FT114: “One of the most effective ways to get privilege is to force fairness on others.” -Old Pithy

Posted by PITHOCRATES - April 20th, 2012

Fundamental Truth

Voters are so Greedy and Selfish with their Hard-Earned Money that they’re not going to Vote to be Subjugated

History is strewn with people oppressing others to gain privilege for themselves.  Kings, emperors and nobles were always a small minority of civilizations.  But they had the power.  And the wealth.  While the masses suffered abject poverty and went hungry.  Or suffered through famines.    And died.  With early civilizations this was just the way of life.  Because there was no middle class.  No free market capitalism.  And no rule of law.  Life was for the most part subsistence farming.  Where most ate only what they grew.  While the kings, emperors and nobles enjoyed lots of food and drink.  Even enjoyed having a little fun.  Unlike the impoverished masses.  Having privilege made life better.  Which is why the privileged worked hard to keep it.  By forcing others to work hard to provide that better life for them.

But times change.  Privileged ruling classes fall.  And middle classes rise.  Creating vibrant economies.  And representative government.  Then one day the privileged find that they are no longer privileged.  That wealth isn’t automatically theirs.  Instead it belongs to the people who earn that wealth.  And if the once-privileged want wealth then they, too, have to work to get it.  So they, too, can have nice things.  And that they can only have these things if they earned enough to afford them.  Which is a great problem if you don’t want to work.  Don’t have any ability to earn a high income.  Or if you have a feeling of entitlement.  Like in days of yore.  Where you didn’t need anything but a good last name to live the good life.  On the backs of those who didn’t live the good life.

Feelings of entitlement don’t die, though.  They don’t go away once the middle class starts sharing the wealth.  Well, not so much sharing it but earning it.  And keeping it.  Instead of giving it to a privileged ruling class.  Which poses a problem for those who aspire to join a ruling class.  Especially now that we have those pesky elections.  Because voters are so greedy and selfish with their hard-earned money that they’re not going to vote to be subjugated.  They’re not going to vote in a privileged ruling class so they can live like royalty.  While those who pay for that royal lifestyle don’t.  ‘Vote for me so I can live better than you’ is just not a winning political platform.  So that’s why politicians lie.

The Privileged Elite uses Class Warfare to take other People’s Wealth

What do you need to live a privileged life?  Lots of money.  No secret here.  But the secret is how to get that money.  In particular, how do those who don’t want to work or have no talent or have no ability create wealth?  Here’s the secret.  They don’t create wealth.  They take wealth.  By going into government.

Only government has the power to tax.  Which can be a great source of wealth.  Other people’s wealth.  Which is any privileged class’ second favorite kind of wealth.  Second only to the wealth they already took from others.  Because that’s what they want.  Other people’s wealth.  And they’ve found a clever way of taking it.  By making the world a fairer place.  And who’s against fairness?  They’re going to make sure that the poor and children have access to food and affordable housing.  And who’s against the poor?  The children?  You’d have to be a pretty vicious, heartless bastard to be against the children.  And the poor.  They’re going to make sure that women have access to reproductive health care.  For who hates women?  I’ll tell you who.  Anyone that opposes raising taxes.  They hate women.  Children.  The poor.  For the world is full of haters.  And just who are these haters?  Aanyone that earns a lot of money and doesn’t want to pay higher taxes.  These people hate anyone not as wealthy as they are.  Because they hate fairness.  And paying their fair share.  Because they’re greedy.  And hate women and children.  And puppies, too.

This is the way the privileged take other people’s wealth.  Class warfare.  And it’s very effective.  By being the party of the poor, disadvantaged, children, women and puppies, they’re kind and benevolent.  With other people’s money, of course.  But those people are evil so it’s okay.  People hate them.  But they like their kind government benefactors.  Who are looking out for their best interests.  Not rich people.  Or corporate profits.  No, our kind government benefactors make sure those greedy rich people and corporations pay their fair share.  Because that’s all that they want.  It’s all anyone wants.  To be fair.

North Korea is pretty much at the End of the Fairness Road

Later incarnations of the privileged ruling class used the fairness approach to give themselves a better life.  While oppressing their people.  Even killing them.  Through famine.  Or deliberate acts of violence.  All in the name of fairness.  And nothing better epitomizes this than communism.  Where everyone was equal.  Brothers.  Comrades.  There were no profits.  No capitalism.  No competitiveness.  No.  Everyone was equal.  They paid everyone the same.  They dressed everyone the same.  They housed everyone the same.  They fed everyone the same.  Very little.  For one thing you never saw in a communist country was obesity.  Instead you probably heard the rumbling of tummies as most people were hungry all of the time.  There was no income inequality.  No gender inequality.  No.  In communism they had nothing but equality.  Life was fair.  Because no one had anything more than anyone else.  As they perfectly distributed the misery and poverty equally among the impoverished masses.

