Archive for October, 2014

Capitalism — not your friend, anymore…

October 16, 2014

What we have now out there in the marketplace is decidedly not capitalism.  It’s yet another hustle to maximize corporate profitability by setting up and gouging an unsuspecting buying public. It smells badly of Milton Friedman’s obscene “crisis finance” strategies, and Harvard Business School’s sociopathic rape of the world economy.

In a perfect world – in a world where there are three or more direct and viable competitors in every business sector – present in every marketplace – where there is enough law on the books and enough regulatory oversight enforcement to disallow unfair business practices, predatory marketing, unfair and dishonest labor practices, the sale of shoddy/unsafe and misrepresented products and services to unsuspecting consumers/ customers/clients – capitalism can be pretty much self regulating…and can be a winner for all the stakeholders.

It actually was pretty decent and good for America, and indeed Americans, in the 50s, 60s and 70s. Competition and sensible rules and laws prevailed and kept everyone honest and kept the industry reasonably stable and predictable…at least until the laws regarding monopolies, unfair and predatory marketing practices were changed and ignored – and oversight was largely dismantled — and were then obviated entirely in the mid and late 80s by merger and acquisition sharks — and slash and burn company destroying asset peddlers (like Romney’s Bain Capital).

The mostly good, fair, play-by-the-rules…and legally compliant socially aware corporate leadership of the 50s, 60s and 70s quickly collapsed in the 80s — and were replaced by a sea of Finance type CEOs who were hell bent on controlling costs – and ‘rolling up’ industries around themselves by eliminating competition. At the same time there was huge (largely self-imposed) pressure to reduce all manufacturing, production,  marketing and selling expenses that could possibly be done — and the savings gained were moved directly into net operating profits…and immediately thereafter into shareholder distributions.

During this period, Capitalism moved from being a financially sound controlled business practice that was essentially healthy, vital, fair and comprised of good neighbor and a good citizen role models…until it morphed into the single purpose obscenity “to maximize return on share hold equity”…that didn’t give a damn about anything else.

The game changed from sweet and good and playing by the rules…to a snake pit that churned confusion that abandoned both the consumer and their own employees. Capitalism became a money machine lead by sharks who eliminated all the protective legislation intended to keep corporations from playing fast and loose…and who had written the new rules and had the money (and the gall) to play and take advantage of the pandamoneium that continued unabated through the great collapse of the 2008 all the way up to today. Friedman would be proud of his boys. They all got fabulously rich, and not a one went to jail.

A couple of serious points here: (because they’re important to understand how much everything was changed in the way business was done…and how completely capitalism became the parody of what it had through the 70s).  Very important to know the difference here.

Back in the day (not very long ago) when there was still some serious (non colluding) competition between companies for customer attention and market share — the dynamics of the competitive market place caused some “healthy things to occur pretty much naturally: for one, prices were more competitive (because they had to be). Two, products were competitively differentiated on the basis of the relative product quality being offered. Buyers understood relative value differences and paid for the differentiating values when they were important to them. Three, labor and community relationships and establishing and maintaining a favorable reputation were held as beacons of corporate responsibly signaling civic intent, social and ecological commitment, commitment to quality, commitment to community, and so on. Lastly, an there was an implicit ‘covenant of trust’ between manufacturers and marketers and the people who bought what they sold. All have been pretty much trashed in the new iteration of what capitalism stands for.

Another point. Where there is significant competitive pressure, corporations are highly incented to spend R&D and new product development dollars to achieve and maintain/sustain product quality superiority – to meet or beat direct competitors efforts to gain product preference superiority.  Where there is relatively little difference between competitive alternatives — competitors are forced to compete on imagery, promotion strategies and price – which forces direct competitors to maintain price parity, which in turn forces prices to stay reasonable and as low as feasible. Competition keeps competitors honest.

Periodic ‘price promotion’ is done by competitors seeking to achieve a short term price advantage for their products to influence customer purchase and to attract multiple purchases of product in attempts to shift product loyalty and competitive conversion to there products versus competitive offerings. The customer wins. And because one competitor shifted the game towards themselves, it always comes to pass that the other direct competitors will attempt to influence the market back in their direction by doing the same type of promotion themselves. And again the customer wins, because through competitive back and forth activity, prices are reduced to something just above sustainability in the business category.

