Welcome to the works of Manfred Davidmann



The World at War!

Multinational (Global) Operations,   and Government Of, By, and For the People:

Democracy under Attack:   The Struggle for the Right to take the Decisions,   and for Social Accountability



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Fundamental reports relevant to today's problems and to a better future

 
         
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The World at War!

Community Economics and the Quality of Managers
  • Purpose of any Enterprise
  • Profit Motivation
  • Real-world Problems

Balancing National Income and Expenditure in the Real World of Multinational (Global) Operations
  • Balancing Income and Expenditure

Multinational (Global) Operations,   and
Government Of, By, and For the People
  • Multinational Operations

The Hidden Faces of Crises and Recessions
  • Real-world Problems
  • National Debt
  • Who Benefits from So-called Crises

Multinational (Global) Operations and Financial and Economic Crises and Recessions:
  • Government and Management; Of, By and For the People
  • Government Income and Spending
  • So-called 'Financial Crisis'
  • Government Officials and their Actions

Democracy under Attack: The Struggle for the Right to take the Decisions, and for Social Accountability
  • Mortgaging our National Future
  • We Need Factual Information
    • Tax Burden, Income Tax
    • Sources of 'Aid' Funds
    • 'Aid Fund' Receivers
  • Aims and Objectives: The Social Struggle
    for the Right to Take the Decisions which Affect Our Lives, and
    for Social Accountability

Some Highlights (Insights) from the Report


Manfred Davidmann

Subject Index Pages and Site Overview



Community Economics and the Quality of Managers


Purpose of any Enterprise

The purpose of any enterprise is to satisfy the community's needs by providing high quality goods and services at reasonable prices.

The community attempts to ensure that its needs are satisfied by persuading those who can satisfy its needs to do so. It does so by providing reward.

Those who can satisfy its needs are motivated by the community towards doing so by the reward, that is by the resulting profit. We refer to this process as 'profit motivation'.


Profit Motivation

The way in which profit motivation is intended to function is straightforward, as follows:

Someone sees a need for a certain product or service, sees that there is a demand for it, and that a profit can be made by providing it. He then provides the product or service and as he is the sole provider he makes a good profit as a result.

Then other people see that a good profit can be made from providing the same goods or services. They do so and this process continues until the supply of these goods or services exceeds the demand at the prices being charged.

Unhindered competition between suppliers then results in prices being reduced which in turn results in demand increasing at the new lower price.

Lower prices mean lower profit margins but the increase in demand can maintain and even improve profits by increasing the sales volume.

At the same time enterprises which may be badly managed or which offer inferior products, would become uncompetitive and cease to trade in this product or service.

In this way the community attempts to ensure that its needs are satisfied at reasonable prices, that it gets good value for money.


Different kinds of enterprises are thus formed for satisfying the needs of the community by providing high quality goods and services at reasonable prices.

What matters is the value of the service to the community. The measure of success is not the 'profit' or financial gain taken by owners, no matter whether private or state, but is the 'gain to the community'. The real profit or gain any enterprise achieves is the gain which the community obtains as a result of the enterprise's operations. Thus the social costs, that is the costs to the community of any operation, have to be taken into account.


Real-world Problems

We have enterprises being formed which are generally managed by directors who are appointed by the owners. It is the directors who generally take the key decisions on behalf of the owners. At times owners may appoint themselves as directors.

Enterprises are not only formed by people who care for other people and who are motivated by the intensity of the need, but also by those who care only for personal gain in wealth and power over others and who are motivated by this.


Problems arise when owners, directors or managers are either unaware of, or ignore, their purpose which is to satisfy the needs of the community with profit resulting from giving good value for money.

To them profit then becomes an overriding and sole objective and they concentrate on maximising profits regardless of the cost to others, regardless of the cost and consequences to the community.

Profits can be increased by reducing labour costs, for example. Those wishing to increase profits regardless of the cost to others, will thus aim to reduce the standard of living of the working population, will aim to increase the needs of the working population so that people will work for less.


The material quoted here was first published in Manfred Davidmann's report Community Economics: Principles. This report includes guidelines as well as controls required to prevent misuse and to protect people.



