Why this Global economic mess? Has Capitalism failed? No, Capitalism has 'nt failed.

Why this Global economic mess? Has Capitalism failed? No, Capitalism hasn’t failed. But interference in the working of Capitalism is the root cause of global economic crises.
Today most large corporations in the manufacturing sector are managed to satisfy stock market expectations at any cost. Every manufacturing organisation has investment in land, buildings, machinery, and people. When the market is not growing the easiest way to increase profit and satisfy stock market is to sack people as it is the easiest thing to do. When people are sacked and don't find alternative jobs economy gets affected. The companies in their blind urge to satisfy stock market will cut more jobs to cut costs and kill the economy further. This is a vicious circle.

Myopic managements are not realising that there will be no company in the absence of customers.
Unions and minimum wages act further to kill jobs by forcing companies to employ automation and robots. Myopic managements, trade unions, and advocates of minimum wages do not realise that automation and robots will not require holidays, clothes, soaps, detergents, processed food, air travel etc. What will happen to the economy?

Bloated government with massive debts and ever-increasing taxes further shrink the economy and create job losses.
Capitalism is blamed for global economic mess. Some economists call for government spending. Some other economists call for more government regulations. Some economists say capitalism has failed. All of them are wrong. Capitalism hasn’t failed. But capitalism has been made to fail by government intervention; following policies of economists recommending either increased government spending, or increased government regulation , or controlling money supply, or fixing interest rates, or by fixing minimum wage rates, or allowing greater say for trade unions; by allowing mainstream banks to enter speculative business and off balance sheet trickery.
Capitalism is closest to human nature. Every human being wants to be free, is born, and dies. In Capitalism companies will be born and some will die. Problems in capitalism arise when dying companies are rescued by government but individuals dying in debt are not only not rescued but downgraded in their financial rating to compound their problem.

Perplexed Global Citizens

An ordinary American or a Britisher or Australian Or Brazilian or an Indian who isn’t an investment banker, equity/derivatives trader, banker, head honchos of corporate sector, wealthy, doctor, or lawyer is deeply affected by what is happening in their respective country's economy. In other words, leaving aside a miniscule percentage of any country's population unaffected by the current state of economy majority are deeply disturbed.

An ordinary American or a Britisher or Australian Or Brazilian or an Indian is interested to work but he can’t find a job. He is disturbed when jobs are not available when corporates are showing record profits, interest rates are low, or stock markets are booming. He is even more disturbed when Nobel Laureate economists, policy experts, & other Pundits give explanations for state of economy which is anything but convincing. He is witness to this state of affairs of the economy since 2008.

 

GLOBALISATION- IDEAL WAY

What is suggested in this blog is the only way Americans, or British, or Canadian, or French, or Brazilian, or Russian, or Malaysian etc. can ensure jobs remain in their respective countries.

Globalisation as practised till now has failed to bring cheer to the people of this world. No two countries are identical. Pressure to satisfy stock markets has forced management of many companies to shift production to any country that can aid it to maintain its profit. Seen in this context globalisation is a facade or euphemism for protecting corporate profits.
It's a no brainer. Loss of jobs by outsourcing production is a loss to the economy that is never rectified. For example, any company that shifts production say from USA will not generate demand for any capital equipment. Hence, there will be no incentive for an investor to set up a capital equipment plant. Absence of capital equipment means no requirement for maintenance and spare parts. Job losses are obvious. So, what is the way forward?
For example if a Chinese or Japanese company wants to export to USA or India, they should set up local manufacturing. This step will neutralise to some extent incomparable conditions say between USA and China or China and India.

To avoid balance of payment crisis an exporter from China who exports to India will get paid in Indian Currency. An exporter from India who exports to China will get paid in Chinese Currency. Trade will balance.

Globalization. Is it beneficial?

Globalization. Is it beneficial? The answer is no and yes.Globalization happened in the absence of a level playing field.All currencies became fiat money after delinking exchange rate with gold.Exchange rates can be fixed to give advantage to the exporting country. Labour laws differ.It is possible to fix low wage rates with tough action.In fact, no two countries are identical.In reality,globalization has helped some countries like China to have huge current account surplus and some countries like USA with huge current account deficit.

Any country that blindly follows liberalisation and globalisation will land in trouble. Any country whose imports are greater than exports year after year will surely face a liability in foreign currency. To meet this liability in foreign currency it will borrow and further incease its liability as it will now have to repay principal and interest.
Such countries whose imports are consistently greater than exports will not be able to create jobs . This is the hidden secret of free trade.