Punch lines:

When there is little or no competition in a given business category, this means that over time (and not a very long time) prices cease being based on competitive pricing activity (because there is none) and becomes based on “what the traffic will bear” (what the manufacturer can get away with). When there is no competition to keep competitors honest – prices rise to the level where the purchasing customer decides that it’s just to high and isn’t worth it anymore…or to the point where lost usage (lost sales) accruing from too high price starts to erode the market sale base…and remaining competitors make adjustments to regain lost positions.

This is also where we kind are right now.

The wholesale roll up consolidation of almost every competitive business sector in the United States (through business defaults, mergers and acquisitions…) where a larger corporation buys or merges with an under leveraged competitor – and takes their customer base – and at the same time, eliminates them as both a competitor – and as a pricing and marketing force to be reckoned with – has dramatically altered the fundamental nature of how business is done today.

The consolidation of industries in this country over the past 30 years – has reached the point where significant competition has either been entirely eliminated, or neutered to the point where there is little justification to compete anymore. Fact is, that tacit agreements have been made between remaining competitors “not to compete” anymore – because it just wastes money that can otherwise be added to a company’s gross margins and net operating profits.

Good old capitalism has essentially gone forever. When you get down to it, anything good that ever accrued from capitalism – where there were strong active competitors present in the market place – totally disappears when competitors are eliminated from the business equation. What we get with the elimination of competitors in the business process is the mirror opposite of what was once good.  What’s left dynamically is a recipe for precisely the disaster that is currently playing out in this country. Very deliberately, by huge corporate roll up king pins who understand exactly what they are doing.

Elimination of competitors from the market place has huge consequence:

No competition translates into corporations no longer pricing to be equitable with competitive product/service pricing for like and similar and identical products. With no competitors to deal with, corporations price to what they feel they can now get away with.

No competition means no periodic price reduction “deals” being launched by a competitor to attract users of competitive products and services…which translates into no reciprocal promotion efforts to try to win the brand switching users back. No periodic price breaks that allow consumers to stock up on cheaper priced products. No reason to. Without competition The remaining company has all the share of market that’s worth holding on to.

No competition means that all marketing dollars (advertising, promotions, offers, product improvements, new products and line extensions) once spent to keep a company viable in a competitive  marketplace (including periodic deal prices discussed above) can now be directly transferred to gross profits – and shareholder wealth.

No competition means there is little to no incentive to maintain product quality above minimally acceptable quality levels necessary to preserve an acceptable price value relationship where the customer doesn’t drop out or quit buying. Gross margin improvements by subtle changes to less expensive ingredients, net weight reductions, cheaper packaging, and so on.

No competition means that the primary purpose for a company’s R&D group is to find ways to make products cheaper…not better.  No need  to justify a product superiority claim.

No competition means that technical and marketing and key operations and procurement people – displaced by defaults, mergers and acquisitions, are looking for jobs and are willing to work for way less. Which changes the whole bases of job and salary ratings and associated pay scales.  Labor and wage savings that accrue to gross margins – and, as always, to enhance shareholder wealth.

No competition translates into less jobs and more people who want/need them…which means a larger “in need” labor pool who are willing to work for less because there are no competitive options left anymore. Lower wages translates into lower ‘manufacturing costs’ which means the cost savings are added to the gross margins.  No reason for corporations to pay fair wages…or benefits. Starving people will always work for less.

No competition means that there are no competitive buyers for key ingredients that these products are made of…which means the roll up winner has a grossly improved bargaining position with the ingredient supplier…who is forced to sell for less. And increasingly the manufacturer of products is hedging bets on the commodity exchange on key ingredients anyway.

And that’s also where things are right now.

And if that’s not enough – these end game players in the corporate roll up of American industries are moving the whole game ‘off shore’ where they can reduce costs of manufacturing (labor/cost of goods) to the absolute least cost business environments – which are cheap enough to produce stuff off shore and then ship it back to be sold in the American marketplace…and still save enough money to be worth the embarrassment of manufacturing off shore.

So, if you haven’t already figured it out…the game being played by large corporations operating in this country today is not “capitalism” by any stretch of the imagination. At best it’s “opportunism” – and in no small degree a skillfully choreographed and tightly orchestrated form of thievery. All shells and mirrors designed by Harvard business school sociopaths to create opportunities for wealth accumulation (by the wealthy) – at the expense of the poor stupid consumer who has been duped into believing that capitalism is still in place, and still is a good thing…while their pockets have been picked by people who have once again rigged the game.

Get it?