Balancing National Income and Expenditure in the Real World of Multinational (Global) Operations.

How individuals in responsible positions or authority, in local and national government, are managing our affairs on our behalf and for us, is of crucial importance to every citizen.

Government has to make ends meet, has to bring about a rising standard of secure living, social security and an increasing quality of life for its citizens. There can be ups and downs but, says Manfred Davidmann, "failure to make ends meet is just as directly and surely the result of bad leadership and management as it is in any commercial enterprise."


Balancing Income and Expenditure

We all have to balance what we are spending against what we are earning. If we consistently overspend then we either have to earn more or else reduce our spending.

Until we make the necessary adjustments, we can increase our spending money by drawing on savings, by selling jewellery, by short-term borrowing from the bank or friends and perhaps by long-term borrowing such as taking out a mortgage.

For a little while our friends or the bank manager will help us by lending money but the loan has to be repaid and we may have to pay interest. The same applies to a mortgage. The interest we have to pay makes our position worse. As a result of having to pay interest we now have less to spend and overspend more heavily.

If we consistently overspend and cannot increase our income then we are forced to reduce our spending and thus are forced to reduce our standard of living.

Hence we aim to increase our income until it more than balances what we are spending and in this way we aim to increase our standard of living.


The same considerations apply to countries, as illustrated by Figure 2 'Making Ends Meet' in
Inflation, Balance of Payments and Currency Exchange Rates
which illustrates what is being said here.
For a full statement and discussion of the alternative ways of balancing national accounts, in meaningful language and with clear diagrams and illustrations, see this report. It is about National Accounts and the national Balance of Payments, in effect about good national financial management, and was first published in 1981. Its analysis and methodology are now widely accepted, world-wide, and can be of enormous help when considering the causes and effects of the US financial crisis.

Take the case where the total cost of a country's imports is more than the value of its exports. This means that more is being spent on imports than is being earned from exports. We see a payments deficit which needs to be made good as imports have to be paid for. We can:

  1. Increase the value of exports or reduce the value of imports, or do both.

  2. Increase short-term borrowing by increasing the interest paid by us to depositors.

    If the country is failing to make ends meet, then short-term borrowing is a convenient way of raising the required funds for paying one's debts but interest rates increase accordingly.

    This quickly affects the level of share prices, which fall. The house of cards consisting of fictitious (unreal) share values then faces collapse. Hence government is under pressure to keep interest rates low.


    Share prices also depend on other factors, but share values may increase steeply, and may be kept up artificially, by reducing interest rates and by keeping interest rates low.

    As interest rates were reduced and as share values increased, corporations (companies) have withdrawn corresponding 'surpluses' from their company pension funds and added them, or a substantial part of them, to shareholders' profits.

    As share prices fall, pension funds can become underfunded. Companies may then be obliged to make up the underfunding to some extent. It appears that the likelihood of this happening may be an important factor.


    And governments are not informing their populations of the enormous costs of importing sources of energy, are apparently trying hard to keep interest rates level or low, are attempting to balance national accounts by means other than short-term borrowing.

    Means corresponding, for example, to selling the family silver or taking out a mortgage, like selling ownership or majority control of one's major productive and service assets into foreign control.

  3. Increase long-term borrowing (for many years) against terms which depend to some extent on our credit worthiness. Interest charges have to be paid regularly and the loan repaid in due course.

    Britain, for example, had to borrow vast sums annually so as to pay for imported oil until North Sea oil became available. Combined with a considerable increase in borrowing requirements by local government, this materially contributed to the annual deficit. It soon became apparent that it is not easy to reduce one's standard of living, and different sections of the population were confronting each other, struggling to maintain their own level, their own standard of living, struggling for a bigger share of what was available.

    Many underdeveloped countries find themselves working to an increasing extent for those who lent them money in the past, or for those who provided essential goods such as oil at high prices, working very hard to export more and more merely to pay interest and repay loans granted in the past instead of bettering their economic capability and the standard of living of the people.

