In my blog of December 9, 2010, I listed 10 main changes needed to the Capitalist system. I am a capitalist, but I recognize the need for change. The severity of the economic meltdown and the outrageous extravagance of those taking advantage of Capitalism, makes change so very necessary.
One can point to many faults, but to organize the matter, I have categorized the major points here. I am listing them again for easy reference, and I will refer to this list as I discuss each point in turn in future blogs.
MY CHECKLIST – The Main Elements of Capitalism that Need Correction
1. Why do we treat the financial system different from the manufacturer of cars or appliances, or providers of non-financial services. They should be treated equally. (See previous blogs in December 2010 for a full explanation).
2. The Lack of Warranty attached to Financial Investments. Buying a car means whomever sold you the car, stands behind the car. The financial system works on the opposite principle. Buyer beware! (See blogs of December 2010 for elaboration).
3. The Commission Incentive for humans to cheat other humans. If you get paid only on what you sell, and the moment it leaves your shop, there is no incentive to stand behind anything, there is something very wrong. We wouldn’t accept this on an electric can opener sold to us. But we do accept it as OK on our money and on our savings.
4. The failure to properly use our Income Tax system to ensure that society works the way it should. Easily attainable excess profits encourage misdeeds and a loss of morality. The tax system is used to promote scientific research, or to plant corn that wouldn’t otherwise be planted. But the income tax system ignores the most important industry of all.
5. Separation of the Four Pillars of the financial system. Because of the destructive nature of human greed, long ago our law makers separated the four main parts of the financial industry. They realized that human greed could run amuk, as indeed it has run amuk. In the misguided urgency to eliminate needless laws and regulations initiated by Ronald Reagan, we have removed logical and necessary boundaries that protect society. We have forgotten what basic human emotions will do.
6. The duties of persons leaving the private or the public sector for the other sector. There seems to be no understanding of the difference between making as much money as possible for oneself, and the selflessness of serving in the public realm. The definition of when a person can shift from one sector to the other, and the obligations of a person to the sector he/she is leaving have escaped us. The result is bad policy.
7. Self-Insurance could be accomplished by a small portion of the profits always directed to a fund. Profits that are excessive to any reasonable criteria should also carry the obligation to self-insure against errors and problems.
8. Understanding internal oversight as compared to external auditors. We rely on public auditors who charge enormous rates varying from $500 to $1,000 per hour. They are an enormous bureaucracy with a monopoly on their services. Yet they fail to understand what they are auditing more often than not. It is the classic story of missing the forest for the trees. It is also a story of auditing a part and ignoring the whole. Responsibility of key people needs to be promoted.
9. Tax havens are respected. Terrorists are not. It is inconceivable to me that we allow persons and companies to make profits within our borders, and yet use supposedly legal means to avoid paying their share of income tax on those profits. This is an immoral drain on our society, yet it is politely respected. Yet terrorists who kill or threaten a few people are hunted down with ferocity. If someone is boldly robbing our society day after day, and hurting millions of people, they are economic terrorists.
10. The Power of Simplicity as compared to being overwhelmed by information. The do-gooders believe in full disclosure. What a farce! When one reads a financial instrument, one must read hundreds of pages of legaleez that is incomprehensible. That very disclosure obscures and conceals the truth. Why do we allow this?
In blogs to follow, I will discuss each of these mentioned issues. I apologize for writing on such dreary subjects, but these subjects seem to be ignored by the world at large and are hurting many of us so very much.