we can sure draw some analogies.

Reflecting on the United States economy and the economic woes reported from the rest of the world’s financial systems these past few weeks, we have noticed a possible correlation to the childhood fairy tale “Chicken Little.”

You probably recall from this old English folk tale that a tiny little chicken called Chicken Little felt a rose leaf fall on her tail one day and immediately ran in great fright crying “the sky is falling!”

First one she told was Henny Penny who joined her in spreading the message. On their way to tell the king, they met Ducky Lucky who joined their chorus. Then Goosey Loosey and Turkey Lurkey also voted for the tale.

Did we say “voted”? Well, they joined the parade of characters till they all met Foxy Loxy who lured them into his den by promising to tell them where the king lives.

The story goes that Foxy Loxy led them into his den and they never came out again.

You can draw your own conclusions about what happened to Chicken Little, Henny Penny, Ducky Lucky, Goosey Loosey, and Turkey Lurkey, but you can be sure that the foxy one came out of that deal okay.

Now there are those who predict that our economy will never emerge from the den it’s in, but that’s not our area of expertise, so we won’t speculate here. Our business is running a business and we plan to keep doing just that.

We believe in persistence and hard work. Those whose wares we represent have their hopes tied into the products we represent. We don’t’ plan to let them down. We plan to be here; to keep on working and hopefully only paying our fair share to the common good in order to remain in business.

We hope to pass along many good deals to you in the coming months. We don’t expect to ever be a Wall Street presence; we are what has come to be called a Main Street business.

We are drowning out those who are trying to spread the message that the rose that fell on Wall Street was actually a thorny stem or the whole bush. We know based on history that some people will come out of this slumping economy smelling like a rose.

We know that some people are simply going to see and seize opportunity out of this turmoil and disruption. Some people are not going to fare so well and are going to need assistance. We support many organizations trying to provide that help.

In some respects poverty and unemployment are big business. Like a friend of mine said after being unemployed for four months a few years ago, “if it weren’t for unemployment, a lot of people would sure be out of work.”

Think about it. The unemployment system here in the United States is huge. We hope our customers don’t have to file to collect, but if you do, you will encounter counselors, clerks, and a cast of helpers that include those who actually keep the records and generate the checks to say nothing of the landlords collecting rent for the space these agencies use. If someone wasn’t unemployed, those people surely would be. Even our culture of helping those with less actually employs lots of people to distribute money, food, shelter, clothing, and other things of need.

We can’t predict where the large-scale economy is going, but we do believe that it will keep going and those who don’t give up on it will be a big part of its recovery.

We plan to be just as “foxy” as we can be to lure you into our den and connect you with some of the finest products from around the world. We can assure you that you’ll come out okay.

Please Reply and Share with us at: http://i-shoptheworld.com/2008/10/29/this-economy-is-no-fairy-tale-but/ all Your thoughts, Comments, etc. on any/all of the following related to the current Economic situation and How we may All work Together to Improve our World Economy for Everyone’s Mutual Benefits! , namely:

- Do You really think the economy is as bad as the news media has been portraying it?

or …

- Do you think this is all just a fairy story they/the media have concocted, just like Chicken Little, to convince everyone that the “sky is falling”?

and if so …

Why?

- Do You think the media telling everyone the economy is bad, just like Chicken Little, is creating a “self fulfilling prophecy” and making the economy worse than it is really otherwise?

- Is the economy in Your country “better” or “worse” than as reported by the news media in the United States?

- How has any of this affected your personal finances and/or family finances thus far?

- What are You doing Now to prevent the reported economic situation from (further) affecting Your personal finances and/or family finances?

- What do You think can and/or should be done to improve the Global Economy?

- And Who should be doing these things to improve the Global Economy?

- What may we All do to work Together to Improve our World Economy?
for Everyone’s Mutual Benefits!

We look forward to hearing All of Your thoughts, Comments, etc. on any/all of these topics related to the current Economic situation and How we may All work Together to Improve our World Economy for Everyone’s Mutual Benefits!

