Dialogue with an Enthusiastic Trump
Supporter, Part 2.
GLOBAL STRATEGIC HYPOTHESES.
Dear Reader,
Below is a transcript of the
second part of a recent dialogue, between yours truly and an enthusiastic
supporter of the second term policies of the Trump Administration. Enjoy!
Trumpist: All very
interesting – your responses. I got a little lost starting with the “The
Root is the fatal flaw in their own economic system”.
I am just on the brink of
understanding this scenario you write next, but I need a more basic example of
how this manifests itself and I WANT to understand this section. Please
provide one or two more basic examples of how this plays out. …
I find personally that it so
helps me to understand the motivation of people like the Rockefeller's and the
host of other people working for the demise of personal liberty and freedom, by
knowing how they got this way. Something
very evil was done to them a long, long, long time ago, that has left a “spiritual
scar” on them that has caused them to fear anyone getting stronger, brighter or
more intelligent. They are “stuck” in
that incident or set of incidents and they view what they need to do – to
suppress everyone they can – not by viewing what is really before them, but
based only on these long, long ago incidents.
This is what we are up against in building a decent, ethical, productive
and sane world: the antisocial individual.
I will be very interested in
reading some additional examples of the one example you gave as I detailed
above. I WANT to understand FULLY that
concept you put forth!
Let’s keep this dialogue
going. ... .
M.D.: Happy to expand on “The
Root is the fatal flaw in their own economic system” with some more detailed
examples.
In the earlier days of the
modern manufacturing economy, before much production machinery had developed,
it didn’t matter so much, to your profitability, if a competitor came up with,
e.g., a better hand-tool, and even if that competitor’s new hand tools
competitively forced you to buy likes of those new hand tools, and to throw
away the older hand tools that you already had owned.
Because those hand tools
didn’t cost very much.
When you charged off the
remaining economic value of your discarded hand tools, in the month that you
“retired” them, subtracting their remaining value, plus the expense of the new
hand tools, from your gross profit for that month, it didn’t lower your profit amount
for that month by very much. Your profit
rate – monthly profit divided by your total investment – did not drop
much either.
Still, it’s important to note
that economic value is not like solid matter.
Even with a hand tool, or a machine, both totally intact physically,
the economic value of that hand tool or machine can suddenly drop, even
to zero, e.g., just because your competitor(s) just installed a better, more
productive hand tool, or a better, more productive machine. The economic values of physical products
fluctuate all of the time.
There is nothing like the
“conservation of matter law”. Economic
value is more a volatile social substance than it is a physical substance.
Anyway, while the part of
equipment in total manufacturing investments was relatively small, compared to
other major costs of production, such as labor and materials costs of
production, the fatal flaw of this manufacturing economy was not very visible.
The relatively low equipment
component of manufacturing investments enabled the “100 Years Peace”, from
about 1814 to 1914, a period during which there was much progress in consumer
goods costs reductions, and living standards improvement, for the majority, and
no world wars.
But, ultimately, this fatal
flaw is the root-cause of world wars.
That may sound counter-intuitive, but that causation will be made clear
below.
Now, suppose that I am
competing at a time and in a market for manufactured products where the
machinery used to produce my product is a physically large and monetarily costly
part of my total investment in my factory.
Suppose that labor costs –
time-worked costs – are also a big part of my total cost to produce my product.
Suppose I discover a way to
reduce the work time needed to produce each unit of my product, e.g., I build a
better – more productive – machine, compared to the machine I was using, and to
the machines still being used by my competitors.
Then the labor cost component
of each unit of my product shrinks. If my
labor cost per month shrinks enough – even though, e.g., my materials costs per
month, if I produce more units per month, go up –
then I can afford several scenarios
that advance my business competitively and profitably.
Scenario 1. I can continue to charge the same price for
each unit of my products as my competitors are still charging for their,
similar, units, so that my monthly profit will be higher, and higher than
theirs, because my total cost of production has gone down.
