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Fixing Capitalism when its not broken vol23

February 10, 2013

If you have been to the website 40over40.ca, you must be a Boomer !

After a vacation and a computer issue fix, we are back looking at the debt problems that us Boomers have. It does not matter whether we inherited this debt from our parents, or its the result of our own spending habits, the result is that we are screwed.

The question is how do we get Boomers out of their current world view, so that we can focus on the challenges ahead.

Capitalism works because we consume thinks. Once we have too much debt, we can not spend the money needed to continue our consumption society. Jobs get lost, and economic recession sets in. It’s a question of what to do going forward. To date, Capitalism has been successful world wide, raising our standard of living to where Boomers are the richest cohort ever. This wealth has allowed us to pay for certain rights and privileges that past generations could only dream of. Global women’s rights is a great example. Our wealth allowed the west to invest in female education, health, and voting.

You only have to look at India today, to realize that many men do not want their female family members to have rights, as they do not have the economic power to give up the free family care, the ability to sell daughters for their dowry, and mess with their social life. It will prove interesting if the current rape case, with the Indian girl who was raped on a private bus, and died from her injuries, if the suspects will actually be convicted.

Democracies have used Capital the same way a train uses the locomotive. Loading too many passenger cars into one locomotive will eventually slow it down, whereby everyone loses. Capitalism, the locomotive, needs to be optimized, so that the whole train continues forward at the right speed. Indeed, the more efficient the locomotive, the more passenger cars that can be added. This “too many cars” vs “making the motor go faster” is the genus of the current fiscal fight now being fought in the US today. Obama believes that the train speed is irrelevant, as he sees more potential passengers that need to be boarded. Republicans believe that too many boarders will slow the train down, effecting all of the passengers.

The grey area has logic on both sides. Liberals make the point that everyone should have a change to join the train, not just the ones who can easily jump onboard. If this slows down the train, well, any speed that allows for full participation is the greater value. Republicans believe that the speed of the train is the main thing, and that keeping the speed up is of paramount value. As long as the train speed is maintained, more people can board.  Thus, both allow for the trickle down of benefits to the people, but disagree on the right process to accomplish this on a long term basis. Trying to get the train started, once its stopped or slowed, is very difficult. The last time a re-start process was tried, we lived through the Great Depression.  Everyone got thrown off ! We all lost.

Our Liberal democracy does its best to weight both sides of this equation. Unfortunately, we the voters continue to ask for and get stuff, like health care that we can not afford. Our bloated debt levels are a testimony to our navel glazing. Believing that somehow the train will magically speed up, even as we only add more weight on, is pure fantasy. It is easy to see how our democracy will have to change in the near future

Capitalism, our locomotive, also has problems that our government has not deemed worthy of a fix. One example is pollution, Yes, the smokestacks cause health problems, but they are needed for the locomotive to work for all of us. Finding a fix is paramount, but outlawing pollution is near impossible. Remember, the strength of our economic system is that it works very well, and its major weakness is that is works very well. Capitalism works, and its weaknesses need to be addressed separately. Perhaps the failure belongs to our Liberal Democracy government, and to us ?   

Another issue with Capitalism is wage inequality. Capitalism works by forcing the jobs into the right places, where workers will work for the least amount of wages. Thus we now get most of our clothing and household items from China. We all benefit from this activity as we get to save money by paying less for these items. This process resulted in jobs going overseas, leaving the US in droves. There is no capitalistic process to reverse this trend, so we better get used to wearing the Chinese t-shirt while you bus to the unemployment line.

Losing these mostly middle class jobs is an effect of Capitalism, not a result. This effect can be mitigated, and in some cases reversed, by investing on long term items like education, research, and entrepreneurship. Until then, lower expectations will be the order of the day.

The impact is that Boomers want things, mostly for free, but now lack the ability to pay the taxes needed to fund these benefits. Boomers kids are having trouble getting jobs, especially well paying jobs to fund these items. Boomers expect to retire and live well, without the means or savings to do so.

Boomers need to wake up to the world around us, raise our eyes from our navels, realize the financial landscape, and make different choices.   

Next time on Boomers – wtf !, why we hide behind our navels, instead of coping with the real future.

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