Over 90% of America did not want to passage of HR3997. The US Congress was held at “Executive Gun Point” and told: “you either pass this bill or we will declare martial law.” The most painful part of HR3997 is the shift in the final bill. What was the shift? Unbeknownst to the American people, however, is that since September 20th, the 0 billion bailout bill signed into law by their President yesterday was expanded from its original 3 pages to a 451 page virtual novel of new laws virtually enslaving them to the foreign holders of their debt. In addition, there are reports circulating in the Kremlin today are stating that the first deployment of Chinas elite People’s Armed Police (PAP) under an agreement signed between the United States and China, and US Homeowners Soon To Be Evicted By Chinese Police Under New Law HR3997. Even more disturbing, these reports continue, are that these new laws not only give Chinese and European banks control over the mortgage debt of the American people, they now include their credit card balances, and which virtually the entire US populace have indebtedness to. To how utterly chilling this new US law for the American people, titled the Emergency Economic Stabilization Act of 2008, Russian legal experts point out in these reports that: Section 101 (a)(1) establishes what is termed the Troubled Asset Relief Program (TARP) to which substantial portions of what the American people currently owe to their banks and financial institutions is to …
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How will globalization shape our lives in the twenty-first century? Commanding Heights: The Battle for the World Economy confronts head-on Americans’ critical concerns about the new interconnected world. Based on the best-selling book by Pulitzer Prize-winner Daniel Yergin and Joseph Stanislaw, this groundbreaking series explores our changing world-the new rules of the game; the winners and losers in the clash between government and the marketplace; the great debate over the impact of globaliz

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The New York Times bestseller: “A lucid account” (New York Times) of the recent financial crisis and the way forward by the Nobel Prize-winning economist, with a new afterword. The Great Recession, as it has come to be called, has impacted more people worldwide than any crisis since the Great Depression. Flawed government policy and unscrupulous personal and corporate behavior in the United States created the current financial meltdown, which was exported across the globe with devastating cons

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This past Friday’s  unemployment report was truly shocking. The reported drop of 533,000 lost jobs in the month of November was substantially larger than the 350,000 median estimates by many economists and our own estimate of 300,000-400,000 for the month. This level of monthly job loss is greater than was experienced in the last recession of 2001-02 and rivals any of the worst recessions in the post-war period. In addition, the job losses previously recorded for the months of  September and October were dramatically revised downward to levels averaging over 350,000 for the two months, 100,000 greater than the average previously reported. Thus, the job market, like much of the rest of the U.S. and international economies has declined severely and precipitously since last summer. But the November unemployment report is far worse than the surface numbers indicate. Yes, the job losses are widespread and worsening in the service sectors as well as manufacturing and construction. This continues the pattern of increased job erosion seen since the second half of 2007. However, the level of 500,000 monthly job losses was not expected to be seen until the first half of next year when it was expected the level of unemployment might be peaking. To be at this level in November when the economy is still declining is daunting and obviously raises the possibility of monthly job losses in the 750,000 range. Such additional job losses would easily take the unemployment rate to 7.5% or higher which would confirm the worst expectations of many economists, including ourselves. But there is something else in the government’s employment report that is causing us to look at unemployment in the current recessionary cycle as unlike anything we have experienced since the Great Depression of the 1930’s.  The government report on Friday mentioned that there were 1.9 million people who were available and had looked for work over the past 12 months and not found employment and according to the government’s report “were not counted as unemployed because they had not searched for work in the 4 weeks preceding the employment survey” for November. If we add this 1.9 million to the 10.3 million reported as unemployed in the report, we get an unemployment rate of 7.9% based on a civilian labor force of approximately 155 million per government statistics. We believe this 7.9% level of unemployment is a more accurate measure of job destruction than the reported unemployment rate in the government release. We believe this is validated by the “free fall” of the U.S. economy since the second quarter of this year particularly when measured by consumer spending and retail sales over the past three months. While U.S. GDP contracted at .5% in the third quarter, we believe GDP in the fourth quarter of this year will contract at approximately 5% with another 3%-5% contraction in the first quarter of 2009. We continue to estimate virtually no growth in U.S. GDP in 2008 as economic decline in the second half of this year outweighs the modest growth in the first half. Please see our recent Economic Presentations on our Presentations Page on our website for more detailed analyses, forecasts and conclusions.

