[p2p-research] The problems of debt

[Michel Bauwens]

Hi Ryan,

when do you place item 8, I think this would be crucial in your theory,

if you place it in 2008, then obviously, this is right,

but if you place it before, it's totally against the historical record, as
debt and credit is precisely the strategy that was chosen to jumpstart the
economy, i.e. the social product going to labour was dramatically
diminished, forcing the middle class to resort to debt-fuelled lifestyles
... It is the collapse of this strategy that led to the meltdown of 2008 and
the death of the neoliberal model (but not of the power of the elite that
sustained those policies, as you rightly say, they were 'saved' and remain
in place)

as any enterpreneur or capitalist knows, in real production, profit only
comes from monopoly, i.e. preventing as long as possible that innovations
are shared, once this happens, super-profits become impossible, and start
declining very rapidly; this is of course why IP is crucial,

in a world of open and social innovation therefore, and I think this is
happening, profit tends to be distributed much faster, and therefore
declines much faster,

as you can see in the RSA animate presentation by David Harvey, and this is
confirmed by The Big Shift of Hagel/seely brown, production-based profit has
dramatically declined, and only financial rent is now providing profit, or
at least it was until 2008




On Sun, Jul 11, 2010 at 10:33 PM, Ryan Lanham <rlanham1963 at gmail.com> wrote:

> I've been asked to explain debt problems as influenced by technology.  I'll
> try.
>
> Here's my "theory".  Many others share or have versions of something
> similar.  I claim no originality.  I've posted several versions on this
> list.
>
> 1. Growth occurs when someone produces something others value.  The sum
> total of value is the economy.
> 2. In the past, it was a matter of work and labour to produce something of
> value...like digging a hole where a hole was wanted.
> 3. People learned to take money that was not in use and to use it by
> borrowing it and then buying value-production which was then placed on sale.
> 4. The process of 3 entails risk.  Risk was rewarded by profit.
> 5. The system of 3-4 really works quite well so long as profit is likely.
> 6. In a world where learning and high productive machinery requiring low
> skill levels is readily available (i.e. post 1990 or so) making profit is
> harder.  7. Item 6 is especially true if innovation is not protected by the
> state (e.g. through intellectual property.)
> 8. Because profit is harder especially in tangible goods and services
> (because of technology and learning distribution) credit is harder.
> 9. When credit became hard, the incentives to cheat increased.  People lent
> money badly and then cleverly sold the bad loans to others who didn't
> understand.
> 10. When 9 happened, the state had to decide whether huge firms fulfilling
> important institutional roles would die, or be saved.
> 11. Nearly all states, especially in Japan and Europe, chose to save old
> institutions (e.g. Royal Bank of Scotland), or in the US, AIG.
> 12. There is now an open question as to whether markets can still create
> value (e.g. the iPod) in such a way that debt is justified.  If not,
> capitialism in the form that creates ready growth through using unused money
> is screwed.
> 13. When money goes unused, it is difficult to create new money and growth
> of value.  There is no/little incentive to innovate.  This can be called
> "deflation."
> 14. Deflation is more dangerous to capitalism by far than inflation.
> Deflation means shrinkage of an economy because unused money becomes more
> valuable by sitting than by being used.  Thus, people become even more risk
> averse.
> 15. When 14 happens for a long time (e.g. Japan) then demographic and
> institutional patterns start to become unsustainable.
> 16. When 15 happens, we do not understand the long term outcomes, but they
> don't seem good.
>
>
> --
> Ryan Lanham
> rlanham1963 at gmail.com
> Facebook: Ryan_Lanham
> P.O. Box 633
> Grand Cayman, KY1-1303
> Cayman Islands
> (345) 916-1712
>
>
>
>
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>


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