Sunday, January 22, 2012

The meaning of the Romney candidacy.

In economic theory there are classically four "factors of production": land, labor, capital and management -- that last often going by other names such as "enterprise" or "entrepreneurship". In a healthy market economy supply and demand causes each factor of production to be used efficiently and rewarded according to its contribution. I believe there exists today a macroeconomic distortion that benefits capital and management over land and labor. Evidence of this is not simply the historically outsized returns, (i.e. corporate profits and management compensation), to those favored factors and the stagnation of wages but also the damage allowed to the environment and neglect of infrastructure, (indicative of deficient demand for and undervaluation of land resources).

In my opinion, this results from the over-stimulation of the financial sector that excessively empowers organizations like Bain which represent the capital and management factors. Whenever we hear rhapsodic praise for somethings of value, such as the liquidity and deregulation enabled creativity of the financial sector, we must remind ourselves that there is always a point of having too much of a good thing and we should ask what such an occurrence would look like should it develop. We have had, and still have, too much bubble producing leverage in the system and it stems, basically, from too much money creation. It feeds into the financial markets and acts like "empty calories" to create fat, bloated financial organizations on something like a sugar high because they simply have more money than is good for them -- or us.

The situation has advanced to the point that capital and corporate management interests have developed an ideology, which I call "corporatism", to justify its continuation and its growing influence within government This is the meaning of the Romney candidacy.

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