Earlier in the week, the National Bureau of Economic Research (NBER), a committee of largely academic economists, that is the official arbiter of economic cycles, declared the U.S. economy has been in recession since December, 2007.  It confirms our analysis of the economy in our article, “We Think We Are Here”, March 10, 2008 in which we stated that we thought the economy was entering recession in the first quarter of this year. It was based on a sequence of weak economic data which included increased unemployment over the second half of 2007 and the first quarter of 2008; weakening industrial activity; increased credit losses in the financial system; worsening financial condition of U.S. consumers; spreading real estate weakness from residential to commercial markets; weakening corporate profits and weakening economies overseas.  Since we wrote that article, all of these important facets of the economy have steadily deteriorated led by intensified weakness in the consumer sector.  We have been concerned about the state of consumer finances for two years and we have consistently written about the housing bubble and overextension of consumer spending versus their income. And we warned about the doomsday scenario of a depleted consumer “knocked out” by a weakening economy leading to unemployment. Likewise we cautioned in our article “Postscripts on the Credit and Private Equity Cycles”, June 24, 2007, that the adverse credit cycle was going to get increasingly worse with dire consequences for the financial sector. In fact our byline on that article was “When a credit cycle turns negative, it does not turn negative a little bit”. Since the summer of 2007, we have witnessed the worst meltdown of the international credit system since the Great Depression of the 1930’s.  The responses of world governments and central banks to the increasing credit crisis were traditional post war economic stimuli, i.e. lower interest rates and taxpayer rebate programs. We wrote in several articles, (“Can the Fed Save Wall St.”, Part 1 and 2), August 12, 2007 and September 21, 2007 and “The Treasury Plan. Is this the Solution?” December 7, 2007 the lack of success inherent in those programs given the depleted financial condition of U.S. consumers and the necessity of expunging bad debts off the books of banks and other credit intermediaries. We also believed corporate profits, the backbone of the economic and stock market growth over the 2006-07 period were weakening sooner and faster than most market analysts had expected. But in two articles, “And Then There Was…” , October 21, 2007 and “GE, The Earnings Cycle and Food”, April 14, 2008 we warned about the rapid deterioration in corporate earnings which had been a bulwark in the corporate and stock market renaissance of the 2003-2006 period. Indeed, S & P 500 Index earnings in the third quarter were down over 20% year over year and would have been at an all time low were it not for earnings from the oil industry. So what began as a mild, containable credit air bubble in subprime mortgages has ballooned into a pervasive credit finance meltdown which has resulted in a zero demand environment in both business and consumer sectors. Now, as mentioned above, chronically worsening unemployment threatens to make the current recession deeper and more extended than previously expected. We now believe GDP for the U.S. next year could also be at zero on a December to December basis. That would make U.S. GDP growth for the 2007-2009 periods less than 1% on average for the three years.

As bad as the recession is in the U.S. it has spread in full force overseas as we recounted in our articles “Is This the End”, September 9, 2007 , “The Other Shoe”, January 7, 2008 and our International Economics article, “The Virus Has Spread”, August 6, 2008 and it is worse overseas as we stated in the August 6th commentary. The U.S. recession has suppressed the exports many foreign economies depend upon for their growth, credit losses from international and domestic asset declines have created an international banking crisis, and the collapse of commodity prices has torpedoed the high flying economies selling oil and other industrial and agricultural commodities that led world economic growth since 2004. The results are economic recessions in Western Europe, Japan, Australia and now Canada in addition to the U.S. While not in recession, India and China, the locomotives of world economic growth over the past four years have slowed dramatically to mid single digit rates and in fact have had to institute multi-billion dollar stimulus programs to keep their economic growth from falling further. In addition there are major economic stimulus programs underway in Europe and Japan. The weakness overseas is expected to be a major depressant to world economic growth in 2009.

With most major industrialized and emerging industrialized economies instituting economic stimulus programs to battle the worldwide recession that has taken hold, it is appropriate to evaluate the theory and success of these programs. We have commented in previous articles on the futility of the U.S. rescue programs (“Can the Fed Save Wall St”, Parts 1 & 2, August 12 and September 21, 2007 and “The Treasury Plan. Is This the Solution?”, December 7, 2007) up to the current time. Finally, last March, the U.S. government caught on to the need to remove bad credits from lenders and pump massive amounts of liquidity into the banking system. That restored credit stability within the banking system and then inexplicably, the U.S. government recently switched gears and decided to back consumer loans to mitigate increasing losses. We and a number of other analysts are puzzled by the unevenness of the U.S. government’s response to the current credit crisis. The capital markets have rallied recently hoping the new economic team of President elect Obama will have a more successful program. However, given the aforementioned severe increase in unemployment and the cutback in consumer spending, we believe nothing less than a targeted second consumer rebate program IN ADDITION to a resumption of purchasing bad credits from lenders and capital infusions to the banking industry is the formula for ultimate recovery from this recession. If consumers are expected to consume, they need to get their balance sheets de-leveraged and have enough liquidity to begin to exercise discretionary spending. Giving money to banks and auto companies will not move “goods off the shelves” in the current demand freeze. In the absence of a resuscitated consumer, this recession will last well into next year.

