Tuesday, December 6, 2011

Sustainable Economics Manifesto

Objective:  Establish a worldwide, fair and free sustainable economic model that rewards innovation, success and hard work and reduces social and economic disparities.

Core Systemic Issues / Solutions, Possible Methods & Ramifications

  • Increasing amounts of consumer credit
    create asset bubbles, unsustainable demand and production inefficiencies. When credit is added, new products and services appear and/or the prices of products and services go up because there are more dollars chasing each product or service. When credit is serviced, capital is diverted from the economy. If the diversion of capital exceeds new capital inflows, then prices go down and/or products and services disappear.  Predominately, most consumer credit is for consumption purposes. The resulting consumer debt is a tax on future economic activity.

    The central banks of the world must gradually increase interest rates. Asset prices will generally go down and products and services will disappear. This will trigger recessions that may last a couple of years in most developed countries. If interest rates are not gradually raised, deeper recessions or depressions lasting much longer will occur.
  • Government subsidies including bailouts and tax incentives for any product or service create pricing bubbles, disenfranchise unsubsidized enterprises and sectors and hinder productive capital investments. For example, the housing sector benefits from government tax incentives.
    Government must eliminate all types of subsidies. This will trigger failures of some financial institutions, manufacturers, builders, farmers and other private enterprises that benefit directly or indirectly from any government subsidies. Some failures will re-structure and re-emerge as profitable operations and others will have their assets bought by solvent private enterprises.
  • Government deficit spending subsidizes wasteful spending, entitlements and the wages and benefits of public sector workers that are substantially higher than the wages and benefits of private sector workers.  (Read more)
    Enacting balance budget amendments will force prioritized reduced funding for only necessary services and programs. Public sector labor unions have to be disbanded and the wages and benefits for all government employees have to be reduced to private sector levels.
  • Labor Unions are Labor Monopolies. Monopolies can inflate their prices because they have no competition.
     (Read more)
    Disband all labor unions and strictly enforce enhanced labor laws. This will enable previously unionized employers to more quickly innovate and adapt to their evolving markets, resulting in improved productivity. Wage and benefit contracts could be adjusted yearly based on the companies overall profit and inflation. Additionally, companies could offer profit sharing to their employees. Any disputes between employees and employers would go to arbitration.  There would be no strikes or work to rule slowdowns.
  • Income disparity. The gap between society's richest and poorest is increasing. In the 1950s, the bottom 90% of Americans had 68% of the nation’s wealth. In 2009, the top 10% of Americans had 50% of the nation’s wealth. The top 0.1% of Americans had an astounding 10% of the nation’s wealth. The gap is increasing predominantly at the top because of the rise in earnings of celebrities attained from lucrative endorsement & performance contracts and the rise of earnings of the owners, founders and executives of financial institutions and publicly traded companies attained from stocks, salaries and bonuses.
    Taxation and/or enacting regulations that reduce earnings of the top income earners. For instance, a regulation that requires the executive compensation package of a public company be approved by a majority of individual shareholders. Another regulation could require yearly bonuses be paid based on the performance of the previous 5 years. This would discount or eliminate bonuses accrued in good years if any bad performance years occurred. Ideally, if distribution of wealth was similar to the 1950's, there would be substantially less poverty.

This manifesto is incomplete.  Please post your recommendations, comments and criticisms.


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