16th August 2004
Thursday, September 2nd, 2010
To hell with the facts
Neither capitalism nor democracy work in the way textbooks would like you to believe.
"In recent months, output has moderated and the pace of improvement in labor market conditions has slowed. This softness likely owes importantly to the substantial rise in energy prices. The economy nevertheless appears poised to resume a stronger pace of expansion going forward."
U.S. Federal Reserve, Tuesday, August 10, 2004
Neither capitalism nor democracy work in the way textbooks would like you to believe. Capitalist corporations are no longer run for the benefit of shareholders, and governments are no longer run for the benefit of voters. Instead, most institutions have now been captured by managers, those who make careers out of spending other people's money. These managers also entertain the same erroneous beliefs that central planners under communism had when they thought that they could plan for "the best" possible outcome and falsified the facts in order to fit predetermined outcomes that never materialized.
The well documented failures of the second oldest profession are indicative of what is actually happening in a world dominated by institutions and bureaucracy and one in which the natural laws of the market are not allowed to function.
The commission into the events of 9/11 stated that the largest and best equipped intelligence institutions in the world, the FBI and the CIA, missed opportunities to detect and disrupt the al-Qaeda conspiracy before the 2001 attacks on New York and Washington took place. They simply failed to pursue leads and to keep their eyes on the ball.
The commission concluded that, despite the vast amount of money being spent on security and intelligence gathering (over $40 billion per annum) and an increase in the number of specialist departments, a complete systems failure occurred. The various agencies found it more important to compete with one another in order to protect their territory (and funding) than to share information and protect the nation.
There is an old joke about military intelligence being an oxymoron, but when both the Senate intelligence committee and Lord Butler in the United Kingdom reported within a week of one another that the intelligence services on either side of the Atlantic had failed to spot the marginal nature of the threat posed by Saddam Hussein's weaponry, no one was laughing. The Butler inquiry stated that British intelligence reports on Saddam Hussein's weapons of mass destruction in the run-up to the Iraq war were "open to doubt" and "seriously flawed." It seemed that professional intelligence officers exaggerated certain information in order to please and appease their political masters and created a litany of errors and self delusion.
Hans Blix, who was the head of the UN Monitoring, Verification and Inspection Commission (UNMOVIC) and the most credible witness on Saddam's weapons of mass destruction, was quoted by the BBC as saying that the information from the intelligence community was: "a spin that was not acceptable. They put exclamation marks where there had been question marks..."
Despite the fact, on both sides of the Atlantic, that evidence was selected and exaggerated in order to support a decision that had already been made, both Bush and Blair are still absolutely convinced that they are right and that they would do it all over again in precisely the same circumstances. Both are adamant that the war designed to enrich Halliburton (controlled by U.S. vice-president Dick Cheney between 1995 and 2000) will provide the USA with a center of influence in the Middle East rather than cause the rise of an Iranian-style Shi'ite theocracy.
At the time of writing, thousands of U.S. marines, backed up by tanks, armoured personnel carriers and attack helicopters are ready to subdue the supporters of the Shi'ite cleric Moqtada al-Sadr. These "insurgents" are armed with light weapons and no body armor and are defending the shrine of their spiritual founder in their own land. Regardless of the outcome, a powerful vision has been set which counts against the Protestant Crusaders.
The selecting of and emphasizing of evidence in order to support a prior conclusion is also rife in the sphere of economics. Although most markets peaked around March and have been grinding lower over the past five months, the chairman of the Federal Reserve keeps on saying that this is merely a temporary softening and that the recent spike in the price of oil is chiefly to blame.
An alternative reality is available for all to see on the website of the Inland Revenue Service (IRS) This shows that the overall income Americans reported to the government shrank for two consecutive years after the Internet stock market bubble burst in 2000, the first time that has effectively happened since the modern tax system was introduced during World War II.
The total adjusted gross income on tax returns fell 5.1 percent, to just over $6 trillion in 2002, the most recent year for which data is available, from $6.35 trillion in 2000. Because of population growth, average incomes declined even more, by 5.7 percent. Adjusted for inflation, the income of all Americans fell 9.2 percent from 2000 to 2002.
The unprecedented back-to-back declines in reported incomes was caused primarily by the combination of the big fall in the stock market and the erosion of jobs and wages in well-paid industries.
Another bit of information for you to consider comes from the General Accounting Office, the investigative arm of Congress. It states that an average of six out of ten American Corporations reported no tax liabilities on their United States income tax returns filed for the five years from 1996 through 2000. The percentage of American companies saying they owed nothing increased steadily but slightly in that period, from 60.3 percent in 1996 to 63 percent in 2000.
Bearing in mind that the American consumer has been propping up the world economy, where has all the money come from? The answer is you and me and generations still unborn. The expansion has been funded by debt and sooner or later this debt will have to be repaid, renegotiated or reneged upon. Cycles repeat.
From Warsaw Business Journal by Zbigniew Piekarski
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