is writing about, as opposed to burying it in jargon, like  Theory Z. In the article I'm referencing, he sub-divides innovation, and thereby uncloaks for us how the business jargon has mashed true innovation together with cost-cutting. (Sorta the same way today's Democratic Party has mashed progressivism together with corporate welfare.) Christensen defines three kinds of innovation:

Performance-improving innovations replace old products with new and better models. They generally create few jobs because they’re substitutive.

Efficiency innovations help companies make and sell mature, established products or services to the same customers at lower prices.

Market-creating innovations, our third category, transform complicated or costly products so radically that they create a new class of consumers, or a new market.

Then, he goes on to essentially say that one of the fundamental tenets of capitalism, a tenet that underlies the austerity mania, is no longer true:
A fundamental tenet of economics is that some of the inputs required to make a product or service are abundant and cheap—like sand. We don’t need to account for such inputs and can waste them, if need be. Others are scarce and costly and must be husbanded carefully. Historically, capital was scarce and costly. So investors and managers alike were taught to maximize the revenue and profit per dollar of capital deployed.

While it’s still true that scarce resources need to be managed closely, it’s no longer true that capital is scarce. A recent Bain & Company analysis captures this point nicely, concluding that we have entered a new environment of “capital superabundance.” Bain estimates that total financial assets are today almost 10 times the value of the global output of all goods and services, and that the development of financial sectors in emerging economies will cause global capital to grow another 50% by 2020. We are awash in capital...witness the $1.6 trillion in cash on corporate balance sheets.

People have been pointing to all the unspent capital, which politically-aware people understand is just parked until the crooks can buy a tax-amnesty. (I would add the estimated $20 Trillion parked in tax havens by the super-rich over the last 30 years.) We should be shouting what Christensen says:
it’s no longer true that capital is scarce.
Therefore, austerity can be seen as a form of looting - privatization (and subsequent under- or dis-investment in public assets) and the ruthless extraction of the life savings of the middle class, as it struggles to keep its head above water.

In an almost Marxian analysis of contradictions, Christensen points out how the mis-measure of what is scarce by Wall St. is killing capitalism:

financial markets—and companies themselves—use assessment metrics that make innovations that eliminate jobs more attractive than those that create jobs...

All of this makes market-creating innovations appear less attractive as investments. Typically, they bear fruit only after five to 10 years; in contrast, efficiency innovations typically pay off within a year or two. What’s worse, growing market-creating innovations to scale uses capital, which must often be put onto the balance sheet. Efficiency innovations take capital off the balance sheet, however. To top it off, efficiency innovations almost always seem to entail less risk than market-creating ones, because a market for them already exists...

We would contend that the ability to attract talent, and the processes and resolve to deploy it against growth opportunities, are far harder to come by than cash. The tools businesses use to judge investments and their understanding of what is scarce and costly need to catch up with that new reality.

This insight did not originate with Mr. Christensen. Even a lowly mug like me diaried about this problem in the biotech industry three years ago, with a title that is a paraphrase of Christensen: Innovation isn't profitable enough for the plutocrats. This same analysis was done by the late Jane Jacobs in her 1969 book, The Economy of Cities:
One of the most expensive things an economy can buy is economic trial, error, and development..."Expensive", of course, does not mean "wasteful". Develop work pays; indeed an economy does not continue to pay its way without development work, unless by a gradually declining standard of living among many of its people. Nevertheless, economic development is expensive and when development work is skimped or obstructed, large amounts of capital thus become available for other uses instead....

In sum, when the development of a formerly strong economy is neglected, so much capital becomes available for unproductive purposes that it is almost an embarrassment. People are hard put to devise ways to use it. The society seems extraordinarily affluent for a time, and in a way it is. For the society is economizing on one of the most expensive things it might otherwise buy. All sorts of philanthropies, extravagances and displays of vainglory become possible.

In America's case, the unproductive purposes began with the 50 year long real estate Ponzi scheme that was the build-out of suburbia and exurbia, as James Howard Kunstler has chronicled over the years. The rest of our surplus has been channeled into the Wall St. gambling casino, the rise of a predatory class of financial capitalists, and a bloated military/intelligence/police budget. (In a later book, Cities and the Wealth of Nations Jacobs lists unremitting military spending as the fastest way to wreck an economy.)

At this point in time, after more than 30 years of government bashing, money worshipping, and general anti-democracy propagandizing, we have reached the point where the only way to treat the corporate conversation about what is wrong with our economy is to call it either delusional self-interest or outright class warfare. Christensen calls the emphasis on austerity a mistake.

I call it class warfare.

So does Michael Lind. I diaried about this in Plantation ownership, it's not just for Southerners anymore. Lind lays out the inefficiencies, lack of investment in innovation, and the extraction of value by sweating labor that is the stock in trade of the new business model.

The mentality of the (today's) businessman is that of the pre-modern "seignurial" elite...It is not an industrial capitalist mind-set at all, but the mentality of the Spanish conquistador, who dreamed of quickly acquiring fabulous wealth by plundering precious metals...

(Today's economics) is based, like pre-industrial agrarian economics, on extensive development...Growth results from the employment of the same primitive, wasteful techniques...on additional resources...The free-market law of supply and demand, according to which reductions in the supply of land and labor should stimulate an increase in the demand for efficient technology , can be evaded by the addition of more land or the enlargement of the workforce by immigration or the expatriation of industries to new countries.

So, with all due respect to Mr. Christensen, these guys are thugs and looters. Your polite attempt to point out they are killing the goose that lays the golden eggs will get no traction with conquistadors. They will continue to suck America dry while looking for the next target overseas.

Still, its nice when I get to use the HBR to bash the financial fundamentalists.

Originally posted to ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement on Sun Jun 15, 2014 at 08:34 AM PDT.

Also republished by Occupy Wall Street and Progressive Capitalism.

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Comment Preferences

  •  Holy cripes, reading that Jane Jacobs quote was (78+ / 0-)

    discomfiting.  She was either unbelievably prescient, or had a keen sense of the downward slouch of the twentieth into the twenty-first centuries.  Either way, the question is, how do we get out of this mess?

    That's one more thing to add to my long list of small problems. --my son, age 10

    by concernedamerican on Sun Jun 15, 2014 at 08:41:51 AM PDT

    •  Yes. She was a great mind who had the misfortune.. (91+ / 0-)

      to live at the time big money created a phony Nobel prize in economics, and the super-rich made Milton Friedman into a saint, and supply-side economics into a sacrament.

      There is so much wisdom and clear thinking in her books. As I was reading the Christensen article, I kept saying that I had heard all of this before. Sure enough it was Ms. Jacobs.

      I miss her.

      •  Kudos for bringing back Jacobs (74+ / 0-)

        She was a heterodox economic thinker whose clear vision and ability to describe reality in plain English was deeply threatening to the orthodoxies of the day.  I don't know why her books didn't spawn a real alternative to current economic dogmas, but she was successfully squelched.  A renaissance of her ideas would probably put us much closer to the right track for rebuilding our society than our current lost way.

        The death of jobs to technology, and the conversion of labor-intensive work to slave-labor countries are creating an economy that won't work for American citizens.  The "surplus of capital" is the result of hoarding by oligarchs of the wealth stripped from our dying middle class.  The solution will be to take that wealth back and redistribute it to the people:  rebuild the middle class, in other words.  Whether this comes from a guaranteed annual income financed by high taxes on the wealthy and corporate profits, major infrastructure rebuilding projects conducted by government and financed by same, or some other method, we will have to find a solution.  Middle classes have come and gone a few times in this country, and it's long past time to talk about inventing the next one.

        We have always been at war with al Qaeda.

        by Dallasdoc on Sun Jun 15, 2014 at 09:15:36 AM PDT

        [ Parent ]

        •  She talked reality instead of abstraction (41+ / 0-)

          In an era when "obfuscation by mathematization" took over the debate among economists, her readable, common-sensical, yet deepy radical thinking was easy to marginalize.

          I have all her books, and re-read them almost as much as I re-read my tattered copy of Hannah Arendt's "The Origins of Totalitarianism".

        •  Two things are going on (35+ / 0-)

          the massive capital was created by "innovative" products in the first place (derivatives, etc.), the reality of which even the innovators doubt.

          Second, that creating jobs is messy.  Having employees is messy.  If you can just make money by having money, why bother with creating job making products and instead just create innovative financial products?  This is Piketty on steroids.

          David Graeber has an interesting analysis of this in discussing why we did not get the future we were foretold we would have--more leisure and better products.

          "You cannot win improv." Stephen Colbert (https://www.youtube.com/watch?v=m6tiaooiIo0 at 16:24).

          by Publius2008 on Sun Jun 15, 2014 at 09:48:10 AM PDT

          [ Parent ]

          •  I like your gist; but I'd say (4+ / 0-)
            Recommended by:
            Master Foo, arendt, rabrock, Gunnar Thomas

            the success of the "innovative products" (presumably, mortgage-backed securities/collateralized debt obligations) rested on the fact that buyers didn't get to see (or if they had seen it, wouldn't be able to fathom what it was) what was in the pretty package they were buying.

            Readers will enjoy Michael Lewis's "The Big Short" and Gillian Tett's "Fool's Gold," for descriptions of the CDOs. This was simply a case of fraud being allowed, which should have been regulated. This became clear after the 2007-2008 part of the crash, when banks refused to lend to one another, or increasingly refused to buy or sell these CDOs, because they had no idea what any bank dealing with them had on their books (or even what was on their own books).

        •  it necessarily requires land reform: (7+ / 0-)

          Let's give everyone a guaranteed income.

          Then watch what happens: the price of putting a roof over one's head increases proportionally, and you still end up with suburbs and slums, hovels and homelessness.

          We went through this before: when women came into the workforce in large numbers, at first it was liberation and equality.  Then it became "the two-income family."  Then the cost of homes, houses, apartments, and hovels DOUBLED.

          The net result was that people were right back where they started, but with twice as many hours of labor required to pay for it.  

