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___Still, the marketplace doesn't necessarily reward businesses with faultless public images. Governments may offer tax breaks for charitable donations, but nonprofitable businesses get no love since they have no gains to write off. Capitalism rewards winners, not losers. Businesses cannot afford good will gestures when their bottom lines bleed red ink.
___In a liberal free-market version of capitalism, businesses are the prime engines of prosperity which distinguishes winners and losers in every phase of the economic cycle. If capitalism were a zero-sum game, it would be judged a criminal scam. Luckily, technologic progress renders a trickledown effect that rewards even losers over the longrun.
___The total economy consists of five sectors: the industrial sector, the financial sector, the retail sector, the healthcare sector and auxiliary services such as go-betweens. Job growth in the 21st-century has come largely from the service sector, which includes information technologies. During prosperous years, one or more sectors will be favored over others. The same holds true for economic downturns where job losses occur in some sectors more than others.
___Governments of every political stripe are stewards of the economic progress which has evolved and grown complex in current times. Governments are the regulators, and they manage the economy so that it benefits the largest portion of their citizens.
___Free markets ignore "sunset" industries in favor of innovative enterprises that produce stuff faster, cheaper and more efficiently. Democratic governments must deal with the casualties of technologic change. They enact programs to support and retrain discarded workers who have lost jobs to technologic progress.
___Hence, businesses and governments have different aims and goals. Businesses want to make profits. To be sure, businesses (listed in stock markets) are obligated to shareholders to generate greater and greater profits. On the other hand, governments are obligated to their citizens. Governments wish for more jobs so that citizens earn enough to feed their families and enjoy recreational pursuits. Moreover, governments penalize industries that cause illnesses in workers and surrounding neighborhoods. In essence, governments let businesses reap generous profits so long as those businesses generate worthwhile jobs and healthful products.
___Prices of goods & services follow the laws of supply and demand. It is very hard to predict whether new products will find loads of eager buyers. Established business tend to be conservative marketers. They sell "improved" copies of products that already have good track records with consumers. This is why brands have "face" value beyond the products they represent.
___To create well-known brands, businesses must spend substantial funds to develop an attractive image. After which, they flood the media with the image until it becomes familiar topic of the public domain. Through exposure and advertising, branded products acquire a favorable niche in the collective consciousness.
___Promotional advertising adds to the costs of setting products on retail shelves, and consumers are the ones who ultimately pay the surcharge. In a competitive marketplace, vendors will often devote substantial funds to advertise their products, yet consumers don't always notice the markups, since most vendors' prices are topped up, more or less, to the same degree. In other cases, shoppers will pay extra for glitzy adverts, deeming them worthwhile if heralded products have a "perceived" reputation for reliability.
___Promotional advertising has become a hidden surcharge on the retail prices of everything from smartphones to waste baskets. And there are further surcharges.
___When businesses introduce new lines of goods, they need funds for development costs and manufacturing facilities before a single product is sold. Few corporations have enough cash on hand to pay for the new product lines. They're forced to borrow from bankers or to issue bonds, either of which must be repaid with interest.
___Guess who ultimately picks up the tab for corporate expansion and debt repayment?
___Consumers pay surcharges on retail products whose prices include development costs, acquisition costs, promotional costs and bonuses for upper management who are orchestrating this financial wizardry.
___Economists say hidden extras, which have been added to retail price tags, are normal for competitive businesses in the free-market system. Economists will cite similar markups the go back 2,000 years to the Roman Empire and Han Dynasty.
___In ancient times merchant vessels were sometimes sunk at sea, so traders would inflate prices to cover the losses incurred during delivery. Roman aristocrats would pay an arm & leg for Chinese silk. Confucian mandarins would pay a small fortune for spices from the Indian subcontinent. But these were rational charges for services rendered, even if you include insurance premiums. In ancient times the markups from financial backers and promoters were a small percentage of the actual retail prices.
___Nowadays we have a service-oriented economy where dozens of promoters, spin doctors and financial gurus are needed to find lucrative marketplace niches for new products. The greatest invention since the iron-rimmed wheel won't find buyers until substantial amounts of promotional hoopla has been expended. When consumers purchase branded products, they're paying the fees of stock brokers, investment bankers, advert moguls and spin doctors, all of whose cuts are added to retail prices. For some products the overhead may reach as high as 40%.
___The total burden for median taxpayers in developed nations is somewhere between 45% and 55% of their disposable incomes. The tax bite includes income taxes, sales taxes, pole taxes and user fees for government services. In truth citizens only get to spend about 50% of what they earn. On top of the tax grabs, price tags have already been bloated to cover a menagerie of middlemen. In developed economies, consumers must pay double, even triple for retail purchases. In emerging economies, the majority of consumers can barely afford basic food and shelter.
___A simple barter system would be more efficient and cheaper for many folks. That's why smart shoppers check out flea markets and garage sales.
___To add salt to consumer wounds, the money itself loses value year over year. Carefully regulated economies keep the rate of depreciation at 98% year over year. The dollar you had at the beginning of a given year is worth 98¢ at year's end. After 25 years your dollar loses almost 40% of its initial value.
___Money loses value because central bankers create new money from nothing and then multiply the effect as they lend out ten times what they possess.
___The entire economic setup is bewildering for consumers. It breeds anxiety and stress because everyone slides down the ski slope of monetary depreciation. When you add on the tax grabs and implied payouts to middlemen, every good and service is priced above its intrinsic value. The only way to get a fair bargain is to attend bankruptcy auctions where you may find stuff at 80% discounts.
___Successful franchises in the capitalist milieu are expansionist franchises. That's how a few lucky dudes can turn basement hobbies into multinational corporations. It's human nature to admire and copy such amazing winners, but copycats rarely achieve the same degree of success. In practice, it's hard to become successful without a healthy chunk of seed capital.
___Capital itself has a quantitative threshold that separates winners from losers. Without truckloads of capital, you'll need partners, and your future profits will be diluted by lenders, promoters and tax collectors. However, those who have sufficient seed capital can get truckloads of more capital, and they'll almost always increase their initial outlays.
___Capital attracts more capital unless the player is a total moron. Even if businesses do poorly, lenders will bend over backwards to ensure that unprofitable businesses don't fail altogether. Likewise governments will coddle big businesses or risk angry mobs of unemployed citizens. When one of the big boys fails, it's like removing the bottom card in a house of cards.
___Needless to say, ordinary folks don't receive the same leniency. The big boys can shelter large portions of their wealth from the taxman. Meanwhile, an armed thief who robs $500 from a convenience store is punished more severely than the con artist who embezzles $500 million.
___Only governments can level the gameboard for one and all. But how?
___Governments have two functions: to regulate the economy and to protect citizens from foreign predators. In the 21st-century, the predators are mostly home grown.
___Major corporations do business all around the globe. If a nation penalizes a multinational corporation, the company will move its operations to another nation. Business investments create jobs, and those investments go to nations where the labor costs and taxes are the lowest. In short, governments have lost leverage with multinationals which gravitate to nations that offer the sweetest deals.
___Another problem is technological change. Governments are forever playing catchup since innovative businesses find new ways to bypass existing regulations. Governments tend to enact solutions for yesterday's inequities. Their short-sighted programs hinder job creation rather than encourage it.
___It's not a matter of liberal or conservative, socialist or libertarian. Political fixes don't help because they seldom reach the heart of the problem. But there are sensible alternatives. Stay tuned to this blog.