Karnal wrote on Dec 3^rd, 2015 at 4:04pm:


Where do I start with this mess

(1) If you understood how money is generated then you would not made the above comments. There are more money now than any other time in history. So how did it come about?

(2) Banks, Super moneys are mandate by governments. So they make money due to the monopolies created by the governments

(3) Hedge Funds are speculations - hint the word "hedge". It's like playing the casino.

(4) Oligarchs and princelings you refer to - they sold something to get money. So where did the money come from? And where did they get their money?

(5) The only "government friendly banks" are the Reserve Banks. Any money given to these people must be underpin by assets. Nothing is for free

(6) They have no duties to share because they are the ones who took the risks.

Kytro wrote on Dec 2^nd, 2015 at 4:06pm:

Limits is the key point: ECONOMICS ITSELF RECOGNISES LIMITS!

One of the most corrupt countries is China, FD. It’s the second richest country in the world. All the high-growth, emerging economies have the highest corruption levels. Pakistan will be in the G20 by 2025.India will be the third largest economy by 2030. The Philippines. Russia. Indonesia. South Africa. The Middle East? Don’t even go there. Even the Australian government pays bribes to do business there. 

You can’t get a government job in most of these places without a bribe normally priced at over half a year’s salary. You can’t get a government contract without baksheesh. Simple things like licenses, government services, getting a case up in court or even reporting a crime - all these things cost in all these places. If you’re poor, forget about it.

This is the way 80% of the world works, FD. It’s not an aberration, it’s the way things are.

Ever get the feeling you’ve been cheated?

freediver wrote on Dec 6^th, 2015 at 9:07am:


Really FD, how do you figure that?

freediver wrote on Dec 6^th, 2015 at 5:01pm:


All countries industrialize and develop through government protectionism, croneyism and corruption. The same applies to Britain during the industrial revolution, the US during the age of the robber barrons, the Prussian industrialists of Bismark’s Germany, the military clans of Meiji Japan, and yes, the corrupt one party state that was the Soviet Union (that was also the fastest state of its size to industrialize - ever).

This is how states mobilize production. It’s a process of divvying up the spoils, quiet deals being done by governments, bankers and those who can get things done - corruptly.

But it’s not what works in the long run. Actually, I could be wrong - it hasn’t worked in the long run yet. A leader like Putin or Hu Jintao might get the balance right, but it will require a lot of popular supression to make this work.

China and Russia are both recently developed emerging economies still functioning under the croney capitalist model. The neoliberal, CNN view of the world would have you think it won’t be long before Freeeeedom sets in and these countries live happily ever after, just like us.

But don’t believe it. They said the same for post-Soviet Russia, post-invasion Iraq, and they even held out hope for the Arab Spring.

Forget this thesis, FD. History is by no means over.

That’s right, FD. Governments "allowed" industrialization to occur because their members were industrialists. In the UK, when laws were changed to allow those with money to stand for parliament (rather than wealthy landowners), we got the industrial revolution.

Those without money, land or title were not allowed a seat in the British House of Commons until the late 19th century.  This, of course, is when the labour parties were formed. With labour parties elected (first in Australia), parliaments represented workers for the first time. Lenin had a different view, but with the formation of the labour parties, workers were discussed in parliament for the first time.

None of these things "just happen". Governments instinctively oppose change because its role is to ensure continuity. Industrialization has only ever occurred by government decree, whether free trade or command policies are used. As Deng Xiou Ping famously said, it doesn't matter what colour cat catches the mouse.

In China, Shenzen was set up as a free trade zone in the 1990s. It wasn’t until this city succeeded that the model was rolled out by varying degrees accross China. As you know, the previous "Great Leap" policies had been a disaster, unlike the command policies of the Soviet Union, which were successful.

I hate communism, just as I hate Fascism. But these two political models have had amazing success at mobilizing populations and achieving rapid economic development. I just doubt you can control populations for long. The Soviet Union fell because people made it fall. The same applied to Franco’s Spain and the Juanta-led Greece. After the command policies grew stale and failed to deliver the goods, people rose up. But when these policies work, people consent. It helps, of course, to have a network of gulags to back it up. 