          To be very clear about this, obviously we shouldn't return to the bad old days when 50% of Americans were denied the opportunity to use their nature-given talents to the fullest extent.  Instead we should reduce the work week to 24 hours: three 8-hour days or four 6-hour days.  We have the technology; all that we need is the sheer force of will to do it.

          But whatever kinds of reforms we adopt, one thing has got to be central:  LAND REFORM.  The cost of a roof was originally considered reasonable at 25% of income.  Great: fix it at that level.  Treat it as a utility.  It's a finite resource.  High-rise density is not the answer: raising children in a high-rise only ensures that they will be parked in front of screens rather than running, jumping, climbing, exploring with their hands and noses as well as their eyes and ears: a formula for impaired brain development as demonstrated by empirical findings with rats.  High-rises breed brain damage.  There are better ways to achieve sustainable human footprint on the land.

          As for the idea of "house as investment," that has to be consigned to the cesspool of history and replaced with employee ownership.  "Your house is your home, your job is your investment."  Mark my words, and read them again in fifty years.  This is as hard-core a truth as the fact that the earth is finite and the logical consequence that unlimited "growth" on a finite planet is impossible.

          We got the future back. Uh-oh.

          by G2geek on Sun Jun 15, 2014 at 08:04:24 PM PDT

          [ Parent ]

          •  Certain critical scarcities are being eliminated (5+ / 0-)

            I think one big problem that we need to deal with is that certain scarcities upon which the economies of developed nations are based are fading away, and the industries based on those scarcities are fighting tooth and nail to maintain that scarcity artificially.

            Energy scarcity.

            Human energy usage is about 1-2% of the solar energy hitting this planet.  Advances in solar and wind technologies are making this energy available threatening industries based on the scarcity of extracting ancient solar energy buried in the ground.

            Labor scarcity

            We can make more stuff with less labor than ever before.  On top of that automation allows even more stuff to be made with less labor.

            There is scarcity of some materials, could create a change.  Lithium and rare earth elements being the big ones of the modern era.

            But, the conclusion I come to is that the making of stuff cannot support an economy anymore.  It cannot employ enough people to create the demand for that stuff or support demand for services.  What I see is a giant pool of wasted people because there is no demand for their talent or labor.  The conservative answer that they should become entrepreneurs is bogus.  Without demand to satisfy there is no way for those businesses to succeed.

            This leads me to only one conclusion.  Government has to seed demand via two channels.

            1) Increase spending on things valuable to the public in order to employ more people directly.  I suggest infrastructure, clean energy, and research.

            2) Increase the minimum wage.  When people work they need to be paid enough to buy what they make.

            3) Reduce the work week while maintaining pay.  We don't need to spend so much time working.  More leisure time will support demand for things to do, which should be less materials intensive than stuff, while providing happiness.

            I sometimes wonder if the consumption of things is driven by the lack of time to get enjoyment elsewhere from the Arts or doing things.

            Most of this is about the first world. Not sure how to help the rest of the world because people don't like being told what to do. And, in some places replacing sustainable local farming with industrial monoculture has destroyed the place.

            •  Seeding demand by government (2+ / 0-)
              Recommended by:
              SilentBrook, Donner

              I agree with these suggestions but would add education to the list of things that we should employ more people doing.  Besides increasing the number of teachers, we ought to be increasing the number of people who are capable of helping teachers, whether as teacher's aides, tutors, or even in things not strictly academic like teaching art, music, or phys ed.  Since we are able to automate so many things, we need to devote more human attention to the area that still requires so much individual human attention: education.  People need a social environment for learning that is meaningful, which is why technology by itself will never improve our educational system.

              •  Considering people don't need to make things... (0+ / 0-)

                I think more people should be encouraged to get education, not to get a job making things, but because if people don't need to be working to make the stuff needed to survive and thrive then what should they do?

                I would say creative and intellectual pursuits.  Those kinds of pursuits require education which requires teachers and connects up nicely with your suggestion.

            •  Scarcity BS (2+ / 0-)
              Recommended by:
              indedave, arendt

              1.) Major "Rare" Earths are as common as Copper, Lithium twice as common as Lead (Wikipedia). REs are a PITA to process but pollution havens like China are OK with that. Used to be more profitable because usually comes with Uranium or Thorium, but radioactive disposal issue in US (but stockpiled in China?).
              2.) Workforce training. Republicans, Reagan thru Bush, have made Education a "for profit" business proposition while other countries' governments train our H1B hires. We need a higher Corporate tax rate to foster training and research (US companies near last in research/innovation) write-offs. Or simply stop overcharging for education.
              3.) San Fran recently hired a Chinese firm to build a defective bridge despite competent local contractors (China firm was not low bid). I mentioned a Value Added Tax, but some sort of incentive is needed by corporations to use local resources. President Obama can raise Tariffs without Congress (a Draconian option to fund the Federal Budget if Congress fails again). A high Corporate income tax with a write-off for using American labor.
              4.) Boeing would rather have employees doing overtime than hire additional employees. With Medical and other HR costs a Boeing employee costs twice the high hourly pay they receive.  (Last time Forbes broke out the numbers, average Boeing employee was paid $25/hr but Profit generated per employee was $687/hr.)
              5.) High unemployment in cities from last generation migrations for city jobs. As factories moved to cheap land in the suburbs now suburbs have higher unemployment. Courts have repeatedly ruled that Growth Management violates corporate civil rights. Oregon guy sued regulators over future value loss because his land might become a future spaceport worth $6B. San Fran BART successful because separation of commercial and residential, unlike LA "raisin pudding" zoning.
              6.) Minimum wage proposals currently skip many employee types. Will not be successful unless agricultural employees and service employees are included, as well.
              7.) Did you look at the last Farm Bill? To keep food stamps the corporate giveaways just got bigger. ADM, Monsanto, et al got their subsidies (why does a US Apple cost $.50 in Japan and $2 in the US?) (why does corn get a fuel alcohol subsidy and not other less resource intensive, sustainable, crops? Iowa?)
              8.) Why do we have robots building cars but not in dangerous occupations like digging coal for our Chinese buddies? Why is BP still fighting a trivial OSHA fine after 47 died in a refinery explosion? The value of human life is too cheap.

            •  Energy? (0+ / 0-)

              The idea that we have surplus, untapped energy shows a rather narrow perspective.  Every erg of solar energy diverted to 'human use' deprives another important terrestrial system of that energy.  

              Solar energy regulates the layers in our atmosphere.  It drives the ocean currents, winds and the earth's hydrology.
              It is used to produce the molecular oxygen that we breath.  And, of course, it is not only our main source of food (indirectly, and, perhaps you included this portion in your 'human use' calculation), but it is also the  source of energy that supports Earth's entire biosphere.

              You didn't say, of course, that 98% of soar energy was available for human use, you simply implied it and expected people to look favorably on using, oh, 10%, or maybe 50%!  Wow, 25 times what we are using Today!

              I can assure you, however, that 'human usage' will never become 50%.  We will be long extinct before then.  In fact, I find that we use as much as 2% to be a bit disconcerting.
               

          •  Shades of Richard Nixon (3+ / 0-)
            Recommended by:
            indedave, arendt, SilentBrook

            Nixon tried for simplified reform: make more than a certain amount, pay the IRS; make less than that then the IRS pays you the difference. Apparently to dismantle "Great Society" Federal aid agencies. This was in response to $1 of every $2 in Federal aid spent for administration of that aid.  Of course some of those dollars went to necessary social services agencies. Problem is the 1% like Romney hide their loot in offshore accounts that the IRS and State Dept only occasionally show interest in (how we fund "Black Ops"). "Tip of the iceberg" that occasionally we catch UBS executives ferrying suitcases full of cash or our Afghan buddy Karzai carrying $50M in cash when he travels. Ever see a private jet fly into an airport and see Customs and TPA swarm the plane? Me neither. (Saw a Limo at a border crossing and noone in the back was checked.)

        •  I believe we need some of both social safety net (1+ / 0-)
          Recommended by:
          arendt

          AND major infrastructure rebuilding.  As much as possible the social safety net should be minimum wage jobs doing useful work (preferably helping rebuild the worn out infrastructure) with pensions for the old and those who really can't do useful work.  The part of the infrastructure that most urgently needs to be rebuilt is energy--where fossil fuel must be replaced by renewable energy ASAP.

      •  Jane Jacpbs (1+ / 0-)
        Recommended by:
        SilentBrook

        She was not only discounted because of Nobel politics but because she was a woman.  The prevailing wisdom held that women, especially those who disagreed with the men whose theories were deemed received truth, were not capable of objective economic analysis or of proposing legitimate solutions.

    •  How do we get out of this mess? (2+ / 0-)
      Recommended by:
      S M Tenneshaw, cotterperson

      Seize the capital, and jail the people who have created the laws, processes and institutions that have stolen it from the People.

      "Political ends as sad remains will die." - YES 'And You and I' ; -8.88, -9.54

      by US Blues on Sun Jun 15, 2014 at 02:21:43 PM PDT

      [ Parent ]

      •  Not. (4+ / 0-)
        Recommended by:
        arendt, rabrock, indedave, SilentBrook

        It doesn't take that.

        But it does take a rational approach to the commonwealth taking rent from those squatting on its infrastructure and goodwill.

        Anyone who thinks the current tax system is unfair "because the rich pay more taxes" is a total idiot who should be run through a meat tenderizer a few times then given a voucher for B-school.

        Okay, so there's room for a little mayhem.

        •  Not mayhem, justice (2+ / 0-)
          Recommended by:
          AoT, SilentBrook

          When the people who control the money write laws that allow them to essentially commit theft legally, which is to say they are breaking no law because they rigged the game, they need to be brought to justice. In my mind justice includes all their cash and personal assets (ill gotten gains), and them serving time, and lot's of it.

          And that fancy thing you said about rent.

          "Political ends as sad remains will die." - YES 'And You and I' ; -8.88, -9.54

          by US Blues on Mon Jun 16, 2014 at 07:08:31 PM PDT

          [ Parent ]

      •  Can we just jail the bankers that stole the money (1+ / 0-)
        Recommended by:
        indedave

        that caused our 2001+ economic crisis. FDR wasn't afraid to jail the bankers.