  4. Sell some of our stock of gold to obtain foreign currency.

  5. Sell assets such as land, hotels, factories and business interests to foreign buyers.
    There are considerable dangers inherent in allowing such investments to take place on any scale, in allowing control of important assets to pass into foreign hands.

In practice any combination of these may be used, dependent on the circumstances the country finds itself in and on its credit worthiness. Each one affects the country's progress and prospects differently, particularly as regards inflation.


For more information, see report
Inflation, Balance of Payments and Currency Exchange Rates.



Multinational (Global) Operations,   and
Government Of, By, and For the People

How individuals in responsible positions or authority, in local and national government, are managing our affairs on our behalf and for us, is of crucial importance to every citizen.

Government has to make ends meet, has to bring about a rising standard of secure living, social security and an increasing quality of life for its citizens. There can be ups and downs but, says Manfred Davidmann, "failure to make ends meet is just as directly and surely the result of bad leadership and management as it is in any commercial enterprise."

This is a severe criticism also of the kind of experts and consultants used, and of the way they are used. "The quality of one's experts and whether and how their expertise is used, and applied, are of decisive importance."


Multinational Operations

It was Manfred Davidmann who twenty years ago demolished the then-current economic myths about 'Price Inflation' and 'Wage Inflation', and about inflation and unemployment. He coined the phrase 'Exporting Employment and Importing Unemployment', and pointed to, and warned about, the social and economic consequences of what is now often euphemistically called 'outsourcing' or 'globalisation'.

In 1996, for example, Manfred Davidmann pointed out that imports were now being priced at what the market will bear, or just under. The enormous profit margins then cause production to move from high-wage to low-wage countries. The consequence is a lowering of standard of living in high-wage countries to that in low-wage countries, instead of a raising of standard of living in low-wage countries to that in high wage countries.

Prices used to be based on 'cost plus reasonable mark-up', and unhindered competition was meant to ensure that the mark-up was reasonable. Prices are now based on what people can be persuaded to pay for what they can be persuaded to buy. The mark-up between producing in a low-wage country, and then selling in a high-wage country, can be enormous.

See   Exporting and Importing of Employment and Unemployment


In 1991, Manfred Davidmann showed that multinational companies were minimising their liability for corporation tax by transfer pricing, that is by making book entries which transfer profits to the country with the lowest corporation tax.

Say a multinational has increased its profits in such ways. As the government's expenses have not changed it must make up this shortfall elsewhere. From its other tax payers, say from its citizens. So its citizens pay more tax, the government can now spend the same amount as before, the multinational's profits have increased.

This tax avoidance is legal and governments have not legislated to prevent this practice.

The multinational, and this means the owners and directors of the multinational, are thus in effect taxing the country's citizens, its population, in this way increasing the multinational's profits and thus their own incomes and wealth.
See   Multinational Operations: Transfer Pricing and Taxation

Studies published in the USA, for example, tell us much about the extent to which multinationals can avoid paying tax on their profits. These present a disturbing picture.


It is an accepted principle of economics, that the social costs of an enterprise's operations have to be paid by the enterprise, expressed by the maxim 'The polluter pays'. In other words, the social costs of unemployment have to be paid by the enterprise which caused the unemployment.
See   Community Economics: Principles
However, multinationals tend to regard profit as the sole consideration, regardless of the consequences to the community, regardless of the cost to people. Instead of producing more effectively and competitively at home, owners and directors find it easier and more profitable to import from low-wage countries. Unemployment increases at home, and increasing unemployment and social need is used to force down wages and living standards.
See   Creating Unemployment for the Sake of Private Profit;
Multinational (Global) Operations and the Exporting of Employment

Owners and directors in this way profit from the unemployment and the lower standard of living their operations cause in the home-country. They will continue to profit from increasing unemployment and its consequences as long as they do not have to pay the social costs of their operations. In other words, as long as they are allowed to pass this part of their operating costs to the community.


Employers should pay wages which will provide a good life for employees and their families. But the lower the wage paid, the higher the profit. And there will be employers who are more interested in their own profits than in the welfare of their employees.

