Survival__ Structuring Prosperity for Yourself and the Nation - Charles George Smith [103]
3. Redistribution of income to capital from labor or local ownership is "necessary" to encourage "investment." Even in Empire States like the U.S., foreign capital is given numerous tax loopholes and other redirections of income to capital. This is always explained as necessary to encourage "investment."
But this greater income did not appear out of thin air; it was redistributed from labor and local owners via tax loopholes and credits. But since global capital is driven to seek the highest returns possible, the income extracted from Locale A is rarely reinvested in Locale A. This justification for the income redistribution--to encourage "investment"--is thus a cover for resource/profit extraction.
In the U.S., global companies like General Motors have received taxpayer bailouts in the tens of billions, supposedly to keep their production and workforce in the U.S., when the demand of global capital for higher returns forces the company to expand in Brazil at the expense of domestic U.S. jobs.
In one sense, the company has no choice. It must deploy its remaining capital at the highest return or simply close down. In the Chinese model the State owns the factories and continues to operate them at a loss. But as China's own state-owned enterprises show, permanent losses are simply not sustainable, even for the government.
4. As middle class jobs are cut, demand falls, exacerbating overcapacity. Global capital shifts away from high cost production (except where that opportunity is limited by the State), replacing middle class employment in advanced economies with lower-cost labor in less-developed economies.
Ironically, this lowers demand for the global companies' goods even as their overseas capacity expands. The net result is that financial speculation becomes an increasingly attractive use for capital. Thus selling consumers credit with which to buy cars becomes more profitable than selling them cars. Additional profit is reaped by bundling these consumer loans into packages--securitization--and selling the newly minted securities to credulous investors around the world.
Thus speculative leveraged credit and securitization can vastly increase profits even as production falls.
5. As its own income falls, the middle class follows the lead of global capital by increasingly relying on credit-based speculation rather than production for income. No one is more anxious to pursue speculative gains than someone whose income from labor is declining. Thus homeowners or prospective homeowners were delighted to follow global capital's forays into credit-based real estate speculation.
Unfortunately, speculation is no substitute in the long run for producing actual goods and services, and once the exponential blow-off was reached and the bubble popped, global capital simply sold off (or got bailed out) and moved on, while the middle class speculators were left with staggering losses in real wealth or capital traps (assets declining in value which could not be sold).
6. Due to its global nature, capital is no longer accountable for the consequences of its choices. Here's how it works: global capital gets huge tax credits (incentives that are basically nothing more than redistribution of income from labor and local entrepreneurs to global capital) for "investing" in the local economy. It then mines the local labor and/or resources of profits until overcapacity or depletion strikes. Then it shutters the factory or mine and moves its machinery elsewhere, leaving the local economy a shambles. Next it hypes the need for "investment" elsewhere, moving production to wherever offers the highest tax benefits, the least environmental restrictions and the lowest labor costs. Final step: repeat.
From the point of view of global capital, this is "obviously" the only model which "works." Local residents, workers and small-scale enterprise