That was for the masses.  It was quite a different thing for the privileged ruling elite.  Those in the party apparatchik.  And the inner party members themselves.  Who were more equal than others.  These people dressed better.  They had better housing.  Even cars.  They ate better.  Some so well that they grew obese.  North Korea suffers from recurring famines to this day but Kim Jong IL had a bit of a weight problem.  As his son does.  Kim Jong-un.  No, life is very good for the privileged ruling elite.  And hell for those living under them.  Who the ruling elite let die of hunger.  And send to concentration camps if they dare speak of their displeasure.  For only under communism is life fair.  And they just can’t risk the unhappy masses to spoil it for the privileged few.

North Korea is pretty much at the end of the fairness road.  The country is so poor and impoverished and hungry that people will risk their lives to try and escape this land of fairness.  To get somewhere that isn’t so fair.  Like South Korea.  Where they have capitalism.  And inequality.  Where someone can come with nothing, work hard and earn a better life.  Allowing them to pay for housing.  And put food in their rumbling bellies.  For a fair and oppressive government surely cannot.  All they can do is create great inequality between the people and the ruling class.  Far greater than that between the rich and poor in any capitalist country.  For the poor in countries like the UK, Canada and the United States are living far better than anyone outside the ruling elite in North Korea.  This is where the fairness road ends.  But it starts with class warfare.  Where a privileged few live the good life through high taxes.  Taxes they use to force fairness on others.  While those at the top manage that fairness.  Skimming a lot off the top of those taxes for themselves.  And what’s left they spend on the poor, disadvantaged, children, women and puppies.  Just enough to make sure the people love their very rich and wealthy government benefactors.  So they can win the next election.  At least while they still have to deal with those pesky elections.

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FUNDAMENTAL TRUTH #63: “There is no such thing as a monopoly in free market capitalism.” -Old Pithy

Posted by PITHOCRATES - April 26th, 2011

There is always Competition

Once upon a time, back in my youth, I sat in a seminar on venture capital.  I learned that venture capitalists are very wise.  And very careful about where they invest their money.  For them it’s not so much as making a return on an investment.  They could do that easier by just buying stocks and bonds.  No, the venture capitalist wants more.  They’re often people who went from rags to riches on a great idea.  And they want to recapture that feeling.  By taking big risks with their money.  On something that could be the next big thing.  And if you got the next big thing, they have that important seed capital you need.  But you have to sell them first.  Really sell them.

All these years later, I still remember this one example about a small startup company that had the next big thing in security systems.  Or so they thought.  Theirs took advantage of the latest in technology.  Motion sensors.  Glass-break sensors.  Sound sensors.  You name it.  If anything happened that shouldn’t be happening, the system would detect it.  But it did more.  It made noises. Flashed lights.  To scare off would be thieves.  Because thieves like to break into quiet, empty places.  Not places where lights went on and off.  And sounds moved around.  It was a pretty impressive system.  And costly.  It would set a business owner back quite a bit to install such a system.  But it would be worth it.  They knew they could sell it.  And, best of all, they would have a monopoly.  For no one else had anything close to what their system could do.  This was brand new.  And there was no competition.

 The venture capitalist smiled and thanked them for their presentation.  But he would not invest.  For they did have competition.  He said there is always competition.  They just failed to identify it.  They were sure there wasn’t.  They did their homework.  No security company out there had a system remotely close to theirs.  Then the venture capitalist smiled and said politely, “Perhaps not.  But I could buy a dog to do the same for less.”

High Gas Prices keep Gas Available

There is always competition in a free market.  If there is a market sector that is making high profits, other businesses will try to enter that sector.  To get a share of those high profits.  And when they do, there’s competition.  And prices come down.  That’s why gasoline prices are so close to each other at gas stations in the same geographical location.  One could raise their selling price by a dollar.  But if they did, their customers would just go to their competitors.  That’s what competition does.  Keeps prices down.  And makes people figure out how to sell the same thing for less.  Because if they can, they gain customers.  While their competitors lose customers.

