All posts by Said E. Dawlabani

President & CEO of The MEMEnomics Group

The Fight for the Soul of American Capitalism

The Fight for the Soul of American Capitalism

One of the most remarkable issues that should be the center stage in the Republican race to the White House has slipped under the radar of much of the Occupy Movement, the nation and the news media; the issue of what defines capitalism. A few weeks ago during one of the Republican debates in Florida Newt Gingrich challenged Mitt Romney on the virtues of private equity firms and whether or not they add jobs to our economy.  This week before the primaries in Michigan, Rick Santorum attacked Romney for opposing the bailout for Detroit but supporting the one for Wall Street. So, who’s right and who’s wrong? And why should Americans care?

 

Capitalism is at a crucial stage in its evolution and politicians looking to define its future only need to look at its recent history to see how it has influenced our culture. Since the early days of Adam Smith capitalist economies have gone through 3 distinct stages of upward emergence: a pre-industrial society defined by rural/agricultural values, an industrial society defined by the values of the industrial revolution, and a post industrial society, which is more aptly known as the New Economy. Somewhere along the line in the last 30 years the promise of the new economy was sidetracked and calls to bring back the values of the old economy grew louder by the day.  This is a fight between what remains of the values of the industrial economy and the promise of the new economy if it’s able to evolve and redefine itself.

 

The ideas for this new economy gained traction in the 1970’s when it preached the values of the clean and white color work of a labor force composed mostly of the service industry, science, knowledge and technology. There will be no heavy lifting in this economy. Manufacturing was quickly becoming a thing of the past. The Reagan era ushered in its values by systemically deregulating every aspect of the industrial economy. Reagan went on to lay down the platform of this new expression of capitalism by curtailing the growing influence of labor unions when he famously fired 11,000 striking air traffic controllers. In doing so he sent a message to American corporations that the scales of fairness have tipped heavily in their favor. While all this was happening Economist Milton Freidman’s  Monetarist ideology that preached the virtues of “only money matters” was taking America by storm. Corporations loved it and with Alan Greenspan becoming the man in charge of money the shift to the new economy was complete. In the  years that followed the Clinton and Bush administrations brought Reagan’s reformist agenda to the banking industry, which gave impetus to financial engineering and placed Wall Street and the bankers squarely in charge of our economy. This was the sidetrack not the initial vision of the new economy and any definition of the future of capitalism must include this observation.

 

Although prosperity has grown much quicker under this expression of the new economy the unfair redistribution of wealth is very telling of its virtues. This economy favored the stockholder, which excluded much of the working class while the industrial economy catered to the wider stakeholder. CEO pay was roughly 32 times average worker pay in an industrial economy while under this economy it’s more than 330 times. A worker in manufacturing on average makes $18 an hour, while a service worker averages $9 an hour. Economic power under an industrial economy was distributed and diverse, under this economy it’s concentrated and follows the dictates of Wall Street.  Asset values and output under the industrial economy were known and measurable, under this economy they’re vague, notional, and rarely understood. This is the primary reason for how  our government was able to design an effective bailout package for Chrysler and GM. The average well informed, industrial-age business manger understood the challenges the auto industry faced, while very few individuals around the world understood the challenges Wall Street faced. Under this sidetracked economy, gambling with billions became legal and it was clothed in sophisticated algorithms formulated by geniuses in suits whose practices culminated in the financial crisis of 2008. Wall Street was upset at Detroit’s bailout because it lost the bet that would have allowed it to collect 100 cents on the dollar through an insurance policy called a credit default swap if Chrysler and GM were to fail.

This should bring to an end the argument about the toxic and unhealthy practices of Wall Street and bring the debate on which form of capitalism is best, but it isn’t that simple. Wall Street is here to stay, but its practices have to evolve and be made to serve the whole economy. Just as worker abuses were common in the early stages of the evolution of an industrial society, toxic practices are part and parcel of a still emerging knowledge society. Politicians need to look to hire geniuses that understand Wall Street but are committed to serve their country in order to intelligently design the pathways for proper emergence. In the age of financial engineering, this is one element of what I call Smart Government. Politicians preaching the virtues of manufacturing have to also understand that innovation has completely revolutionized the process of manufacturing and its business model has to stand on its own and have the directive that it must compete with emerging economies on its own merits.

Above is a brief summary of 2 of the 5 elements that form the pillars of what I call “Functional Capitalism” which are detailed in my upcoming book about how to design for a future economy based on the emerging science of value systems.

 

 

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Perversion of Capitalism

3 years ago I offered a Memetic analysis on why the housing cycle we were in will be the worst since the Great Depression. Here we are almost 3 years after the financial crisis, over a Trillion dollars in stimulus money, and most analysts now agree that the housing market hasn’t bottomed out yet. It doesn’t take a genius to see that when lenders flood capital markets with liquidity under the guidance of a Federal Reserve that believes government regulation is evil that systemic greed will be the order of the decade followed by years if not decades of markets suffering the consequences. The aftermath of Japan’s real estate crash and the resulting 2-decade long recession paints a very scary picture on what the immediate future of the US economy might look like.  In my upcoming book, I spend quite a bit of time defining the Value-system role of money. Since its earliest use over 8,000 years ago money has always served as a function of productive output. Alan Greenspan and the geniuses on Wall Street sought to alter that roll by making money productive output itself. A classic and grossly misguided case of the tail wagging the dog.

