Wednesday, January 27, 2010

British and American Wishful Thinking

In one Carpool interview, Richard Noble echoes a British Minister who stated that the Science and Technology sector will have to save Britain because the Finance sector will be crippled for 10-20 years. Unfortunately, current policies in the US are not supporting Science and Tech, only Finance. Science and Technology have been dying for 20-30 years since wages have either stagnated, or are declining. We don't import H1-Bs for finance jobs, but we do for tech jobs. We outsource tech jobs to India and China. Until those trends are reversed somewhat, and policies are more aligned with what the country needs which is jobs, America and Britain will likely resemble Japan over the next decade.

I don't see a scientific or technological blossoming anytime soon. This is because large multinational corporations are getting bigger, not smaller. This isn't just in Banking. We see this in Aerospace (Boeing, Lockheed Martin), Semiconductors (Intel, ARM), Software (Microsoft, Oracle), Internet Advertising (Google), and Biotech (Hoffmann-LaRoche, Monsanto). Just about every sector of the British and American economies is either contracting into a monopoly or oligarchy or dying due to cheaper imports from overseas. The larger a company, the bigger its bureaucracy, and the more innovation is stifled. At some point, the concern shifts from building market share to preserving market share and preventing competition which is the underlying driving force in capitalism. When that shift occurs, oligarchies and monopolies form and society at large suffers because change and innovation are stifled in favor of the current elites. Do you think Bill Gates, John D. Rockefeller, or Andrew Carnegie would want to go up against a younger version of themselves? All of these men are or were exceedingly ruthless businessmen who did not like competition because competition was bad for their bottom line. Our world is becoming more like the Rollerball world, a global corporate state, than we wish to admit. This is what Congressman Ron Paul is warning people about and one of the reasons why he is appealing to voters. This is the underlying fear of what the latest Supreme Court decision means for all elections. Many judges are elected in Texas at the local, county and state levels.

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Britain is in even worse shape than the US. I think in the US scientists like physicists, chemists and electronics engineers have a high status. In Britain they're thought of as oddities ("boffins") who should be studying economics or languages.

Meanwhile China and India are on the upswing into manned space programs not to mention consumer electronic research.

Pete
 
Hey bud, I was scrollin' past this one until the label stopped me short. Yeah, that (old) Rollerball movie portrayed a worrisome world.

"This is because large multinational corporations are getting bigger, not smaller."

Existing business income taxes allow tax deductions in proportion to business spending. The bigger the business, the bigger the tax advantage.

I read once of business growing "beyond its economies of scale." That's unnatural. If a business is so big that being smaller would make it more profitable, then it should naturally get smaller.

The tax code prevents it.
 
Arthurian,

Yes, but there is a feedback between corporate and state entities via lobbying and employment revolving door (government <-> large corporations). Is the reason the tax code encourages corporate oligarchies due to deregulation, lack of enforcement of antitrust and tax laws, or lobbying by these huge institutions to give themselves tax breaks? The only difference between a large government organization and a corporation is the purpose of its existence. Utilities have more in common with government agencies than corporations since everyone needs electricity and telephones just like certain government services (Postal Service). The only differences are one of efficiency and the single-minded focus of generating a profit for the private sector utilities. Everyone assumes that the government is less cost effective and efficient than a similar business (Parcel Service versus UPS), but is there adequate proof?
 
Hi, JB... I cannot reply to most of your remarks. (Nothing comes to mind.) But regarding government and "the purpose of its existence" I fall back to to promote the general welfare.

And regarding "the reason the tax code encourages corporate oligarchies," I suppose it's the chicken or the egg.

Still, I think tax law that favors bigness is something people can readily understand. Maybe the notion is simple enough that even politicians can understand it.

Voters were not happy with the "too big to fail" excuse.
 
Arthurian,

Dean Baker does not hold out much hope for policy makers "having clue":
http://www.pbs.org/newshour/updates/business/july-dec09/econyearahead_12-16.html . If someone like Baker is disillusioned, we should all likely be worried, because he is quite good at explaining economics to the general public, and he saw the Housing Bubble very early (see Galbraith pdf at http://openeconomicsnd.wordpress.com/2010/01/05/unperson-economists/ ).
 
Pete,

China has more smart people than the US HAS people! It's only a matter of time before the superpower mantle passes to China.

John
 
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