society and economics

Why socialism and communism are the future.

Capitalism – the new old slavery

Contrary to what many people think, especially the younger generations that did not get the chance to see successful socialism, the capitalism is not the free and democratic society that many think it to be. It is a system that favours the violence and absence of scruples. It thrives on deception and manipulation with only one goal in sight: the profit. That goal is essentially taking away from many to give to few. To hide its’ true face, capitalism is built around a few tricks that on paper seem quite logical and fair, but they are there simply to deceive the masses and soften them up while fleecing them off.

These tricks are simple but powerful tools for deception and manipulation.  For example, to hide the true nature of the profit,  capitalism tells us that the “growth” is good. By insinuating that “growth” is good and, indeed, necessary, it fools us to believe (for, there is no proof whatsoever to support the notion that the growth is good) that if we all “work hard” we’ll all have a lot of profit. “Opportunities equal for all!” “The USA is the land of opportunities for all!” “If you work hard you will succeed!” We have all heard those slogans many a time.

However that is a blatant lie. The first thing you must understand is that economy is one and the same, whatever the system you live in. There is no “capitalist” or “socialist” economy. The fundamental rules of economy are the same in every system. Capitalism and socialism are political systems. As such, they create political rules for economy to develop and work under. These rules can be constructive o disruptive. Neither is good or bad. What is good, or bad, is the ideology behind a system that creates the rules. And ideology is created by humans to impose their own opinion on other humans and force them to do what the ruling class wants them to do.

Some will argue that socialism is ideology.  If we agree on that argument, then capitalism is an ideology too. However that is not correct. Ideology is actually quite different to politics. Ideology dictates your politics. Politics do not dictate the ideology.

So, going back to the subject, the “profit” is the surplus value after a producer pays all debts and costs incurred in production of a product. If you are a baker, for example, and you make 100kg of bred per day, you have to incur first some expenses to be able to make the bread. You must buy or rent a space for your bakery, you must buy machinery to make your bread, you must pay your utilities (electricity, gas, water, telephone etc.), you must buy ingredients for your bread, and you must pay your workers (even if it is only you in the shop, you still must factor in your own salary, pension etc.). You may have had to take a loan from a bank or from a family member, friend whoever, and you must pay them back too. All these costs are your debt. You must pay them first, from the money you earn. You will hear from “self-help” and similar “gurus” another bullshit mantra “pay YOURSELF first”.  That is a risky advice that will most likely land you into bankruptcy. We’ll talk about that in another article.

Once you pay your debts at the end of the month, what you are left with is your profit. Now, how do you decide how much of your price per unit should be your profit? Easy. In a capitalist economy you simply decide what margin you wish to charge on top of your expenses. Socialist economic fundamentals prefer to have a margin of your profit prescribed (max limit which would allow you to earn well but not overcharge just because you can) while capitalist economy prefers to have it “free” of “control”. Capitalists claim that it should be the “forces of the market” the only authority that dictates the market prices. However, this is the hypocrisy of capitalism at work. The forces of the market are “demand” and “supply”. Who decides that the market is oversupplied or not? The reality is that if the market is “free”, then there is no such thing as oversupply. Let me illustrate this.

In your area there are two other bakers. The whole area has a certain amount of people – your customers – who require 450 kg of bread per day. One baker will be better and more popular with the customers than the other so that baker will make more bread to satisfy the need. But the word of mouth may spill outside of the area and some people from other areas ma y come and buy the bread from the more popular baker. So, he may end up selling 300 kgs of bread, the next baker 150 and you 100. So that’s now 550 kgs of bread per day. Purely on numbers, the local market is oversupplied. But, that is not correct because the additional demand is coming from the outside of your area. So it is really a demand that is growing. But neither of you three may necessarily know that. Bakers are not market researchers and may not actually know where the extra interest is coming from. And it really doesn’t matter, in a stable economical environment. What matters really is the skills of the baker who is attracting the customers from elsewhere. His business experiencing the growth. Right?