    •  Just looks ignorant to me (0+ / 0-)
      One of the most expensive things an economy can buy is economic trial, error, and development..."Expensive", of course, does not mean "wasteful". Develop work pays; indeed an economy does not continue to pay its way without development work, unless by a gradually declining standard of living among many of its people. Nevertheless, economic development is expensive and when development work is skimped or obstructed, large amounts of capital thus become available for other uses instead....
      This, of course, is nonsense.  An economy does not need trial and error development in order to maintain a constant or even increasing standard of living.

      For example, a manufacturing based economy can continue to grow and produce more without any new technological development just by continuing to invest a portion of its wealth in new capital investment.

      The limiting factor, of course, is running out of resources - you run out of whale oil or old growth timber or oil or coal.  But this does not seem to be what Jacobs is referring to.

      •  Simply wrong. (10+ / 0-)
        An economy does not need trial and error development in order to maintain a constant or even increasing standard of living.
        Wrong. When the U.S. stopped innovating, it's high wage work went to China, where it became a commodity and is now manufactured by low wage workers. Did you miss the last ten years, because that is what happened?

        By bad-mouthing "trial and error development", you are bad-mouthing the innovation that has grown the economy dramatically over the last century.

        For example, a manufacturing based economy can continue to grow and produce more without any new technological development just by continuing to invest a portion of its wealth in new capital investment.
        Wrong again. This is exactly the argument that Michael Lind shoots down. They are not innovating with their investment. They are simply running away to low wage, pollute as you please countries like China to perform the same old, un-innovative work cheaper.

        James Fallows calls this "growth without development".

        -----

        You are really quick to accuse Jane Jacobs of ignorance, when you seem to never have heard of her. Why don't you show some humility and educate yourself before mouthing off?

        •  Pathetic ignorance and straw man arguments (0+ / 0-)
          An economy does not need trial and error development in order to maintain a constant or even increasing standard of living.
          Wrong. When the U.S. stopped innovating, it's high wage work went to China, where it became a commodity and is now manufactured by low wage workers. Did you miss the last ten years, because that is what happened?
          First, the US never stopped innovating.  See Facebook, Google, Uber, and Tesla as great examples.

          Second, for the purposes of this analysis, the US is not "an economy".  For the purposes of almost all economic theory, an "economy" is a closed system.  

          Third, the difficulties that the US has had with China have nothing to do with lack of innovation.  The US has higher wage costs than China so no matter how much innovation we have, any labor that can be moved to China will be moved to China.  That will continue until Chinese labor costs get close enough to US labor costs to make other issues like fast response, coordinate problems, and logistics costs become more important.  This is happening now - which is why companies like Wal-Mart are working to bring production back onshore.

          If you think manufacturing moved offshore because of lack of US innovation then how do you explain the recent push to move manufacturing back onshore?  Did the US suddenly start innovating again?

          By bad-mouthing "trial and error development"
          And here is your straw man.  I challenge you to cite a quote in which I bad mouthed "trial and error development".
          For example, a manufacturing based economy can continue to grow and produce more without any new technological development just by continuing to invest a portion of its wealth in new capital investment.
          Wrong again. This is exactly the argument that Michael Lind shoots down. They are not innovating with their investment. They are simply running away to low wage, pollute as you please countries like China to perform the same old, un-innovative work cheaper.
          Let me guess... you don't know what the Cobb-Douglas Production Function is.  Look it up.  http://en.wikipedia.org/...
          •  This is only true if you CAN move the labor costs (4+ / 0-)

            to China ("The US has higher wage costs than China so no matter how much innovation we have, any labor that can be moved to China will be moved to China".)

            Prior to air travel and the container-shipping network that has been developing vertiginously since the 1960s, labor and manufacturing could not be outsourced at the levels at which they are now.

            It is true, and good, that some manufacturing is being brought back home!  More should be brought back home-- all of it.  

            We should try to foment home-grown innovation in computer-chip and phone production that might reduce the environmental impacts of the heavy metals and the manufacturing waste disposal.  The development of new mitigation technologies and processes not only would create new employment opportunities here in the USA, it could also make it safer to manufacture the equipment our world runs on, such that that manufacturing could be done here in the USA, creating new development strategies for communities.  Such innovation could lead to new industries, new technologies, new employment.  

            The trick, of course, is that companies like Apple and chip manufacturers would have to take a small reduction in their outsized profits, so as to pay the US wages.  

            And this is the question:  what is the obligation of business to communities?  What is the moral obligation of capitalism?  Is capitalism only about profit, human capital be damned?  

            That's one more thing to add to my long list of small problems. --my son, age 10

            by concernedamerican on Mon Jun 16, 2014 at 06:18:26 AM PDT

            [ Parent ]

            •  You are not addressing the issues I was discussing (0+ / 0-)
              We should try to foment home-grown innovation in computer-chip and phone production that might reduce the environmental impacts of the heavy metals and the manufacturing waste disposal.  The development of new mitigation technologies and processes not only would create new employment opportunities here in the USA,...
              Why would it create employment opportunities here?  Even if we develop the technology here, why can't it be used overseas?
              The trick, of course, is that companies like Apple and chip manufacturers would have to take a small reduction in their outsized profits, so as to pay the US wages.  
              OK... but then if a Chinese company offers to sell you a phone or a tablet that is cheaper than the US company's product because they have lower costs because they produce in China will you pay more for the Made in America product?  Sad experience shows that even if you will, most consumers will not.
              •  Most consumers will not, because most consumers (2+ / 0-)
                Recommended by:
                SilentBrook, cville townie

                have not been educated as to the larger costs and penalties that our society pays for offshoring jobs and innovation and manufacturing.

                Educate the people about how spending two dollars more, or five dollars more, or fifteen dollars more per phone can create hundreds of thousands of jobs a year and help communities to become stronger, and our economy to get moving again, and people will start being willing to do that.

                The walmartization of pricing was so damaging to our society.  We were hammered over the head for decades that it's all about paying five cents less!  Never mind that in order for something to cost five cents or ten cents less at Walmart, it has to be made overseas, and your local stores are going to shut down because the lightbulb factory has closed, the local hardware store has closed, and everyone is running to walmart to save five frackin' cents.  

                And then when your local stores shut down, the politicians get to blame somebody-- the opposite party, the party in power, American lack of skills, a need to be more productive, unions, blah blah.  Blame anybody or anything other than the massive global structural changes taking place thanks to the twinned notion that obscene profit, swollen CEO pay and outsized bonuses are king, more important than anything else in this society or in the world; and that the consumer shouldn't care about anything other than paying five cents less for a pack of lightbulbs.  

                That's one more thing to add to my long list of small problems. --my son, age 10

                by concernedamerican on Tue Jun 17, 2014 at 07:46:55 AM PDT

                [ Parent ]

          •  Wrong B'bubs (2+ / 0-)
            Recommended by:
            arendt, SilentBrook

            Oh "Lord of the Flies" whose name evokes manure.
            In the Global Economy, US Companies are near the bottom in spending on research.
            Taxpayers pay for US Government sponsored research that corporations use (researchers leave to open "startups").
            Innovation? Electric cars have been around since the 70's, q.v. EV1. Uber is an illegal attempt at bypassing cities' Taxicab laws and licensing fees. Only my younger teenagers would call Facebook an "innovation" (Facebook copied MySpace which copied Friendster). Wasn't there Veronica, then AOL Search, then AltaVista, then Yahoo then Google "innovation", and so on. And that Google is no longer innovation since newer Bing came out?

            •  Thanks for digging deeper into this "innovation" (0+ / 0-)

              I would like to add that Uber's bypassing of these protocols is most malign in it's poor risk management: most Uber drivers do not have sufficient insurance to cover their passengers in case of an accidents, while those Taxicab laws require them to carry enough insurance to cope with such sad circumstances.

              The only real innovation underlying these is the Internet itself, which was funded by our Government (not the private sector) as a way for academics to communicate and encourage their innovative talents. The BBS's of the late '80s are the predecessors of the social media, and the search engine idea is of similar vintage.

              Of all of Bub'z examples, only Tesla really qualifies, and the reactions of the other automakers toward this actual innovation provides ample evidence of the diarist's points.  

              We build on foundations we did not lay. We warm ourselves by fires we did not light. We sit in the shade of trees we did not plant... We are ever bound in community.-Peter Raible

              by SilentBrook on Tue Jun 17, 2014 at 09:36:53 AM PDT

              [ Parent ]

      •  Edison, I think, would disagree.. (5+ / 0-)

        In order to produce one useful product in the marketplace, Edison estimated 99 percent of the cost of the product was in making prototypes which needed refinement, reproducability and cost as factors in the product's success. Only one percent of the product contained the efforts within the thoughts or ideas of the inventor. In total, the product innovation was 1 percent inspiration and 99 percent perspiration. That wa innovation.

        During  Edison's time, thousands upon thousands of Americans were developing products, most of which did not pan out in the marketplace. A few thousand did; the Caterpillar tractor, the McCormack reaper, the synthetic fabrics, the automatic switches for phone grids, and the hydroelectric power plant to name only a few. Most of these innovations were enormously expensive to develop, done in passionate people's garages and basements, but the costs were recovered fabulously in the most vibrant economy the world had ever known. Everyone of my age had a grandfather or two who was inventing some world and cost saving improvement in the basement.

        Those self-funded innovations were, and remain, the last true economic engines in America, and with a few exceptions since then, continue to provide growth in our economy.

        The key to future American economic success is research, development and innovation free from the captivity of corporate bureaucracy and control-freak militaristic organization.

        Only a free people can innovate. A captive and cowed population can only exist, for a while, until they realize they are captive and cowed.  

