Preface to a Work of non-fiction I am working on. lgl

IN SEARCH OF
THE PERFECT ECONOMIC MATRIX
by
Lawrance George Lux

PREFACE:

Economists, great and insignificant, focus on some aspect of productive generation, claiming it is the panacea for all economic disturbances. Some say it is government expenditure, some claim financial liquidity, others say it is Government promotion of business. There are the Free Traders, the Protectionists, The Monetarists, Supply-Siders, Resource Underwriters, Tri-plane Economists, and the Tax Policy Economists (of which the author is one). This Preface will examine all of the above, before moving on to greater discussion. All share one element in common: No list of economic initiatives works under all economic stress conditions. It can be more simply put: Each proscription runs into it’s own set of limitations, causing eventual depressed economic performance and recession.

Free Traders insist economic health resides in the removal to all barriers to Trade, asserting excess production can be disposed Overseas, at profit to the distributing nation. They propose such productive dumping at profit eliminates factors of overproduction, with it’s resultant reduction of production, increased unemployment and underemployment, and loss of Profits. They studiously avoid discussion of Transportation Costs; insisting such Costs are only increases of Productive capacity. They refuse commentary on the effect of the spread of technology; simply protesting there are regional advantages of production, without explanation of such advantage loss due to technological refinement. They contend the increasing levels of education for Consumers has no bearing on the analysis, though Market studies assure Consumers quickly drift to the most advanced and efficient product. Their studies do not account for the almost ‘Fab’ bias inciting major drops in Sales. Free Trade analysis has only fundamentally fit in study of the 1930s, then only in the alternative which should have been adopted; not in any functioning economic performance.

The Protectionists seem dead in the modern world of economics, though they really are not. They are simply hidden in another guise. They can be found today in the Conglomeration advocates, who claim capital aggregation provides for real advantages of economic performance. They presently state formalization justifying monopoly conditions, as suitable for modern economic conditions. They advocate relaxation, or elimination, of anti-trust legislation; with concordant theory of Major producers buying out minor producers, thereby integrating any and all technological advances made by these smaller companies. Their specialized language calls for price-setting on the part of the Majors, based upon what the Market will bear; much different from production based upon costs of production. They concentrate on Corporate-set schedules of production, rather than Market-generated demand; depending on Marketing strategies to get the appropriate Consumer Demand. They failure comes from lack of such conquest of Consumer Demand.

Monetarists insist the economic performance of an Economy rests upon the provision of funds for productive energy. The foundation of Monetarist theory comes from study of the industrial societies of the 1930s, a period asserted by all to be an aberration (special case). They quickly point to shortage of the financial supply, to claim cause for any recessive conditions. This purportedly presents justification for their basic hypothesis. They cannot provide a real justification for the loss of liquidity, though, from a previous period of high financial reserves. Their analysis of the proposed dis-economies imposed by loss of liquidity lack for verifiable authenticity. They cannot answer the contention loss of liquidity comes from loss of productive performance: the famous ‘Cart before the Horse’ issue.

Supply-Sider Economists declare it is the role of Government to promote Business activity. It is overly assertive to say they propose Business welfare, though examination of their tenants brings an effective similarity. None have yet been so blatant, but they would desire elimination of all taxes on Business income. They wish elimination of Capital Gains taxation, insisting Profits on business enterprise should be a Freebie, not taxed as individual income in any way. They would have Government fund all research through a reverse taxation. They insist Government should pay for all needed infrastructure costs, with business enterprise being immune to taxes (property and Sales) organized, to pay for such infrastructure costs. They would covet a Government repayment program, which would transfer entrepreneurial risk off the shoulders of Investors, and placing the burden on Consumers through increased taxation. Their program has a rich collection of proposed initiatives, none of which have proven to effectively enhance levels of production, though all promote the individual incomes of business personnel.

Resource underwriter Economists are little noticed by the Public, though their impact remains huge. Theirs is the policy favored by Landlords. The basic thesis asserts aggregated capital should receive a huge rate of return. Their ideal rate of return would be the ability to pay off any Mortgage within fourteen years, with annual profit to the Mortgage-holder of an additional sixteen percent profit per year. They are adamantly resistant to any reduction of Property values, even to the point of refusal of Sale for years, rather than accept a reduction of price. They insist Property values should increase by Eight percent per year, without consideration of depreciation values. They make little claim to knowledge of methodology in the process of expanding economic performance; except to assert Property values should rise, and property taxes should decrease. They have direct impact upon levels of production, in a very adverse manner; most often seen in the Transport industry, where Prices have continuously risen for half a Century though actual production costs per unit have been going down.

Tax Policy Economists contend Government must assure solid Consumer Demand and restrict Production through proper tax rates. They believe economic performance remains dependent on proper allocation of resources to all Sectors. A fundamental assertion made by them, lies in a tax upon income based solely on largesse; without resort to method derived. This means there would be only an Income Tax–inclusive of Capital Gains, Corporate Tax, and all Excise taxes. Economic performance should be studied by Sector size during periods of economic prosperity, and Excise taxes imposed on Sector production exceeding percentage growth. Liquidity should be maintained by the process of maintaining Governmental surpluses from taxation, which can be lent to the Public through normal deposit in Banks. Tax restrictions should be imposed upon internal financing by Corporations, through tax regulation placing higher taxation based upon undistributed Profits. This factor allows for more uniform growth of personal income by all participants in the business activity, and provides review of capital investment by outside lending institutions. Such a program has never been implemented.

Everyone agrees the Economy must have modified performance factors, eliminating the cyclic performance of Boom and Bust. Most Economists will agree this cyclic performance occurs from dis-equalities of economic development between Sectors. Shortages and Surpluses appear which require reduced production, until the Shortages can be made up, and the surplus stocks reduced. The manner in which elimination of these productive dis-equalities can be achieved, underscores the entire discussion.

Copyright.Lawrance George Lux. August 2002.