Regulation Theory And Marxist Bankruptcy

I am enjoying my Fall reading. The Great Equalizer by David Smick has been an incredible source of ideas. Also, Entrepreneurship as Social Change has been a wonderful source of theoretical elements that I am adding as a foundation for my understanding of Entrepreneurship and Main-Street Capitalism.

I will, at a later date, explore the concepts of modernization and dependency perspectives, as associated with indigenous entrepreneurship, but as I was reading this morning I ran across the concept of Regulation Theory. According to the author, “Recognizing the increasing flexibility of modern economic systems. Regulation theory analyzes the global economy in terms of a series of modes of development based on combinations of the currently ascendant regime of accumulation and a variety of modes of social regulation.” The author continues this thought by defining terms. The regime of accumulation describes the production possibility of an economy. When there is great possibility there is a greater opportunity for both growth and redeployment of profit to meet various social needs. However, regulation will occur when the system goes through a change.

Regulation Theory posits something similar to a thermostat in an automobile. The “stability of the economy is dependent on the emergence of a further set of social relations that preserve it.” This sounds very similar to Democratic Capitalism. However, what intrigues me about this theory is its relation to history. It seems that we can see this dialectic occur in the evolution of our US economy. “Another aspect of regulation theory – its historicity – adds further strength to the argument of modes of social regulation, therefore modes of development differing considerably one from another.”

This argument is another way of looking at the evolution of our economy from agrarian, to unfettered industrial opportunity, to government regulation, and now to a new version of market stability, whatever it may be.

Some have called Regulation Theory a “currently-fashionable type of Marxist economic theory. I think this in conjunction with Marx’s dialectic of thesis – antithesis, and synthesis. Some have described this regulatory theory as medieval economic naivety resulting from feudal dominance (regulation). However, within the urban settings feudal regulation was weaker, leading to a more capitalist outcome. However, social regulation occurred through “rules about market days, and locations, who could sell what and when” (Fainatein and Campbell (2001). This illustrates the strong connection between economic freedom and the ability of people to regulate its expression.

There is a question why Regulation Theory was developed? Some would argue that it was developed by “Old-line Marxists” who “had gotten themselves into a lot of theoretical trouble on the issue of reproduction and the question of the social and cultural side of capitalism” (Fainstein and Campbell, 2001). From this I see two things. First, history has proven the bankruptcy of centrally planned socialist economies. Our current lesson is in Venezuela where we can see the results of a regime and its ability to destroy hope, initiative and innovation.

Second, this theory makes sense to me. The connection of the economy and society is strongly correlated. And as we can currently see, Corporate Capitalism is experiencing a strong social regulation. All of us are tired of the system being stacked against the people. This is why I am a strong Democratic-Capitalist. We the people have the ability to regulate our economic system. However, we the people also like our freedoms, and the freedom to own our property, and when we take a risk to reap the reward. If we lose that freedom we will lose our country, as we know it.

And that is my thought for the day!

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Bernie – Healthcare, Democratic Capitalism, Main Street Capitalism, Entrepreneurship, and the Kitchen Sink

Recently I was made aware of the red pill movement. It involves young people who are declaring their disconnect from the Alt-Left. They are saying they have taken the red pill, waking up and disconnecting from the machine, which is from the Matrix. I find this very encouraging. I love it when people decide to think for themselves and ignore the system, whether it is the Alt-Left or Alt-Right, to find solutions to the complicated problems we face.

One of those problems is healthcare. Bernie has proposed that all of our citizens go on Medicare. I am on Medicare and with my supplement I have found it to be exceptional. Of course, my supplement is very expensive. Analysts have stated that Bernie’s proposal will cost about $32 trillion over ten years. The federal budget in 2015 was $3.8 trillion. If we buy into an extra $3.2 trillion a year our national budget will be $7 trillion. I don’t think there are enough wealthy people in the United States to cover that amount. Therefore, every one of us will need to pay more taxes. Those who have disposable income will be able to weather the storm, but those that don’t will be adversely affected.

This means that the government will then need to raise minimum wage, create a basic income, which means small businesses will shut down, which means the government will need to make sure people are displaced from their homes, which means the government will buy all of the property, which means the government will provide our health care, wages, homes, thus destroying the initiative we have had in the past. Wait a minute, I think I just described Socialism – or even worse – Communism.

I know this isn’t going to happen, and I know that Bernie knows that his proposal will never be passed, but maybe, just maybe through the debate we can come up with a more reasonable solution to the healthcare fiasco in this country.

This brings me to my thoughts on Capitalism. I am convinced that the Capitalism young people are against is what we would call Cronyism. David Smick calls this Corporate Capitalism. This is a very different expression than what Democratic-Capitalism and what Main Street Capitalism is.

According to Michael Novak Democratic-Capitalism “is not just a system but a way of life. Its ethos includes a special evolution of pluralism; respect for contingency and unintended consequences; a sense of time; and a new distinctive conception of community, the individual, and the family.” In Democratic-Capitalism we see what Locke describes “as a novel and invigorating sense of human vocation.” Because we have the ability to take risk and receive reward and to own the means of production, we can experience initiative and growth.

