Destructive destruction

As opposed to the "Creative destruction" long heralded as Capitalism's (oxymoronic) driving force we appear to have met Capitalism's opposite and equal (possibly greater?) force - Destructive destruction. While elected politicians (or unelected technocrats) are furtively attempting to "manage democracy" in the quest for sovereign fiscal survival and implementing, brazenly political, social engineering - the financial institutions are betting against them succeeding in a knee-jerk quest for profit. Unfortunately, whatever the governments do the very financial institutions they are attempting to save will manipulate the outcome to their own short-term financial benefit even if this leads to their own eventual, predictable, economic downfall. Free-market theory demands that even when facing the distinct prospect that the world's economic system is collapsing nothing should or can be done to prevent it committing suicide.

Rather than Bulls and Bears what we have is a Mad Dog that won't let go of the bone. The same financial machinations that brought us to the edge of darkness are still out there Trading, Shorting, Hedging and generally trying to find a way to make money at someone else's expense right up to and until the lights go out. A sort of financial "Doomsday" scenario where they keep firing financial missiles until there is nobody alive to claim victory.

Lemmings going over the Free-market cliff.

We're facing a somewhat stark choice. Democracy, Liberal Democratic Capitalism or Managed Democracy, State Capitalism. The present trend is towards the latter duo. Certainly the present Merkel/Sarkosy manifestation of a Euro solution is anything but Democratic and an attempt to save themselves and their banks by denying others their right to choose. By inflicting austerity upon the less fortunate they imagine they'll be able to avoid the same fate themselves. For this the others will pay. Those with the most money to lose will set and impose the rules and woe betide those that don't obey. Somehow I don't think this is going to work. Aren't they missing something here? Haven't they got this backwards? Isn't it those who must obey that can spoil the plan by just saying no more surrender of democratic rights and ask for the UK model - in the EU but out of it. Sadly if the errant, fiscally irresponsible nations (who loaned them the money in the first place?), chose to go for a UK model they'll take the UK down as a result - banks and all.  If you were looking to set up a brilliant "can't win" position this is it - a lose/lose situation.

So here we are entrapped by a system that we're trying to save whose very tenets prevent us doing just that - an oxymoron indeed. Or is the true oxymoron "Moral Hazzard"?

Jobs to China

Good to see that you're in China perpetuating the very problem that will eventually destroy your GDP along with your Balance of Payments and eviscerate your nation's tax base. More or less guaranteeing insufficient domestic employment (or income for those still in a job) achieved through international Arbitrage of wages and leading to loss of domestic demand from an impoverished market and reduced services and infrastructure due to falling domestic tax revenues. You may enjoy the short term increase in profits by adding a few percent of value to finished products while adding nothing to the domestic manufacturing base - basically you're financialising (latest economic buzz word) - that is creating nothing but "soft" money. The problem with that is it doesn't create any local domestic wealth outside the transaction - so no "trickle-down. Leading to such anomalies as fictional increased GDP as total cost is included in the sales number while most of the money resides overseas along with the jobs. While this makes corporate profits look better it does, evidently, lead to poverty, strikes and riots.

The Chicago School is the major originator, ideological prothletiser and defender of Neoconservative Economic Theory and Free-Market Capitalism in general. It dabbles in manifold mathematical models which will provide any answer you want in order to prove itself correct. It has been the most influential economic model (monetarist, monetarism) of the past 40 years. Largely the product of the University of Chicago Economics Department this school of economic fundamentalist thought gained influence during the 1970s particularly through the scribbling of a professor Milton Friedman (Nobel Prize in economics for the theory of the "Natural Rate of Unemployment" and advisor to General Pinochet shortly after Pinochet had the elected guy in power painfully terminated). The gist of it is that - government regulation of an economy creates monopolies thus - markets are more efficient at allocating resources than government so -  government has no business managing aggregate demand leaving - government's only job is to maintain a constant, low, rate of money supply growth.  This school's greatest influence has been relatively short  - since Maggie and Ronnie - but dominant since the fall of the Soviet Union and capitalism declared unconditional victory. Sadly it hinges on total transparency in the market provided by self-regulation. So, even more sadly, as a result it doesn't work.

Your Enterprise minister guy has just complained that not enough businessmen care sufficiently about achieving a reduction in Corporation tax - even though no company with a decent tax accountant pays much of it anyway. He should consider that, just possibly, the electorate don't want companies to pay any less tax than at present - frightening thought it is for a corporatist to grasp that the majority of voters don't support higher corporate profits bereft of an accompanying and demonstrative benefit to them.

If investment in R&D doesn't provide the tax-payer that funded it with any benefit why should they spend the money on something that translates into overseas jobs and untaxed corporate profits? I'd like to know your justification for using public money to enhance jobless corporate expansion.   The present correlation between corporate profit and employment is one of higher unemployment and lower or stagnant wages - what are the chances of reversing this by lowering corporate taxes?