Government Defines Profit

Abstract; Free market fundamentalists ignore a paradox of economics: defining what a “profit” is can only be done by the government! Thus, when only profit seems to reign, as now, the real government is hiding. Hiding in plain sight, just as the Saudi criminal organization, manipulating the absence of global legal jurisdiction to implement criminal propaganda, or grand theft. Thus, Apple, Google, etc. have all too much in common with terrorist networks. Understanding much of this, the Japanese PM is suddenly behaving as if he led China. (Precisely because he has his eye on the PRC…)

***

Sometimes progress is all about rediscovering what was known for millennia. Sometimes progress is all about unlearning outrageous propaganda. An example? The public is increasingly stuck in the West. From a very deep lack of understanding.

The richer the lords, the poorer the commons.

The richer the lords, the poorer the commons.

The degeneracy of the public is directly related to a lack of philosophical definition of what “profit” means. If one does not have a philosophical definition, one has no practical definition, either.

The graph of profits above is, in a sense, a joke; Apple, to single the typical case of the most prominent corporation, has tremendous profits in one sense, for would-be share holders, and none for fiscal authorities.

That lack of definition of “profit”, in turn leads to fiscal imbalances, that lead to rising plutocracy, its accompanying rising unemployment, and general impoverishment of the commons while our lords thrive ever more.

There are still more than four times as many long-term unemployed workers in the USA as there were before the 2007-2008 financial crisis. Europe’s economy is back in recession, and has grown less over the past six years than it did between 1929 and 1935 (yes, that includes Thatcherian Great Britain!), while hitting ever higher highs for unemployment.

Yet there is no major change in policy in sight. Savage, even criminal, austerity programs are imposed by Brussels and Berlin on the most indebted nations. Children go hungry, life expectancies are going down.

Why the unfolding disaster? The way the role of government in economics is looked at is key.

In his first inaugural address, Ronald Reagan said: In this present crisis, government is not the solution to our problem; government is the problem. From time to time we’ve been tempted to believe that society has become too complex to be managed by self-rule, that government by an elite group is superior to government for, by, and of the people. Well, if no one among us is capable of governing himself, then who among us has the capacity to govern someone else? All of us together, in and out of government, must bear the burden.”

Neofascists have misused that quote ever since, extracting from it the aphorism that government was the problem. Worse: under Clinton, Bush Jr., and Obama, they put that scheme into action, deciding that finance would be self regulating.

Ever since the Medes-Persian empire of Darius and contemporaneous Athens, all serious countries acknowledged the overwhelming, domineering role of government in economics. The rise of Frankish Europe of the High Middle Ages, England 1066, or the Italian republics, France in 1600 (Henri IV’s “chicken in every pot”), or Great Britain, later, were all tied in to massive redefinitions of the socio-economy by the government.

(Anglo-Saxon academics love to throw in the word “Keynes” at this point, but Keynes’ suggestions were minimal relative to what serious governments have done in economics for millennia before him, or even since! The only thing about Keynes is that he lived in the 20C and spoke English, enough for simple minds to adulate.)

The government does two things, ever since serious civilization has been instituted: first, government insures enough fundamental economics, to make the basic functions of society possible: defense, police, justice, and basic food and water procurement possible.

Secondly, the government determines and regulates the arena of the “free” market. In other words, there is no “free” market, just a market the government decides is free.

Unfortunately, rogue economists, in the last 35 years have imposed a view, in South America, the USA, and the UK, and then Russia, and worldwide, according to which the free market determines everything, including the government, that it, somehow self generates. One may as well let a headless chicken guide us all.

Mr. Abe was Prime Minister of Japan seven years ago. Illness forced him to resign after a year. Now he is back, with more impulse. Although a conservative politician, he understands well that, when the economy is stuck it needs to be stimulated directly by the government. Abe’s 100 billion dollars stimulus would be equal to roughly 300 billion in the USA. That big stimulus does not contradict a loose monetary policy. Nor does it contradict extinguishing Japan’s more than 200% debt/GDP, because for governments, only growth (or default) can extinguish debt.

The first results of Mr. Abe’s policies have been very encouraging (after a 55% rise, a sharp correction in the stock market was caused by fears that the central bank would not keep on giving enough money to the financially starving economy.)

So why does not the rest of the Western world copy Mr. Abe? After all, is not Mr. Abe just trying to do what China has been doing ever since Deng Tsiao Ping decided that “getting rich was glorious“? That has worked splendidly: open the free market in full, and the governmental stimulus too. It’s actually what the Western governments did after 1945, for thirty years, when they were obsessed by growing the economy (before getting obsessed by fighting inflation).

Why is the rest of the Western world insisting upon guidance by the headless chicken of the free market? Simply because plutocracy is the new world order, and that’s best insured by restricting access to money to the very richest. Austerity is not about balancing the books, as much as it is about restricting the money going to the populace (hence the power it disposes of).