What Novak describes is similar to what Smick calls Main Street Capitalism. In his book “The Great Equalizer” Smick states, “Americans feel besieged precisely because in recent decades, a Corporate Capitalism of top-down mismanagement and backroom deal-making has smothered their innovative spirit. Government and central bank policy now favors the big, the corporate, and the status quo at the expense of the small, the young, the new, the inventive, and the entrepreneurial. . . In response I envision a vibrant Main Street Capitalism of mass small business start ups and bottom-up innovation, all unfolding on a level playing field. Main Street Capitalism is the Great Equalizer.” Hmm, I like this.

In the first scenario we see large government stifling innovation and growth. In the second large Corporate Business environment is stifling growth. In either case we see socialism and capitalism leading to the same end “secular stagnation.

Therefore, the answer is better opportunities for entrepreneurs to thrive. According to Smick from 1952 – 2000 “the US economy grew at an impressive annual rate of 3.5%.” Not bad, but during the Ronald Reagan and Bill Clinton years growth was over 4%. This was due to their ability to work in a bipartisan way. This is what we need today. We need the support the opportunity for small businesses to thrive. If we do that, maybe we can get away from 1.4% economic growth which is losing ground.

The last element of this blog offering today is the kitchen sink. By the way, that was a joke.

And that is my thought for the day!

Time To Start Writing Again

I just looked, and my last blog was posted July 4, 2017. That was over two months ago. It is time to begin working on writing a bit more. As I pondered what to write about today I thought through many topics. I could write a piece about DACA. I know several students who are covered by DACA. The only reason DACA was necessary was congressional inability. I am afraid that is what will happen now. I hope not because I do support the young people covered by DACA, I guess I am a dreamer supporter. So Congress, do the right thing and help them have a path to citizenship.

Or I could write about the level of hate in this country. Alt-Right and Alt-Left are terms that reflect the level of dysfunction that has developed. There is no place in this country for Nazi’s or White Supremacists, they are hate mongers who have been in existence far too long. We also have the Anti-Facists, Antifa, that are considered anarchists and really don’t care about meaningful dialog in any manner. So the left has their issues too.

However, both of those topics have too many voices inflaming the rhetoric, and I don’t want to add wood to the fire, at least at this point. Therefore, I have decided to write about my favorite topic Social Entrepreneurship. I have just come across a great book, Entrepreneurship As Social Change, which is the “third book in a mini-series of four publications called Movements in Entrepreneurship” (Steyaert and Hjorth, 2006, p. xi). I am finding this book an incredible resource providing theoretical foundations and strong arguments for this thing we call Social Entrepreneurship.

Some of you may not know but where I teach, Warner Pacific College, has a Social Entrepreneurship program that has been both strong and weak at the same time. I was having a conversation about this with my Vice President, and boss, and we came to an agreement that our students have no problem with the Social part of the equation, but the entrepreneurship part is not as strong. This has me thinking about what to do next? How do we fix this?

Obviously, the phrase social entrepreneurship connects business and social in a way that implies transformation. Joseph Schumpeter is his classic work Capitalism, Socialism, and Democracy, develops the entrepreneurial essence of creative destruction. He describes this process as, “The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as US Steel illustrate the same process of industrial mutation – if I may use a biological term – that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.”

This process of Creative Destruction is the life-blood of entrepreneurism. In 2009 the Economist demonstrated this reality in a section called Idea. It started the article with “Jean-Baptiste Say, a French economist who first coined the word entrepreneur in about 1800, said ‘The entrepreneur shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.’ ” This definition has been applied to both entrepreneurship and Intrapreneurship, which is consistent with Schumpeter’s postulate.

The reason I want to regroup and revisit my ideas of social entrepreneurship, and main street capitalism in general, is because of the continual frustration with economic conditions in our country. My greatest fear is our young are looking for the benevolent state to provide them with a basic income, instead of working hard for the American dream. Their reasoning for this is because they feel the deck is stacked against them. I know this a huge generalization, but as I am energized to read again, I see the wisdom in what David Smick has written in his book “The Great Equalizer: How Main Street Capitalism Can Create An Economy For Everyone.”

Smick states that world-wide debt has grown to $180 trillion, as of 2015, which he argues is not the really scary part. “Here’s what is really scary. Throughout the world, the return on capital, the rate or income received from an investment, is often so low there are serious questions about how long borrowers will be able to service that massive debt, particularly when their debt is denominated in strengthening US dollars.” This coupled with the reducing number of dollars available throughout the world has created a tenuous situation where “the majority of people believe their children’s future is at risk.” To mitigate this they look to the state for single payer medical insurance, basic income, and other gifts so they can be comfortable in life.

It is my argument that by grasping the power of entrepreneurship, and main street capitalism, we can reclaim the “economic dynamism” needed to improve our productivity from 1.4% to 3.2% annual average, and regain our previous standard of living for all. This dynamic entrepreneurial spirit can create both social and economic growth that will be the great equalizer. This is what I want to write about.

And that is my thought for the day!