posted 12-17-2001 12:06
I think the real issue is the monopolization of capital. The more concentrated financial resources, the higher price entrepreneurs have to pay for investment or credit.
The result is exploitation of enterprises by investors, demanding unsustainable profits. A small group of investors with a such a strategy and control of the majority of capital, do not have to worry about someone funding a more sustainable model. They can simply churn and burn companies.
The result is management which are forced to drive down costs, accelerate product cycles, and shed workers at the slightest downturn to make this quarter's number, even if doing long term damage to their intellectual and human capital.
The concentration of capital also favors large scale investments, and leads to consolidation. The economies of scale and time to markets to meet the expectations of these investors, also drive consolidation.
Small shareholders and employees alike are confronted with an unstable environment, of rapid hiring and layoffs, mergers acquisitions, and sudden shifts in strategy and organization.
The result is destruction of capital, sustained by transfer to those that drive companies to short term profits and then sell them, to those that buy or invest in them. Note even a non-shareholder employee is an investor of sorts. You take a salary rather than a high hourly rate in expectation of a career path and work through downturns. You are taking a lower return on investment, on your human capital, for less risk and long term growth.
Management in this environment has more leverage than employees or small shareholders, hence their higher compensation, which is disproportionate to value added.
We need to have more investors and more enterprises, with diversity of strategy and time horizons for divestiture.
The point of capitalism is to drive the creation of economic value through competition at all levels. Our current situation has transformed all economy into commodities used for speculation and manipulation, which are not value adding activity. The only way such an economy can sustain itself or grow is through consumption of new resources from the bottom, hence longer working hours, lower real wages, and need for constantly larger markets for consumer goods and labors.
We have removed the drive to compete at the very source, capital, namely competition and the possibility of true failure. Did any of the investment banks behind the dotcoms fail, what about venture capitalists ? What about those behind Enron ?
Note consolidation of capital to a handful of private individuals has the same effect as communism, namely central control. Welcome to the new command economy. A economy which is a zero sum game, and requires mercantilism to sustain it, through saturation and exploitation of global labor and markets.
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posted 12-17-2001 12:06
posted 12-17-2001 12:37
posted 12-17-2001 13:00