Scenario 2. I can lower my price for each unit of my
products, below my competitors’ prices. so that my competitors will sell way
less of their units while I will sell many more of mine, while I continue to
make a profit, because my costs are still enough below my new, lower prices.
If my competitors match my
price, still using the old, less-productive machines, then their amounts and
rates of profit will go down, putting them at a competitive disadvantage, e.g.,
when it comes to the price of their stocks, and the interest rate on their
bonds.
This is because they will
have less profit to distribute, as dividends, to their stock owners, and their
bond buyers will demand a higher interest rate, because the risk of their
bankruptcy and default on their bond-loans – as well as of the collapse of
their stock price – will be seen as greater, their failure as more likely.
By the same token, banks will
be more reluctant to grant them loans, for expansion, for new machinery
investments, etc., because their banks will perceive them as more likely to go
bankrupt, and to default on repayment of their bank loans.
If their banks do grant them loans,
they will do so at a higher interest rate, because of this higher perceived
risk, further lowering those competitors’ profits.
Scenario 3. If my work-time costs, per unit of my product,
have dropped enough, I can lower my price to the point where my competitors, if
they match my price, will be selling their units at a loss. Thereby, I can drive them into bankruptcy,
buy their former assets at “fire sale prices”, for “pennies on the dollar”, and
thus expand my business, my market share, and my profit, moving toward monopoly
power in my market.
Scenario 4. Suppose, instead, my competitors see my
prices drop, learn that I am using a new, higher-in-productivity [i.e., higher
in number of product units out-put per hour of work-time] machine, and respond
by scrapping their older, less-productive machines, and by buying new,
more-productive machines, like mine.
If they are still paying,
e.g., monthly debt-service on the bank loans that they had used to buy their
older, less-productive machines – loans that have another, say, 10 years before
they are to be fully paid off – then they may be facing higher financing costs
than I am for another ten years, if I installed my new, more productive machine
after I had paid off my bank loan for the old, lese-productive machine, or if I
had self-financed my old machine, without needing to take out any bank loan at
all.
Moreover, most of my
competitors will probably have to take out new bank loans in order to
buy similar new, more-productive machines for their factories. So they will be paying on two bank loans,
and, on their second, new bank loans, say, for another 30 years, increasing
their costs and lowering their profits, relative to my profit, for another 30
years, even after their first bank loans are paid off. This puts them, once again, at a competitive
disadvantage relative to my manufacturing business, with consequences for them
similar to those cited above for Scenario 2.
If I and/or other
competitor’s keep innovating more productive machines, the other, lagging
competitors will have to scrap a whole sequence of machines, and take out a
whole sequence of new bank loans, with their profits and their profit rate
dropping lower each time they scrap their old machines and buy the new, better
ones in order to stay in business. If
this keeps up, they will eventually go bankrupt.
Now, please note that all of
this productivity-increasing innovation is ‘incentivized’, for the innovators,
because those innovators expect at least temporarily higher profits to result
from their innovating.
And note that – at least
prior to the Federal Reserve – This increasing productivity
benefitted the majority, with lower prices of manufactured products, and higher
wages [to be explained] – as with the “Great Deflation” of ~1870 to ~1890 [to
be described in more detail later on], when manufactured products prices fell,
and manufacturers’ profits also fell, for the reasons described above,
precipitously – creating the fierce reaction, among some super-rich banking
and manufacturing families.
The graphs posted below
document this fall of the rate of profit for U.S. manufacturing for the period
from 1880 to 1955. The lowest of the
three curves, color-coded in faint green, gives the profit-rate history of this period [Gross Profit $s
divided by Manufacturing Plant & Equipment $s]. The yellowish curve puts the crossover point,
from labor costs dominance to manufacturing plant and equipment dominance of
manufacturing production costs [Fixed Capital $s divided by Wages $s], at around
1886. This is the point whereafter aggregate
profit decrements to manufacturing profit rates from further increases in
manufacturing productivity outpace profit rate gains for the more productive
equipment early-adopters overall.