Even oil companies feel the heat of competition.  High gas prices may hurt the wallet at the gas pump, but they are an incentive to them.  When the demand of oil grows greater than its supply, prices soar.  Why?  Because oil is becoming a more scarce commodity.  And the scarcer a commodity is the higher its price.  Simple supply and demand of economics.  These higher oil prices allow the oil companies to go after oil in the ground that was before too costly to bring to market.  Deep water drilling is more expensive than conventional drilling.  It simply wasn’t cost feasible before.  As was extracting oil from oil sands.  But high oil prices allow this extraction.  Bringing more oil to market.  Which ultimately will reduce the price of gasoline.  Or at least reducing the increase in the price of gas.  Simply by increasing the supply of oil to more closely meet the demand.  More importantly, even though prices may go up, gasoline will be available.  Unlike it was during the 1973 Oil Crisis.  Where OPEC cut oil deliveries to the U.S.  Instead of letting market prices rise to match the supply to the demand, the Nixon administration implemented price controls and rationing.  It seemed the kind thing to do for the consumer.  But by selling below the market price a lot of gas stations simply ran out of gasoline.  Resulting in further rationing.  Long lines at gas stations.  And scenes of people pushing their out-of-gas cars to the gas pump.

So, yes, even high gas prices can be a good thing.  It’s simply the market setting the price to make sure gas is available to buy.  We may not like the price.  And think the oil companies are gouging us at the pump.  But they’re not.  Even when they have record profits.  Though it is tempting to hate them after they post some of those record profits.  They sound huge.  And unfair.  But are they any bigger than other corporate profits?  Not really.  Oil companies have huge revenues.  So their profits are huge.  But as a percentage of sales revenue, they’re actually not that huge.  Here are some examples of net profit averaged over five years.  Chevron (8.22%).  BP (4.94%).  ExxonMobil (8.79%).  And how does that compare to other corporations?  Here are some from various sectors.  Home Depot (4.86%).  Sony (0.82%).  General Electric (9.93%).  Apple (17.60%).  Microsoft (28.20%).  If you look at net profit, the oil companies aren’t really making more profits than other corporations.  (For source of net profit information see YCharts.)

The Federal Government is a Monopoly

Of course, when gas prices go up we tend to feel that more than other commodities.  Because we use a lot of gas in our daily lives.  Which leaves us less money in the wallet to buy those other commodities.  Which are more expensive because of the higher energy costs to bring these other commodities to market.  Few things affect prices like energy.  And oil is the big player in the energy market because it is the energy of choice in transportation.  Ships, planes, trains and trucks all use oil-based fuels.  And no matter how green we get this isn’t going to change.  Because there is no other portable fuel with such a large energy content available.  And won’t be in the conceivable future.  You just aren’t going to replace any of these with electric versions.  And that’s just not in the U.S.  It’s in all of the advanced and emerging economies in the world.

This is why oil prices are going up.  It’s not the greed of a small cartel of oil producers.  It’s the exploding demand.  And the high oil prices are allowing these companies to bring oil to market that was simply impossible a decade or two go.  And there’s more oil out there.  But we have to get it out of the ground.  And we need to be doing this some 5 years before we need it.  Because it takes about 5 years to bring new oil onto the market.  And they would be drilling exploratory wells like there is no tomorrow in the U.S.  If it wasn’t for the hurdles they have to jump through to get a permit from the government.  An oil company can spend 5 years or more in the permitting process.  They can spend millions of dollars in the process.  And yet the government can still deny them the permit.  Without any compensation for their investment to date.

This isn’t unique to any one oil company.  They all go through this.  It is very difficult indeed to start drilling a new well in the U.S.  Which means it costs more to drill a well in the U.S.  So some oil companies eventually give up and go elsewhere to look for oil.  Taking with them good oil jobs.  Which reduces domestic oil supplies.  Making us more dependent on foreign sources of oil.  Which increases the cost of oil-based fuels in the U.S.   But it’s not any oil cartel doing this.  Although it is a monopoly.  It’s the federal government.  The oil companies will still go out there and find oil and bring it to market.  It’s what they do.  They just don’t do it here.  Because the U.S. government just makes it too difficult to do this in the U.S.

Getting Oil out of the Ground is not Easy

Only the power of government can interfere with the free market.  Because it takes legislative authority to restrict the free market.  Create cartels.  And monopolies.  It’s not one big oil company keeping the others out of the U.S. market.  It’s federal regulation keeping all of the oil companies out of the U.S. market.  And this is what is increasing the price at the gas pump.  And in commodity prices across the board.  Because the high oil prices are just begging for them to come in and find oil and bring it to market.  Even in sources once considered too costly (oil sands, deep wells, arctic climates, etc.). 

And just like every business has competition, so do markets.  Getting oil out of the ground is not easy.  It is a very costly and speculative industry.  And as oil becomes more costly to bring to market, fewer are able to do it.  You need deep pockets.  And deep experience.  Those who can and do so at a profit are in great demand.  So if they can’t drill in the U.S. they can drill someplace else.  And do.  Because of the big U.S. monopoly, the federal government, has shut them out of the U.S. market. 

But as people look forward to the summer driving season, they will curse Big Oil.  Not the federal government.  Even though the former fights to bring oil to market.  While the latter fights against it.

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