Likewise, the stimulation of overseas economies by government spending programs will have limited success for two major reasons. First, nobody will get exports “cranked up” as long as the U.S., Western Europe and Japan are in recession. Second, the collapse of commodity prices will severely depress the stimulative spending of commodity based economies like Canada, Australia and now the Middle East. So in the end, worldwide economic recovery will depend on the U.S. as it has since World War II.
To be sure, the U.S. and foreign governments and their central banks are sparing no expense or spending to cure the worldwide financial crisis and recessions. As a result fiscal budget deficits and increases in national debt will increase substantially over this year and next. We have previously written about the large future cost to U.S. and other credit and currency markets to the deteriorating national balance sheets, particularly for the U.S.
Consistent with the worldwide recessions and deteriorating economic outlooks for 2009, worldwide capital markets have virtually collapsed this year. U.S. equity markets are down approximately 40% year to date and overseas equity markets which have outperformed those of the U.S. for the past three years, are down by more than 50%. In addition, international credit markets have been crippled in the non-government sectors by the international banking and mortgage security losses. Now the spread of recession to the corporate sectors have depressed corporate bond prices and increased the spreads over non-government securities. This will continue until economic conditions stabilize. After outstripping all other asset markets over the past four years, the recent collapse in commodity prices has thrown previous profits in commodity assets into big losses since the summer. In addition, one of the biggest capital market casualties this year has been the hedge fund industry. After excessive proliferation over the past four years, a “shakeout” of this industry was inevitable. The demise of leveraged derivatives, the collapse of equity and non-government bond markets, the cutoff of bank credit and finally a stampede of redemptions by investors have caused hedge funds to sell marketable assets further depressing capital markets and have resulted in an increasing number of hedge funds to close.  In addition, the “drying up” of credit and the erosion of corporate profitability has put an end to the leveraged buyout mania of private equity funds. We had warned about the speculative excesses of the merger and acquisition craze in our article “Caution: Asset Bubble Building”, November 19, 2006 and the demise of this cycle is creating quite a bit of pain for the managements and investors in these firms who have “overpaid” with high amounts of leverage for firms that are now “reeling” in this recession. As a result of the credit and capital markets meltdown will be a new era of regulation, transparency and more financial discipline in investing. The attrition and change in hedge fund and private equity strategies is positive for sound investment in these sectors going forward. In fact we believe a shift of private equity firms to infrastructure investment is very attractive for investors.

Going forward, we view worldwide equity markets, particularly U.S. equity markets, as much undervalued looking forward 2-3 years.  Many market analysts are increasingly of the opinion that much of the bad economic news is already known and discounted in the U.S. stock market. However, our more pessimistic outlook on unemployment and the uncertainty of a more successful economic rescue program add to the continued downside risk to U.S. and overseas equity markets. As a result, the risk in equity markets at this juncture is that the U.S. recession lasts longer than calendar 2009 and is more severe in terms of corporate earnings declines and failures. For bond markets, there is more risk in that this is still a credit erosion cycle. Non-government bonds will continue to sell at inflated spreads over U.S. Treasuries until the recession bottoms. Longer term, we believe there will be a dramatic increase in interest rates as economic and financial conditions stabilize and then improve in the 2009-2011 period. The huge financing of the current economic stimulus and recovery programs will necessitate large bond offerings that will cause a large increase in yields from current levels. Commodities and commodity stocks will be depressed for most of 2009, reaffirming our economic forecast in our August 11, 2008 article on the “Dollar, Commodities and Geo-Politics”. We would still maintain a defensive posture in regards to capital asset strategy with well above normal cash positions. We would avoid fixed income instruments, particularly sovereign debt. There are some attractive fixed income opportunities in municipal debt markets but here also selectivity and credit due diligence is required. State and local governments are another big casualty of this recession and their creditworthiness is being increasingly strained. Downgrades in municipal credits are to be expected over the next two years. Once the current economic cycle bottoms, we expect huge stock market rallies led by U.S. equities and followed subsequently by overseas markets. We continue to be attracted to infrastructure investment as the long term need for infrastructure upgrade and expansion is large. Other sectors we view as attractive for investment include electric power generation, energy conservation, agriculture, water conservation and development, healthcare and education overhaul.

We invite questions regarding our current views and forecasts of the economy and capital markets for the remainder of this year and next and the longer term economic and capital market outlooks

After meeting with a family at their home in Fairfax, Virginia, the President holds a discussion on the economy with families from the area.