The “great prices deflation”
period, from ~1870 to ~ 1890, was similar to what we experienced in the initial
period of the personal computer consumer electronics market, where computer
prices kept falling while the quality and usefulness of computers kept
rising. Except that this happened, in
the extended period from ~1870 to ~1890, for almost all
manufactured products, not just for one kind of product.
The plutocratic families’
violent reaction is what, at root, led leading banking and manufacturing
families to fund the later, engineered ideologies of “Social Darwinism” and
“Eugenics”, and to WWI, Naziism, WWII, the Military-Industrial Complex, the
1960s coup d’état/assassinations, and the ideologies of anti-technology,
anti-science, “back to nature”, “neo-primitivism”, “limits to growth”, “zero”
[negative] population growth, “zero” [negative] economic growth, “small is
beautiful”, and to “people are pollution” environmentalism, and the “Global
Warming” global pogrom, all aimed at manufacturing majority consent – i.e., at “popularizing” –
an enforced slow-down in
productivity-improving innovations and investments in the private manufacturing
markets, and the profit-rate lowering effects thereof for those leading
families’ legacy and obsolescent investments.
The prospect of the innovation
of fusion-powered, low-cost electricity-producing power plants was particularly
threatening to the families invested in oil production and distribution
infrastructure, because the advent of fusion power would quickly out-compete and
deeply devalue their investments in petroleum production and other fossil fuel
production, for use in conventional electrical power plants.
Now, so far, these scenarios
fit for a national market and for competition among manufacturers in that
single market, for a single kind of product.
But watch what happens if we
run these scenarios in the context of the world market, and for whole
nations that had been peripheral to the manufacturing economy, and undeveloped
in manufacturing, but that suddenly started to develop their manufacturing
capabilities.
Manufacturing economies have
a geographical core. Originally the U.K.
was that core. Later, the U.S.A. and
France merged into that core. By now,
Canada, and even Mexico, and the whole EU, as well as New Zealand, Australia
and Japan have merged into that manufacturing core, and a second, contending
core is developing with the BRICS.
But the process of admitting
a new nation into the manufacturing core is not usually a smooth process. It usually requires one or more major wars.
Here’s why.
The same profit, wealth, prosperity
and social power motives that motivate
families and groups of families in the core to invest in manufacturing, at any
given stage of core expansion, also motivate nations in the periphery of that
core, which had not been manufacturing powers before, to develop their own
manufacturing, and to compete in the world market.
But because those
newly-manufacturing nations of that periphery are starting their factories,
etc., from scratch, they tend to have (a.) lower wages than those in the core
nations, and (b.) they have the chance to start their factories with the
latest, most productive equipment. Thus,
they can easily, once they get the hang of manufacturing, sell their products
profitably on the world market at lower prices than can the core countries’
manufactories.
When they do that, they can
force the core countries’ competing manufacturers to scrap their older, less
productive machinery, and to take on further bank loan debt, to finance the
purchase of the newer, more productive machinery, while still paying, e.g.,
monthly principal and interest instalments [“debt-service”] on the bank loans
that enabled them to purchase the older, less-productive, now scrapped
machinery in the first place.
Thus, subtracting the
remaining economic value of their scrapped older machinery from their gross
profit in each accounting period during which such scrappings occur, and paying,
on the new bank loans, new debt-service, accounting-period-accounting-after-period,
for years to come, the profits and profit-rates of these core manufacturers
fall, and also fall relative to those of the new manufacturers in the
peripheral nation-states, newly entering into the manufacturing economy.
Another dimension of the
devaluation of machinery, of manufacturing investments, also comes into play, especially
at the world market level.
It is not
only in the manufacturing of “end products”, of consumer products, that
technological innovation, that the invention of more productive machinery,
comes into play. The manufacturers who
manufacture the productivity-improving machines themselves, whose products are
those machines themselves, also keep improving their own productivity.