        Figures don't lie, but liars do figure-Mark Twain

        by OregonOak on Mon Jun 16, 2014 at 07:23:46 AM PDT

        [ Parent ]

      •  By "trial and error development", (2+ / 0-)
        Recommended by:
        arendt, SilentBrook

        I think they mean trying new things and taking risks to gain a new goal.
        A great example of this is the fairly recent privatization of space.  This is an incredibly expensive area to innovate, but it may lead to much cheaper, less wasteful, and more extensive access to space.
        But this is not simply producing cheaper versions of NASA's rockets, so there is a lot more trial and error involved.  Generally, you don't want the error, but it goes along with the territory, and sometimes the error becomes new insight.

      •  It is better to appear ignorant that to (2+ / 0-)
        Recommended by:
        arendt, SilentBrook

        comment and remove all doubt.  @BBBBB

        Actually there can be no ever-increasing standard of iving on a finite planet.  There can also be no ever-increasing wealth save it is sucked out of one class and given to another.  

        Not hard to find where the standard of living and bottom line of net worth are declining.  Though it is more difficult to document, I would wager that off shore assets are gaining at or near the same rate.  Sometimes the answers hide in plain sight.

  •  Any Time There's Large Amounts of Capital It's (40+ / 0-)

    because there's too little wealth and income in the hands of consumers.

    So there's nothing substantive for capital to invest in, there's no potential for much overall growth, so capital has nothing to do except to bet on the short term behavior of other capital.

    We learned this once in the early 20th century, got the most vibrant economy when we had our hardest ever brakes on accumulation at the top.

    Seems to me our system is premised on there being less capital than the market can use, for the reason that the economy is presumed to be far more inefficient than today --leaking income and wealth out all its seams, from the bottom up, into the hands of the participating masses, and not efficiently concentrating it at the very top end.

    Mechanization blew away that 2nd expectation beginning a century and a half ago, to usher in the First Gilded Age, and we saw that the heavy New Deal era tax and regulatory scheme was needed to artificially impose inefficiency --ie leakage, sharing-- on an unhealthily efficient system.

    Was any of what's gotten us to this point not known in the 1970's when we started all this malpractice? I can think of some elements of it that were known in our framers' time and before.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sun Jun 15, 2014 at 08:55:00 AM PDT

    •  It was known... (30+ / 0-)

      but financial crooks are an adaptable bunch. They bided their time until Reagan got in and they were let loose on our economy.

      Parapharsing (badly) a quote about the 1987(?) stock market crash:

      The Reagan tax cuts gave a lot of money to people who had no use for the money. So, they parked it in the stock market.

      The market had a bubble and then collapsed, reducing the value of that money to the zero value it had. Notice that the economy recovered rapidly after that crash, proving that the money vaporized in it was essentially worthless.

      •  Yes. Black Monday 1987. (7+ / 0-)

        It was blamed on some of that "financial innovation."
        http://en.wikipedia.org/..._(1987)

        The stock of the company I was with at the time went from 137 to 87 overnight and it continued to slide. That put a $100m convertible bond under water and broke the company.

        I had a couple of stock options. Please don't ask. It's too painful.

        I'm a Vietnam Era vet. I'm also an Erma Bombeck Era vet. When cussing me out and calling me names please indicate which vet you would like to respond to your world changing thoughts.

        by Just Bob on Sun Jun 15, 2014 at 12:25:00 PM PDT

        [ Parent ]

      •  "but financial crooks are an adaptable bunch" (7+ / 0-)

        They've been around since the first coin was minted back in the dawn of history. You have a money supply, there's gonna be a grifter along soon enough to take some of it from you.

        The cliche "the rich are with us, always" is a cliche for a reason - it's true.

        Sometimes, I think we invented Governments to ensure that We the People retained (at least nominal) power over a stick big enough to beat the wealthy back into line from time to time. So they can't just accumulate everything and make us all start wearing #taker labels, which I'm sure more than a few of Mitt Romney's co-horts have dreamt of these past few decades...

        This was a terrific read, thank you for posting the diary.


        "I like paying taxes...with them, I buy Civilization"

        by Angie in WA State on Sun Jun 15, 2014 at 01:32:02 PM PDT

        [ Parent ]

        •  The historical record is pretty clear that (0+ / 0-)

          there weren't wealthy people before government. Government was mostly invented to protect the wealth of people and keep folks in their place. Without government there is no money, and coinage was invented well after the first government first came to be.

          Governments were almost certainly imposed upon people and not mutually agreed upon.

          No War but Class War

          by AoT on Sun Jun 15, 2014 at 01:40:14 PM PDT

          [ Parent ]

        •  The Bible also says "the poor are with us, always" (0+ / 0-)

          and claims that **** wants average income and above persons to make some effort to relieve the poverty of the poor.

    •  This is the problem (12+ / 0-)
      ...leaking income and wealth out all its seams, from the bottom up...
      People no longer view capitalism as something that functions from the bottom up.  They view it as a top-down process thanks to Reagan.

      Instead of workers reaping the vast majority of the money from their own productivity with capital holders reaping only a small percentage of each workers productivity, we now have a system where workers get a tiny share of their own productivity and the capitalists take the lions share.

      Properly run bottom up capitalism is like a pyramid scheme that actually works for everyone involved, with each level above the producers (the labor force) getting a small cut of the producers productivity.

      "There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy." - Me

      by Darth Stateworker on Sun Jun 15, 2014 at 10:10:49 AM PDT

      [ Parent ]

      •  Top down has been the norm for capitalism (9+ / 0-)

        Workers have never reaped the vast majority of the money from their labor. That's one of the myths of capitalism.

        No War but Class War

        by AoT on Sun Jun 15, 2014 at 10:25:12 AM PDT

        [ Parent ]

        •  Not true. (0+ / 0-)

          Wages plus benefits have equaled about 60% of national income since the 1930s. See: Income, Benefits and Profits

          Obi Ben Ghazi to House Republicans: "Use the Farce."

          by edg on Sun Jun 15, 2014 at 01:18:48 PM PDT

          [ Parent ]

          •  Capitalism well predates 1930 (2+ / 0-)
            Recommended by:
            YucatanMan, samanthab

            And those charts are solely in the US. The relatively affluence of the US is subsidized by other countries shitty wages and slave labor. Prior to that it was subsidized by cheap access to natural resources, which we quickly tapped out.

            Capitalism generally means horrible working conditions and shitty pay. We just have put all that out of sight these days.

            No War but Class War

            by AoT on Sun Jun 15, 2014 at 01:30:09 PM PDT

            [ Parent ]

            •  Changing the terms? (0+ / 0-)
              Workers have never reaped the vast majority of the money from their labor. -- AoT

              Obi Ben Ghazi to House Republicans: "Use the Farce."

              by edg on Sun Jun 15, 2014 at 04:16:57 PM PDT

              [ Parent ]

            •  That certainly was not true in the sixties in CA (2+ / 0-)
              Recommended by:
              arendt, SilentBrook

              "Capitalism generally means horrible working conditions and shitty pay. We just have put all that out of sight these days."

              My husband worked for Hughes Tool Co. and according to an old tax return I found we earned about $12,000 annually.  Yet we were living middle class with no credit cards and only a home mortgage and car payment.  We had two week family vacations which we paid for by saving for two months.  We took our kids somewhere every weekend year round, we ate out and slept in motels with no twinge to the budget.  And I was a stay at home mom of three.  And we had savings.  On top of that Hughes Tool was making money every year.

              I was an accountant in the seventies and many small privately owned corporations were very happy to have just under 20% profit on their P & L Statements.  The owners had a new car every year, a country club membership, several cruises per year, and all on a reasonable salary for their work managing the company.

              This began to change when Conservatism alla Reagan took over the country.  He told lies with a smile and many are still believing them today.

          •  You're both right. (8+ / 0-)

            Wages did equal about 60% for a while - during the height of the US middle class.  It no longer does.  As seen on the chart in your link, wages have since fallen below 50%.  Benefits might still push the total over 60%, however, stock options, golden parachutes and such are "benefits", so how much of that is actually going to rank-and-fileworkers, and how much is going towards the CEOs?  That muddies the picture considerably.

            AOT is correct in that for much of the history of capitalism, wages have been depressed, with most of the benefit going to the capitalist class.  I believe Picketty touched on this and noted the wages of the US middle class during its heyday was an anomaly.

            Taken together, I believe it reflects that to have a vibrant middle class, it needs to be a bottom up endeavor  where the workers reap most of the benefit of their own labor.

            "There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy." - Me

            by Darth Stateworker on Sun Jun 15, 2014 at 05:37:26 PM PDT

            [ Parent ]

      •  Isn't that feudalism which we read about in (3+ / 0-)

        8th grade history?

        "Instead of workers reaping the vast majority of the money from their own productivity with capital holders reaping only a small percentage of each workers productivity, we now have a system where workers get a tiny share of their own productivity and the capitalists take the lions share."

    •  those of us who were around (5+ / 0-)

      back then and could read the handwriting on the wall did not all interpret it the same.  

      Some of us read "... better start saving the planet ("spaceship Earth") now by respecting the limits to growth, etc".

      Others read "...better grab what you can while you can...".

      And now it is almost 50 years later.

      don't always believe what you think

      by claude on Sun Jun 15, 2014 at 02:25:36 PM PDT

      [ Parent ]

    •  "There's nothing substantive for capital (3+ / 0-)
      Recommended by:
      blackhand, Yonit, arendt

      to invest in".

      Exactly. I've been talking about consumer spending (70% of our economy) since the start of the Crash. any reduction in consumer's ability to purchase goods and services is huge-- investors see this and don't invest in new retail or service businesses, or there's reluctance to expand existing businesses. obviously this in turn impacts job growth.

      this is actually the source of business "uncertainty regarding the future" we keep hearing about, not the bullshit hand wringing about the ACA.

      businesses provided health insurance in the past as a form of employee compensation, so this excuse just doesn't hold water.

      In past recessions, construction was often the engine of growth which pulled out of the ditch; that's not happening this time.

      Construction could pull out of of the ditch this time-- but it has to be in a sector more or less ignored for decades: INFRASTRUCTURE.

      a twenty to twenty-five year $2 Trillion dollar investment in infrastructure would mean hundreds of thousands of good paying jobs. this would put more money in the hands of consumers, and capital currently sitting on the sidelines would be invested in new business or expanding existing businesses.

      we have to have some sort of engine to drive economic growth. a massive investment in infrastructure is a double win; we get the new infrastructure we need and the new jobs we need.