GLOBAL ECONOMY WEEKAHEAD-Clouds linger over US, Europe, Japan
GLOBAL ECONOMY WEEKAHEAD-Clouds linger over US, Europe, Japan
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Jobs & economy to top Fianna Fáil think-in
Job creation and the economy are set to top the agenda as the Fianna Fáil Parliamentary Party meets in Galway over the next two days.
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Economy: Fears of second recession ease, for now
WASHINGTON — No, the economy isn’t roaring ahead. And no, companies aren’t making lots of job offers. But a fresh batch of economic data Thursday at least eased summertime fears that the economy might be on the brink of another recession.
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China economy shows inner strength in buoyant data
China economy shows inner strength in buoyant data
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If you are fed up with Washington boondoggles, and you like the small-government, politically-incorrect thinking of Ron Paul, then you’ll love Tom Woods’s Meltdown. In clear, no-nonsense terms, Woods explains what led up to this economic crisis, who’s really to blame, and why government bailouts won’t work. Woods will reveal:* Which brave few economists predicted the economic fallout–and why nobody listened
* What really caused the collapse
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Economy 101: Jobless Rate Widens for Black Workers
Economy 101: Rising unemployment hits some workers harder as job seekers flood into the market Unemployment – Employment – Business and Economy – Job Search – Canada
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Obama: Economy Better Off After Efforts- YOU DECIDE: What the Fix?
Faced with an economy that won’t kick into gear, President Obama nonetheless took to the airwaves Saturday, telling Americans — particularly the middle class — they’d be worse off without his economic policies.
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Crisis in World Economy and the proposed New Model for sustainable development.

The ongoing turmoil in world economy raised the doubt that present model of capitalism cannot be sustained for environmental and social reasons. Respected thinkers and scientists have pointed to this reality. Now we should look ahead to a new system that is sustainable and humane. Otherwise whatever wealth is created would be wiped out by environmental disasters and social upheavals. Whole system is complicated by lack of transparency. It is not clear where all the money gets invested. Hedge funds are cloaked in secrecy- even bailout money has disappeared with no effect to the economy. Even now nobody knows which are the real bad toxic assets, so stock market is also not recovering.

In this treatise some key issues in this crisis are discussed and a new  model is proposed that will engineer a balanced global society  globally conscious, active and sustainable.   

Regarding overpaid CEOs

Let us ponder over some news those captured the attention across the globe. Washington Mutual Chief Executive Alan Fishman could walk away with more than 18 million dollar in salary, bonuses and severance after less than three weeks on the job as golden parachute from flight WaMu in danger, according to the terms of his employment agreement. Lehman Brothers was handing out 23 million dollar to three executives just days before it collapsed. It paid 2.5 BILLION dollar bonus fund after failing. CEO of American Express saw his pay go up much more than double although shares price nosedived. Hewlett Packard CEO destroyed half the wealth of her investors and yet still earned almost 100 million dollars in total payments. Exactly same is the case with Informix Software CEO. The list goes on and on. It means what?  This isn’t a diatribe against CEO pay. Point is failure has become a recipe for financial success of CEOs especially in America by virtue of their intelligent manipulation and abuse of power.  Martin Whitman, economist and the great advocate of capitalism opined that apart from corruption another reason as to why a free market situation is probably doomed to failure is very exorbitant levels of executive compensation.

 Regarding free-market economy

I do not think free market is really free. Those who say they favor a free market are speaking in a relative term.  In an absolutely free-market economy, all capital, goods, services, and money flow are unregulated by the government. There is simply no free market yet, given the degree of state intervention in even the most capitalist of countries. For example US government took an 80% stake in AIG in return for an 85 billion dollar investment to save the company. Recent news of Citi bank is being given a bail out package of 326 billion dollars and Jaguarâ??s requirement of 1 billion pound for sustaining economic meltdown are significant. Under pure capitalist theory, none of these actions should’ve been taken; the government should have stood by idly while the economy tanked. So how can a free market be free if it’s regulated?  The fall out of free market economy such as black Market, underground economy, Drug trade essentially justifies governmentâ??s intervention to remedy the situation and establishes the argument against free market as an impractical ideal that engenders vested wealthy interests. Experiments in absolute adherence to free market principles evince signal failures in Military, Road, Health Care, Civic Amenities, Education, R & D etc. Free- market economy is a fantasy – outside of the bounds of reality in a complex system with opposing interests and different distributions of wealth. Time and again world is realizing this fact is a harder way. Hence I align with those critics who are in favour of a planned economy  as advocated by socialism and who associate markets with greed  as the basis of capitalism. I believe it is inherently immoral. More over one practical objection is that free market economy does not take into account the externalities i.e. effects of transactions that affect third parties, such as the negative effects of Global Warming that brought world to Apocalypse in foreseeable future. I guess that in well-run industrial economies like Japan, Singapore and China, there is marriage between government and the private sector, each benefiting from the other. Any temporary prosperity on an extremely austere free market concept can crumble like a pack of cards, like it happened in USA.

Regarding Nationalisation and regulation.