When machines are themselves reproduced
more productively, even without any innovations in their design, their prices
fall too.
Therefore, new entrants to
manufacture, e.g., in the newly-manufacturing peripheral nation-states, just by
coming later to manufacturing, can buy even the very same vintage of machines
as their competitors in the core are still using, but for a lower price than
the core competitors could buy those machines for, simply because they core
manufacturers bought their machines earlier.
So again, the cost of production, hence the out-put product prices, of
the new entrants to manufacture, in the peripheral nations, can drop lower than
those of the core manufacturers’ similar products, while keeping the new
entrants’ profit amounts and profits rates higher.
Many of the core
manufacturers go bankrupt in this situation.
Many of their [former] investors
switch to financial investments, in banks, but not in
banks that loan to manufacturers, with loans that are never paid off if/when
those manufacturers go bankrupt.
Instead, these financial
investors seek banks and other financial institutions – insurance companies,
etc. – that make profit by speculation; by speculation in the stock market, in the
bond market, or in real estate, or in national currencies [e.g., in the “forex”
– foreign exchange – market], or in “commodity
futures”; “profits” which require no manufacturing production, no manufactured
products at all.
These “financial” investors
avoid investing in manufacturing, because of manufacturing’s very vulnerability
to the progress of productivity, to ‘technological obsolescence/competitive
obsolescence devaluation’ of manufacturing investments, and the
resulting fall in the profitability of those manufacturing investments.
Germany in the late 1800s and
early 1900s is a case in point. From a
gaggle of squabbling principalities earlier, Germany had unified into a new
nation-state in 1866, with advanced scientific and engineering institutions,
and a rapidly-advancing manufacturing economy.
Germany’s products, from
their brand new, then state-of-the-art factories, were out-competing products
of the U.K. manufacturers, who suffered from obsolete, dilapidated production
machinery, made worse by the shift to financial investments, and the neglect of
re-investment in and modernization of the U.K.’s manufacturing sector machinery. Even the newer machinery of the U.S.A.’s
manufacturers were hit hard, at home and abroad, by competition from the lower
prices of German exports of manufactured products, including those imported
into the U.S.A.
World War I, starting in
1914, just after the imposition of the Federal Reserve System in the U.S.A.,
which also funded that War by massive printing of paper money, money that was then
loaned to the, nearly bankrupt, U.K., to pay for their war wherewithal,
happened because the rulers of the U.K. and of the British Empire wanted it to
happen.
The purpose of World War I
for the rulers of the U.K. and of the British Empire was to crush Germany as a
manufacturing power, to drive Germany back into a “Third World”-like,
low-living-standards, re-medieval, agricultural/extractive economy, providing
cheap food stuffs and other raw materials to the U.K., France, and the U.S.A. The horrific “war reparations debt” forced on
Germany by the U.K. and the U.S.A. after WWI almost succeeded in
“de-industrializing” Germany. Even a
monster like John Maynard Keynes predicted that this reparations debt would soon
lead to another world war.
World War II was another
attempt by the rulers of the U.K. especially, as well as by the U.S., by its ruling
Rockefeller Faction, to crush both Germany and the rising power of Russia as
manufacturing powers, by having Germany and Russia engage in a war of mutual
destruction.
The plutocratic rulers of the
U.K. and the U.S.A. financed Hitler’s rise to power, for the express purpose of
waging war on Russia. Unfortunately for
those rulers’ scheme, Hitler realized that, instead of being their
‘servant-dictator’, he could likely take over the both of them, and the rest of
the world, by turning against them, by becoming a ‘Franken-Dictator’, and using
the military that they had funded for him first to conquer them instead,
leaving his conquering of Russia until later.
Late in the evening of August
23rd, 1939, and on into the next day, Hitler finalized a “Peace Pact” with
Stalin. Instead of attacking eastward,
into Russia, Hitler was first going to attack westward, e.g., driving the
U.K.’s troops into the sea at Dunkirk.