      "We are beyond law, which is not unusual for an empire; unfortunately, we are also beyond common sense." Gore Vidal

      by Superpole on Mon Jun 16, 2014 at 05:11:21 AM PDT

      [ Parent ]

      •  Supply and Demand are out of balance (2+ / 0-)
        Recommended by:
        Superpole, arendt

        There is too much supply, i.e. capital and other forms of cheap money, but no demand for it to go anywhere.  Why is there no demand?  There is no demand because 70% of the economic engine is doesn't have enough and doesn't want more debt at any interest rate.  

        Yet all of the economic stimulus has been more supply side easing that was championed back in the 80s.  An earlier post mentioned the market bubble of 87 bursting and the fake money fell to zero value.  It looks to me like we're in the same predicament today, only bigger, with this excessively inflated stock market.  

        Making things worse is all of the right wing rhetoric proclaiming that the problem is that we haven't cut enough and we need to make things even more attractive to businesses.  Reading between the lines the astute observer will notice that this means that the US citizen is not living in 3rd world poverty yet.  

        To get out of this mess we need to do two things.  Actually one thing, make it less viable for these businesses to hold onto that money than it is to spend it in this country and not overseas.

        "It's not surveillance, it's data collection to keep you safe"

        by blackhand on Mon Jun 16, 2014 at 07:35:29 AM PDT

        [ Parent ]

        •  Agreed (4+ / 0-)
          Recommended by:
          blackhand, Yonit, arendt, SilentBrook
          Actually one thing, make it less viable for these businesses to hold onto that money than it is to spend it in this country and not overseas.
          However, we know the deadbeats in congress don't have the balls to increase corporate taxes.

          How "ironic" that even with the low tax rate we now have, coupled with all of the loopholes, U.S. corporations are now acquiring EU corporations, moving their corporate headquarters to the EU nation which is home to the acquired corporation-- all so they can further decrease their "tax burden".

          classic example being today's news that Medtronic purchased Covidien, located in Ireland, for $42.9 billion. well known that Ireland has a lower corporate tax than we do.

          http://www.reuters.com/...

          "We are beyond law, which is not unusual for an empire; unfortunately, we are also beyond common sense." Gore Vidal

          by Superpole on Mon Jun 16, 2014 at 08:45:37 AM PDT

          [ Parent ]

          •  Back in college, I took a macro economics class (3+ / 0-)
            Recommended by:
            Superpole, arendt, SilentBrook

            One of the few lessons I remember, probably because it was repeated ad naseum, was about how money moves around to obtain the best return.  The focus was usually on short term returns but the idea applies long term too.

            So now, companies are sitting on gobs of inflated, fake fiat money and looking for ways to generate a return on it.  Hence the buying you mentioned and the mega mergers in the US.  Unfortunately this is offering a better return than investment and growth.  It will because there is no demand.

            I've read a couple of different theories on how to get the US economy going again.  One method involves raising import tariffs and other legal protections to artificially make domestic US production more attractive.  The second was an economic proposal from the 1920s or 1930s and (if I recall correctly) dealt with separating the money supply from interests rates.  In effect, breaking the Federal Reserve as we know it.  

            Both approaches would have a dramatic and immediately harsh effect on the US economy, but would overall make it a lot stronger.

            "It's not surveillance, it's data collection to keep you safe"

            by blackhand on Mon Jun 16, 2014 at 09:02:31 AM PDT

            [ Parent ]

            •  Why Not (3+ / 0-)
              Recommended by:
              blackhand, arendt, SilentBrook

              huge infrastructure investment as I mentioned?

              Thanks for your take.

              "We are beyond law, which is not unusual for an empire; unfortunately, we are also beyond common sense." Gore Vidal

              by Superpole on Mon Jun 16, 2014 at 12:48:37 PM PDT

              [ Parent ]

              •  That would get things moving too (3+ / 0-)
                Recommended by:
                Superpole, arendt, SilentBrook

                At least for this time.  It certainly needs to be done, least we will find ourselves in a much worse problem in the not so distant future.  

                It find it ironic that the one thing that seemed to have the biggest impact back in the 2009 time frame was also the one that was least funded: the so called "cash for clunkers".  It injected economic activity at the bottom end of the chain that was multiplied several times up through the supply chain.  If I recall correctly, some factories even put people back to work to meet demand.

                It really drives me nuts that somehow it is deemed acceptable to give money to those that have too much and don't need it, but to put it where it will do good is seen as some form of sacrilege.  

                We still need to address the fundamental structure issues that plague the economy and realize that 19th century Capitalism isn't working so well in the 21st century.  

                "It's not surveillance, it's data collection to keep you safe"

                by blackhand on Mon Jun 16, 2014 at 01:01:15 PM PDT

                [ Parent ]

  •  Valuable insight--a starting point (21+ / 0-)

    If capital is not scarce, then it need not be priced as though it was scarce.  

    That is a quandary for pension and endowment funds, whose beneficiaries--retirees, pensioners, and universities and non-profits--need returns for income.

    But…as we look at how policy needs to be restructured, the insight is important

    •  Hmm. Another "dilemma" (6+ / 0-)

      because economics IS really complicated; and my purchase is your income.

      Theoretically, doing things the right way would result in cheaper/better products. At least that way, the value of retirement assets would buy more, despite there being very little monetary return on capital.

    •  We should rethink the entire notion of saving (8+ / 0-)

      for old age, and simply decide on a basic retirement guaranteed income that lets retired folk live securely, and mark up their accounts once a month accordingly.

      For those who want to save now in order to have more than this guarantee later, well, that's a risk they can decide to take.

      But modern fiat currency seems to me to be a poor store of value, and a super velocity machine.

      We should capitalize on it's advantage as a velocity machine, and update our economic thinking accordingly.

  •  Shorter Christianson (36+ / 0-)

    Financial engineers are destroying the world.

    Financial engineers have extirpated managers with any vision out of the senior ranks of all the major corporations.

    Their financial engineer brethren in private equity are destroying small companies like a gigantic army of wood chippers devouring our economy.

    Absolutely appalling, and barely even discussed in the "news" media - a big tell that the programming spoon fed to Americans who think they are being virtuous by paying attention to "news" is deliberately constructed as a gigantic kaleidoscope of soap opera drama and trivia.  

    Its a symptom of our country's modern sickness and dementia that "news" contains remarkably little focus on anything that matters.  And when these useless twits do focus on anything that matters, they conspicuously (maybe deliberately) get all the details wrong and attribute the misrepresentations and oversights to the limited attention spans of their audience.

    Though its really no surprise: media companies are all run by financial engineers, too.

    Toto, I've a feeling we're not in Kansas anymore

    by Minerva on Sun Jun 15, 2014 at 08:58:01 AM PDT

  •  I believe that capitalism can and has to change (15+ / 0-)

    Republished in Progressive Capitalism

    Capitalism can and has to change.

    Daily Kos an oasis of truth. Truth that leads to action.

    by Shockwave on Sun Jun 15, 2014 at 09:15:13 AM PDT

  •  Capital is just another resource (4+ / 0-)
    Recommended by:
    arendt, Dallasdoc, Rogneid, opinionated

    for the executive class to acquire as cheaply as possible.  

    222 house republicans support the Ryan budget that would convert Medicare to a premium-support program. In other words, they want to repeal Medicare and replace it with a system that works just like Obamacare.

    by happymisanthropy on Sun Jun 15, 2014 at 09:24:01 AM PDT

    •  If capital is just a commodity, then why... (9+ / 0-)

      aren't capitalists just another class of exploitable labor?

      But, such embarrassing questions should not be asked.

      •  The question then is, who's doing the exploiting? (10+ / 0-)

        Which is why the question shouldn't be asked.  It's a difficult question to answer, but ignoring it doesn't eliminate exploitation.  Those currently doing the exploiting can be forgiven for not wanting to change positions with someone else, but that doesn't mean they should get their wish.

        We have always been at war with al Qaeda.

        by Dallasdoc on Sun Jun 15, 2014 at 09:38:24 AM PDT

        [ Parent ]

        •  Computers? (3+ / 0-)
          Recommended by:
          arendt, shaharazade, Rogneid

          The socio-politco-economic system we live under perhaps. We've set up a system where there aren't necessarily individuals responsible for this kind of exploitation, just systemic factors. Or at least that's the neoliberal ideal, the reality isn't there yet.

          No War but Class War

          by AoT on Sun Jun 15, 2014 at 09:54:01 AM PDT

          [ Parent ]

          •  Cui bono? (10+ / 0-)

            Somebody's set up the computers with a specific goal in mind.

            The exploiter should be government, for the benefit of society as a whole.  That's the only way middle classes are ever built and sustained.  Our government abdicated that role, starting in the 1970's and proceeding from there.  That's why the middle class is dying.  It won't be resurrected until our politics demands it.  Certainly not by our current crop of Democrats.

            We have always been at war with al Qaeda.

            by Dallasdoc on Sun Jun 15, 2014 at 09:56:40 AM PDT

            [ Parent ]

            •  Unions build the middle class (5+ / 0-)

              not governments. Sometimes unions use governments as a vehicle to build a middle class, but it's just one way.

              As for who benefits, a number of people do. But just because some people benefit doesn't mean that they aren't being exploited. You can have a society where some are better off than others but everyone is being exploited.

              No War but Class War

              by AoT on Sun Jun 15, 2014 at 10:10:05 AM PDT

              [ Parent ]

              •  Yes, unions are important to building a strong (5+ / 0-)
                Recommended by:
                arendt, terabytes, NoMoreLies, where4art, Yonit

                vibrant middle/working class but tax structure is also important. When the top marginal tax rate was high and corporate executives didn't get stock options instead of salaries, there was a tax incentive to reinvest back into building the business instead of parking money in the capital markets. The employees of these businesses were the beneficiaries of this tax structure but that all changed with Reaganomics.

                Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

                by RMForbes on Sun Jun 15, 2014 at 05:13:50 PM PDT

                [ Parent ]

                •  Yes. This history is deliberately ignored. (7+ / 0-)

                  They always ignore the fact that America's most productive years had incredibly high marginal tax rates.

                  And those tax rates caused exactly what you said: they forced businesses to re-invest their profits to keep them from the tax man.

                  Some of that reinvestment was in "disruptive innovation", and that is what drove a vibrant economy.

                  I bring up this embarrassing fact whenever someone goes on about how low taxes are needed for economic growth.

            •  I think you have to be careful... (0+ / 0-)

              I think society should use its resources wisely and in a relatively fair manner.  Gov't should reflect the goals of society, and help society attain them to the extent reasonable.
              While I'm not a big conspiracy person, I don't think we should give gov't too much power either.  And then only the power it can handle to help society, and anti-social elements should be worked out of gov't over time.

          •  Do you mean the High Frequency Traders? n/t (5+ / 0-)
            •  For one (7+ / 0-)

              There are any number of modeling software that can be used, along with statistical analysis programs like what the US uses to determine drone strikes. That instance is particularly interesting because it is self reinforcing in many ways and forms a weird circle. The computers take information from humans and use algorithms to determine strikes and then tell humans to tell other computers(drones) where to shoot missiles.

              Other examples are the insurance industry. Premiums are set through algorithms and the numbers themselves are set by computers running those algorithms. Ditto with credit scores. I'm sure there's more I don't know about, but they're all over and the programs have become so dense and complicated that no one really knows how they work anymore.

              Additionally, places like facebook perform social mediation controlled by computers as google computers determine what we get to learn about and know.

              I think that this reality is responsible for a lot of the problems we see today.

              No War but Class War

              by AoT on Sun Jun 15, 2014 at 10:19:45 AM PDT

              [ Parent ]

      •  what do you mean by "capitalist?" (4+ / 0-)
        Recommended by:
        arendt, Rogneid, Just Bob, mightymouse

        The theory used to sell the 401-k system is that we all work for the shareholders.  In practice, [most] shareholders are just dumb money to steal from.

        222 house republicans support the Ryan budget that would convert Medicare to a premium-support program. In other words, they want to repeal Medicare and replace it with a system that works just like Obamacare.

        by happymisanthropy on Sun Jun 15, 2014 at 09:39:48 AM PDT

        [ Parent ]

        •  Those who control the flow of capital (2+ / 0-)
          Recommended by:
          shaharazade, Rogneid

          presumably. Technically everyone has some capital unless they are naked and own nothing at all, but the capitalist class are those who control vast quantities of capital.

          No War but Class War

          by AoT on Sun Jun 15, 2014 at 09:52:02 AM PDT

          [ Parent ]

        •  I mean the "smart money" (5+ / 0-)

          The HFT crooks, the hedge fund managers and their 15% tax bracket,  the bums who sell derivatives to dumb city comptrollers.

          •  Dumb city comptrollers? (11+ / 0-)

            It seems to me now that I'm taking an active interest in local city and state governance and policy that the city comptrollers and the local supervisors are as corrupt and in the bag as the Feds. They are not dumb but crazy like the foxes they are. Privatizing and unchecked development are the order of the day on every level. The bums who are selling derivatives are not selling to the dumb. The buyers of this brand of unfettered capitalism are knowingly selling way the public's common good and could careless if it causes disparity and fleeces the public money. If you can't survive your a loser.

            It's systemic disaster capitalism wherein those who own the place have changed the game to be not husbandry of the public's monies and well being but instead just part of casino economy wherein we the people are just a profit loss and the marks. Why does a corporation in Scotland  own our electricity? Why are they privatizing our water? Why do we have for profit prisons and deportation camps? All for the market where everything is just fair game in this 'race to the top' for the looters and pillagers.

            FIRE runs the world and humans and the planet are just fodder for the funny money they call an 'economy'. What I don't understand is why people think this is a free market and inevitable and unstoppable. Wealth creators are not creating wealth they are sucking the world dry and all the economic data they spit out is just the voodoo they use to con us all.
                     

  •  I am spending the weekend in Napa. (7+ / 0-)

    What I see is that a lot of smaller business that actually produce things and products are not being located in SF or San Jose, but out here.

    It seems too expensive to actually create or keep a business in those cities unless you are into information technology or "social networks" (from what I have seen "anti-social networks" might be more apt to say they are social in any meaningful sense in the first place) and have unusual financial arrangements and connections.

     

    "You cannot win improv." Stephen Colbert (https://www.youtube.com/watch?v=m6tiaooiIo0 at 16:24).

    by Publius2008 on Sun Jun 15, 2014 at 09:35:50 AM PDT

    •  Napa is "cheap" compared to SF?? News to me. (1+ / 0-)
      Recommended by:
      mightymouse

      Lots of other places in the greater Bay Area that are less expensive than Napa.  Unless those businesses started out there before urban sprawl and winery tourism really drove up R.E. prices.

      My Karma just ran over your Dogma

      by FoundingFatherDAR on Sun Jun 15, 2014 at 04:06:46 PM PDT

      [ Parent ]

      •  Pretty much everywhere is cheap compared to SF (1+ / 0-)
        Recommended by:
        Aquarius40

        at this point. The last five years have been brutal.

        No War but Class War

        by AoT on Sun Jun 15, 2014 at 04:37:26 PM PDT

        [ Parent ]

        •  SF is the 3rd most expensive US city to live in; (1+ / 0-)
          Recommended by:
          AoT

          San Jose is the 3rd. I believe that SF was the 3rd most expensive place to live in the US when I was an undergrad at Berkeley, almost 20 years ago. Urban gentrification has driven prices up all over the country- to shockingly high prices, really. Napa probably is cheaper, but "cheaper" isn't saying a whole hell of a lot.

  •  Not to get too teleological (5+ / 0-)

    but this seems to be inevitable in a capitalist economy. Since money, or capital, is the goal eventually money will become superabundant. The only way to prevent this is to attack the structure of capitalism and markets because the structure is what makes capital accumulation more efficient and the more efficient capital accumulation is the more likely this is to happen.

    Of course, the lasting solution would be to ditch capitalism instead of sticking with a system that means a constant, unending battle with economic forces intent on destroying or subjugating the working class.

    No War but Class War

    by AoT on Sun Jun 15, 2014 at 09:36:46 AM PDT

  •  Well stated, Thank you. (3+ / 0-)
  •  Boeing is a good example (23+ / 0-)

    A few weeks ago I saw a big article in the Seattle Times that was based on a major policy statement by the CEO.  Boeing was specifically going to simply refine existing technology rather that doing anything innovative.  This is just more rejection of the engineering emphasis that has built and sustained the company over the years.  This, when added to the attempt to destroy the engineering talent in favor of financial engineering will assure the demise of the company in the long run.  The infamous 787 program is a prime example.  This is not only ill advised but is a sign of how stupid senior management is at this company.  The fact they did a press conference to proclaim this dumb short term tactic attests to how stupid they really are.  And, of course, it isn't just Boeing.  Why do we pay these people so much money?

    •  Hey, no difference in news papering and media. (2+ / 0-)
      Recommended by:
      yoduuuh do or do not, NoMoreLies
      This insight did not originate with Mr. Christensen. Even a lowly mug like me diaried about this problem in the biotech industry three years ago, with a title that is a paraphrase of Christensen: Innovation isn't profitable enough for the plutocrats. This same analysis was done by the late Jane Jacobs in her 1969 book, The Economy of Cities:
      Fire all the employees. Then we'll make money ... Without reporters.

      Thump! Bang. Whack-boing. It's dub!

      by dadadata on Sun Jun 15, 2014 at 10:08:15 AM PDT

      [ Parent ]

    •  Higher Corp Taxes increase growth: Boeing example (5+ / 0-)

      From multiple reviews and discussions of Sam Howe Verhovek's book Jet Age: The Comet, the 707, and the Race to Shrink the World

      In 1950, Boeing held less than 1% of the commercial airliner business that was dominated by Douglas and Lockheed.  Congress legislated an "excess profits" tax; basically Congress taxed military-industrial companies at 82% on all profits they made above the amount that the company had made 1946-1949.  Well, unfortunately, Boeing had near zero profits 1946-1949 due to post WW-II contract cancellations, so they faced at 82% tax burden.

      Boeing chairman Bill Allen was not an engineer, his background was tax law. And when he saw that shareholders would only get 18 cents of every dollar in profits, he made a bold move instead to use that money as investment rather than profit,  he helped fund what was to become the Boeing 707.  This change the face of the company, the industry, and even to some degree the world.  It's also noteworthy that both of Boeing's competitors were in a much lower tax bracket, and so did not make a similar investment.

      Higher corporate taxes can incentivize investment, and Boeing is a perfect example

       

      •  Except that tax law calculating net taxable inc (0+ / 0-)

        has changed considerably since the early 1950s.  For one thing, companies must now capitalize a lot more investment/development costs instead of deducting them up front (IRC Sec. 263A).  While some of those costs may ultimately be expensed via depreciation, that's over a number of years instead of one.

        My Karma just ran over your Dogma

        by FoundingFatherDAR on Sun Jun 15, 2014 at 03:59:49 PM PDT

        [ Parent ]

        •  Which still isn't huring them. (1+ / 0-)
          Recommended by:
          Yonit

          See GE and their negative tax rates for a clear example.

          "There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy." - Me

          by Darth Stateworker on Sun Jun 15, 2014 at 05:47:10 PM PDT

          [ Parent ]

    •  It's everywhere (5+ / 0-)

      Over 40+ years in corporatedom, I've seen company after company, in industry after industry, trade its industry-experienced CEOs for finance guys. I have yet to see a company succeed after such a switch.

      Why do you need to motivate your employees? Didn't you hire motivated people?

      by davelf2 on Sun Jun 15, 2014 at 01:53:06 PM PDT

      [ Parent ]

    •  What lead Boeing to greatness... (8+ / 0-)

      ...was when it was lead by engineers. Of course, that doesn't bring enough profit for the shareholders and Wall Street.

