Thursday, October 13, 2011

What economic system do you propose? (To the "Occupy Wall Street" protesters).

In recent times we have seen some amazing things taking place before our very eyes. We have seen Middle East and North African protesters overturn their current occupying government(s). The economic watchdog proposes a question. Which economic system provides the best economic benefits to the most people? This is a question that all protesters should consider. Why?

Because, once an old system is overturned a new one must be put in place. This occurs all throughout human history. For example, economic systems usually follow this basic (crude) cyclic system of transition. First, thought is formulated into a philosophy of how one interprets the world around them. Then, the philosophy starts to catch on and spread as more people follow the ideas. As more people follow, eventually, Institutions are constructed as the cornerstones of those beliefs. The Institutions then create the working rules (rules of the game) for the society to function. However, there are many flaws in every system that is created by man. One of the largest and most important flaws is that humans are not always logical or rational.

To give recognition to Jeremy Bentham.........humans tend to pursue pleasure and avoid pain. As they do this, the people for a myriad of reasons (usually an oppressed class within the current system) destroy the current system in favor of one that supports the currently oppressed. This is known to be true all throughout all of known human history. However, as the new system is created this just starts the cycle all over again. The new system defines new "winners" and "losers" (people who benefit and those that do not). Human emotions such as greed occur in every system. These behavioral emotions skew the majority of economic benefits towards the elite class (top 5% or so). This always occurs, as these elites almost develop a sense of entitlement as the ruling class. Once a group (top 5% or so) obtains these economic benefits they often will not let them go easily. Even if the majority of people in the system oppose their rule.

Another major flaw is that all systems are subject to a very important economic law. Resources are scarce. It takes a resource to power an economy. Just as a person needs to consume food for subsistence. An economy (Pre-Agriculture, Agriculture (crop rotation, horse and plow, etc.), Industrial, Financial, etc...) must consume a power source in order to survive. An economy can shrink or expand just like a human that eats too much or too little. If an economy runs out of a primary resource and cannot find an equivalent resource it can prove to be disastrous for those that exist within the system.

The challenge is to create a long term sustainable growth economy. How do you create and regulate such an economy? Whom would be the regulators of such a system? Many have tried to envision such a utopia with no real coherent way of achieving such a system (In fact, the most stable system (that lasted the longest) was created by religion). However, that time period was also known as The Dark Ages. The best attempt I have read to date is Karl Marx's Das Kapital. However, he like many others, leave no plan of how this utopia is created. My view, is that first and foremost you need unlimited resources. How is this achieved? I have no idea. But, I am sure that a prize awaits anyone who can solve this main problem.

To the current 99% which system or new type of system do you propose?

Some system construction understanding can be found in these books (Warning these are not lite reading):

Karl Marx's: Das Kapital (system cycles, Socialism, Communism, Capitalism, etc.)
Karl Marx's:The Communist Manifesto (The economic clauses/principals)
W.F Bruck: Social and Economic History of Germany 1888 to 1939
(specifically on page 207 the National-Socialist official economic clauses such as 1: Abolition of unearned income : Overthrow of the slavery of interest. 2: We claim the Socialisation of all trade organizations , hitherto established in the form of companies. 3: We claim the share of profits in large scale enterprise. 4: The immediate communalisation of big departmental stores. 5: We claim a reform of the land adapted to our national needs, creation of a law for expropriation of the land for common purposes. Abolition of the investments in land and prevention of any speculation in land. 6: We claim the replacement of the Roman Law, which serves the materialist order of the World by German common law. 7: Points out: "Common weal before private interest" etc.)
Adolf Hitler's: Mein Kampf (National-Socialist philosophy and economic clauses)
Mao Zedong: Severeal works/writings(Economic and political philosophy)
Stuart R. Schram: The Thought of Mao Tse-Tung(Economic And political philosophy)
Adam Smith: The Wealth of nations(Capitalism)
F.L. Ganshof, Philip Grierson: Feudalism(Feudalism)
Any Academic Works on Monetarism
Any Academic Works on Transitional Economics
Any Academic Works on philosophy or ideology (Gandhi, Theodor Herzl, Plato, etc.)
Any Academic Works on History
F.A. Hayek: The Road to Surfdom
William Minto: Logic: Inductive and Deductive(Understanding Behavioral Biases)
James Angresano: Comparative Economics(History of known Economic Systems)

As you can see there is a lot of reading.........happy reading all.