 What does the US federal government taking control of financially crumbling mortgage holders Fannie Mae and Freddie Mac with a bail out package of staggering 800 billion?  Why on the earth Fed and other regulators are coming into the picture particularly for some of those that got overextended with the subprime and other kind of mortgage debt? Nationalization occurs when full or partial control is taken of private financial institutions, usually to avert a crisis. Scandinavian nations successfully averted an economic meltdown through nationalization in the early 1990s, and in recent times. US government is taking similar actions. It looked at the global fallouts and how politically they will be viewed by the world powers. So they bailed out finance industries, but not agreeing so easily to the auto industry. these issues are interlinked with power, military, oil.

 Regarding mortgage financing

It was the proponents of Capitalism who supported advantage of loan facilities and low interest rates for houses to be owned by people at low income group. There was enormous marketing effort to dupe people into it.  Logic was simple. If one buys house, he will also buy complimentary household goods like furniture, Fans, AC, Cars etc. creating a demand pull in the economy. Banks also extended the moratorium on interest and principle up to 5 years to convince the borrowers. When crisis occurs, should we brand common people as â??lazy bummersâ?? Similarly it is unfair to blame the common investors for lost speculative fortune when Stock Market is institutionalized by system as a socially and ethically valid means of income.

Regarding targeting CEOs

In our capitalist system, you’re free to earn what you can, and what the market will bear- this logic does not hold water since big companies are increasingly depending on public money for a bail out. Hence I support newest trend of shareholders in raising questions and putting pressure on boards and compensation committees to make sure compensation is fair but not excessive. The interesting News was that US Law Makers asked blunt questions to CEOs like Wagoner, Nardelli, Mulally of GM, Chrysler and Ford who came to the Capital Hill with a begging bowl for 25 Billion of Tax Payers money, when each one of them preferred to fly in their individual Private Jets, when as many as 24 non stop flights fly daily from Detroit to Washington. Lifestyle and salary should definitely be a valid question when companies are using public money. That is why companies are facing “say on pay” resolutions from shareholders. The board of directors should have taken this role, but instead they normally abdicate it. Most CEOs considers keeping board members happy as their primary duties. For example taking the board members on an all-expenses paid trip to a five-star international resort, allowing his compensation to spiral out of control, which is nothing but intelligent corruption and abuse of power.

Myth regarding the CEOsâ?? â??sheer value-addâ?? in the corporate world.

For a company to become successful entails billions of variables, which are oftentimes beyond the ambit of human ability of one individual. Even with our full regard on Narayanmurthyâ??s ability, we must accept Infosisâ??s success was primarily on account of flattening effect of world by Internet revolution in 92.  Jerry Yang, co founder of Yahoo, considered to be a great CEO, had to step down amid mounting pressure from investors after he botched takeover talks with Microsoft Corp. and failed to broker an online advertising agreement with Google Inc. Many CEOs were rated highly for certain techno bubble, which turned out to be utterly divorced from any business purpose whatsoever. Of course there is positive effect too- it attracts lot of investment and accelerates the pace of innovation. The trophy cases of HP CEO with so many industry awards and accolades were crucified for her destructive reign of terror with “Silicon Valley greed.” Hence it is fundamentally wrong to empower one individual so much for the success and failure of an organization. In Japanese and Chinese model, system is ascribed more powerful than an individual.  Once CEOs become all-powerful, their executive staff is reluctant to challenge them. Instead, the natural tendency is for these dominant leaders to become cocooned from reality. They are told only what they want to hear and hear only what they want to be told. Sequestered from the rest of the company, they lose the pulse of the business eventually.

Regarding Capitalism vs. Socialism

By virtue of the extremely clever indoctrination, a spin-off of media advertising especially of US kind, our thought process is getting clouded driving us towards more personal interest, freedom and power than social responsibility. Do we really need large waves of money sloshing daily around the planet for benefit of only a few, waves often generated by speculation capable of dislocating economies? Do we need larger and larger corporations which concentrate economic power into fewer and fewer hands? When seen in this light, capitalism has a shadow side. Economy in its root sense means acquiring the basic material things we need to lead a human life: food, shelter, energy, etc. But this is something quite different than a quest for a so-called higher standard of living. This really is the unending quest for a higher level of consumption. Our material needs are finite. After a certain point we are simply embellishing them. Then we begin to distort them making them the carriers of our own disordered desires.  Recent news of bra and panty for men in Japan is the right example for such disorder. We need shelter but we don’t need 50,000 square feet trophy homes when billions of people canâ??t even afford a shanty. Now we are living in a time when we donâ??t even feel shame. We have become so much closeted within ourselves that even with the back up of enormous fortune, we feel unsafe with the slightest possibility of economic meltdown.  Capitalism propels us to become shameless consumers and run our lives according to the design of the contemporary social machine, which foreshadows world destruction, whereas our true nature favours a life closer to nature. If American Capitalism is a kind of religion with its own dogma, then its God is Money and its driving force is Greed.  The fall out of this ruthless system is obscenities of unemployment, homelessness and economic insecurity and hence is not sustainable in its present form. The whole system is designed to make fewer and fewer people richer and richer at the cost of resources of the multitude. It definitely operates below the level of consciousness and no longer works for us.  I understand one very simple thing â?? goods and services generated in an economy must be shared equitably in a population. Otherwise those who will be deprived will take resort to unethical or socially unacceptable means- theft, dacoity, terrorism, drug, killing, cheating, narrow politics and what not.   Recent examples of everyday terrorism, Piracy, Mao attacks, dark killing are the pointers to this fact.   