Some employers may then pay wages which are so low that employees are forced to work long hours merely to survive. A government may then make up such wages with income-support benefits to a poverty-existence level. Which is apparently what happened in the UK while minimum-wage requirements ceased to be applied. And which is also being done in Germany.

In such ways taxpayers' moneys are used to subsidise the profits of companies (corporations), of their owners.
See   Taxing the Population for Private Profit


MAI stands for 'Multilateral Agreement on Investment'. But its name does not reflect those aspects which are of deep concern. What is disturbing are not only the provisions of this proposed treaty but also that the provisions were debated in almost complete secrecy.
See   Democracy Under Attack: Top-level Leadership and Decision-taking

Also see   Multinational Summits and Agreements (Top-level Decision-taking and Democracy)

It appears that representatives of multinationals and governments representing the 29 richest industrialised countries, all OECD members, had been developing the MAI's provisions at the OECD (Organisation for Economic Co-operation and Development) since 1995. This seems to have been done in complete secrecy till a leaked copy became available on the Internet in 1997.

It seems that the agreement was to have been finalised in February 1998. Apparently it was adverse publicity relating to its restrictive provisions which delayed completion as concerned groups of citizens publicised their concerns. And some governments then withdrew their support.

So let us look at the kind of provisions this almost-agreed agreement on 'Multilateral Agreement on Investment' contained:

Democratically elected governments

  • Would have had to allow multinationals access to the country.

  • Would have been prevented from discriminating against foreign firms, would not be able to refuse any form of investment in any sector apart from defence.

  • Would have been prevented from reducing or controlling a multinationals profits, say by minimum-wage or anti-pollution legislation, or by legislation to ensure local employment.

Multinationals would have had the right to

  • Sue national governments for any profits lost through laws which discriminated against the multinational, and which harmed a multinational's interests.

  • Sue national governments in an international court which would have been closed to public scrutiny.

We saw that multinationals can legally avoid paying corporation tax by transfer pricing. Unitary taxation can overcome this tax avoidance by assessing the actual profits being generated by a multinational in a particular country. Multinationals could, under MAI, have refused to be taxed by a system of unitary taxation.
See   Taxing the Population for Private Profit


So it appears that under MAI the national governments would have handed over control, that is authority to act, over much of the economic and social welfare of their citizens to multinational corporations (that is to those who own and direct these corporations), if they had agreed to this treaty.

In other words, multinationals would have been given overriding authority over democratically elected governments.


Governments recently promised to provide vast money handouts to what appear to have been speculative financial institutions when commercial banks considered these institutions too great a risk and refused to continue lending money to them.

Following which multinational motor manufacturers were claiming that they would have to seriously curtail or close down their operations in major industrialised countries, thus increasing unemployment, apparently hoping or clamouring for similarly enormous money handouts.

With governments seriously considering the motor manufacturers' requests and apparently agreeing, at least in principle, to the handing over of vast sums to them.


Socially responsible and caring governmental legislation has to take precedence over the profit-motivated activities of corporations (including financial institutions)

No elected representative, government or government employee has the authority

  1. to hand over to corporations (that is to those who own and control them), or to anyone else, an overriding control over the present and future, economic and social, welfare of its people, or

  2. to sign away the democratic rights of their people for the self-determination of key fundamental aspects of their lives.


Sources, with Descriptons

Title   Description
     
Exporting and Importing of Employment and Unemployment   Discusses exporting and importing of employment and unemployment, underlying principles, effect of trade, how to reduce unemployment, social costs of unemployment, community objectives, support for enterprises, socially irresponsible enterprise behaviour. See 'Press Notices'.
     
Multinational Operations: Transfer Pricing and Taxation   One of the most controversial operations of multinationals, transfer pricing, is clearly described and defined. An easily-followed illustration shows how transfer pricing can be used by multinationals to maximise their profits by tax avoidance and by obtaining tax rebates. Also discussed is the effect of transfer pricing on the tax burden carried by other tax payers.
     
Inflation, Balance of Payments and Currency Exchange Rates   For a full statement and discussion of the alternative ways of balancing national accounts, in meaningful language and with clear diagrams and illustrations, see this report. It is about National Accounts and the national Balance of Payments, in effect about good national financial management, and was first published in 1981. Its analysis and methodology are now widely accepted, world-wide, and can help a great deal when considering the causes and effects of these crises.