Seeing such coming, the U.K. rulers declared war on Germany on September
3rd, 1939. World War II had
begun
“As Colonel David Sterling,
the founder of Britain’s elite Special Air Services, related in a private
discussion almost a half century later [after WWII], “The greatest mistake we
British did was to think we could play the German Empire against the Russian
Empire, and have them bleed one another to death.”
[F. William Engdahl, A
Century of War: Anglo-American Oil Politics and the New World
Order, 2011, p. 97.]
But, in general, the ~1870 to
~1890 period taught the wealthiest investors in manufacturing businesses and
banking that their very own manufacturing and manufacturing bank loans, which
had given them such stupendous wealth and power, so many posh benefits, was
turning against them, and was about to overthrow them, by bankrupting them.
This led them to formulate a
whole series of socially vicious ideologies, such as “Social Darwinism” and “Eugenics”,
so to prepare majority acquiescence in their plans, and to design and impose
the Federal Reserve System and the Federal Income Tax system in the U.S.A.,
both in 1913, on the eve of their planned First World War against Germany.
Germany was not the only
source of technological-progress-based threats to their profit-rates. Other nations of the periphery – Japan,
Brazil, Argentina, Spain, Italy, South Africa, Iran and India, to name a few,
were showing signs of potential and even actual manufacturing development by 1913.
The plutocratic families’
purpose, in imposing the Federal Income Tax, was to force lower-level manufacturers
and the majority to pay for the military dictatorships that these families
intended to set up all over the periphery, to suppress and reverse the former
manufacturing development underway there.
By this means, these families created what came to be known as the “Third
World”.
The Federal Income Tax
system, as designed and imposed by these ruling families, was never intended to
fund benefits for the majority – never to fund anything like the later Federal Unemployment
Insurance program, or like the later Social Security program. Those programs were the work of their
opposing, Roosevelt Faction of leading families, that came to power because of
the “Great Depression”, engineered by the Federal Reserve in coordination with Rothschild
and other wealthy and “aristocratic” factions in the U.K. and in continental
Europe.
The Roosevelt Faction, like
today’s Trump Faction, sought to stay in power by delivering benefits to the,
previously highly abused, majority, who would then vote that Factions’ leaders
back into Presidential and Congressional power in return for those benefits.
The plutocratic families’
purpose in imposing the Federal Reserve System in the U.S., and similar central
bank systems in other nations, was to impose a continuing near-hyperinflation,
to shore up profits against the ongoing and accelerating technological/-competitive
obsolescence of factory machinery, by a continual lowering of real wages, so
that the resulting real wage losses were turned into manufacturing profits
instead of into rising standards of living for the majority.
The graph posted below tracks
the mega-inflationary sharp rises in U.S. price levels, and the consequent
lowering of real wages, for the period 1665 to 2005.
[The University professor
tracking these trends was “cancelled” after 2005, so that no updates to this
chart since 2005 are available]. The
continual steep rise in U.S. inflation that it shows after 1913,
and especially after 1945, are nothing short of horrendous.
The resulting downward
pressure on majority living standards also made the majority less able to afford
the education and free time needed to invent new productivity-increasing machinery
designs, that would devalue or destroy the leading families’ manufacturing
investments, thus lowering their profits, and also give birth to new leading wealthy
manufacturing families, new “upstarts” not easily subjected to the older
leading families’ control – potential new threats to the older families’ economic,
political, and social power and prestige.
The creation, by the ruling families,
of what President Eisenhower named “The Military-Industrial Complex” was also designed,
in part, to put a damper on the falling profit-rates of the U.S. manufacturing
economy. Military “goods” have a single,
captive market – the U.S. Federal Government.
That government, “owned” by the ruling families, is only too happy to
indulge covering huge cost overruns for military manufacturers’ federal
contracts, using taxpayer money, insuring their hyper-profitability.