Even in USA people are facing dark side of capitalism when blue collar Americans have been losing jobs because of outsourcing and off shoring in the mask of progress for real intention of more profit.  What is the social damage? Skills for manufacturing a certain product developed over the years are getting lost in the society.  Capitalist countries use capitalist ideals as a matter of convenience.  When Government owns hospitals, libraries, transportation systems, utilities, army, Navy, Air Force, forests and national perks- yet, who would call these institutions examples of socialism?  Socialism means a government in which the people collectively own and democratically operate the industries and social services through an economic democracy by ending the waste, duplication and inefficiency of capitalist industries. Under capitalism the industries operate for one purpose â?? profit maximization. As per Capitalism profit is also a cost, cost of staying in the business. Under Socialism goods are produced for use and to satisfy the needs of all the people. Under this system everyone could live comfortably with no giant gaps between rich and poor. Is it not really humane? Just because a system is not strictly as per lower merits of human nature say greed, it should not be rejected. Socialism talks about higher sense of our human values and existence.  After Industrial resolution act 1956 in India, socialistic pattern of economy in India has produced wonderful developments in sectors till seventies. Hence we can infer that Socialistic system can produce wonderful results under certain conditions and social environment.  However I do agree classical form of Socialism may not take into account of the Individual brilliance and creative pursuit, which is probably its one of its weaknesses.

The New Model

Having said this, we should find out whether there can be a balance between the two systems and what kind of mechanism society should develop so that one can approximate the ideals of good life in his individual life and in the life of community of which he is a member. I feel it is possible to have our modern global economy while being socially, culturally & environmentally responsible at the same time. Society has go through a difficult paradigm shift in personal values, which will instill a degree of awareness in our mind as opposed to the blind, materialistic way we are living.

I have thought of one model that will engineer a balanced global society that is globally conscious, active and sustainable. Way out is to lead humanity by the collective wisdom of most talented people in a society or country- a kind of meritocracy.  Mechanism to harness collective wisdom will be -say for any policy and contentious issue, opinions of most eminent people of the country will be  collected by a network of computers and looking into the wisdom of eminent people who are most knowledgeable on the subject under consideration, decision can be made in real time. Their services can be hired at a cost; they can be selected based on the track record etc. Decisions can be taken in National forum if discussion and debate are warranted. Experiments, research and its implications can be interpreted by eminent people only and that is why collective wisdom as instrumentality for decision support system may be a model worth trying for. One may argue country does not need only dry knowledge culled from books. There must be leaders to make certain things happen. Yes leaders are required. But a leader can be chosen by collective wisdom, which should be supremely empowered. A leader will resort to collective wisdom for at least for major decision. The collective wisdom is likely to veer country to right direction. Humanity has to go though different experiments and whatever evolved as better model will be accepted and perfected in course of time. We should never be blind to state that capitalism or the socialism is the right system with dogmatic finality.

This is a reprint of the 1869 first edition in English, which was translated from the Paris edition of 1869.

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Writer:  Darren Ng

Op-Ed

Can Tax Cuts Help Improve the American Economy?

In this paper, I intend to pursue a discussion which fundamentally affirms the relative benefits of Senator Barack Obama’s plan to increase taxes, in view of the telling need to rescue the American economy, against the disadvantages of Senator John McCain’s proposal to push for tax reductions. I intend to take cue from the manner by which these two senators have capitalized on the current state of the American economy to proffer their respective views on the economy. Surely, the American people are a witness to the epic battle between Senators Barack Obama and John McCain, especially in respect to the contrasting stance they took on thorny issue of tax levies; i.e., while Senator Obama has staunchly supported the concept of keeping the American economy afloat through a tax increase scheme, McCain has, on the other hand, espoused the more populist tax-reduction approach. Through this brief paper, I intend to prove that Senator Obama’s proposal to relatively increase taxes is what the American society needs right now, so as to restore the people’s confidence in the state of the economy.