      Based on my own experience as an engineer, I've told all of my friends to try and never work at a company that isn't lead by an engineer. Most of the companies I've worked for have been run by sociopath salesmen who think they are brilliant but quite literally don't know crap about engineering. The current company I'm at is run by a salesman who is micromanaging my area of the company and the accountant runs the office. You should have seen him, the accountant, get all hissy when I bought a $60.00 chair because my old one was broken. Half the chairs in the office are broken.

      So I decided to spend "company time" dismantling my broken chair in order to fix it since they don't let you buy new ones. After an hour and a half of working on it, my boss (sane) asked what I was doing and told me to just order a new one. When the accountant found out my boss approved it, he told me to make sure no one knew and to destroy the old one. All over a $60.00 chair at a company where the owner usually takes home $10 million a year on average.

      It was somewhat heartening to me to finally see the quote where Steve Jobs said to never allow a salesman or an accountant to run your company. My only response was, "no shit!"

      Regulated capital serves the people, unregulated capital serves itself.

      by Alumbrados on Sun Jun 15, 2014 at 05:44:03 PM PDT

      [ Parent ]

      •  One place I used to work at (2+ / 0-)
        Recommended by:
        Yonit, arendt

        Had management that was dominated by the salesmen.  It took a VP signature to order so much as a pencil and you had to justify it by showing them the stub of the one you had been using.  Try to buy a piece of capital equipment that would actually increase productivity?  Forget about it.  There was no chance to spend $10K-$20K on something like that, but they sure would spend it on furniture for the guy in the corner office.

        "It's not surveillance, it's data collection to keep you safe"

        by blackhand on Mon Jun 16, 2014 at 07:47:54 AM PDT

        [ Parent ]

  •  You can start a business without capital (11+ / 0-)

    but you can't start one without labor.

    Fry, don't be a hero! It's not covered by our health plan!

    by elfling on Sun Jun 15, 2014 at 10:08:28 AM PDT

  •  I only have a primitive view of capital. (6+ / 0-)

    You have to expend your labor to get it.  I just can't understand how the Fed can have an open window where they can just shovel vast pallets of greenbacks into the banks. No wonder there's a glut of capital. I should stop now before I start channeling Glenn Beck. Thank you for introducing me to Jacobs and reminding me of Arendt

  •  Capitalism is whatever the 1% says it is (9+ / 0-)

    So get with the program. If they want to rape and pillage like Attila the Hun, then Attila was a great capitalist.

    "The oppressors most powerful weapon is the mind of the oppressed." - Stephen Biko

    by gjohnsit on Sun Jun 15, 2014 at 10:42:16 AM PDT

  •  We don't have capitalists in this country. (9+ / 0-)

    We have predators and parasites attached to a host and sucking it dry.   Like Bill Gates destroying our public schools, they somehow think making a lot of money makes them qualified, special, and entitled.  

    I will not vote for Hillary.

    by dkmich on Sun Jun 15, 2014 at 10:53:20 AM PDT

  •  Austerity is a form of looting. Thanks ... (13+ / 0-)

    ...for that bullseye zinger.

    Don't tell me what you believe, show me what you do and I will tell you what you believe.

    by Meteor Blades on Sun Jun 15, 2014 at 11:36:29 AM PDT

  •  And every day they control more governments (5+ / 0-)

    Capitalism is like kudzu growing through every branch of government at the national, state and local level. Control of government funding, regulations and courts is an essential part of their strategy. It cements their channels for profitization and provides them with more and more new revenue streams.

    Money is property, not speech. Overturn Citizens United.

    by Betty Pinson on Sun Jun 15, 2014 at 12:08:59 PM PDT

  •  Glad someone diaried this ! (4+ / 0-)

    Thanks, diarist.

    "..The political class cannot solve the problems it created. " - Jay Rosen

    by New Rule on Sun Jun 15, 2014 at 12:22:10 PM PDT

  •  Christensen, van Bever, and others (7+ / 0-)

    With so many bright intellectuals writing on the subject of innovation, it's hard to understand why so few have remained silent about the disastrous turn "capitalism" has taken in today's finance-driven marketplace.  I know of several who depend on corporate contributions and consulting to sustain their research, which probably explains their reluctance to call bullshit on their golden goose.

  •  When even the "Capitalists" don't know what ... (5+ / 0-)

    ... capitalism is anymore, you know we're fk'd.

  •  Just wanted to point out (3+ / 0-)
    Recommended by:
    YucatanMan, arendt, Yonit

    that from my point of view, way down at ground-level, it's not talent, ideas, labor, that are scarce, it is exactly capital. The financial wherewithal to connect work that needs to be done with unemployed and underemployed labor; the financial wherewithal to fund valuable R&D in the full knowledge that much, if not most of the R&D won't result in successfully commercialized products.

    Now, as far as "the processes and resolve to deploy it against growth opportunities," I'm not a venture capitalist nor a businessman, so I can't speak to that. But I can say that without money that connects labor to work that needs to be done, and without money that fuels the development of innovative products and services, we'll never discover those processes or find out whether we have such resolve. And we'll continue to have a stagnant economy.

    There is no way for a citizen of a Republic to abdicate his responsibilities. ---Edward R. Murrow

    by SouthernLiberalinMD on Sun Jun 15, 2014 at 03:33:55 PM PDT

    •  I agree that it is hard to get micro-capital... (3+ / 0-)

      the kind needed to start a small business. The withdrawal of revolving lines of credit to small businesses since the crash of 2008 has been documented.

      But, the diary is really about macro-capital - the tens of millions of dollars necessary to kickstart a high-tech startup.

      I don't object to your point. Its just that I don't want to muddy the water between necessary, but not "disruptive innovation", businesses and the kind of breakthrough tech that is absolutely necessary to deal with climate change, super-bugs, and the surveillance state. Granted all those problems were created by earlier rounds of "disruptive innovation".

  •  So, from the point of view of the HBR (4+ / 0-)
    Recommended by:
    YucatanMan, arendt, NoMoreLies, Yonit

    yeah, there's a lot of  capital and little talent, ideas, innovations; from my point of view, you can find a pretty fair amount of all those things but there's never enough money to do anything.

    Because money is being extracted from the people who give a damn about doing, well, anything beyond gambling on real estate or exotic financial instruments (or both) and being handed to people who want to do nothing but concentrate money, natural resources, and power into their own hands and hoard it.

    There is no way for a citizen of a Republic to abdicate his responsibilities. ---Edward R. Murrow

    by SouthernLiberalinMD on Sun Jun 15, 2014 at 03:37:00 PM PDT

  •  Great diary & posts. Thanks arendt. (0+ / 0-)
  •  Christensen needs a 4th type of innovation (2+ / 0-)
    Recommended by:
    arendt, Yonit

    Government capture innovation

    Today's reality is that the "marketplace" has been distorted by the decades in the making business takeover of the politicians, regulatory agencies, and courts. The best return on investment for the wealthy has been, by far, political contributions. The powerful wealthy no longer need to innovate per previous definitions, they use the power of government to guarantee their profits, stifle competition, prohibit their prosecution, and enable the looting of the rest of our population.

  •  I have been making a similar point (3+ / 0-)
    Recommended by:
    arendt, mightymouse, Yonit

     The rich have so much money they make foolish investments.  The excess capital chases after quick returns and creates bubbles or invest in Ponzi schemes.  

      The investments not made are public investments, cheaper higher education, wi-fi broadband everywhere for free, bridges, maintaining parks, healthcare for all, food subsidies, housing for poor, mental healthcare, etc.  These investment would generate returns to the society far beyond the meager public investments of the Walton daughter in an Art Museum, or the money wasted with Madoff and thievery.

  •  lucky there's smart people here (0+ / 0-)

    because I'm trying to understand what's a neoliberal and how they control the economy. what i see sneering superiority is certainly not neo but musty and sagging nor liberal or even particularly conservative but more fundamentally greedy. crass as Crassus is only two millenia old-is that neo?

  •  Like trying to make cars better (4+ / 0-)
    Recommended by:
    Jackson L Haveck, blackhand, Yonit, arendt

    by producing more gasoline. Instead, that just leads to faster, more wasteful and often dangerous cars. The problem isn't the supply and liquidity of capital. The problem is demand, and the supply-siders' approach has ignored it.

    We need to get more products and services in the supply chain that people genuinely need, could actually use, and that would be beneficial, to their health, safety and well-being, physical and emotional, now and in the future, and not the race to the bottom crap often being made and sold today. It would stimulate the economy and be sustainable. And we have the capital, of course.

    What we have today is an unhealthy, unfair and unsustainable distortion of one aspect of capitalism, the financial and economic equivalent of shoving feed down a goose's neck to produce a fat-rich liver that will be turned into the fois gras that a small group of rich people can enjoy, to the detriment of the goose.

    We've focused excessively on parasitic and non-productive financialism, at the expense of sustainable productivism. We need more solar cells and healthy organic foods and fewer hedged trading strategies and credit default swaps.

    "Reagan's dead, and he was a lousy president" -- Keith Olbermann 4/22/09

    by kovie on Mon Jun 16, 2014 at 05:05:42 AM PDT

  •  He's Fundamentally Wrong (2+ / 0-)
    Recommended by:
    Yonit, arendt

    No, he's not wrong that "today's" capitalists are bullshit. They are. Though it's bullshit that today's are any different from any others, except they stand on the shoulders of bullshit giants. They are the natural evolution of capitalism as governance. Capitalism simply values property above all - especially labor that it always seeks to devalue. It's nearly totally at odds with democracy, since 99.99% of us are primarily labor, even if some labor owns some capital.

    Where he's fundamentally wrong is where he divides innovation into three categories:

       Performance-improving innovations replace old products with new and better models. They generally create few jobs because they’re substitutive.

        Efficiency innovations help companies make and sell mature, established products or services to the same customers at lower prices.

        Market-creating innovations, our third category, transform complicated or costly products so radically that they create a new class of consumers, or a new market.

