Economic confidence is tenuous, at best. Employment is question able for both the unskilled teenage youth and the well-trained college graduate. "Unemployed? Fired? Laid off?" are the startled responses of many middle-aged persons in both management and labor; the luckier ones are confronted only with salary cuts and paybacks. Increasingly, more Americans feel victimized and discouraged by forces beyond their control. Reinforcing this despair is cynicism toward the economic policy-makers: economists and politicians.
When beset with pessimism and despair, most people initially seek the comfort of ignorance, or they adopt a Pollyanna disposition. Although imitating an ostrich is a common response, ignorance is bliss only for a while.
With time, growing numbers will turn to formal and informal education on economics--out of necessity and anger. Some people will be contemplative; others will be more aggressive in their search for economic reform. The 1980's will be the decade of new economics; traditional economics is dead.
Our own progression from being concerned citizens to economic gadflies will not only be the path of many more people, but our questions will provide guideposts for others to travel more rapidly than we did. Others recognize the foolhardiness of resting one's fate with economic policy-makers who have records of dismal performance. From necessity, they, too, will strike out for a new understanding of what is wrong. This book is a series of essays to alert other concerned citizens to the problems behind "necronomics", a term that aptly describes the necrotic laws behind our economic bankruptcy.
This book asks for a reappraisal of our everyday economic assumptions. Some overlooked solutions are startlingly obvious when the problems are presented in a better light. We have coined new words, from time to time, to describe everyday economic forces that have been ignored by existing policy-makers. One reason the politicians have escaped meaningful scrutiny is the abundance of misleading terms and concepts that cloud the nature of their actions.
The dedication of this book describes one frequently misused term: capitalism.* Is one a capitalist if his use of stocks breaks up a corporation and generates unemployment? Unemployment removes heads ("caputs", whence "capital") from production; this stock activity is the opposite of capitalizing production. It is decapitalism! While a capitalist creates new wealth, a decapitalist acquires wealth from producing less than nothing.
"No One Beats Inflation" conveys the nutshell summation of our philosophy. When one pursues income from inflationary speculation, one is seeking wealth by producing nothing. For example, the people who speculate in gold and silver are seeking non-productive income. Similar are the acquisitors who take over companies for a fast dollar without adding one new product.
Necrosis of the economy results when public laws rationalize, legitimize and encourage people to turn away from the creation of new wealth. Consider precious metal speculation: production suffered with every dollar and thought that was wasted on trying to get something without producing. The rules and reasoning behind speculative activities are necrotic laws: necronomics. Necronomics eventually beats all people, including those who were initially successful in speculating for inflationary income.
Amazingly, the populace has expressed concern about unstopped inflation but has, nonetheless, pursued new avenues of income from inflationary gains. A connection has not been made between how every dollar of inflationary income is also a dollar of inflationary loss and suffering. This contradictory behavior is most evidenced in laws passed by the politicians. For example, supposedly to help people fight inflation, politicians removed the ceilings on savings interest rates. They have ignored how this legal action forces up the interest rates on loans; after all, bankers cannot lend money at interest rates below the rates paid to savers. Interest rates have been a major factor in recent industrial slumps,, especially a factor in the ailing industries which have had to pay higher rates than healthy companies. Legalizing high interest rates on savings is an example of a necrotic law, for the action also forces the loan interest rate up to the detriment of business and employment.
People suffering from inflation do not beat inflation with increased interest on savings. Every additional dollar paid to savers by a bank comes from the loan borrower who increases the cost of his goods or service. In other words, the saver does not come out ahead in his battle against inflation: The dollar received in high interest is paid out for higher priced products. In addition, many savers lost dollars overall because the high savings/loan interest rates resulted in rising unemployment.
Most Americans do not realize that the few additional dollars received in high interest savings have cost them hundreds of dollars in jobs. An example of this on the individual basis is the construction worker who cannot find work because of high interest rates, yet he brags about the amount of interest that he is receiving on his savings account. While he might get a few more dollars on his savings, the accompanying high interest on construction loans has pre vented him from working and earning much more money. On a community basis, one can find examples of local economies, such as Houston, Missouri, that are suffering high unemployment because of high interest rates, yet members of the community are still enthusiastic about high interest on savings accounts.
Increased interest on savings account is a form of inflationary income, for the saver receives more money without producing more goods or services. This particular attempt to beat inflation with inflation boomerangs to cause unemployment for individuals and the community. Other examples are given in the following essays on how people and politicians ignore the connection between inflationary income and inflationary suffering. When this ignorance is not reversed, an economy is destroyed by efforts to beat inflation using inflation.