Wrong. The total amount of bread sold in a wider area, say your city where there may be tens or hundreds of bakers, is still the same. Now, in a perfect capitalism the prices of the less skilled bakers would have to go down to regain their customers with the cost if not with the quality. If the market is free and uncontrolled, it is assumed that it will “self-regulate”.  In theory, if there are lots of buyers, you will sell more and the price should go down because of large demand. If there are not enough buyers, or you make too much bread, the market will be “oversupplied”, and the prices will go down as well. Supposedly to attract the market.  So when a baker sees the demand growing, what will he do first, reacting naturally to that growing demand? RAISE the prices.

Why is that?

Because he will automatically assume that he is popular for some reason, most likely because customers like his products better than products of his competitors. And if that’s the case, he can maximise his profit by charging more. After all, (the true rule of capitalist economy) the quality comes at a price. Simple example are the “luxury” goods like perfumes or cosmetic products. Famous brands sell hundreds of thousands of tons every year but you do not see these product being any cheaper as a result of large production. To the contrary. Every new product is more expensive than the previous. The companies can safely hide behind the lie about “demand” growing and charge you what they will.  What you may not be aware of is that these “luxury” products costs of manufacture are very much the same as the cheap products. The differences are minute, even when exotic and/or rare materials are used. I find it interesting that between the big businesses, the suppliers and manufacturers of consumers’ goods do sell cheaper when manufacturers buy large quantities of raw materials. The more they buy, the cheaper the materials are. But, we the final customers in the chain rarely see these savings passed on to us.

One problem is in the fact that no one can tell how much bread you need to make until you become familiar with your local environment.  Production planning in the start is absolutely impossible and even if you make a detailed market research and analysis, you WILL be guessing your production needs for the first month or so, probably even longer. So, you may bake too much, or too little. In both cases you will suffer the losses, and will continue to do so until you understand the local market’s needs and adjust your production cycle to operate as efficiently as possible (minimum loss, maximum earnings). If you set your prices, are they low or are they high? How do you set them against the competitors? Are you a good baker? Will you attract the customers with your products? Environmental conditions are too numerous to know on the day one, so the start will invariably shaky and rocky. The chance of failure is very high. If you had to borrow the money to start your bakery, your challenges will multiply faster than the rats in your cellar.

The other problem is that since many fail, only a few remain. That opens the door for these few to dictate their own prices in a market where the buyers have limited options, even if there is no need for demand to outgrow the supply. That is called “monopoly”. A few producers control the supply of the market and dictate the prices. As soon as the conditions turn into monopoly, the prices jump up. The real demand is still the same but what is really in short supply is bakers, not the bread. Because of increased demand for their products, bakers are in good position to expand without fearing the additional investment loan drawn from a bank. The sales will provide the income to repay the loan. The risk is low, so the interest on the loan should be low too. However, this is another point where socialism and capitalism economies part. In socialist economy (not Soviet or Eastern block style, of course. That was never a socialism, let us make that clear now and it will be explained in another article.) the bank should follow the state of the market and, much like insurance companies, charge LESS interest for enterprises with LOW risk. (In capitalism, while they say they do so, they do not. Anyone who has a small business knows that.)

In doing so, the banks in socialism would protect the markets from something that makes the capitalist markets boom in short term and inevitably, without exceptions, fail in long term.

Another of capitalist manipulative tricks is inflation.

You may have heard the mantra: inflation between 2% and 3% is a “good” inflation. It “drives the “growth”. How does it do? It, literally, inflates the prices for the predetermined and stable coefficient called interest. In capitalist economy, the inflation is calculated on a bunch of what amounts to baloney information to depict supposed “growth” of productivity, also known as Gross Domestic Product (GDP). In very simple terms, some punk in some small office in your country’s ministry of finance and/or treasury is told to find an average interest charged for investments on a number of products that are considered as “essential” for the economy of your country. The interest on the bank loans taken for production of these products is the actual inflation (to inflate – to add the costs to the baseline price). The average of the total is what you are told is an “inflation”. This is all covered by lots of veils to disguise the simplicity of the deception served to you, the voter. Some countries will say it is the actual interest rate of the Reserve Bank of your country, which IS a BANK. So the argument remains valid. But not every company can go to the state for the loan. Most will have to go to commercial banks, which borrow the money from the Reserve Bank and then charge their own interest on top of it. Whatever is the final interest manufacturers must pay is the actual inflation. Are you noticing how much longer is this process already, in comparison with the above socialist option? And it is not over yet.

