The Power of Capitalism: Global Capitalism Meets CAP

1. CHAPTER 2 GLOBAL CAPITALISM

2. MEET CAP

3. Capitalism (CAP) runs the world. • CAP is more powerful than any nation, government, corporation, institution, person, military, or social movement. • CAP can’t be controlled, only imperfectly managed. • CAP is based on self-interest within a system of mostly impersonal commercial transactions.

4. Corporations control most of the world’s commercial assets: technology, factories, intellectual property, etc. • Corporations create most of the world’s jobs & national exports. • Nations depend on corporations for their national economic growth and standard of living. • Corporations influence global political leaders more than any other source of power.

5. CAP is impersonal & amoral (values-neutral) because the marketplace is also. • CAP is based on consumerism, which is based on self-gratification, spending, & debt. • CAP is an interdependent, impersonal community where capitalist activity affects everyone & everything. • CAP is the driving power source for the world, economies, nations, corporations, institutions, & people.

6. CAP can be stabilized to a great extent by institutions but periodically becomes temporarily destabilized via recessions, inflation, social change, institutional incompetence & fraud, politics, & nationalistic conflicts. • CAP, not war, is the main form of nationalism in the 21st century. • CAP can quickly become exploitative without laws, regulations, institutional oversight, professional codes of ethics, & media exposes.

7. CAP is ideological, & hence controversial, because it is based on self interest, which must be justified & rationalized by a variety of often conflicting (ideological) systems. • CAP is the main source of self-identity in the industrialized world, since capitalism directly & indirectly generates most jobs/careers, which are the foundation of self-identity for most professionals. • CAP is the catalyst for most social change in the world, because capitalism thrives better in individualistic social structures than in extended family communities (which are the dominant social structure of the world). • CAP is the best economic system for the world because it is the least imperfect & the only one tied to human nature (self-interest).

8. THE BENEFITS OF GLOBAL BUSINESS

9. GENERAL BENEFITS OF CAPITALISM • Economic growth • Jobs, careers & periods of full employment • Tax revenue for local communities • Technology development • Investor income • Marketing systems that deliver a high standard of living

10. 7. Companies can get lower interest rates on the international market than the domestic market (but then are subject to the demands of foreign creditors). 8. Trade enables consumers to buy cheaper products (but sometimes at the expense of sustainable worker incomes in developing nations). 9. Free trade opens the door for technology sharing (but this may drive weaker domestic companies out of business). 10. Free trade opens borders (but also increases the risk of short-term unemployment).

11. CAPITALISM AT WORK 1. Reducing poverty in developing nations: • Between 1978-1998, poverty was reduced in China from 28% to 9%. • Poverty in India fell from 78% to 26% • Poverty in Africa did not improve during this 20-year period because of lack on industrialization & institutional advances in democracy

12. 2. The U.N.’s International Labor Org. estimates that 100-200M children under 15 work in the global workforce, 95% in poor nations. At least half of these children don’t go to school. 3. Globalization is perhaps the main benign factor in reducing child labor, because the long-run presence of foreign companies raises the wages of parents, enabling children to stop working and start school.

13. 4. “On average, developing countries protect their production much more than developed countries, even though their protection is much less widespread. This protection means less South-South trade, which is of vital importance for them to achieve more economic growth. Those who oppose globalization should be reminded that what is necessary for increasing growth and reducing poverty and inequality is a drastic reduction of trade barriers, that is, more and better globalization, not less.”

14. 5.Research has shown that multinational companies normally pay at least 10% higher wages in developing nations, and often times 40-100% higher than existing wages. 6. The rights of women have also improved over the long-run in global business, because foreign firms who provide equal employment environments for women have such a large competitive advantage over local firms, that the local firms must improve treatment of women in order to stay in business.

15. HOURLY MANUFACTURING PAY COMPARISONS • USA: $21.33 • EU: $20.18 • Japan: $18.83 • S Korea: $9.16 • Singapore: $7.27 • Taiwan: $5.41 • Brazil: $2.57 • Mexico: $2.35 • China: $0.69

16. MANAGED GROWTH (by Global Institutions) IS BENIGN GROWTH • Global growth is healthiest when it is it is gradually introduced over several years (as opposed to instant “shock therapy”). • The better global growth is managed, the more its effects are benign rather than malign. • Multinational companies must avoid the quest for fast profits in developing nations to provide a healthy long-term operating environment.

17. % OF POPULATION WHO AGREE THAT FREE-MARKET CAPITALISM IS THE BEST ECONOMIC SYSTEM FOR THE FUTURE: • China: 74% • USA: 73% • India: 72% • Britain: 70% • Germany: 68% • Italy: 60% • Russia: 40% • France: 36%

18. MERCANTILISM & PROTECTIONISM • Mercantilism was an economic system practiced by European nations from 1500-1750 in which nations strived to gain economically at the expense of their neighbors via: exporting more than importing; engaging in protectionist activities (primarily tariffs) against foreign imports; colonial exploitation of foreign colonies; hoarding precious metals (“bullion”) as a major source of national wealth. • 18th century economist Adam Smith developed early free trade theories that largely discredited the mercantilist “win-lose” system of trade.