Describes, reviews and illustrates the underlying relationships. How inflation affects currency exchange rates and trade. How interest rates determine share prices and pensions, and thus also the extent to which pension funds are in surplus or underfunded. Discusses multinational operations such as transfer pricing, inflation's burdens and worldwide inequality. Clear diagrams and worked examples.

See 'Press Notices'.
     
Community Economics: Principles   This statement of the fundamental principles of the free-market economic system is unique and outstanding because it allows for the needs of the community.
     
Taxing the Population for Private Profit   Shows how taxpayers' moneys are used in different ways to enlarge the profits of companies (corporations). These are in effect allowed to tax the population and to pass large parts of their operating costs to taxpayers.
     
Democracy Under Attack: Top-level Leadership and Decision-taking   Discusses and illustrates the internal struggles taking place in political parties and all other organisations, for achieving greater democracy and against those wishing to overpower democratic processes of decision-taking.
     
Multinational Summits and Agreements (Top-level Decision-taking and Democracy)   Describes how secretive top-level multinational meetings and agreements (such as GATT and MAI) negate democratic government and decision-taking. Shows that publicity about what is being planned or taking place is an effective deterrent.
     


The Hidden Faces of Crises and Recessions


Real-world Problems

We have enterprises being formed which are generally managed by directors who are appointed by the owners. It is the directors who generally take the key decisions on behalf of the owners. At times owners may appoint themselves as directors.

Enterprises are not only formed by people who care for other people and who are motivated by the intensity of the need, but also by those who care only for personal gain in wealth and power over others and who are motivated by this.


Problems arise when owners, directors or managers are either unaware of, or ignore, their purpose which is to satisfy the needs of the community with profit resulting from giving good value for money.

To them profit then becomes an overriding and sole objective and they concentrate on maximising profits regardless of the cost to others, regardless of the cost and consequences to the community.

Profits can be increased by reducing labour costs, for example. Those wishing to increase profits regardless of the cost to others, will thus aim to reduce the standard of living of the working population, will aim to increase the needs of the working population so that people will work for less.

See   Community Economics: Principles.


National Debt

Government has to make ends meet, has to bring about a rising standard of secure living, social security and an increasing quality of life for its citizens.

To these ends do we elect governments and these objectives do we expect our government to achieve.

How individuals in responsible positions or authority, in local and national government, are managing our affairs on our behalf and for us, is of crucial importance to every citizen.

There can be ups and downs but, says Manfred Davidmann, "failure to make ends meet is just as directly and surely the result of bad leadership and management as it is in any commercial enterprise."

A government needs to balance income and expenditure, and generate a surplus, just like ordinary people, enterprises or organisations, as Manfred Davidmann clearly explains.   
See   Inflation, Balance of Payments and Currency Exchange Rates
which includes sections on 'Quality of Government', 'Standard of Living' and 'Worldwide Inequality'.


Consider what has been happening in Germany.

It appears that quite early in this (financial) crisis, the enormous sum of EUR 100 Mrd
(100 000 million) was given by the German government to only one bank, the Hypo Real Estate, apparently as aid-money. And it seems that much more could well be required.


Why should we, our future and the future of our children, be burdened on such a large scale by our governments, without our specific agreement, without being even asked?

Government officials seem to be mortgaging the future of their populations, are apparently handing over to 'money-lenders' the value of the future work of their populations, as it is the population who would have to pay the interest the government would be paying on these 'loans'.

And the population would also be repaying the loans, because interest and repayments paid by the aid-receivers to the government, would be included by the aid-receivers in their costs, and thus included in their prices or fees, and thus collected from, and thus paid by, their customers or clients.

In other words, governments are apparently making astronomical money gifts to selected organisations, companies, corporations, institutions, at our cost.

After all, it is we, the people, who elected our governments to manage on our behalf. Instead of doing so, they seem to be selling-off the product, the gain, from our labours and from that of our children and future generations, in effect committing us to servitude.


