From my last post, it is clear many do not understand why capitalism is failing.  This is as important as the solution to a failed economic system.   However, the reason that capitalism is failing badly is its inability to monetize work.

Look around the world.  There is plenty of work that needs to be done.   Cites are run down.  Infrastructure crumbling.  Social services are needed everywhere.   Poor education.  Factories closed.  It may be difficult to measure but my guess is there is more work that needs to be done by a factor of two than there is people to do it.   So, this is the question — if there is so much work to do then why are so many people unemployed?

Answer: Capitalism can’t figure out how to monetize work — that is, how to make profits on work that needs to be done. This is the heart of the failure of capitalism, and it is going to get even worse.

Consider MySpace as one example.  It is a social networking site with millions of users.  There are millions of  pages on MySpace and there are lots of people who view them every day.   However, MySpace cannot make money.  They have changed from one CEO to another and still cannot make money.  Why they cannot make money is at the heart of capitalism’s failure.  They can’t figure out how to monetize their product.   For now, they run a few ads but these ads are generating less and less revenue.  They are largely ineffective and will be more ineffective over time.  Yet, traditionally a product that is in high demand and there is no mistake MySpace has demand — certainly more before the capitalistic Murdoch took them over.    So, MySpace keeps cutting its staff and losing to other social networking sites.  Thus, if MySpace cannot make a profit then it can not exist in a capitalistic world, but it can exist in a socialistic one.

This example can be repeated over and over again.  And not just in so-called soft products.  Consider computer harware — memory, chips of all sorts.  It is getting more and more difficult to profit from computer hardware in general.  This is the reason it is made in developing world where labor is cheap.  Chips are made for pennies when they use to be made for hundreds of dollars.  It is like flying a  747 airplane across the country and then throwing it away.  Computer hardware is getting cheaper and cheaper and it is getting harder and harder to make money with it.  Yet, these are legitimate products.  Products that at one point in time were highly profitable but over time with have no profit as all — at least not enough to make capitalism care.   Technology is a self destructing industry.  They keep building faster and faster products, saturate the market, and then wonder why companies have to consolidate to fight over the remnants of demand that remains.

More and more of the economy is available for free or much less cost.  Music free. Movies free. Software free. Books free. Journalism free.  Computers almost free. Cell phones getting cheaper.  Over time, it will all be free.  And this is the problem with capitalism.  Plus, as fewer and fewer people are needed in once healthy industries, there is less and less disposable income to consume products.  Meanwhile, profits margins get lower and lower as they approach free.   Two decades ago you needed a new computer every few years.  No more.  Computers are fast enough to last much longer.   What happens to the people who made those computers?  They are unemployed.  What happened to the people who made the software? They are unemployed as well, even programming with massive free software sites for nothing.

Health care is such a fierce battle because it has been locked down and protected but this cannot last forever.  In time, the walls are going to be busted down and it is going to be much cheaper.  There is no reason there are not more doctors and doctors are not paid much less.  There is no reason drugs are not much cheaper.  There is no reason that a person shouldn’t be able to perform tests on himself with the aid of technology for much cheaper.  The battle rages right now but eventually the costs will plummet.  This is what has the medical community so upset and the reason they are trying to protect their turf.  It is completely artificial that medical cost is so high.  Not only is it high but it is consuming a bigger percentage of the GDP, now approach 20%.  It was 3% in 1960.

Industries to survive have to get special laws to protect them.  For example, most professional sports have laws to protect their monopolies.  They want to make sure there is no competition.   They cannot compete if there was not these protections.    There is nothing free market about these industries at all.  Copyright and patents laws are intended to let companies maintain unfair advantages over others.   They are even patenting human DNA to give advantages.  Think about how this limits society.  Peer review research is kept behind walls to let companies make money, because these companies provide no service at all.  There is no reason this research should be locked up.  Not only is capitalism failing but it makes the world worse in the process.  Eliminate capitalism and the need for profits and there is no more artificial protections.