19. BUSINESS EXTERNALITIES

20. Externalities = the positive & negative impacts of corporate profit-maximization on non-stakeholders. Positive externalities: • Job creation • Tax revenue • Productive use of technology

21. Negative externalities: • Pollution • Social outsourcing • Unemployment • “Sweat shop” operations • Political bribery (legal & illegal) & lobbying

22. CAPITALISM SYSTEMS

23. SYSTEMS THAT FEED ON CAPITALISM Corporations Consumers Non-ownership workers Politicians Non-profit organizations

24. II. SYSTEMS THAT CAPITALISM FEEDS ON Consumers (primarily middle class) Under-developed nations (land & labor) Government nationalism

25. Monopolies & industry concentration Deregulation Political lobbying & campaign contributions Technology

26. III. SYSTEMS THAT SEEK TO MANAGE CAPITALISM IIIA. Governments Regulatory agencies Tariffs & subsidies Interest rates Taxes Keynesian economics (deficit spending)

27. IIIB. Financial Institutions Private & public banks Stocks markets Currency exchanges Brokerage companies

28. IIIC. GGOs WTO: Global trading policies & practices; Advocacy of PPMM capitalism: Private, Profit Maximization, Market-controlled IMF/WB: Using loans to establish PPMM capitalism in the developing world

29. IIID. NGOs Environmental Human rights IIID. LABOR UNIONS

30. IV. CORPORATIONS THAT SEEK TO DOMINATE & CONTROL CAPITALISM Transnational (non-nationalistic) corporations (“Fortune” 1000) Controlling the VAC via business function dominance Off-shoring & using labor as a commodity Influencing national & regional politics

31. SYSTEMS OF SELF-INTEREST (right click on title)

32. THE CAPITALIST PRISM (who wants what from capitalism)

33. NATIONALISTIC NATIONS Capital account expansion Military-industrial complex “Turbo-capitalism” Exporting of products & culture

34. TRANS-NATIONAL CORPORATIONS Using the entire world as an operating arena via: Controlling the VAC Off-shoring (labor as an impersonal commodity) “Social outsourcing” Financial backing of politicians Deregulation

35. GLOBAL INSTITUTIONAL INVESTORS Trans-national investing Influencing global financial policy-making Shifting investment risk via derivatives & creative accounting Controlling major investments via majority share-holding

36. DOMESTIC CORPORATIONS Minimizing business costs Inventing & innovating (intellectual capital) Building bulk via mergers Debt leveraging Seeking trade protectionism & govt. subsidies Value-neutral corporate values

37. GGOS Reinforcing neo-liberal global capitalism Brokering regional free trade agreements Accommodating the interests of global corporations

38. STOCKHOLDERS Maximizing share price appreciation & capital gains Maximizing dividend yields Seeking inside financial information Influencing corporate directors

39. TECHNO-CLASS Resume-building Opportunistic job-hopping Dual-career marriages Debt-based consumerism Capital asset appreciation

40. SUSTAINABLE INCOME NATIONS & WORKERS Alteration of the VAC via “community capitalism” Job security & family-provision Illegal immigration NGOs

41. NGOS Opposition to global consumerism/materialism Opposition to neo-liberal capitalism & GGOs Business regulation Sustainable income global standard

42. Consumers Debt industry Corporate executives & stockholders Middle class

43. Individualism cultures Unisex cultures Oligopolies & monopolies Nations high on the VAC Social Darwinist cultures

44. WHO SERVE CAPITALISM The Earth Corporate employees Workers with non-sustainable incomes WTO & IMF

45. THE INVISIBLE HAND OF GLOBAL CAPITALISM

46. Author Edward Luttwakcoined the term “turbo”-capitalism (commonly referred to as neo-liberal capitalism) to describe the highly aggressive global economic system that has “flattened” the world by its single-mined pursuit of profit maximization via free trade agreements, deregulation of industries, unencumbered flows of investment across borders, & Social Darwinism (only the largest, most dominant corporations survive & thrive.) According to Friedman, “In a flat world, you either compete successfully or get run over.”

47. “Turbo”-capitalism is embedded in invisible political, economic, & cultural SYSTEMS that shape the behavior of most people, organizations, & nations—even though many are only dimly aware of it. The “invisible hand” of capitalism is a dominant SYSTEM in the world because of its far-reaching influence on the subordinate SYSTEMS of politics, markets, industries, companies, consumers, & technology. These SYSTEMS in turn impact the wealth, status, & power of people, organizations, & nations. Everyone is part of the capitalist SYSTEM, but some are more in control of it than others and hence benefit from it more.

48. Living in an organizational/capitalistic society makes you dependent on a number of invisible SYSTEMS which influence your life & livelihood. The more dependent you are on a SYSTEM, the more it controls you. The more it controls you, the more you must conform to its (often invisible) machinations. To the extent that you voluntarily join a SYSTEM, conform to it, & personally benefit from it, the more accountable you are for any negative impacts it may have on others.

49. EXAMPLES OF SYSTEMS INVISIBILITY • Corporations seek to maximize profits & minimize costs through a complex & impersonal SYSTEM of financial, logistical, marketing, & human resource decisions revolving around self-interest. • The two leading economic global governmental organizations (the World Trade Organization & International Monetary Fund) mandate “neo-liberal” (profit-max/cost-min) policies for nations that parallel the Western economic SYSTEM.

50. The value of a nation’s currency SYSTEM directly impacts the success of its importing & exporting. • The vitality of most global industries is indelibly tied to the global price of gasoline. • Free trade SYSTEMS between nations set off a chain reaction of economic, political, & social reactions. • Even “domestic” companies are part of the global economy because in most cities they face foreign competitors & are also dependent on global supply chain logistical SYSTEMS.