The “Chicago Boys” (followers of Hayek and Friedman) proclaimed that profit was the optimal organizing principle of society. Their students were the perfect decoys for neofascist plutocrats to take control in Chili, Argentina, Brazil. in the 1990s Jeffrey Sachs and Larry Summers went to Moscow to teach that greed was the royal road to progress, and they had an eager audience among the new potentates, who loved to hear that plutocracy was morally correct, and economically optimal.

However, this is all hogwash. The foundational work has not been done well enough.

“Profit” means augmenting “property”. Yet, “PROPERTY” CAN ONLY BE DEFINED BY GOVERNMENT.

For example, the Babylonian state, the Roman state, 15 centuries later, and the USA, 33 centuries after, allowed to own people as “property”. However the rights of those slaves were vastly different: Babylonian slavery was not “racially” based, and slaves could become immensely richer than their owners…

In the Roman Republic, for five centuries, “property” was defined as land, and as such, it was limited, by law. In other words, Roman plutocracy was strictly limited by law. Thereof the secret of the success and longevity of the Roman republic.

However, the rise to Rome into a global empire, beyond the jurisdiction of the city of Rome, exploded both the application of the law and its relevance. Plutocracy got unchained, and wrecked its natural enemy, the Republic.

The present situation is technically similar to what happened to Rome when it went global: armed forces, finance and the economy have gone global, but NOT LEGAL JURISDICTION.

Western civilization has got global, but not its root, the rule of democratic law. One may as well transplant a giant tree in the desert, leaving its roots behind where they grew. This is not going to work.

The problem of international terrorism has two faces: international finance and the bombs it (indirectly) plants.

Indirect action can be extensive, along vast causal chains. For example giant kelp forests are disappearing off Alaska. Why? Because of (over)fishing.

How does that work? Extensive indirect causality. Human overfishing makes orcas hungry. The killer whales then go eat sea otters. Then urchins, now uneaten by sea otters, proliferate, and eat the kelp. hence the apparition of a lot of clear coastal waters off Alaska. Pretty, but not what the ecology used to be.

Indirect causality chains relate and entangle religious and financial terrorism. And they have a common cause: no global legal jurisdiction.  

Consider Salafist terrorism, as exemplified in Toulouse, France (killing of Jewish children and adults by a Salafist fanatic), or in the USA (killings by Salafist fanatics within the army, or in Boston), or in London (several times). How is it related to the tax terrorism practiced by Apple Inc, or Google, IBM, etc.?

In all these cases, it’s the limitation of legal jurisdiction that allows the growth of the criminal activity. The Salafists get their ideas according to what plutocrats in Saudi Arabia want them to have. The ideas the Saudis, a family of gangsters who have given their name to a country, wanted people to have are conveyed by considerable amounts of money. The Saudis pose as the guardians of Salafism (the way of the old ones). They actually seized power, 90 years ago, by spilling oceans of blood.

The promotion of bloody ideas and ideals the Saudis extol should all be illegal, and those instigating plutocrats ought to be put in prison. However, Western law does not reach within Saudi Arabia, for the exact same reason that it does not reach within global corporations.

The Saudis are, arguably, the world’s largest and most criminal corporation. (Qatar is only an also ran.)

Global corporations’ main business model consists in claiming to have no, or little, profits, outside of tiny jurisdictions that basically don’t tax them. Others claim to be made of subsidiaries that are citizens of nowhere (that’s Apple’s method).  Apple ferries more than 100 billions of profits through the British Virgin islands. The British Virgin islands have 20,000 citizens, and more than 500,000 global companies registered there.

As the Wall Street Journal just noticed, global corporations are now even hiding the thousands of subsidiaries they own, and through which they ferry profits, thanks to new USA laws. Many of the biggest USA companies have removed hundreds of offshore subsidiaries from their publicly disclosed financial filings over recent years. They are taking advantage of SEC rules that demand disclosure only when subsidiary operations are “significant” (meaning siphoning 105 of the business)

Oracle, for instance, disclosed more than 400 subsidiaries in its 2010 annual report. By 2012 the list had been whittled to eight—five of which were located in Ireland. Similar decreases in the number of disclosed subsidiaries were found in filings by Google, FedEx, Raytheon and Microsoft. Presto, no more traceable profits!

In the European Union alone, tax evasion by large crooks is evaluated at more than a trillion dollars, much more than all the national deficits combined.

Apple makes billions in the United Kingdom, while using services there provided by British society, still does not contribute to pay for any of what it exploits. It apparently pays a 2% global tax in Ireland alone. Amazon does something similar, paying basically no tax, while devouring local bookstores, which, submitted to local jurisdiction, pay huge taxes (thus have to sell their books at a much higher price).

