Two Sides of the Same Gold Coin
The modern multinational corporations, situated in gleaming glass and steel buildings all over the world, are not as they are popularly presented and commonly understood.
Generally speaking they are no longer run by business entrepreneurs who successfully read the ebb and flow of supply and demand; nor managers who live or die based upon the success, or not, of their predictions. They are overseen by bureaucrats whose sole function is to ensure that the decisions and management responses of another time are successfully kept in place. They don’t respond to observations of the current state of affairs, coupled with predictions of the future; they show blind obedience to the echoed revelations of the past.
As long as the market remains within the confines of a similar supply/demand situation all is well. The problems begin when the necessarily temporary state of the market (the ‘new era’) predictably morphs into the paradigm of the past. In a healthy economy, business constantly responds to the incessantly changing demands of the market. In an unhealthy economy, legislative bodies attempt to force markets to adhere to the corporate status quo. The former is as blessed with success and affluence for all except the unproductive, as the latter is doomed to failure and poverty for all except the elite.
The freeloaders occupy different ends of the spectrum depending upon whether a market is free or controlled.
Huge corporations are not so much businesses, as profit producing machines with a ‘use by’ date. They do what they do because that is what they have always done and once upon a time it was successful. When what they do ceases to make sense, they yet continue to do it anyway. Why? Because business acumen and management competence have been replaced by bureaucratic inertia. The media portrayal of these corporate bureaucrats as Titans of Industry is as far from the truth as it is possible to get. They are more correctly viewed as splendidly attired attendants mincing along behind, and deferentially holding up the skirts of, an aging past success… not an attractive sight.
Corporations are doomed when they become so unwieldy that they are unable or unwilling to react to external market circumstance. Eventually they degenerate to the point where they fail to even appreciate the significance of the external forces at play. The smartest of the corporate bureaucrats understand this and seek to extend the spasms of their soon-to-be corporate corpses via the political process. Political corruption and corporate monopolies unresponsive to market needs are the result.
Such is where we find ourselves today; surrounded by corporate corpses which remain upright only because of the wads of money that have been stuffed up their rectums. The people doing the stuffing are the same people who are quaintly described by our droolingly compliant media as ‘world leaders’. Why do politicians not let these quasi-businesses fail and do themselves and the taxpaying serfs a favour? Because being entirely uneducated in economics, and still relying on the drivel of Keynesian twits who have ignorantly taken us to the edge, they simply have no idea of the destruction that they are causing. Governments are still listening to the experts who got us into this mess in the first place. They borrow ever larger amounts of money creating debt sends us even further into the third world. The belief that prosperity can be borrowed into existence is right up there as an economic theory with the Papua New Guinea Cargo Cult.
The constant toppling of the largest corporations is a sign of a properly functioning economy. In a genuinely free market, large is not strong, big is not better. Small and flexible leaves large and ponderous in the dust. The free market is characterized by nimble and aggressive newcomers garnering the market share of cumbersome and flaccid old-timers. Success in the free market is a measure of energy as much as anything. Large corporations are like old batteries. They still look fine, they usually just don’t work anymore.
If old wasteful and capital destroying businesses are not allowed to fail then there is no room for dynamic, capital forming businesses to enter the market. If there is no destruction to make way for creation then there can be no economic growth. The consequence can only be a falling standard of living.
The modus operandi of an economy run by government dictate is that large businesses with powerful political connections legislatively destroy smaller businesses that seek to compete.
In a free market new, small and efficient businesses squeeze out older and more unwieldy business incumbents. Vibrant new entrepreneurs and business people enter at the bottom of the market and push the plodding old geezers out at the other end. The free market serves all consumers equally, and everyone of course is a consumer. A genuinely free market is a wholly egalitarian affair which pays neither heed nor reward to any elite.
It is not only products that become defunct. Obsolescence reaches into all aspects of the demand and supply chain. Everything is in a constant state of evolvement. Sometimes imperceptibly slow, at other times bewilderingly fast. A free market simultaneously both creates and responds to the constancy of change, and thrives on the process.
Governments resist change with all their might. Whole government departments are set up to ensure that no changes are possible. Governments are the nemesis of commerce and wealth creation in that their whole raison d’être is based on the constant effort to hold in suspense that which is naturally fluid.
The elite of the free market achieve that status because of their superior ability to produce goods that are needed and wanted at a price people are willing and able to pay. The elite of a controlled economy are the unproductive who managed to cut the best deal for themselves via the political process. The controlled economies of our modern world are designed to keep the rich permanently rich and the poor permanently poor. Only the free market allows for easy migration from poor to rich and, as importantly, from rich to poor.
