Ways of Viewing the World’s Most Important Product
I’ll begin by quoting from contemporary philosopher and psychologist Eric Fromm’s work, ‘The Art of Loving’, “The principal underlying capitalist society and the principal of love are incompatible.” And. “Those who are seriously concerned with love as the only rational answer to the problem of human existence must, then, arrive at the conclusion that important and radical changes in our social structure are necessary . . .”.
Eric Fromm could as-well have put it this way, ‘The principal underlying our present economy and the principal of love are incompatible’. I also believe that true democracy and true capitalism have not been and cannot be realised under the present restraints of economic rationalism.
I would like to clearly detail why I believe those two cornerstone ideals of society are not at present feasible. The type of society we expected from within a democracy and the expected scales of prosperous economies under capitalism have been, and are unachievable. The expectations of the more humane among us are one thing but the actuality is that which we have, and that which we see; a world in crisis.
An article by Paul Monk in a recent ‘Australian Literary Review’ describes the climate debate as “. . . generating more heat than light”, seemingly producing emotional responses from both sides in a so-called scientific debate. Polarisation of views among the pros and cons has degenerated into name calling. Some of those for Anthropogenic Global Warming have called those who question the science; names with religious overtones like “denialists” or “skeptics” even suggesting moral dereliction, as in a heresy.
“On the other hand, skeptics are prone to dismiss or attack the proponents of the AGW hypothesis as “green fascists” or as believers in a new religion . . .” All seem to delve for evidence that supports their position while dismissing any to the contrary.
Why are we having such a heated and protracted debate? “Quite simply” says Paul Monk, “because we are being told that the very future of civilisation is at stake and we need to make drastic changes to our economies, our energy infrastructure and our consumption habits”. What is never mentioned in this debate is that while ever our economies are driven by our present financial system of spontaneously created debt money; no change in our exploitation of fossil fuels, our unsustainable consumption or our dysfunctional economy is at all possible.
Over three hundred years ago an act of parliament made legal our current method of creating money on the spot as a debt to the borrower at interest; it is usually loaned on the basis of a ‘security’ or in the case of proposed production; a ‘potential security’. This money was created out of nothing, so it only exists while out on loan; as the loan is paid off it ceases to exist; but the interest it attracts while on loan serves as the bank’s profit.
The borrower is compelled to ask more money for the product than the cost of its production. The cost of production is wages and salaries; which is the local market’s buying power; plus the banks interest, its fees and charges. So the bank relies on and trusts that the borrower can get more for the product than the borrowed cost of producing it. The borrower must create a profit for the industry or both the bank and the producer fail. Our borrower then must rely on export marketplaces for buyers so that profit can be achieved.
The prices asked for goods and services within our debt system, are therefore higher than the buying power of the local market because the buying power of our local marketplace is only the wages and salaries cost of production, which doesn’t cover the cost of the borrowing or allow for the borrower’s profit.
There are differing perspectives on money such as what it is and what it does. The popular view is that it’s somehow created by hard-work and production, skill and clever trading and is representative of physical wealth and is always very scarce and therefore valuable..
An economist’s view is that it incorporates simultaneously, great complexity and vast wealth or great poverty i.e. you can borrow your way into either while at the same time it is the lifeblood of capitalism if successful manipulation brings prosperity.
A monetary reformist’s view i.e. my view with some classifications: it is a borrowed financial-product or commodity that is useless, unless successfully used as a hired financial-tool to produce goods and services which are then traded to produce our society’s most valuable product; a financial-product called a profit. A profit is the most important product on the face of the planet; without it you ‘live’ the life of a third world inhabitant. Borrowed money can be not only valueless but a life-threatening liability unless it has been successfully used in making a financial profit that is greater than the cost of the borrowing.
The all important ‘profit’ product is produced when the borrower of new finance sells this finance for more than the cost of borrowing it. It is sold by using goods and services as the vehicle to transport finance to the marketplace at home or aboard. If profit is unachievable the goods and services are valueless to the industry.
There are many economic consequences to the way we create the financial-product as a debt to the borrower; i.e. create money as a debt. Unfortunately they all have damaging side effects to either society or the environment but this is the only legal way new-money can legally be created or manufactured. To create profit out of debt involves the economic principal of eliminating competitors or at least defeating business competitors in the race to secure some of that scarce finance. Without adequate finance no profit can be made. An economy without profit can’t survive. No matter how potentially productive the nation may be, its population will have little or no access to its own production or resources.
Until a profit has been produced, the product called finance is only on loan at a rental cost (interest) and is just a borrowed device that remains, while unpaid, as a liability to the borrower. But finance is the primary element we use in the making of the profit-product. So profit making is money’s only practical function, both for the borrower and for the lender, i.e. the business enterprise of banking.
Profit is squarely in a separate category to the initial borrowed finance, its status is superiour to moral and ethical considerations; it is our society’s highest value, it keeps the economy running, it keeps us alive. Although the elements used in the making of debt and profit are exactly the same; a borrower or a lender gets to keep net profit, they can use it at will. If the financial-product’s problematic value and financial colour is changed in a nanosecond to that of profit, then an alchemic-like conversion occurs; it is now as gold was unto the alchemist. What was debt is now profit, like lead into gold!!