Some people will use a radical label to describe these writings. Our extremism, if it be so, is both a literal interpretation of and a uncompromising faith in the institutions of democracy and capitalism. The "radicalism", if any, is in seeking the untainted and unbridled heart of these two so that our world can be problem-freer. Radically, we urge the resurrection of their original and literal meanings.
Democracy translates "divisions of people rule". Literally, democracy is more than "people rule" and the existence of elections, a very common description of democracy. The role of divisioning in democracy is overlooked in both the semantic roots and the practical application. When people are optimally divided up and apportioned power, they solve their common problems.
Somewhere between despotism and anarchy is an optimal blend of dividing the people--and their time--so that they can rule themselves by ruling the problems out of their lives. Despotism allows no divisioning of problem-solving power, for one person holds all the power. Anarchy, the opposite extreme, finds power totally divided and diffused. With either despotism or anarchy, few problems are solved. Democracy is the Golden Mean between these two extremes.
The U.S. today has a form of democracy which is not relevant to its problems; and, thus, it does not have the implied benefits of optimal democracy: a problem-freer world. This book describes some steps toward improving democracy in this country and refutes the efforts of others to reform policy-making away from democracy.
In the realm of private problems, e.g., food, clothing, housing, capitalism is the best solution.* Only by rewarding the individual can these private problems be solved. Just as with democracy, America does not have an optimal form of capitalism. Rather than providing capitalism for the individual (per capita), the economic policy-makers have legalized capitalism for a fewer few.
Capitalism for a fewer few is an insidious, greedy form of capitalism. It is most evident in the tax-support for business activities that reduce production and employment per capita. Most recently, capitalism for a fewer few has taken the form of tax- subsidized mergers and takeovers. Using the tax-free exchange of stocks and securities, this business activity has generated large financial gains for a few in the marketplace. Simultaneously, many workers have lost their jobs as a result of the questionable streamlining of the involved corporations.
An example of this kind of streamlining was the Wheelabrator-Frye takeover of the Pullman railroad car manufacturer in 1981., Using bank loans, the smaller and younger corporation bought the older and much larger company. As one financial article described the resulting activity, Pullman was "milked" of its resources; one year later, Pullman was not manufacturing any railroad cars and many people were jobless. As a result of a few people making a financial killing, many more people lost employment, and America lost production of new railroad cars. The tragic irony is how Wheelabrator-Fry used bank loans that may have involved the savings of the discharged employees.
The promises of leaner, more efficient production as a rationale for dismembering production are questionable. While production per remaining worker may have increased, the statistics reveal that total production per capita has suffered.
Rising unemployment in an industry or the nation indicates that capitalism for a fewer few is active in America. General Motors in 1982 practiced capitalism for a fewer few when it negotiated "pay backs" from the unions while seeking to sweeten bonuses for management. A few benefited from capitalism while a greater number were required to accept a reduced standard of living.
Similarly, the corporate policies of severance pay for executives affected by takeovers could seemingly encourage management to be indifferent to takeovers and dismemberment of production; plausibly, insane business activity could result if "mad money" for the top executives is too sweet. Policies that promote capitalism for a fewer few and decapitate overall production should not be called capitalism. Rather, "decapitalism" is a more accurate term.
This book is not a gothic novel to cheaply entertain and distract one from the painful economic realities. These writings will be appreciated to the degree that one has lost faith in the existing economic policy-makers.
Inflation: The cost of Unsolved Problems
The central thrust of this book is analysis of the causes and cures of inflation. Viewing inflation as a matter of rising prices is simplistic, insufficient and misleading. More complete is expanding this traditional approach up to the concept of "inflationary suffering." Clearly, if one's wages do not rise as rapidly as prices, one suffers from inflation; this is the traditional view of inflationary suffering. Ignored, but just as important, is the inflationary suffering that results from unemployment.
Price rises and unemployment are two sides of inflationary suffering. In both, a disparity occurs between price and wages. Of the two, which is worse? This question is raised because the answer refutes the economic policy-makers--Nixon, Ford, Carter, Reagan--who use recession (unemployment) to fight inflation. While this particular anti-inflationary action might reduce inflationary price changes, forced unemployment increases total inflationary suffering, thus, the cure is worse than the disease.
When one expands his understanding of inflation from price changes to inflationary suffering, two general and related definitions of inflation are useful in prescribing cures. The general definitions are: (1) inflation is the cost of unsolved problems and (2) inflation is the cheapening of human time.