Nothing "just happens", FD, but in a sense, you’re right. The conditions to allow them happen do appear as "just happening".

When you look closer, you always see human action and decision. Free trade and production has never just happened. In every industrial surge around the world, policies have made it happen. How else could a country lay down roads and power grids and create tax incentives for foreign investment (or tariffs to keep foreign goods out)?

How would this be possible without monopolies? In the US, the railways developed privately, but they were given land, and in many cases, finance, to do so. In the 20th century, the automobile and petrol companies joined forces to buy up those tracks to build highways. Again, they were given consent and government money to do so. From the outside, it looks like a change in technology, but on the inside, it's a shift in policy from public transport to car use. It's a shift driven by government deals, lobbying and political donations. The car industry in the US is propped up by the government, just as the railways once were too.

Is there any difference between a private investment model where monopolies are granted through government favour, and a publicly-owned government monopoly?

For Milton Friedman, there isn't. For Lenin, there is. But in the end, does it really matter which colour cat catches the mouse?

aquascoot wrote on Dec 7^th, 2015 at 9:28am:


Those guys are not the norm, Aquascoot. The clove monopoly in Indonesia is not owned by a self-made man, he was granted this monopoly by his father, a former dictator. The same applies to essential goods and services throughout most of the world.

But understand that what these innovators do to succeed in a market is ultimately the same as Thommy Suharto's clove monopoly. Bill Gates found an idea for operating PCs and monopolized it.  Bill Gates initially beat Steve Jobs to market share by selling the software, not the hardware. PCs with Gates' software prevailed over Apple, with the software Gates copied. It was a business model that gave Gates a monopoly over the software used by an entire generation, until Google and others started to compete.

These companies use innovation to gain market monopolies. Sure, this is highly preferential to a government telling a developer what to do with a product, but a look at the inside story of technological innovation shows that the market does not fully drive the process. Computer networks require a monopoly. No one wants to be on a social network hardly anyone uses. No one wants to use a word program no one else can read. The beauty of Windows and Facebook is that everyone uses it. Like an electricity grid, we only need one wire to bring us power. With most technological innovation, one or two players ultimately rise to prevail. This applied to Edison and Westinghouse in their time just as it applies to Gates and Jobs today.

I'm not really sure what Richard Branson has done to change humanity. Sure, he's made a lot of money, but again, airline routes are monopolies granted by governments. If anything, Branson's greatness lies in challenging British Airways and Qantas to the routes he was ultimately allowed to compete on. But he then became the monopolizer, seeking to protect his company from competition from the low-cost carriers. This process repeats itself, continually.

Again, whether monopolies are formed by government decree or whomever rises to the top of the heap, it matters little. I've seen the benefits of competition in aviation policy. I used to fly to Asia with Qantas, paying a small fortune. Today, I go with Air Asia and pay half the price in 1990s dollars. I'm a big fan of competition when it works. 

Competition is important, but it's not just competition that creates better and cheaper products. I hate to use corporate jargon, but synergy is crucial. Synergy allows different parts of a company to fund other parts. Synergy between companies allows networks and connectivity. "Integration" as the jargon goes.

Business is no longer pretending that competition drives them. They now acknowledge that synergy and vertical and horizontal integration is key to success. You know, like the car and petrol companies buying up railroad tracks in the 1950s to build highways: vertical integration.

This is the way business has always been done, it's just not captured in classical economic theories, which were written in an era of free trade versus protectionism. This changed when the cold war started and the choice was Amerikan trade versus communism, but the very elements of "free trade" are the question here.

FD's comments on communism are an interesting throwback to the cold war. Then , it was believed that if you questioned free trade, you were advocating communism. Today, of course, hardly anyone advocates communism. Free trade won the cold war.

Communism is not an alternative many want, but Soviet economics was never communism, merely state capitalism. We live in a dynasty of capitalism, with varying models. We cannot not live in capitalism - it's the way the human world has been structured since the Dutch East Indies Company sold the first company shares.

But we need to make capitalism work for us, not Bill Gates, not Richard Branson and not Thommy Suharto.

Karnal wrote on Dec 7^th, 2015 at 11:18am:

Nice.