STRAWS IN THE WIND: by Max TeichmannNews Weekly
Destruction of wealth / Negative gearing
, February 22, 2003
As reported by John Beveridge, in a recent Herald Sun
financial page, the Australian Stock Exchange (ASE) chairman, Maurice Newman, gave the US, and in particular its corporations, a very poor report. He highlighted the facts that US households were burdened with debt, companies were struggling to finance employee health and pension costs, and earnings were flat.
The US was "choking on more than A$51 trillion of debt. Companies were only improving their results through the one-off measures of slashing costs and cutting staff.
"America is living on borrowed money and borrowed time," he said. Very likely, but as I will presently suggest, so are many others. But the ASE chairman seemed to think that perhaps the most important factor of all was that collapses, corruption and greed had shown that a mercenary and self-indulgent culture was not enough to hold society together.Destruction of wealth
And something which hasn't yet worked through the American financial system was "the destruction of wealth through the meltdown of the US market since 2000. And only at the start of the Great Depression from 1928-1932 had there been a greater nominal destruction of wealth."
What should we make of these daunting observations? Our
writers would agree; having said this sort of thing for a long time. But these flaws are well in evidence in many other economies besides that of America, although the very size of the US economy produces a devastating effect upon the global system when things go wrong. But things have been going far more wrong in many other economies - which have been stagnant, in some cases, for years. Most Europeans, Japan and South Korea have performed far less successfully than has the US - or Australia. Germany is declining by the month: her share prices falling 45 per cent past year. Europe's overall have dropped another 15 per cent this year so far.
German unemployment, just below four million a few months ago, rose to 4.2 million, and is now up to 4.6 million - that is, 11.2 per cent unemployment with a rate of 20 per cent in the east. There is worse to come. And Germans could be stuck with Schröder and the Greens for another four years. Incidentally, the US unemployment rate is 5.7 per cent.
Virtually all of the economic hopes for the world rest on America. If she is living on borrowed time, so are we all.
But Mr Newman goes on: "The excesses of US executive pay and accounting practices and, to a lesser degree, in Australia, showed the danger of greed overtaking morality. Integrity should not be for sale at any price, our way of life depends on it," he said. Would he like to address our cricket boards on all this?
Does anyone really think greed hasn't well and truly overtaken morality, and that the only way greed is being held at bay, if at all, is via the operation of intrusive regulatory bodies, laws and regulations with real teeth; governments to back them up; and a legal system which deals with cases quickly, instead of insulting the public intelligence with long, drawn out judicial ballets. Feeding frenzies for lawyers? And what does the ASE chairman think of our financial advising and planning fraternity?
Does anyone believe that we have such desirable regulators here, such laws, such governments to give support and enforcement? Judges who cut the cackle without fear or favour? Who don't set up a greasy pole in every court room around which lawyers worship, with a meter on? No - I don't think anyone thinks we have such a system here, or in America? Yet nothing less will do.We
, not just America but the world corporate we
, may be on borrowed time.
Furthermore, Mr Newman would know that the triumph of greed over morality here, as elsewhere, does not stop with corporate misgovernance, concealment and looting shareholders funds for CEO golden handshakes, free stock options, personal display and so on ... this is just the icing on the cake.
The Herald Sun
published a tax office estimate of $5 billion of local money being laundered into one or another of 22 offshore havens, per annum. The reporter had
to insert something about the mums and dads now getting into this. Really? Not the banks, corporations and poverty-stricken millionaires? But this figure misleads - far more has been "minimised" or made tax exempt, just by lobbying politicians and bureaucrats, and the ATO has to wince and bear it. No need to money launder this
Now these practices and the consequent rise and rise in personal fortunes, the suddenly enhanced profitability of hitherto languishing corporations, and the appetites of our professional classes, have not been lost on the rest of the community. So the ethos of short-changing society and misgovernanance has become a general, defensive self-compensatory strategy. "Let someone else pay", becomes "let someone else do it - or take responsibility".
Every man is an island in an amoral sea.
Finally, the world owes you a living. Our corporate world, in its growing impotence and decadence, believes this and practises it. How the spirit of capitalism has become the spirit of extortion and social piracy, is yet another story, for another time.
But our stock exchange leader's semi-apocalyptic account of the US economy - which I have extended to many others - suggests that some kind of major economic slump is in the air. A depression - but called something else. Who would suffer? Who would suffer most? Who would prove semi-immune?Who would suffer?