Because of the inflation, the prices are bound to grow. Always and forever. Any “reduction” in price, at any time, is just temporary. Inflation itself does NOTHING to actually stimulate the production. It is simply a way for the banks and big business to charge the interest on money lent and add an imaginary coefficient to a fake economic calculus in order to confuse the masses. In a proper economy there is no reason for an inflation to exist. The question we must ask is why is the state bank charging interest in the first place?The short answer is to cover the costs of printing it. The actual answer is a quite bit more convoluted. For starters, the state/government in capitalism, as much as they are trying to convince you otherwise with constant “privatisations”, is in business of making money to pay for projects of building “infrastructure” (roads, schools, energy, whatnot) – or so they say. That is almost never the case because it interferes with privatisations. The taxes do not pay for everything, so the money is for sale too. It has been converted into a commodity for that main purpose. To make profit for governments to re-invest. The fact that then the governments “privatise” everything and everything then immediately becomes expensive, contrary to that other dogma (that the privatisation of resources and/or infrastructure will bring competition and reduce the costs to ultimate clients – you), has never been a problem.

The actual truth is, if there is an inflation, something is seriously wrong with your economy. We have seen inflation in action since the beginnings of capitalism. And we have seen a never-ending stream of economic collapses in capitalism since then too. The two events are strongly correlated. You can say that they are economic symbiosis.

These episodes are called crisis, usually financial, like the “global financial crisis” that started in 2007 (yes, it actually started in 2007 in the USA, but it took a year for it to blow out and spill over the world. Some dumb enthusiasts call it the crisis of 2007-08, but in 2014 the crisis is still raging and although many claim to have seen the first signs of recovery, there is no sign of crisis going away any time soon), or like the “great depression”, which too started in the USA, the source of all evil, economic and everything else under the sun. And there were many other economic collapses such as the  “oil crisis” of 1970’s, “internet bubble” in 2000, again in the USA, of which I can see some signs again in 2014 and predict it may blow up in a myriad of new ways to further decimate the economies of the world in a number of very unpleasant ways. I am not alone. Pay attention at author’s language describing the actions and behaviour of bankers and capitalist inventors as “creative” and “convoluted”. Lies and manipulations as I call them.

The simple truth is that inflation is the source of many evils in today’s “free capitalist” economy. It should NOT exist because it is a fake index used to measure a growth of economy as a whole, in a country and in the world. Instead of inflation we have a very real index of growth that should and must be used to measure the real growth: the growth of population. Local, regional, country or the world. I shall dedicate a separate article to the growth and prove that the growth is the most dangerous and destructive of all capitalist indexes, no matter where it comes from (inflation or natural growth). See, the growth is not necessary to plan for because it comes already naturally from the growth in population. One could factor in additional growth in manufacture by gaining the grounds against their competitors, but in general as long as there is no inflation and the prices (the margins charged for products) are kept fair, you will always have a market and you will always be able to make a solid living from your trade. Providing you are not carbonising your bread, of course…

Those that fail simply open the path for others to replace them and for those who are more skillful to grow by attracting more customers. No need to raise the prices as your profit will already grow from increased sales. However, in capitalist economy everything is convoluted in a mystical and top secret mambo jumbo about the “ever-changing” conditions on the market, and cyclical crisis that are “inevitable”. And so they are, in a capitalist economy. The crisis in capitalism are not only the proof of capitalist economy being outright bullshit. They also have another function. To prune the weaker competitors.

This unravels another problem, which has been particularly well documented in the last global financial crisis: crisis create monopolies.

