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Letters to The Economist
Capitalism and Democracy
30 Jun 2003
Dear Sirs,
So much to say and so little space.
While we can be optimistic about the prospect of The Economist continuing
to offer intelligent reporting and opinion on global affairs, it is very
unlikely to be necessary to promote free trade for the next 160 years.
Human society has moved very quickly from command economic model towards
market models. A command economy is based on hierarchical control
from one at the top, whereas market economies (like nature) are based
on free decisions made by all participants. Today, information flows
quickly and virtually freely around the world. Individuals now increasingly
influence resource allocation decisions. And, liberal trade is a
subset of free markets.
But competition is not at the core of a market system. Competition
is useful for benchmarking performance within sectors or across time,
but a free market is efficient because of cooperation - all participants
looking for a win-win solution. Competition is destructive in that
it demands a win-lose result; if competition is the essence of a free
market then half of the participants must lose, and this is not sustainable.
Rather, as with all sustainable systems, interdependent cooperation must
be the underlying value: the human body works because the circulatory
system and nervous system cooperate, the biosphere works because carbon
cycles cooperate with water cycles, companies work because teams work
together (and they fail when internal competition destroys goodwill).
Financial engineers use a "sustainable rate of return on equity" to evaluate
capital structures and operating financials.
The impediments to free markets that you identify are falling away.
The administrators (politicians, civil servants, regulators etc) that
allow bosses to walk free are less able to do so as the individuals suffering
from their unethical behaviour demand compensation. The bosses that
reward themselves so well for doing so little are being recognised for
the criminals that they are. And politicians and business leaders
that could preach "the ends justify the means" are finding out that stakeholders
know better than them that "what goes around comes around". In an
efficient market you have to do the right thing the right way. And
that always requires compromise and cooperation rather than competition.
For those passionate about anti-globalisation please remember: brands
are good because, as in ancient times, they allow you to distinguish friend
from foe. And capitalism is good because you can vote for the products
and services you want with your wallet every day, whereas you may only
get to vote or demonstrate once or twice a year. And please don't
vandalise others' stuff; you wouldn't want it done to you, and putting
energies into providing acceptable substitutes will have a quicker effect.
Let us play the game as if free markets are here and we do not have
to accept the status quo of rewarding those with political or economic
responsibilities because they are in positions of responsibility,
but let us continue to move to a value-for-money marketplace. Voting
with our wallets is an essence of the free market.
And if The Economist is still campaigning for free trade in even only
30 years, then it is very unlikely that there will be any kind of stable
society to support The Economist in 160 years. The rapid pace of
change in this age must result in a stable global economy soon or the
forces at play, whether they are corporate bankruptcies, wars or weather
patterns, will destroy our wonderful life. We may not expect "utopia",
but we certainly have the resources to feed and house the world.
Once resource allocation is stable, we can expect to continue to find
interesting things to do with our time, other than competing for the spoils
of war (military or corporate).
Yours faithfully,
Only One Planet
18 Jul 2002
Dear Sirs,
An excellent summary of the issues attending global development, driven
by the rising realisation that there may be many planets, but only one
where life exists! And the useful supplementary editorial focusing
attention on energy consumption, coal in particular. Thank you.
I submit a couple of refinements. The technology for sustainable
development is largely tested and in place. The greatest need for
technology development is in clean energy but even here it is market inefficiency
that supports the imbalance in price between clean and dirty energy consumption
- as you point out if externalities are priced into fossil fuels their
cost would exceed those of clean energies even though they now suffer
from lack of economies of scale and inefficient markets. The precautionary
principle remains important because technological development has consequences
whose impacts affect the existence of life - a mutant gene produced by
a Monsanto could wipe out fertility in mammals thereby destroying life
immediately - your ozone layer lesson can not be taken too lightly.
There was scant discussion of the role of global management systems whose
development is playing an increasing role in allowing educated consumers
to be the drivers of change. The noosphere (humanity's virtual consciousness
created by the real time connectivity of internet and other media) is
forcing change even among the stagnant and entrenched industrial
elite that have a vested interest in perpetuating non-sustainable consumption.
Consumers can choose sustainable options with far lower transaction
costs than even 10 years ago (e.g. our organic farm sources seed, at a
competitive cost, from another country because it is not available domestically).
This phenomenal change in markets, both economic and political,
is changing humanity's management systems faster than some can comprehend.
Although we accept as normal the concepts of private property (introduced
in Europe only 500 years ago - Statute of Wills etc) and broad political
representation (only ~ 100 years ago women got the vote) these human rights
are foreign to a large percentage of humanity, while at the same time
those of use plugged in to the net can mobilise and allocate our own economic
and political capital globally, seeking out the most attractive markets.
(Perhaps your survey on The World Economy in September will address this.)
Did any of the "rich elite group taking rents from the poor" read the
article? Probably not even many of the educated ones, I'm afraid.
Perhaps these naysayers need to see your message in big bold letters:
GET GREEN TO GET THE GREEN! The growth in markets
for sustainable goods and service is faster than any others and success
requires commitment of resources and business philosophy. The payoff
is wealthy humanity on a healthy planet. For the sake of our children
(for our grandchildren it will be too late - NB your ozone lesson) and
all other life on earth (read the universe!) I hope they all get this
simple message.
Yours faithfully,
CAP Reform
11 Jul 2002
Dear Sirs,
Is it true? Reform of CAP at last? Hurray!
In other industries when times are tough people get laid-off and lose
their jobs. Businesses which have developed efficient operations,
a quality product and decent customer relations survive and grow when
the business environment improves. But not farmers. No we
farmers just whine and put out our hands for more cash and then we perpetuate
inefficiencies. Let incompetent farmers sell out to those that
can be profitable in an industry where 50% gross margins are possible.