Military manufacturers’ “production”
is also inflationary. The government payments
for military manufacturers’ [stockholders’] profits and workers’ wages increase
national demand, bidding general prices up. If you manufacture tractors, with essentially
the same manufacturing equipment, used to manufacture tanks, the tractors could
be invested in producing an increased supply of agricultural products,
putting downward pressure on prices, helping to balance the demand increased by
their manufacturers’ profits and wages.
When you manufacture tanks
instead of tractors, demand is increased, without any balancing supply
increase, because the tanks sit stagnant in arsenals, at best. At worst, if the
tanks are used in warfare, they destroy other supplies and other sources of
supply, further increasing upward pressure on prices.
In the 1960s, the ruling
families of what we call the ‘Rocke-Nazi’ Faction decided to overthrow the
power of their rival faction, the Roosevelt Faction, by then inherited by the,
formerly Rockefeller-serving Kennedy family, in a disguised coup d’état,
including via the Rockefeller/CIA orchestrated murders of President John
Kennedy, Robert Kennedy, Martin Luther King, Jr., and many others, and the
cover-up of the Rockefeller-CIA orchestration of those murders, and the
takeover of the U.S. Federal Government by the Rockefeller Faction that
followed, along with their War on Vietnam, etc.
By the 1970s, the ‘Rocke-Nazis’
were becoming desperate yet again, as their system of their ‘servant-dictators’
in their “Third World” began to fail, and signs of new, technologically-innovative
and productivity-improving manufacturing development began to burgeon in Brazil,
Argentina, South Africa, Russia, India, etc., and as “guerilla “wars of
national liberation” spread throughout “Third World”.
In response, the ‘Rocke-Nazis”
engineered and funded a whole new crudescence of socially-vicious ideologies --
anti-technology, anti-science, “back to nature”, “neo-primitivist”, “limits to
growth”, “zero” [negative] population growth, “zero” [negative] economic
growth, and “small is beautiful”.
As they were losing control
of the, then-growing, world population, the ‘Rocke-Nazis’ desperately concocted,
using their vast funds to pervert the grass roots anti-pollution movement into “people
are pollution” environmentalism, a “Global Warming” pseudo-scientific ideology,
and, thereby, a planned global pogrom, aimed at a “95%” [to quote CNN founder
and ‘Rocke-Nazi’ hyper-whore Ted Turner] global human population extermination.
To foment this, their media used the rising
symptoms of an accelerating Milankovitchian Global Cooling approach to a new
Ice Age – e.g., drought – as “proof” of “Global Warming”.
But the lowering of majority
living standards in the U.S.A., by their export of manufacturing equipment and
jobs to “Third World”, low wage countries, and increasing outlawing of fossil
fuels, driving up monthly household energy utility bills, gasoline prices, and,
since energy costs are ingredient in almost all manufactured products, product
prices in general, plus the ongoing, Federal Reserve imposed lowering of real
wages, eventually evoked a massive counter-reaction from the, long-suffering,
U.S.A. electoral majority, which elected Donalf Trump and to the Presidency,
and his new Faction to power in the Federal Government.
Meanwhile, in the U.K., in France,
and in Germany, the de-manufacturing “Global Warming” so-called “sustainability”
policies, imposed upon the majorities there by the Rocke-Nazis’
agent-governments there,
provoked the “Brexit” vote in
the U.K., the “yellow vests” rebellion, and the rise of the Marin Le Pen populist
Party in France, and the rise of the “Alternative for Germany” populist Party
in Germany, threatening to derail the Rocke-Nazi “Global Warming” austerity
pogrom in the E.U. as well.
The desperate Rocke-Nazis – in
the face of these global threats to their pogrom, and the “impossible” economic
boom and majority income gains initiated by Trump’s economic policies in the
U.S.A. – launched, prematurely, their long-planned global ‘designer disease’ pandemic,
using Anthony ‘Dr. Mega-Mengele’ Fauci’s “gain-of-function”, “Covid” virus for
a global germ warfare attack against humanity, and launched an all-out mass
media war against their, rival, Trump Faction – a Faction that is in many ways
a resurrection of the Roosevelt Faction that the Rocke-Nazis thought they had “liquidated”
forever in the 1960s.