All problems have a cost which inflates the price of goods or services if not solved. Under this general definition, the cure to inflation is better problem-solving. Better problem-solving in the public sphere requires more relevant democracy. In the private sphere, capitalism per capita is needed instead of decapitalism.
Inflationary suffering as the cheapening of human time can be justified in numerous ways. The traditional definition of inflation as an increase in prices above wages is synonymous with one's work time being cheapened. Equally true, if one's form of inflationary suffering is unemployment, one's time has been immensely cheapened.
Another way of showing that inflationary suffering is the cheapening of human time is to consider the other general definition that inflation is the cost of unsolved problems. What is a problem? A problem is something that wastes or cheapens your time. Unsolved problems means that a lot of time is being cheapened.
Still another (and subtle) rationale for viewing inflation as the cheapening of time is to consider the nature of currency. With inflation, one's currency is worth less, i.e., currency is cheapened. The conceptual origin of currency is found in the following phrase: "I'll pay you what your time is currently worth." This insight has importance for the issue of standardizing currency as a way of fighting inflation. Currency should be tied not to gold but to its name sake: time.
Two general problems are common to all specific problems. One problem is "semantic slippage" where the meaning of words drift from the literal root meaning. The other is the lack of an adequate public problem-solving process.
Semantic slippage reduces problem-solving of problems by permitting misdiagnoses of problems. Even worse, some words have come to mean the opposite of the original, still-literal meaning. As a result of the latter, many negative actions are justified using productive terms and concepts.
Two instances of semantic slippage will be offered. Consider the word "capital". Reaganomics called for unbridled capitalism as the solution to our problems. Did Reagan's implementation of supply-side economics foster more capital formation and investment? No. Reagan's policies increased unemployment which signified a decapitation of production while the recession indicated reduced production per capita. In confusing the symbols of capital (stocks, bonds, and currency) with real capital, Reagan fostered "decapitalism".
Real capital in a country is what the people do with their heads and time. Capital translates "from the head". Regardless of the money, stocks, securities or deeds involved, if the business transaction does not increase production/employment per capita, then it is not capitalistic in the true, literal sense of the word. Semantically and productively, business activity is capitalistic only if it promotes the first six letters of "capital", that is, the capita or people of an economy.
The mere use of the symbols of capital (stocks, bonds, currency) does not make a transaction capitalistic. The proof, if one is to have viable economics--not necronomics, is the effect on the substance of capital: the capita. If production and employment drop per capita, one does not have capitalism; one has "decapitalism".* As long as the mere symbols of capital are confused with the substance of capital, America will suffer from destructive policies under the guise of capitalism.
Another instance of semantic slippage is inflation and how to fight it. More important than inflated price changes is inflationary suffering. The latter is the cheapening of one's time. Economic policy-makers think that inflationary suffering only affects the employed. Their statistics on inflationary suffering do not include the inflationary suffering that results from unemployment. With unemployment, one's wages not only fail to keep up with price rises, but one's income falls almost completely. The use of unemployment to fight inflationary price rises actually magnifies the substance of inflationary suffering. Unemployment cheapens time more completely than a loss of buying power due to a few percentage points of price rises.
The issue of semantic slippage is raised because the reader will be forced to confront self-education in this book. Numerous instances of semantic slippage will be analyzed in this book. Among them are: profit, pride, economics, investment, politicians, compromise and democracy. Eventually, enough people will recognize and champion the needed semantic honesty to stop the inflationary losses. Until that point, inflationary suffering will correspondingly rise.
No Public Problem-Solving Process
The other general problem common to the specific problems behind inflationary suffering is the lack of a public process for actually solving problems. Despite the overwhelming evidence of rising unemployment, taxation and crime, many people cling to the idea that our policy-making process should not be tampered with.
Semantic slippage plays a role in people accepting modern politics as a necessary evil. "Compromise" is the old standby for justifying the evils of politicians. A distinction exists between compromises "for" and compromises "of" the nation. The present electoral process percolates people that are beholden to a small portion of the population who pass laws that bend the common weal to benefit a fewer few. Said another way, can an average American ever benefit from a compromise formulated by politicians that represent a few special interests?
To reverse inflationary suffering, - both prices and unemployment - Americans must concertedly alter their complaints against politicians into actual reform. To solve the problems behind economic decline, America needs democracy in the public sphere and capitalism in the private sphere. America presently has little of the two. Democratic Capitalism is the needed process.
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