    I develop network software for building automation, specializing in energy efficiency. The technology transforms complicated and costly building machinery into simple tools that use less energy per per building performance. So it's the third category, right? But it does so by innovating efficiency - second category, right? The efficiency increases performance, first category - huh?

    Some customers use it to cut staff, so my small company replaces a larger headcount of unnecessary and less effective building staff as we move from building to building. Other customers use it to get more out of their existing staff, or replace more (mechanically) skilled staff with less skilled staff. Others add staff, spending money on salaries instead of on energy, or bringing in house management that used to be outsourced equipment repair.

    Meanwhile, building occupants are more comfortable, less fuels are mined and burned, Greenhouse pollution is reduced. It's disrupting the HVAC and controls industry, and growing enough to disrupt the energy industry.

    The capitalists are still bullshit. The building owners usually just use less labor and less energy to increase profits - which they spend on buying more buildings, because capitalism is interested in profits only as a means to get more property. Efficiency as a means to get more property. It's capitalism.

    But this analysis is bullshit, too. I'm an entrepreneur, and I'm not bullshit. I work hard, I take big risks, I employ people, I cut the Greenhouse and our dependency on fuels. I help the US lead in knowledge and technology.

    The Harvard Business Review is a capitalist propaganda organ. It has a capitalist ideology, so a capitalist agenda, that its editors select articles to promote and comfort. Capitalism's image is in tatters worse than since the Great Depression, so it's "reinventing itself" by scrubbing the same capitalists with a rag of new bad theory.

    Meanwhile some of us are making capital less lethal to we who must live among it, and among its capitalist owners.

    "When the going gets weird, the weird turn pro." - HST

    by DocGonzo on Mon Jun 16, 2014 at 08:08:11 AM PDT

    •  Points for what you do (0+ / 0-)

      The rest of it, I'm too tired to comment about.

      This thread has gone on for a day and a half. Its been amazing. Thank you for your contribution this late in the game.

      Your point, of course, is valid. It is very hard to compartmentalize reality. There is always leakage.

      Beyond that, I'm pooped.

  •  Unfettered market success breeds its own failure (2+ / 0-)
    Recommended by:
    arendt, SilentBrook

    It seems as if success in any "free" market leads to the use of that money to remove regulation AND to remove competition, leading to monopoly or cartelization, which is... the destruction of the free market.

    Neat diary! Just enough breadth and depth. It sounds as if I need to read this Jane Jacobs. I like what she says here. I agree, development has given way to the pre-Industrial plunder economy that your Michael Lind quotes indicate.

    It all reminds me very much of the dissolution of the Republic of Venice, which I believe ended in rather aimless froth among its monied classes, and whose fall began with -- significantly, given your diary's mention of military follies -- its creation of a land empire, at the expense of its natural seafaring primacy and its privileged trading position. This land empire creation was something that an earlier doge had explicitly cautioned against (the Doge, Foscari, invoked God's wrath, but also the wrath of debt).

    The difference, though, is that instead of colonizing foreign countries, the targets of this dissolution-covered-by-plunder regime are now the middle class and poor.

    •  Thanks (3+ / 0-)
      Just enough breadth and depth.
      Thank you. You must have some idea how hard that is to achieve, in order to comment on it.

      And, I agree with all you said. The reference to Venice is new to me. I will give it some investigation. I always thought they went under because they were simply too small - a city-state in an age of nations.

      •  Venice (1+ / 0-)
        Recommended by:
        SilentBrook

        Hm--well, in the end, that is shown by their being trounced, first by Napoleon's empire, and then by Austria-Hungary's. I don't think it was inevitable for a city-state to go under at the time, since even when great empires duke it out, some tiny states always survive somewhere (think of remoras around a whale). It is often decided by geography, as when a place is directly in the path of conquest.

        However, consider that Venice only flourished in its infancy in the first place because it was a group of islands, and thus difficult to invade. One wonders what would have happened if Doge Mocenigo's warning (sorry, I miswrote, above--it was Foscari who was warned AGAINST, not who sounded the warning) had been heeded, or even if Venice had remained nothing BUT islands--I don't know that Napoleon or Austria-Hungary would have bothered invading then!

  •  Capitalists, hah! (1+ / 0-)
    Recommended by:
    arendt

    Spread the word: the only way out of this is to tax the bejeezus out of these Lords of Creation sitting on their dragon-hoards. We must drive them before us like a herd of wildebeest wielding the stick of progressive taxation on unused funds, to make them egest some and plunk it down in the real economy. They will suffer, but they will be purified and survive. And the rich-poor gap will narrow, and the unemployment rate will go down, and all will be as it should be. After all, it ain't capital if it's not invested, which means they aren't capitalists until they do.

  •  What came first? (1+ / 0-)
    Recommended by:
    arendt

    Business or capitalism?

  •  Arendt -- the banality of ignorance (1+ / 0-)
    Recommended by:
    arendt

    "Now, even the Harvard Business Review is calling out the neoliberal nonsense about "entreprenuers", pointing out that the short-term view of the financial markets values "disruptive innovation" less than "efficiency innovation" (i.e., cutting jobs)."

    It's spelled ENTREPRENEUR, NOT "entrepreuer."

    •  I always hated the word, pardon me for... (1+ / 0-)
      Recommended by:
      SilentBrook

      misspelling it.

      It is so misused to describe every Joe who opens a pizza stand. Plus it is soooo pretentious.

      My second most hated bit of pretentious biz jargon is "value proposition", which I translate as "sales pitch".

  •  Labels (1+ / 0-)
    Recommended by:
    arendt

    Greed-is Good capitalism has destroyed us from within. Why is "Socialism" a dirty-word ? Let's dump the labels and start from scratch with a just and transparent system. Jean Clelland-Morin

  •  HBR is a bunch of socialists! (2+ / 0-)
    Recommended by:
    arendt, SilentBrook
  •  There should be little doubt... (1+ / 0-)
    Recommended by:
    arendt

    That Western Capitalism is in such a crisis now that it's doubtful it will survive unscathed.

  •  Capital ? what is that exactly? (2+ / 0-)
    Recommended by:
    belinda ridgewood, arendt

        I am not sure how one would define "capital," but I'm with Frederick Soddy on wealth.  If it didn't come from the sun, or receive energy from the sun, then in the long run, it is worthless.  If it doesn't eventually degrade, then it was already worthless.  Our monitary system should not run ahead of the relatively steady output from the sun.  We cannot continue to consume more "wealth" than the out put of the sun to the earth, or we are dipping into the "savings" of fossil fuels and perhaps other "savings" that will run out.  We are not even close to sustainable as a culture, or as a planet.  Time to quit "spending" like there's no tomorrow.  MONEY IS DEBT.

  •  Jill Lapore's article (1+ / 0-)
    Recommended by:
    mygreekamphora

    In this weeks New Yorker Jill Lapore does a devastating job on Cristensen's theory of disruptive innovation. The subtext is that Harvard professors write books about business, boardrooms all across the country treat them like bibles, though they are often shabby in their methods and wrong in their conclusions. In addition to writing for the New Yorker, Lapore is a Harvard historian!

  •  Thank you for this (0+ / 0-)

    You have me thinking of markets in new ways. As I think of ways to improve my business, I'll try to focus on market-creating innovations.

    Although it still seems to me that we have to force the wealthy's hoarded millions back to our shores and out of the bank vaults, or no one has the money to buy new consumer goods.

    Capital is scarce for the working poor and middle class. At least, it is around here.

  •  A single phrase ... (1+ / 0-)
    Recommended by:
    mygreekamphora

    ... in the 3rd block quote, above, explains SO MUCH about what's wrong with the world today:

    " ... total financial assets are today almost 10 times the value of the global output of all goods and services ..."

    Which means that there is more money available than there are things to spend money on!  And, as we all know only too well, most of that money is in the hands of a very few, very wealthy people, which means that the size of the marketplace is also smaller.

    Yes, it all does roll back to the inequality problem, doesn't it?

    OF COURSE the New Right is wrong - but that doesn't make WRONG the new RIGHT!

    by mstaggerlee on Tue Jun 17, 2014 at 11:33:35 AM PDT

  •  Hide and Seek (0+ / 0-)

    As long as 20 trillion stays in hidden accounts American capitalism is totally dead. Billionaires and millionaires are in totally denial as to how their fortunes were made. They are/were so busy patting themselves on the back for being brilliant they won't recognize how they made their first million. If only half that money went back into the economy as investments they could have grown that investment but as it is the fragile economy threatens everyone even the richest billionaire. So until then, American capitalism  as well as world capitalism is broken forever.

  •  Executive compensation may play a part in this too (1+ / 0-)
    Recommended by:
    arendt

    Many "pay for performance" plans have short horizons and, as noted, efficiency innovations  pay off in that time frame.    The Roosevelt Institute did an excellent report a few weeks ago:

    http://www.rooseveltinstitute.org/...

    Here's a key quote:  stock-based components of this pay have encouraged CEOs to distribute cash to shareholders at the expense of investment in innovation and provision of secure, well-paid jobs.

    BTW - I'd lost my password, and wanting to add this comment was enough to get me back on to participate rather than just read, so thanks!

  •  The DEFINITION of monetary DEFLATION! (0+ / 0-)

    THIS seems at least a substantial portion of how to define the current trend of our society as DEFLATIONARY....as capital is hoarded and efficiency becomes more important than innovation, largely for the purpose of preservation!  

    Deflation defined...too much capital chasing too little goods, services, research and so on....which leads to less than efficient use of and then the loss of that misappropriated resource, which once was truly a precious commodity (remember 18% CD rates?  THAT was when cash was truly PRECIOUS)!  Perhaps as DEFLATION removes the excesses, we will see such things again, especially as we have 100X's (guessing) the DEBT now that will ultimately be repudiated (cleansed through massive defaults of lesser quality debts at the least).

    About the LAST bastion of this unbridled and inefficient use of capital, known as LIQUIDITY is about to change, as the US EQUITY markets, the last "haven" for this unused capital excess, is about to be REDUCED as deflation grips more and more of our society!

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