A key to the Trump Faction’s
successes in reviving U.S. manufacturing and, thereby, the U.S. economy in
general is Trump’s tax law changes, allowing investments in manufacturing plant
and equipment to be expensed in the same accounting period in which they are
purchased.
This does not completely
solve the problem of the ‘techno-depreciation’-driven fall in the rate of
manufacturing profit.
However, it does mean that
the purchase cost of new plant and equipment is recovered immediately, via
taxes-reducing immediate expensing, instead of via tax-reducing depreciation
expenses dribbled-out over 10 or 20 years, during which the plant and
equipment likely becomes obsolescent and scrapped, so that its purchase cost
will never be fully recovered. This
helps mightily to increase he profit incentive for manufacturing investment in
the U.S.A.
The Rocke-Nazis then rigged
the next national, Presidential election against Trump, and then, for the next
four years, tried to ‘Putinate’ Trump, by foisting upon him “Trumped-up”
charges by which they had hoped to imprison him, precluding any further
Presidential runs by him, as assassinating him threatened a popular uprising of
which the Rocke-Nazis feared they might lose control.
Instead, an even greater
majority of Americans returned Trump to the Presidency in the 2024 national elections. Trump has since proceeded to dismantle the Federal
Government’s former funding of the Rocke-Nazis’ Global Warming Austerity pogrom
and of the propagation of their attendant “people are pollution” ideologies by
U.S. taxpayer money.
The Rocke-Nazi “Dr. Strangeloves”
have now become so desperate that they appear to be pinning their hopes for “95%”
global human population extermination on leveraging the Israeli theocracy’s wars
in the Middle East, and the Ukraine War, to instigate a global nuclear war,
while they retreat into their – “radiation proof” – underground cities,
secretly built over the last decades using taxpayer dollars, “until the
radiation clears”.
By these more detailed
scenario examples, and historical narratives, you may be seeing how the reality
of the socio-political-economic “law” of evolution of modern society – this “law
of the tendency of the rate of profit to fall” due to the profit-incentivized rise
of manufacturing productivity, via ‘technological obsolescence depreciation’ of
manufacturing machinery, has shaped the history of the modern world, especially
since the late 1800s.
Once the economic value of investments
in manufacturing machinery becomes the dominant component of manufacturing
investment, the profits-incentivized continuing rise in the productivity of
manufacturing machinery will drive a continuing fall in the rate of profit on
manufacturing investments, provoking an aggressive attack against any further
manufacturing technological progress by the owners of the largest manufacturing
investments that are exposed to this ‘techno-depreciation’ and ‘de-profit-izing’
of their investments through any further productivity progress.
Consider the example of the
Japanese auto and steel manufacturing companies during our life-times. After WWII, Japan could not safely be suppressed,
as a manufacturing power, for fear that Japan would be captured, via a popular
revolt, by the bloc of nations led by Stalinist Russia. So Japanese manufacturing had to be allowed to regenerate. Remember how the competition from new, innovative
and lower-priced Japanese auto manufacturers’ exports to the U.S.A., and
Japanese, lower-priced, steel exports to the U.S.A., nearly wiped out the auto
and steel manufacturers in the U.S.A.
Remember also that the
economic causes of the American Revolution against the evil British Empire were
rooted in that Empire’s outlawing and suppression of independent world market
trade and manufactures by the American colonists. The British imperialists did not want any profits-diminishing
competition from a world-trading and manufacturing America!
Some quotes from mainstream economists
may help to cement an understanding of the deep-rooted and widely unrecognized “root-cause”
causation that has shaped modern history.
1. “The point under discussion is met with in
the case of privately-owned undertakings when a technical discovery affords
the opportunity for installing a new equipment or capital improvement which
is technically superior to an equipment which is
already being employed.”
The equipment being employed,
that is to say, may be rendered obsolescent and this may
occur before the equipment has earned sufficient revenue to cover its past
cost.”