Capitalism requires the presence of viable competitors to make it work and to keep it honest. When there are no competitors on the field (or where a market sector is dominated by colluding competitors moving in lock set with one another – ex big oil, big banks, big agriculture) all bets are off — except dishonesty…and horrendous manipulation by those rigging the game by employing legions of legislation writing lobbyists (ALEX) and PR firms to gild their deceit…and to payoff of our elected representatives to pass their legislation and to hold the water open for them while they plunder.

These people are not working in our behalf today. Own the thought.

What is being sold as Capitalism in this country for the past 30 years is not anything close to your father’s understanding of capitalism.  What we have today are “capitalists” (people who hold vast amounts of capital) using their power and wealth to create extraordinary and exclusive advantage to pillage the citizens of this country and the world. It has destroyed the marketplace and the economic engines we have come to depend on completely because there’s no option.  These determined and slippery opportunists are killing the country.

A close look at the Friedman school and Harvard Business School’s teaching and practices over the past 25 years, wouldn’t be a bad start on identifying what needs to be cleaned up. I suspect a fair viewing might find a fair bit of societally destabilizing and  treasonous manipulation of long established best practice legislation to put more than a few asses in jail.  We need to get this snake pit cleaned up.


Not quite worthy posts…

October 9, 2014
Joseph M Burke

October 6 at 4:29pm

If you’ve been wondering why we have lost so much daylight over the last month…it’s actually “Global Darkening” — which is caused by man (of that there can be no question) who have taken joy out of the world.

October 4 at 10:07am ·

The simple truth of the matter is that men start wars. Sometimes on principal, sometimes out of frustration of not being heard or considered…sometimes out of perverted delusion and personal dreams of power and control, and sometimes for retribution in response to oppression and diminution, and sometimes out of racial and tribal hatred…and sometimes to improve there country’s/tribe’s competitive or defensive or economic position. But almost always war is justified with passionate moral certitude, righteousness and belief in moral authority and religious superiority. There is no irony lost in mans insistence in the presence of god when attempting to justify extreme positions taken — and their very worst instincts and urges. WTF. Over.

JMB. Well then, maybe we ought to “choke up” a bit on our exercise of free will. Self-restraint for the greater good isn’t a terribly difficult notion. It’s also a lot nicer than being a dick head. Don’t you think? (In response to a comment on “free will”)

‪JMB. Let’s try it this way then. War is morally wrong. Period. Those who start it are morally wrong. Those who perpetuate war are morally wrong. Those who justify war as bring morally, ethically justified are morally wrong. Those sanctimonious who attempt to justify war as being sanctioned and lead by the will of God are wrong and are reprehensible. There is no right here. Only the dead and the damaged and the survivors who have to live with what was done in gods name. So. Blasphemy if you are a believer. Mankind at its absolute worst if your not. I frankly don’t think god has a damned thing to do with it. War is pure unadulterated human immorality. Man at his worst. And we have institutionalized it in this fucked up country.

September 29 at 10:52pm

I would feel so much better if our poor beleaguered President came clean on who had a gun to his head on all the major issues he’s done a 180 on. At least then I could understand what was influencing his decisions. Right now all I have to wonder about is who bought him off…or if he was a fraud right from the get go.

September 26 at 10:34pm

So how do all these flying ISIS snuffers pick out the right guys to bomb the shit out of. Do they all wear red turbans or something? Do they all have ‘bad guy’ ISIS gps chips imbedded in the top of their heads?

I don’t care how good these fly guys and drone jockeys are, it sounds a little more than imprecise, and collaterally messy to me. Like something a terrorist might do even. A lot of innocents are going to get killed I fear. What the hell are we doing?

September 24 at 5:10pm

I don’t know about you, but I’ve reached the point where I don’t want any member of congress having anything to do with approval of war, energy, global warming, banking, tax reform, farm subsidies, healthcare, social security, et al. Their collective performance over the past 14 years has been just awful. Mostly because they’ve been taking huge sums from large murky donors and lobbyists who control how they vote. They’re not on our side. I don’t want these people in my life anymore. They cannot be trusted to do anything other then what their owners pay them to do.

September 19 at 9:45am

Funny, but I woke up thinking that maybe it’s time for Americans to declare their independence from a United States government who clearly no longer gives a shit about them. (on Scotland’s referendum)

September 11 at 9:59am

So, was the President’s speech initiating war on ISIS last night, really an attempt to morally and cost justify all the surveillance, data collection, and phone and internet privacy intrusion systems…and the development of the national Homeland Secret Police and the militarization of local police forces?

I mean when you declare war on a bunch of people who have their hair on fire and promise to bomb them into oblivion…isn’t it sort of expected they’ll probably declare war back.