Today we have vast corporations vainly trying to masquerade as businesses. Most of Wall Street should more properly be viewed as a museum; ditto for G.E., Ford and Chrysler and many of the other behemoths. They are relics of a bygone era. There may or may not be a cultural case for supporting museums, there is certainly no case for supporting yesterday’s superseded and defunct business models in the forlorn hope that a sudden demand for the equivalent of cutthroat razors delivered by horse and buggy will again render them economy builders. They are finished; it is just a question of how much further financial damage will be caused in the vain attempt to keep the smelly corpses upright.
The folly of John Maynard Keynes’ belief that the government is better equipped to run the economy than free people acting volitionally is demonstrably absurd by any rational measure. The current state of the world economy should put the end to that lie for all time. Yet the most egregious failures of Keynesian practise are more visible in the area of morality.
Those of you of a delicate disposition should grip the sides of your chair firmly prior to reading the revelation in the next sentence… or close your eyes.
Standards are falling.
There are those who point out that standards were falling toward the end of the Roman Empire. The fatuous implication is that if moral standards have been falling for 2000 years then they are obviously not. The reality of course is that they do not fall continuously. Moral standards are inversely proportional to the coercive power of government and fall and rise accordingly.
The perennial journey of governments from weak to strong and then from strong to despotic parallels the rise in immoral behaviour, not only of the politicians and their bureaucratic enforcers, but of the public at large. We live in a deeply and pervasively immoral time.
The moral problems created by the ability of the majority to vote themselves the money of a minority is the Achilles Heel of any democracy unrestrained by a constitution. Immorality with a less obvious cause also flows from government debasement of currencies via inflation. Such debasement makes honest and fair exchange between people almost impossible. Any sort of credit/debt arrangement becomes suspect because neither party can accurately predict the future value of the irredeemable paper coupons which they are forced to use for the exchange.
The ubiquitous inflation of irredeemable currencies destroys the free market concept of trading for mutual advantage. The resultant, distorted concepts become entirely negative and consist crudely of “how can I screw this other fellow so that I make more whilst he makes less?” In a practical sense right now one such equation would be: “if I borrow money to buy a house is it likely that I can pay back the lender with money that is worth less than that which I borrow?” The automatic Win/Win of the free market operating with honest money, becomes a Win/Lose, or even Lose/Lose proposition. Shifty people and dealings have consigned principled people and exchanges to the state of seeming charmingly naïve and old-fashioned.
Wealth cannot be produced with either dishonest money or dishonest people; it is the former that encourages the latter. Despite some philosophical and religious tenets to the contrary, one of the more obvious lessons of life is that the vast majority of people are basically honest and decent… not necessarily right or smart, but honest and decent. Such qualities are not legislated into existence, but it has become apparent after 70 years of Keynesian inspired inflation, that the qualities of honesty and decency can be submerged by legislation that rewards the opposite. For that insight (and only that), we should be grateful for the ill-fated Keynesian experiment. Mind you, Plato did point that out quite a while ago. "What is rewarded in a country will be practiced there."
It is not people who are basically bad and who need controlling, though it well suits government to propagate such a myth; it is government issued irredeemable currency that is basically bad, and governments who need controlling.
It is imperative that governments be again constrained by the Gold Standard. We desperately need to instate gold in its rightful role as honest broker. Not because bail-outs would not be possible under a Gold Standard, but because the immoral logic that proposes and supports such bail-outs would not even exist. The giant corporations and banks should be allowed to collapse. Let those who were foolish enough to invest in them lose their money. Yes, it would be hard, but the alternative being implemented right now is going to be very hard for everyone. Instead of the losses being restricted to the criminal and the foolish, society itself is being sucked into poverty.
Nothing, absolutely nothing, has the power to stop this vast destruction of wealth other than the instatement of the multifarious disciplines of the Gold Standard. There is a natural cohesion between the prosperity that results from the use of sound and honest money and moral standards. They are two sides of the same gold coin.
It is for this reason that The Gold Standard Institute has now been established. www.goldstandardinstitute.com
Because of the success of Professor Antal E. Fekete’s seminar in Australia last year Marcus Matthews is organizing another. Details are:
University House, Australian National University, Canberra, 2 to 5 November 2009
Jun 3, 2009
© Sam Mathid 2006-2009