USA ,being the largest and the most open economy in the world , is vital for the survival of many export oriented countries like China, Japan , Germany...
Globalization plus proclivity of American Corporations to meet or satisfy the expectations of Wall Street has impacted Americans.
American economy should benefit American Citizens first. A new report says that Walmart importing good from China has led to 400,000 U.S. jobs being lost between 2001 and 2013.Read Article in the hyperlink given below:

http://www.nydailynews.com/news/world/400-000-u-s-jobs-lost-due-walmart-imports-china-article-1.2460025

Job losses will certainly impact American economy.American Corporations will do well to reduce their urge to satisfy wall street.Job losses will also happen because of Automation,Artificial Intelligence,& Robots.
Manufacturing matters.To protect manufacturing industry which needs consistent R&D investment Governments of all countries should fund manufacturers with some financial instrument like preference shares or some other method to ensure zero role for share market.No manufacturer can afford to dance to the tune of share market as doing so will require them to outsource,reduce R&D spend, downsize etc.
Manufacturing's Multiplier Effect is Stronger than Other Sectors' in the economy.Look at the figure below:

Every dollar sales of manufactured products supports $1.33 in output from other sectors—this is the largest multiplier of any sector.  Manufacturing plants, therefore, have a powerful and positive impact on economic development. This study in USA will be valid for every country in the world.Both globalization and excessive obsession with stock markets needs a rethink for the benefit of global economy.Read the full article in the link below:
http://www.themanufacturinginstitute.org/Research/Facts-About-Manufacturing/Economy-and-Jobs/Multiplier/Multiplier.aspx



This post was written much before Donald Trump became president of USA.

Idea to save capitalism

Investment banks, banks, hedge funds, financial wizards, powerful politicians. Have all contributed in some measure to the present crises the World is in. Every one blames capitalism for the wrong reasons.
 Numerous books, expert advice.... all have one theme in common and that is: financial institutions, investment banks, and their employees made disproportionate profits at the expense of tax payers money in different countries, poor became poorer, and pensioners faced a bleak future. Why this is happening?
Despite mounting evidence of financial skullduggery, billions of dollars were pumped to bail out financial institutions for their misdeeds. The result: Financial Institutions have been saved to lay the foundation for another financial crises, minimal economic growth, bleak future for pensioners, high rates of unemployment.  If governments of various countries are serious to save their respective economies then don't allow deposit taking financial institutions to invest in stock market and financial derivatives. Speculators including investment banks should fund their adventure with their own money and not the tax payers.

In the real world, there is no real capitalism, no real free market, no ethics, no morals, & no values.
The western world is anything but capitalist. Every large bank, large financial institution, large insurers know that they can freely pursue their indulgence, without facing their consequence, knowing fully well that they will be saved by the in government and that there is no punishment for their misdeeds.

Is there a free market? The answer is no. Large banks, financial institutions have so much money and power to manipulate any market. The only section to suffer ignominy are the retail investors.

If the countries in the world follow current course of action then the result is clear: No Positive Result.

What should be done by different countries in the world to come out of this economic conundrum?
Every country should understand what governance is.Every government is servant of its people. It directly follows that all institutions (including banks & financial) that support the in government in its governance are also servants of its people.
Every in government should strive for the wellbeing and welfare of the vast majority of its people. Is this the case in the real world? The answer is a clear no. Every in government works for the welfare of a small percentage of its people.
Every in government in the world should not dance to the tunes of their stock markets. Thanks to dancing to the tune of Wall Street, USA lost its technological and manufacturing prowess in the process. It created a manufacturing giant China out of nothing. It inflicted a huge financial deficit upon itself.
Can economies in the world grow without satiating the appetite of stock markets? Can we have pension schemes that are different from pay as you go or DB? Can we raise finance for companies that are long-term like equity but without its associated costs? Can we get rid of investment banks, hedge funds, and financial derivatives? The answer to these questions will be attempted in the coming days.
Financial innovation that eliminates dependence on stock markets & elimination of investment banks will make world economy stable. Powerful investment banks can manipulate stock markets & stock prices at will.
Companies with no pressure to answer the call of stock markets will become more responsible socially & have less temptation to shift manufacturing base.
Pensioners in any part of the world would like to have steady pension that is not based on speculation. A fixed rate for pension can be fixed country-wise & this also will reduce healthcare cost of pensioners.

As every country in the world has an all-intrusive government, health care & low-cost housing need not be a business. The action taken will boost the purchasing power of low-income groups & help the global economy to recover.

About Source Actionable Ideas

Source Actionable Ideas focuses exclusively on actionable ideas to make capitalism work to help people find jobs in each country.

The Goal: Make people find jobs in every country.

The world is facing an economic crisis. Yet each country is clueless on how to come out of the crisis. All formulas to revive economy suggested by economists including Nobel Laureates has been tested without success.
Some economists suggested government intervention and spending. After implementing this suggestion economy becomes worse.

Some other economists suggested controlling money supply to control economy. Even this suggestion doesn't work.

Some other economists suggested inflation targeting. Even this suggestion doesn't work.

This blog will focus on possible solutions to economic problems that will help aspiring citizens find jobs in their respective countries.