The 2 slides below are from a presentation I recently made at the Wold Future Society in Vancouver, Canada. The first summarizes a chapter from my book in which I trace the storied history of money leading up to the time it was corrupted by the financial innovation on Wall Street and the arrival of Greenspan at the Fed. The second slide shows a timeline on how the Federal Reserve became perverted and started serving a completely different master once Congress placed it in charge of insuring full employment. Time for the geniuses in Congress to create a 21st century central bank that will pull the rug out from under this bloated and diseased entity  if the US ever decides to become serious about regaining its global competitive edge.

Historic Role of Money in Human Emergence

 

The Fed. From regulator to Facilitator of Capital Perversion

 

 

 

 

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HUMAN CAPITAL, The Future Economies of the Middle East Part 1: Reforming the Educational Systems

This is part one in a series of posts about Integral planning and design for the future of the Middle East that first appeared in Integral Insights Quarterly Newsletter.

Do you want to be a Doctor or an Engineer?

While growing up in Lebanon, this was the constant question that thousands of middle schoolers including myself were raised to answer. The world has come a long way since, but ironically these two professions remain the most honored careers in the Middle East today. As the Arab Spring continues to unfold all throughout the region one must wonder:  If these young men and women taking to the streets had had gainful employment would they be rebelling against their leaders?  Economic innovation has been the hallmark of peaceful advancement for First World cultures and in order for the Middle East to realize a fully diverse economy that respects all other professions as much as doctors and engineers, it must focus its next efforts on economic and educational reforms.

The development of economic and educational institutions would, for the first time establish Arab Nationalism as a collective movement that looks forward to the future of a diverse Middle East compared to one that reflects on the glory of the ancestral past while repressing the rights of many. In this part of the series, I’ll focus on the educational reforms needed as an integral part of an organic whole that will allow the Middle East to emerge into a sustainable, self reliant future. Much like what a World Bank or an IMF development program calls for, the Middle East should embark on a 10-year development program to build the region’s educational infrastructure.  It should do this with its own sovereign wealth reserves to empower it with its own sense of accountability, while at the same time incorporate best global practices in its design and implementation. This program requires the bravery for taking a great leap forward and must have the visionary leadership of a fully integrated design that plans for 100 years into the future. Exceptionally integrated thought processes have to go into all the following aspects of its design:

1.       INNOVATION AT THE MINISTERIAL LEVEL

a.       An Education Ministry in every country in the region must be directed by an independent Committee of Visionary Leaders who have full authority in setting educational policy. This committee must make Education as the number one NATIONAL PRIORITY and its declaration must be heard in every home and on every street.

b.      This Ministry must be void of any nepotism and corruption and must have an independent funding mechanism.

c.       Specific advancement and performance measures must be set by this Committee of Visionary Leaders to align the educational aspirations of Arab youth with the best educational practices in the world.

d.      A partnership with private educational institutions to offer broad-based scholarships based on merit for underprivileged students would act as an insurance policy against the generational ill effects of poverty.

e.      A newly empowered Education Ministry must work effortlessly with regional economic centers of employment in order to determine future needs of the labor force.

f.        A partnership must be created with the private sector with regional and global reach to expose students to what a work life would be like upon graduation.

2.       ARCHITECTURE OF NEW SCHOOLS AND UNIVERSITIES

a.       Designs that honor the past in some of its elements, but whose focus is on the learning environments that emphasize teachings that embrace the future.  Create labs for the newest advances in math and science that are integrated into the classroom design.

b.       Green technologies that become a part of the learning environment.

c.       Computers with internet connectivity must be available at every desk.

d.      Open space design that is conducive for expanding the mind and harnessing individuality and self-reflection.

e.      Allocating indoor and outdoor space for sports activities and encouraging all student to participate in them.

f.        Emphasis must be placed on much larger and user friendly spaces for libraries that create a continuity of learning environments outside the classroom.

g.       Universities must embrace fully integrated efforts to create the necessary habitats that foster the creation and growth of native innovation. Much like King Abdullah University for Science and Technology where the University’s quest for innovation becomes the catalyst around which a new paradigm for redefining life, culture and industry takes hold.

3.       TEACHERS AND ADMINISTRATORS

a.       Teaching must be redefined as one of the most rewarding careers based on merit,  and appropriate payscales should attract the most qualified teachers for the jobs.

b.      The teaching curriculum should be geared towards establishing solid foundations in modern math and science.

c.        Debate clubs must be fostered to encourage critical thinking and logical, rational and objective thought processes among students as early as possible.

d.      All teachers must be put through a prequalification process to insure their capacities can deliver the outcomes needed to meet the educational goals identified by the Committee of Visionary Leaders.

e.      Administrators must be constantly searching for the newest teaching innovations that are adopted into the learning environment by the most successful schools around the globe.

These are just a few recommendations that will create a starting point for the debate on educational reforms in the Arab world. A more collective view on the future of the Arab child has to be debated in order for an organically designed educational system to emerge. Without addressing the kind of educational system needed to compete in a global economy, no economic reforms of any kind would have a lasting effect. Those reforms will be addressed in the next post.

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