If you can not adapt to changing farm markets go into other businesses.
Let the market influence decisions, not bureaucrats who can never predict
how demand and supply will fluctuate.
All good wishes and strong support to those who are making this long
overdue reform from this small farm working to survive and grow without
subsidies.
Yours faithfully,
G8 Debt 1 billion
27 Jun 2002
Dear Sirs,
So, we of the generous G8 have decided to forgive $ 1 billion in developing
country debt.
Please let's put this in perspective ... this is the amount of agricultural
EU subsidy Ireland receives annually. Ireland, one of the fastest
growing economies in the world over the past decade, has a GDP per capita
of over $ 20,000 and this subsidy, over $ 250 per capita, is around
the annual income per capita of much of Africa. Even as
a farmer, my perspective is that the African aid is paltry and the EU
gricultural subsidies are embarrasing, not to mention costly, inefficient,
disruptive and anti-competitive. Please let's get real perspective.
Yours faithfully,
Stop Blaming The Weather
26 Jun 2002
Yes PLEASE! And all other excuses. In Ireland, where a
third of the economy is subsidiesed agriculture, farmers recently sought
another compensation for too much rain flooding their vegetables.
As an organic farmer without subsidies, it is aggravating that there
is no competition in food production in Europe and knowledge of agricultural
technology is rapidly wasting because farmers merely do what they
are told by central planners, who often are inadequate for the job in
hand. It is more embarrassing that wealthy nations continue to
perpetrate this subsidisation which makes it more difficult for developing
economies to leverage the meagre resources they do posses. Wealthy nations
cause hunger in poor nations by subsidising the primary producers in
their own coutries as if they are incompetent to exist in a free market
like everyone else.
Please stop controlling the market for agricultural produce.
Yours faithfully,
Dirty Bombers
26 Jun 2002
At last, leading coverage of the fallacy of behaving like an ignorant
and angry parent with a naturally mischievous child.
On 9/11/01 perhaps the first thought of guilt might have been directed
internally against those ingenious anti-globalisation warriors who can
set up mass rallies with apparently little effort whose primary target
of vandalism might be Wall Street. And if it may be that Americans
are terrorising Americans, the solution can not be made in war.
Joan of Arc was a terrorist burnt alive for voicing different views to
the incumbent authorities, yet now she is revered as a leading author
of change and a saint as well. We should all take note, and especially
leaders vested with responsibility to do the right thing, that punishment
for violence is no rehabilitation (Robert Stroud tried to teach the US
administration that lesson). Education, training, economic development
do rehabilitate. A time-out may be appropriate but violent and persistent
beating only encourages delinquency in the juvenile. Let us all
please take a more enlightened route to peace.
Yours faithfully,
Bush on Palestine
24 Jun 2002
Dear Sirs,
It is shocking that Bush, representing the USA, can speak for democracy
but in the same breath give the ultimatum of rejecting a chosen leader
of some 30 years! Will other states condone this, or will a voice
from within America be heard to decry this double standard? This
self-ignorance is symptomatic of the goss breaches of ethics seen in some
American companies recently. We are fortunate that the country has
great economic and technological wealth upon which to leverage its cultural
morality - I'm (fooloshly) optimistic that his remarks will be retracted/clarified
quickly.
Yours faithfully,
Innovation
05 Jun 2002
Dear Sirs,
It appears that there is no basis for supposing that one group, culture
or people are more innovative than another - we all posses the immagination
that drives creativity. What observers may measure is the
extent of commercialisation of ideas. For example, the venture
capital community has recognised that while much creativity is nurtured
in UK academia and industry the rate of commercialisation is relatively
low compared to USA where efficient markets and low barriers to commercialisation
have nurtured new technologies in all industrial sectors.
Innovation is motivated by innate creativity not cash. While property
protection and capital transfer mechanisms may allow the dedication
of resources to facilitate leading edge innovation (eg biotech) the
creativity is motivated by the desire to "build a better mousetrap".
The diffusion of innovation has been accelerated by the introduction
of low cost information and communication infrastructure allowing technology
to be shared widely and cheaply. For example many business
websites may offer information on their business model and experiences
which may be used by others (including competitors). This phenomenon
will lead (in the long term) to the reduction of the cost of technology
(in product or service) and a tightening of income differentials based
on technology rather than time worked.
Yours faithfully,
Capitalism and Its Troubles
27 May 2002
Dear Sirs,
We can be sure that the world did not become "significantly less wealthy"
in this current recession - the global balance sheet is largely unchanged
and future net productivity was probably enhanced. And the troubles
faced by "capitalism" are merely the accelerated challenges of adapting
a human economic system to the earth's natural economic system of resource
allocation.
Free markets (the basis of an economic system based on interdependent
transfers of capital) require sufficient good information to be effective,
and information is becoming more available and easier to access.
IT and communication technology are providing the infrastructure to
support many more and much smaller decision makers (eg individuals can
screen and buy listed companies as easily as big firms). This combined
with a growing trend to account for pollution (industrial eg emmissions
as well as institutional eg fraud) is forcing free markets to account
for costs that have to date been accrued but not recognised. In the
coming few years consumers and regulators will encourage consumption
patterns which are more globally responsible and thus allocate resources
more efficiently. But short term demand volatility will put pressure
on assets not engaged efficiently (eg polluting assets, especially energy
and processed and packaged food, and dishonest assets like Enron).
In conclusion, it is well that the global economy is adjusting its consumption
patterns, even though tardy adaptation now requires some short term
distasteful medicine.
Yours faithfully,
Astraea
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