As a borrower, finance is not ours: it’s a debt we owe to the lender plus the interest fee but it is ours to use in the hope of making of a profit. However, an adverse side-effect of our profit-product has serious economic implications: it must have been borrowed by someone somewhere who must return it with interest to the lender. The banking business as with any other business, must gain a profit to survive.
This is interesting because if we do a breakdown of the money-cycle process, we can uncover the motives and imperatives that drive industries and businesses to exploit society and environment. And why as individuals we compete with and exploit our fellow humans.
The breakdown of the cycle:
(1) Profit making is essential to economic life. All producers and businesses rely entirely on profit. Just as any other business the financial-product’s maker and lender; the bank; as a business, requires profit. The return of just the original borrowed money to the lender is useless; it only existed while on loan and therefore cancels itself on return. It is crossed off the borrowers account as soon as it comes in. The lender’s profit comes in the form of interest owed, which the borrower gets from another borrower through trade. The goods and services we trade are really only symbols or tools employed to secure the only product of value: the one product that gives us consumers’ access to the necessities of life, i.e. profit.
The fact that we as individuals do exploit our fellows is largely unknown and so is the reason we participate in subjecting billions of our global population to a life of poverty. The abject destitution of approximately two thirds of our world’s six and three quarters billion population results from the first world’s need to eliminate them from competing for an extremely scarce product. Scarce: means not enough to go around. There may be no national shortage of other resources but without this profit-product those resources can’t be accessed. Even though you may live in midst of potential plenty you must go without. We in the first-world want to use and enjoy our potential and sustainable plenty. We want to live, not die amid disease, short life-span and poverty.
For us to maintain a reasonable standard of living a large proportion of humanity must be excluded from export market-share. The exclusion is achieved by force if necessary, sometimes as colonisation, the euphemism used is, ‘protecting our interest abroad’. For this we in Australia have, need and use, powerful friends among other first-world countries.
The populations in third-world countries have not suddenly become incompetent; they have never been and are not stupid or lazy; they do not in the vast majority of cases even lack any of the necessary physical or material resources. What they lack is the two things on the planet that legally gives them access to the sustainable necessities of life or to the means of producing them: profit and the tool needed to create it; the artificial financial-resource product we call finance. When able to borrow finance they are unable to cover the cost of borrowing it. Unable to make a profit for the lender they become a liability; not profitable to the lender of spontaneously created debt-money.
(2) Finance created by borrowing (and that’s all finance) gets into so-called circulation as wages directly or as capital equipment purchases that pay the wages of workers who craft it or build it. The majority of the money-product around in the marketplace is buying power.
It is the wages and salaries borrowed by business and yes, even some lending businesses borrow what they lend. And along with industry it is paid to the workers producing goods and services. The workers, have earned it, it is their profit.
Those wages and salaries are the local market’s profit but this buying power too, is ultimately worthless, because the sum total of wages and salaries in the market-place, adds up to a lot less than the price the producer must ask to make that all important profit plus a profit for the lender. No profit for the lender, no lending. No lending means no money; no buying power means the failure of the whole national economy.
Unless an export market can be found to purchase these goods, the producer cannot even pay the interest owed and cannot make that vital profit upon which all producers; including the bank, depend. The lender or bank in this context must also be viewed as a producer; a producer of that important product called finance. So the bank’s profitability depends, relies upon, a share of the export market. The money received for our exports is not borrowed by our producers, they are not the ones who have to repay it plus interest and they have therefore created or made a profit. Our exporter’s profit enables the local purchasing of smaller local producer’s goods and services.
Profit, in economic terms, is the one and only valuable product on the planet. All other goods and services are valueless; inaccessible, they can’t be consumed unless we as a nation can generate the product called profit.
(3) The export marketplace suffers the exact same restrictions and requirements as the local and national one. Its buying power is also restricted to its wages and salaries, industry where ever it is, ultimately must export its goods and services to make a double profit, one for the banking industry and one for itself.
So the struggle for export market-share results from the scarcity of and the fight for the scarce profit-product that results from the inherent lack of the finance-product in the marketplace, because wages can’t cover the cost of the lenders finance product. A banking business can only lend to producers who can make a profit for them. And in all markets; elimination of competitors is mandatory. To succeed, businesses must ever grow and expand, creating as they go an ever monopolised competitive market, or collusion of competitors on a finite planet
What do We Actually Trade?
When we hear of trading with our trading partners what do we initially think. Until I seriously considered the question I automatically thought of primary produce, from minerals to grains, from live to not so live stock. But on second thoughts I begin to realise that there is another way of understanding what we are doing; what we are really trading and hoping to gain from it is in fact a whole other dimension.
Sticking with material goods and services for the moment; we export to foreign markets everything they need to make secondary products. Food, we export if possible, eighty per cent of our food production and most of our minerals and energy
We could mention that massive market place; the Stock Exchange, where stocks and shares are vigorously traded in search of profit but what is actually traded on the ‘goods and services’ export market, is a financial product; a finance-package; in hope of gaining a profit product. The only valuable product in the global economy is the profit product. The physical goods or services in the trading mix are mere pawns in the transaction. Unless we win a profit in the competitive trading transaction we are unable to consume our goods and services; they become inaccessible (they are unaffordable) and therefore valueless, so they are burnt, mothballed, dumped in landfill or at sea and future production ceases. .
further reading:
http://nimbinaustralia.com/zenwatt/political-economy/fiscal-flaw.html