Well ... businesses already just on the borderline of (genuine) profitability, and debt tolerance. Many of our icons live in this twilight world of credibility. Job holders in the private sector - still a large sector despite the Left's efforts. Farmers dependent on domestic and overseas demand; and miners. Masses of shareholders, many of these new chums, still
in the dark as to the true viability and earning prospects of their investments. Investors in managed funds and superannuation schemes, particularly those entities that have invested heavily overseas, or gone energetically into the share market. And smaller schemes with top heavy, old boy network administrators, who eat up the returns ... stand out. Virtually unsupervised, especially if they have union or ALP political connections.
The recipients of welfare - as against their go-betweens, the bureaucrats/carers - would suffer. Hospital and nursing home users and inhabitants, schools and colleges (as against their staffs and bureaucrats), recipients of newish and innumerable caring schemes designed as vote buyers and job creators for the new class would find themselves in the spotlight. All these clienteles might expect a rough ride, if public money runs down. Viz the poor, the old, the sick, the workless (either retrenched or with no real jobs available), the working poor. They all would suffer, as they did in 1929.Who wouldn't suffer?
Among those who wouldn't suffer greatly: those on state payrolls, like the armies and bureaucracies of the Romanov, Ottoman and Communist empires, the backward states of old eastern and southern Europe and now Latin America and Africa. These essentially non-productive sectors survive, for they and the rulers scratch one another's backs. But small business and farmers, urban employees, even big firms out of political favour, can eat cake. Well .. pick up the dole, and their progeny become permanent students. Or migrate.
State employees may be forced to take wage cuts and new recruiting drop off - but our current new politicised, bureaucratised class are closely knit, highly-paid by earlier standards, and determined to stay that way.
But to return to economies that are malfunctioning and to share markets that are distinctly fragile - affected by rumours, stampedes and vulnerable to manipulation. Nowadays, when a company rings up a poor result, or has a falling share prices, it ascribes its problems to the threat of war in Iraq. Deutsche Welle, the German news service, assures us every day that Germany and Europe's inability to recover, all goes back (subliminally) to George W. Bush. But the voters don't seem to agree. They have just shattered Schröder's Social Democrats in two states and only regret that they voted him back a few months ago.
But many corporations and businesses are near the edge, so dread disruption of any kind or duration. So they oppose war with Iraq - or with anyone, about anything, as they did in 1939 or even earlier. One has sympathy, but they are
paying the price of their neglect of economic, moral and political fundamentals - as Mr Newman might say.
The good well-run firms and stable economies will survive, probably prosper. But nothing can help some of the others.Negative gearing
Melbourne columnist Andrew Bolt recently wrote a suitably acidulous note about a rain dance of naked women, not Aborigines, and now there is fresh grist for his mill. Up to a thousand naked women gathered behind Byron Bay, a well-known working class area of northern News South Wales, to send an anti-war message to John Howard. I assume Saddam Hussein will be sent some of the photographs. A number of the ladies brought their children.
A series of nude protests is being held throughout the world including in New York's Central Park (Really!) by similar women.
Now that the Internet is with us, what used to appear as provincial imitations of what the important people overseas - the US middle class - were doing, can now be co-ordinated to appear spontaneous and authentic. What Lenin and Goebbels could have done with the Internet!
Whole new sub-cultures of isolated, disaffected, existentially fragmenting poor sods can be mobilised to make a protest, strike a pose, bare their problems and be seen
. And, of course, paedophiles and similar groups now have their
Before these latest effusions of boredom and group unhappiness or - to give it a positive spin - broiler power, there was the series of naked groups posing worldwide, organised by a photographer to prove something or other. But that ended in acrimony over copyright.
We are moving back to the world of the sects - with names like Anabaptists, Cathars, Ranters, the Flagellants, and groups that call themselves Prophets and Brethren - and woe betide you if you weren't a member, or stood up to them single handed. Their children suffered the same kind of damage and blighted lives.
Perhaps these sad nudity carnivals should be seen as cries for help, and meaning, in a now incomprehensible world. Their parents said they found meaning, and ideology when protesting against Vietnam and listening to Bob Dylan and Martin Luther King - and Gough Whitlam. The bridge between then and now - Mandela, Lady Di, Bob Geldof - has fallen down. So ... we either recycle the self-hypnosis of Vietnam - and many are now trying to do this; act out the covert fascism of the anarchists and nihilists of urban Europe; or we slide further back to the anger, despair and magical thinking of the medieval heresies where sex, politics and harassing the normal, became a way of life.