As many companies bankrupt and fold over, those who remain are having rich pickings that they get for next to nothing. Just remember how Fiat became the owner of Chrysler. They bought it, if we can call that hypocrisy a purchase, for mere 3.1 billion euros. In a similar pattern many a healthy company managed to purchase the assets of their competitors who were forced by the crisis into bankruptcy, for a handful of sand.  This sort of strategy is also as old as the history of mankind so it should not surprise us to know that crisis are the best time to buy. One capitalist mantra is “buy when cheap, sell when expensive.” Crisis destroy many and what is left behind is sold for next to nothing.  Those who are still in business, have consolidated their markets and productions by injection of new productive capacity and the markets left behind with the need for those products. What they told you you should call a “crisis”, for them (the capitalists) was a boom time and a time for expansion.

How you will ask. Going back to your bakery, if the nearest competitor went out of business due to some difficulties, what are the people who were buying the bread from them going to do? They will HAVE TO come to you first. You are the next nearest baker. Just because a business goes out, does the world stop turning? No. So some if not most of their customers will look for another supplier.

If you go on to buy their equipment and/or shop, which is the smartest thing to do in order to slow down any new competitor taking over newly available hungry market, you will also be able to produce more, should you choose to do so. Which you will, of course. But the good news for you is really in the fact that you are now free to lift your prices UP.

Not down. UP. If you now ask why again, you have been brainwashed to think that when a factory produces more the “costs of production go down” and manufacturers can pass on those “savings” on their customers. You would have heard that lie many a time. Especially if you were buying a computer or other electro-domestic appliances. And you have it already seen happening so why would you think otherwise.

That has never happened, and it never will. If you believe so, as I said, you are only a victim of your stupidity and a brainwash by your local capitalists. As a baker in our example, you will lift the prices of your bread because you are becoming a monopolist in your area. You are now the only baker in the area with twice as many customers and that is the real “supply” and “demand”. You can supply all the bread, but since there’s no one to compete with you in your area, you can raise the prices as you are pleased despite the the fact that your production costs may actually go down since you would be buying more flower and salt for your bread, which mean that a wholesaler may give you further discounts on volume. Demand for your bread is up, so you will raise the prices just because you can. It is of absolutely no importance to you that the production capacity has not changed and that the actual demand remained the same as yesterday, before your competitor went out of business. The actual supply reduction is not in bread. It is in bakeries. You have successfully created a monopoly based on a false perception that there will be less bread available because there are less bakeries around.

You could have, of course, kept the original bakery open under the “new management”, but you have cleverly seen the opportunity to increase the profit, to cut the expenses by ditching the old bakery and expanding your own to cope with the increase in demand. That is how the things are done in capitalism. Reduce expenses, maximize productive capacity, form the maximum price possible to operate just under the point of your own collapse – if you charge too much, you may lose your own business and inspire someone else to get into the business – and you are making hefty profits.

What does all this then mean for you and I? Well, some, if not most of the crisis have been provoked artificially for the purpose of getting rid of weaker competitors, crushing the prices of the assets and buying the failures at a prices YOU dictate. Usually the bargains not available to ordinary people like myself. The working class that is trapped in a vicious circle of low pay, high prices, never-ending loans and mortgages that keep you tied down even more and make it next to impossible to make progress and escape from that vicious circle. The circle that makes you live a life of an economic and financial slave to the system that claims bounty and opportunities for ALL. Well, the opportunities are there. They just aren’t for honest working people. Only for criminals who usually sit at the top of the economic cupolas of capitalism. That includes premiers, presidents, queens and kings, religious leaders like christians’ pope or muslim preachers who even command armies of religious fanatics ready to cut down anyone in their way, and everyone else in between within the system that governs your “free democratic capitalism”.

Social consequences of such “free enterprising” are, sadly, horrendous but people seem to be willing to put up with a lot of terrorising if a trade-off is attractive enough to keep them quiet. Capitalism offers something just perfect for them: a false perception of personal freedom and liberties.Why is this perception a false one we’ll see by the end of this series.

 

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