I must admit that I am hardly surprised at all to see that Senator McCain’s proposal for tax cuts has been gleefully welcomed by a majority of the Americans, who feel that they are to become the direct beneficiaries of such a program. As far as McCain himself is concerned, he believes that by lowering taxes, he would be able to stimulate the economic trends of the country. In an article by a political reporter named Abdon Pallasch, she reports that according to Douglas Holz-Eakin, adviser to the McCain camp, the latter’s proposed tax policy is essentially a “job-first plan that keeps small businesses in the game” (SunTimes). But what McCain’s tax reduction scheme unfortunately undermines is no less than the wellbeing of the already battered American economy. I have reasons to believe McCain’s tax-cut scheme would end up benefiting the rich enterprises with large sum of money inasmuch as tax cuts would give them more money to invest more on than place their assets on commodity consumption and/or providing services. There is only a need to show why and how.

In order to explain why tax cuts would most probably not yield considerable benefits for the American economy, I find it appropriate to cite the principles which enable economist to measure the economic growth of a given country. Under normal circumstances, a country’s economy is measured by rate of its Gross Domestic Product – “the goods and services produced and consumed in the private, public, domestic and international sectors of the economy” (Frumkin 114).  And what determines the real expansion of GDP, according to The World Book Encyclopedia, can be summed in the following: private consumption, investment expenditures, government purchases and total value of exports. Put in other words, personal consumption and expenditures – i.e., for food, clothing, cars and household appliances – contribute directly to a given economy. Second, the expenditures of business enterprises, specifically when they spend for buildings, machineries and tools, also keep the economy robust. Third, the government’s public spending relative to education, healthcare or social services is also crucial. And last, the summary cost of a country’s export is likewise constitutive of real GDP growth and value (WBE 382).

I feel the need to further underscore the fact that financial investments – i.e., those investments placed in bonds, stocks or trust funds – by big businesses do not translate to real GDP growth rate and value. This is because they do not actually fall into the category of goods or services produced by a country. This is where I believe tax cut proposals fall short of stimulating a given economy. Since tax cuts proposals yield greater returns for big business than they do for average American families, then it is highly likely that these tax benefits shall be translated to financial investments, which in turn would leave the GDP growth as is. The academic entry from The World Book Encyclopedia is very crystal about the fact that “consumption” is a direct determinant of GDP growth. Without it, there can be no driving force to get the economy back in shape from a serious slump.  In fact, according to Kogan Richard – a critic of tax-reduction schemes – since “the economy expands so much as a result of tax cuts that it produces the same level of revenue as it would have without the tax cuts” (Kogan), then there is no point at going through the risky business of tax cuts that can leave the economy scathed from yet another crisis. And if tax cuts would not translate to real GDP growth, then we have all the more reasons to believe that the converse holds true – i.e., that increasing taxes can in fact stimulate the American economy; specifically, a relative increase in tax cuts can provide greater stimulus not only for private consumption, but even more so for public spending.

To this end, it would be insightful to look at the wisdom of Senator Obama’s economic roadmap. On the one hand, raising taxes may not look rosy for average Americans; but it certainly would give big corporations more reasons to spend for projects that may qualify them for tax incentives. This usually happens when they contribute a part of their revenues to funding certain projects, say construction of roads and schools, which would benefit the people in the long run. In the process, they could have these expenses lined up for tax exemptions. The point here is that increasing taxes would encourage, if not force big businesses to spend for goods and services. When they are spared from taxes, they would tend to keep their resources, and have them re-diverted to non-measurable financial investments. On the other hand, increasing taxes would also stimulate public spending – i.e., those types of spending entered into by the government on behalf of the people. This is because the continued inflow of tax levies would ensure that the greater American public would benefit from the government’s provision of basic services such as education, healthcare, and social services, among many notable others.

Now, since it would appear that Obama’s tax increase would benefit the American economy by way of stimulating large-scale private and public spending, I wish to therefore propose that, in order that the plan may not hurt average Americans, the government under the leadership of Barack Obama must implement a discriminate tax increase scheme. This means those big enterprises, as well as those who belong to the upper classes of the American society, are the ones to be levied with more taxes in the next few years. This is certainly far from being unfair. Instead, it would ensure that those who are capable of spending for goods and services are given welcome avenues to jumpstart the growth of the GDP.

For such reasons, I wish to briefly conclude that Obama’s tax plan – which is to increase taxes for the rich, and keep them the same for the rest – is the most viable solution for our battered economy right now. With a significant increase in taxation, the government can inspire large-scale spending so as to keep the economy afloat. Conversely, I strongly disagree in McCain’s tax cuts, as his proposal cannot promise to stimulate private or public spending on goods and services. In the final analysis, I find it imperative to remind the ever passionate Senator McCain of the fact that taxes constitute the backbone of the great American economy.