Capitalism's Fatal Flaw, and the Way Forward: Dialogue with an Enthusiastic Trump Supporter, Part 2. GLOBAL STRATEGIC HYPOTHESES.

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 3^rd, 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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