From time to time, this blog has posted cartoons from a wonderful political cartoon site.   For a while only a few of their cartons were available to embed — the rest were available to republish for a free.  Now it appears there are none that are available for free to publish on my site, and this saddens me.  It also proves the point of this post.   They are trying to monetize because they need a way to survive in capitalistic America.    But by locking their work behind a copyrighted, capitalistic system, fewer people will be able to enjoy it.   Yet, it is still available for free — just click and view it yourself.   In the end they are giving their work away for nothing as they attempt to profit on crumbs from a capitalistic society.   These people are thousands just like them need to be guaranteed basic standard of living so they can produce their cartoons without worrying about making money.

Capitalism is failing and the only solution is to guarantee living wages for everybody.  Unleash people to be productive doing things they want to do — even things that do not make any profits at all.  This is the critical point.  People do not need to make profits — only greedy corporations and selfish rich people.  People just need to support themselves, contribute to society, and all of society needs to work together to make it better for everybody — not just rich people.  Money — it means everything today but eventually it will mean nothing.  And that day is getting closer all the time.

One last point, if capitalism is such a great system, why can’t it create jobs?  There are millions of people who need jobs but there are no jobs for them.  Again, why not?    And before somebody gives the Republican talking point about taxes, just remember there have never been taxes on companies that do not make profits.    So, why can’t capitalism produce jobs if it is such a great system?  The answer — capitalism cannot monetize most forms of work and what they can is getting less and less all the time; thus, the increasing unemployed.

As long as America continues to believe in the past and keeps fighting for something as meaningless as money …

America is Doomed.

Republican Governor Arnold Schwarzenegger has a great idea.  He just ordered most state workers to work for the month of July at minimum wage — 7.25 per hour.   For him, it is just temporary until the California legislation passes a budget, but let’s ignore that part.  Let’s guarantee everybody a minimum wage.

Just think, if everybody in the country had a guaranteed  minimum wage, there would be no more unemployment, no welfare, and nobody without a means to support.    For decades, minimum wage has been advocated as a living wage.  Well, let’s just assume that is true for the moment.  Then, everybody can have a guaranteed minimum wage and pay no taxes on any of it — no federal, state, or sales taxes.  Zippo.  Everybody gets to spend the 40 hours per week, $7.25 per hour, as they see fit.  Then start taxing the next $7.25 per hour at 20%, the next $7.25 per hour at 40%, etc.   Right up until it is taxed at 100%.  Use all those taxes to pay for the minimum wage and whatever else government needs.  It seems like a great way to redistribute the wealth, provide for all the citizens, and make sure nobody gets too greedy.

There would be no such thing as unemployed benefits — everybody is guaranteed a minimum wage.  If people want more than a minimum wage they could get a job and earn some more money.   If they couldn’t find a job, they would still have their minimum wage.  The minimum wage would be for every single citizen, regardless of age.  So, a family of four would have four minimum wages guarantees.

If the minimum wage just wasn’t enough, it could be raised but it would be raised for everybody.  It could also include some basic benefits, like health care, housing and public transportation.  So, every citizen would receive a minimum wage and benefits. It would be a much fairer system.  There would be plenty of incentives to work as well.

By working, people could get something more than the minimum.   It would also allow people to explore areas that didn’t traditionally pay so well, such as journalism, music, and art.  They could work for themselves, start their own businesses, etc.   If certain jobs were particularly important, wages could be higher to attract people, but not high like professional athletics high. They would pay 2 to 5 times the minimum wage.   There would still be plenty of people to play baseball, be doctors, etc.  People would gravitate to things they liked to do which is almost always the things they do best.

Everybody gets a minimum level of income, there are still incentives to work, and nobody gets greedy wealthy.  Let’s give it a try — it has got to be better than the rich getting richer, people struggling to find jobs, and 30% of the nation’s children on welfare or hungry.  Did I mention, there would be no more welfare ? — everybody makes a living wage, including the children.

For now, Obama pretends that the economy is improving.   Republicans complain that it is the government’s fault that private business is not hiring.  They are both wrong.  This economy is getting worse as the jobs’ report demonstrated today.  There are now 8 million fewer people at jobs than before the financial crisis in 2008.  It is getting worse and if something is not done about guaranteed income for all citizens, people are just going to die.  It’s that simple.

America is Doomed.