Governments, all over the West, having learned their masters’ lesson well, have defined profits of said masters are inexistent, fiscally, while the masters are making the greatest profits ever, and unemployment is at a fifty year high in the West.

 It’s also striking that, although the greatest heists ever, have been revealed since 2007, no one, absolutely no one, has gone to jail for this. A striking example is the LIBOR CONSPIRACY. Many billions were stolen, however, none of the bosses of what is, therefore, twenty of the world’s largest criminal organizations, went to jail. It seems the largest thievery is perfectly profitable. 80% of financial derivative trading is through tax havens, and thus is hidden too.

Who profits from the new world order is becoming something to hide, and that has gone deep underground, all the way to Hades. The Sicilian mafia does not behave any differently.

Thus one can see that the neoconservatives advocates of predatory finance harbor contradictory notions; they claim profits should rule, but then their heroes, wealthy corporations and individuals, hide them as much as they can, just as predators hide their excrements. So what are profits about? Heavenly stuff, or something one cannot speak of?

The economy should not rest on what its beneficiaries want to hide.

***

Patrice Ayme

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3 Responses to “Government Defines Profit”

  1. pshakkottai Says:

    Hi Patrice:
    In
    http://mythfighter.com/2013/03/13/germany-eat-our-neighbors-then-kill-our-citizens-wwii-revisited/

    shows what the future is for Germany. “The long term survival of any monetarily non-sovereign government requires money coming in from outside its borders. Germany, for instance, survives by exporting goods and services (i.e. importing euros).

    Of course, Germany has to get those euros from someplace, and unfortunately for their neighbors, that “someplace” is them. The flow of euros toward Germany sucks the life blood from France, Greece, Portugal, Spain and other nations having negative balances of payment.” And
    “A growing Gross Domestic Product requires a growing supply of money. In the case of Monetarily Sovereign nations, like the U.S., Canada, China, Australia et al, that money can be created ad hoc by their sovereign governments.
    But for monetarily non-sovereign nations, which have no sovereign currency and so the total supply cannot be increased, each nation must try to steal euros from the others, in a nationalistic riot of mutual cannibalism.”

    The state and local govts are money users and use this balance;
    taxes + net exports = spending + savings = spending – debt.

    The federal govt is a money creator and uses this balance;
    deficit = private savings + net imports.
    A deficit is a positive for the economy and MUST not be cut.
    The federal govt has huge money creation power. States can’t do much. Very few are aware of this difference. USA can operate very well with low taxes or even zero taxes.

    Why not increase deficits enormously and start a WPA? Like India.
    India’s debt to GDP ratio stands at 68%. It was much higher in 2005 at 85% in 2005. Its economy has grown quite well. Again India is a monetary sovereign and deficit funds like crazy.
    http://www.tradingeconomics.com/india/government-debt-to-gdp

    http://timesofindia.indiatimes.com/business/india-business/India-has-highest-debt-to-GDP-among-BRIC-nations/articleshow/14529330.cms

    India is a monetary sovereign just like USA. The govt spends 85% on free university education. It funds infrastructure directly as this story shows.
    http://timesofindia.indiatimes.com/business/india-business/India-has-highest-debt-to-GDP-among-BRIC-nations/articleshow/14529330.cms”

    Europe should go the way of a monetary sovereign and nationalize all banking to put an end to plutocracy.

    • Patrice Ayme Says:

      Hello Partha! Very glad to hear from you. I’m in the middle of publishing another broadside against Christ/Mithra, so I will be brief.

      All the troubles in Europe do not just emanate from Germany. As it is, if Merkler was magically removed, nothing would change. The Bundesbank chief parrot gets his orders from Harvard, vipers’ brain central, and the more insidious powers behind it, such as USA billionaire Peter Peterson, and the entire USA plutocracy.

      Many of the countries that are doing much less well than Germany at this point have, mostly, themselves to blame.

      Take France; it has much more (twice or thrice) more civil servants than the UK. Average cost of a worker, per hour is FIFTY dollars. Even more than that: 37.5 euro/hour. Significantly HIGHER than Germany.

      Also the French used to retire at 65. Now it is between 60 and 62. There are all sorts of grotesque regulations against work (to keep the 6 million civil servants busy; by comparison the USA has 18 million civil servants, all told.)

      Also banks were rescued on the public dime. EXCEPT in ICELAND. Hence the enormous debt levels. And are banksters in jail? No. Although there are encouraging signs in Spain.

      Make no mistake: I am irrate against the present German government. But I am even more irrate against some of the pseudo victims. Per capita, many of those who pose as victims are much, many times richer, than the Germans, as a class.

      More later. I do agree with many things you say. The gist of my essay was that the government not only regulate the free market (as everybody says), but even defines its engine, the notion of profit.
      PA

  2. Pe Romaneste Says:

    “The investor elite is too expensive relative to its value add. Their keep is much greater than what the society can bear.”

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