This does not happen everyday that I get same message consecutively from four different renowned economists in Mumbai, India and not just some ordinary citizens. The message reads- “Express BBC News…Banks all over world are selling gold to hedge currency. A Midnight disaster…equity markets are going to crash. ” This is what happened today at 1:55 pm, Indian Standard Time on 22nd July 2015.
I started wondering…hmm… has the panic started so early? Has the much awaited and expected Collapse of Crony Capitalism started so soon? Well, I started looking at my calendar and noticed that starting tomorrow i.e. 23rd July 2015 up to 31st October 2015 there are exactly 100 days. While my forecasts made in my article “Macroeconomic Cycles and Business Models” have hit the bulls eye and also believe that it is just a matter of time that Crony Capitalism in United States and around the world would meet its demise due to bursting of debt bubble like a fire cracker by this October 2015. Now, What’s next after demise of Crony Capitalism for the global economy? Will we have another round of bank bailouts and same failed policies which have worsened the global economic crisis since 2008? No. Be rest assured that we are heading to a new golden age for global economy post the collapse of Crony Capitalism.
In my article, “Are Crony Capitalism and Communism two sides of Same coin? “, I mentioned that in both Crony Capitalism and Communism, the control of the economy is in the hands of a very few. In one system, the control is in hands of a few private businessmen and in other it is in hands of a few government officials ( In fact, Communism is nothing but Government controlled Crony Capitalism ). Hence, For long term stability of any good free market system and in order to ensure that the economic system does not result in exploitation and preserves an incentive to work hard, the control of the economy should be in hand of majority rather than minority. However, It also needs to be mentioned that even if the control of economy moves into the hands of majority, there should be an incentive for hard work and economic system should ensure prosperity by ensuring that wages reflect productivity of employees. This would ensure an economic balance because productivity contributes to supply and wages contributes to demand of goods.
If free market Capitalism can work for all, wouldn’t that economic system ensure that everyone gets a fair share of hard work and control of economy is restored into the hands of majority? Of course, It would ensure that. Now, Let me explain how this new free market economic theory of Mass Capitalism as explained in detail in my 2014 book “Mass Capitalism : A Blueprint for Economic Revival” is different from both Crony Capitalism and Communism. The following are the differences between Mass Capitalism, Crony Capitalism and Communism.
(1) Mass Capitalism recommends a three-tiered business model. Here, employee sponsored corporations occupy the middle industrial tier; Top-Tier industrial sector has capital intensive industries like High Tech Semiconductor manufacturing, Nuclear power reactor, etc. which have a backing of government to keep this capital intensive business sustainable; and lower industrial tier has small businesses where entrepreneurship is to be encouraged.
(2) Mass Capitalism’s approach to employee sponsored businesses is based on voluntary, not enforced, cooperation between business. However, Mass Capitalism believes in giving tax breaks to those businesses which adopt a CBMS (Co-operative Business Managerial System) to encourage more co-operation between businesses. In case of Communism, government enforces laws which are extremely un-psychological for businesses, and employees are not paid according to their individual output, which makes Communism not just un-psychological economic system but also highly unproductive one. In Mass Capitalism : A Blueprint for Economic Revival, I have explained how Crony Capitalism has resulted in counter-productive trade policies and unsustainable budget deficits for United States , when businesses overlook common sense macroeconomics in order to minimize the costs of production, to maximize their profits.
(3) Communism’s industrial approach was centralized, with huge factories producing one item to be widely distributed, whereas supply chains under Crony Capitalism are centralized (in order to maximize profits of businesses) which results in unsustainable trade and budget deficits. Mass Capitalism recommends decentralizing the supply chains which would have added advantage of increasing efficiency of supply chains as explained in my article published in premier online community of global supply chains professionals, “Decentralize to Improve Supply Chain Efficiency “. Thus, Mass Capitalism would ensure that local people have all a say regarding the development and utilization of local resources, etc. This way the existing form of economy and existing democracy would overcome some of its defects, when it would take into consideration the opinion of people, who are most aware of their economic problems and potentialities, and therefore are best able to plan for local economic development.
(4) Employees in both Communism and Crony Capitalism are alienated due to lack of ownership and stake in the success or failure of the business. Mass Capitalism’s employee sponsored enterprise system would increase employee motivation and enhance possibilities for personal fulfillment. It would also ensure that entrepreneurship succeeds because of a steadily growing consumer demand in the economy.
(5) In case of Communism, the resulting state-capitalism produced a command economy which was responsive to production quotas. In Crony Capitalism, an excess greed of a few cronies has resulted in political corruption due to passage of counterproductive laws, resulting in a failure of not only economy but also democracy. Mass Capitalism believes in a balanced free market economy where supply and demand would both grow and fall in proportion. In this way, Mass Capitalism’s free markets aim at increasing consumer purchasing power of people in the economy to generate greater economic demand. As per the reverse of Say’s Law, this increasing consumer demand will in turn call for its own supply of goods thereby creating innumerable high paying jobs in the economy. This way Mass Capitalism would not only meet people’s basic needs and amenities but it would also maintain economic vitality.
(6) As an “engineer-cum-economist” as mentioned by Professor Ravi Batra in his recent volume “End Unemployment Now: How to Eliminate Poverty, Debt and Joblessness Despite Congress “, I have offered solutions to ensure that Mass Capitalism puts an end to the un-productive use of technology that happens under Crony Capitalism. In fact, My message runs counter to the established norms of the U.S. semiconductor industry and its professionals, who tend to believe that it’ll be economics that would leads to the demise of Moore’s Law – the observation that, throughout the history of computing hardware, the number of transistors in a densely integrated circuit doubles approximately every two years.
Thus, As explained in above paragraphs, Mass Capitalism is an alternative free market economic system for global economy post collapse of both Crony Capitalism and Communism which shall ensure a broader prosperity. This free market economic system appeals to the classical and neoclassical economists, as well as the entire business community, since the book’s thesis supports small government. Neo-Keynesians will appreciate the details acknowledging the importance of low unemployment and the inherent stability in the economy; my thesis supports wages reflecting worker productivity, resulting in less inequality in the economy.
On the other side of the same coin, CEOs of the today’s industry, who are witnessing a steady decline in corporate profits, would like the proposed business model presented because it would ensure a steady growth in corporate profits and, hence, a steady rise in share prices of their corporations. By bringing about an end to the control of businesses by their non-employee investors, this new free market economic system, I propose, would put an end to the ballyhoo and hoopla of speculative bubbles, which has been always been followed by an inevitable crash of U.S. stock markets. ‘Mass Capitalism’ offers a solution for all the potential economic ills plaguing the global economy. Hence, It’s a blueprint for our economic revival.