“The question then
arises whether the prices of the output of the equipment should be
such as will bring in sufficient revenue to cover the prospective costs of
producing that output or whether the revenue aimed at should cover, in
addition, the uncovered part of the original cost of the old equipment.”
“As is clear from our
discussion of costs and prices it is the first alternative which is
economically advantageous to the community; in other words, the “undepreciated” part of
the old equipment, as it may be called in conventional
accountancy language, should be written off [subtracted
from gross profit].”
“A firm operating in
conditions of competition may have little choice but
to adopt this policy because of the likelihood that other, competing firms which
have taken advantage of the technical improvement will undersell.”
“But if the firm
possesses a high degree of monopoly it can, if it is so
disposed, try to recoup the loss on the old equipment out
of the revenue earned by the new…”
[A. M. Milne and J. C.
Laight, The Economics of Inland Transport, Sir Isaac
Pitman & Sons [London: 1965], p. 232n, underlines
emphases added].
The following passage was written
in the early 1970s, as a warning to small and medium manufacturers in the
U.S.A., by a management consultant, just as the fleeing of U.S. manufacturers from
what became the U.S. “rust belt” to the lower-wage, higher-profit “Third World”,
and especially to China, was to begin in earnest:
“In the late 1940s, business
depreciated its assets over an average life of about 20 years. In
recent years, however, book depreciation rates for manufacturers of durable
goods now average closer to 15 years.”
“The significance of this is
very great.”
“Economic obsolescence as a result
of advancing technology has a much greater impact
than it used to. And the trend undoubtedly will continue, since the rate of technological progress shows
no sign of leveling off.”
“…the need to modernize is
now demanding reinvestment more quickly than
before. Even with the stimulus given to cash flow by depreciation,
total cash flow (profit and depreciation) in relation to investment has declined.”
“As a
consequence, business has been forced to take on additional debt.”
“Much of this debt has
been justified under the banner of expansion, but unfortunately it has in
reality resulted from industry’s inability to earn enough of a [profit]
return to provide the capital needed to maintain itself in a viable state.”
“...When returns become insufficient to
attract capital economic stagnation and decay are inevitable.”
“There isn’t much time left
to change direction.”
“American industry, collectively, is in trouble, and
trends are continuing in the wrong direction.”
“This is not an idle cry
of alarm to attract attention. It is very real, and very frightening.”
“The rewards [profits]
of business have been declining in relation to
the investment required to produce these rewards.”
“We are fast approaching
the critical point where prospective rewards
will not justify the perpetuation of free enterprise as
we know it today.”
“…almost any way one puts
together data involving profit or cash flow on one side,
and some definition of investment on the other,
the trend lines point the same way -- down! These
are, of course, averages; some companies have done better, others not so well.”
“But collectively the
industrial bastion of our economic system is
being seriously undermined.”
[Robert A. Peters, ROI
[Return On Investment],
American Management Association, Amacom, 1974, pp. 1-5, 13, 35, 44; underlines
emphases added].
The following passage by
famed economist John Maynard Keynes hovers around the same points:
“The output from equipment
produced today will have to compete, in the course of its life, with the output
from equipment produced subsequently, perhaps at a lower labour cost, perhaps
by an improved technique, which is content with a lower price for its output
and will be increased in quantity until the price of its output has fallen to
the lower figure with which it is content.”
“Moreover, the entrepreneur’s
profit (in terms of money) from equipment, old or new, will be reduced, if all
output comes to be produced more cheaply.”
[J. M. Keynes, The
General Theory of Employment, Interest, and Money, Harcourt-Brace,
New York, 1964, p. 141].
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Regards,
Miguel
Detonacciones,
Voting Member, Foundation Encyclopedia Dialectica [F.E.D.];
Elected Member, F.E.D. General Council;
Participant, F.E.D. Special Council for Public Liaison;
Officer, F.E.D. Office of Public Liaison.
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