Who Benefits from So-called Crises

These 'aid' moneys are in effect taken from ordinary people and placed under the control of a few people at the top who in this way gain power, are enabled to dispense patronage (and support each other), gain high incomes and much wealth.

This seems to be a key feature of the way society is organised to benefit those at the top. In other words, society as a whole is organised for large-scale transfers of moneys (income and wealth) from the working population to the already rich and wealthy, for the benefit of those at the top (Vetternwirtschaft, Old-boy network, Cousinhood, Proteksia).

A company, corporation, government and its officials, multinational organisation or multinational meeting, can serve as a front behind which those who take key decisions can hide, as a front for owners, directors or top-level individuals.

Bear in mind that it is people, individuals, who make the decisions, who are responsible, who pocket the gains in one way or another, that gains in wealth and power accrue, not to companies, GmbH's or organisations, but to specific (sometimes shadowy but usually top level) individuals within them, to such as owners, directors and top level managers (executives).

So let us look a little more closely at what is actually taking place all around us, at the normally hidden face of exploitation, at the reality behind the smokescreens. Doing so by looking at, and considering, the information in the following reports which are comprehensive, objective and factual, written in clear and meaningful language:

Title   Description
     
Understanding How Society is Organised for Controlling and Exploiting People   Describes how corporations (companies) accumulate their capital and reserves from moneys taken from customers. Enterprises are allowed to collect, take over and control such moneys and co-operatives also take over moneys from their members. Describes how people's massive savings are placed under the control of others.
     
Ownership and Limited Liability   Discusses different types of enterprises and the extent to which owners are responsible for repaying the debts of their enterprise. Also discussed are disadvantages, difficulties and abuses associated with the system of Limited Liability, and their implications for customers, suppliers and employees.
     
Ownership and Deciding Policy: Companies, Shareholders, Directors and Community   A short statement which describes the system by which a company's majority shareholders decide policy and control the company.
     
What People are Struggling Against: How Society is Organised for Controlling and Exploiting People   Report of study undertaken to find out why people have to struggle throughout their adult lives, in all countries and organisations, at all levels, to maintain and improve their standard of living and quality of life. We know what people are struggling to achieve and the study investigates why people have to struggle by looking at what they are struggling against.
     
Multinational Operations: Transfer Pricing and Taxation   Shows how multinationals, which in effect means the owners and directors of the multinational, are in effect taxing the country's citizens, its population, in this way increasing the multinational's profits and thus their own incomes and wealth.

This tax avoidance is legal and governments have not legislated to prevent this practice.

Studies published in the USA, for example, tell us much about the extent to which multinationals can avoid paying tax on their profits. These present a disturbing picture.
     
Community and Public Ownership   This report objectively evaluates community ownership and reviews the reasons both for nationalising and for privatising. Performance, control and accountability of community-owned enterprises and industries are discussed. Points made are illustrated by a number of striking case-studies.


The underlying economic system, and the way it is applied, serve to brutally exploit ordinary people, the population, and to keep this hidden from them, from the exploited, deceived and manipulated people.

And the effect of these financial, economic, business, cash flow, etc., crises amounts to the wholesale transfer of the vast funds that are being borrowed by governments in the name of the population, and then handed over to unspecified recipients, while at the same time mortgaging the population's future to equally unspecified lenders (who appear to have such vast funds immediately available!)


However, socially responsible and caring governmental legislation has to take precedence over the profit-motivated activities of corporations (including financial institutions)

No elected representative, government or government employee has the authority

  1. to hand over to corporations (that is to those who own and control them), or to anyone else, an overriding control over the present and future, economic and social, welfare of its people, or

  2. to sign away the democratic rights of their people for the self-determination of key fundamental aspects of their lives.

See   Multinational Summits and Agreements (Top-level Decision-taking and Democracy).



Multinational (Global) Operations and
Financial and Economic Crises and Recessions


Government and Management;
Of, By and For the People

Government has to make ends meet, has to bring about a rising standard of secure living, social security and an increasing quality of life for its citizens. There can be ups and downs but, says Manfred Davidmann, "failure to make ends meet is just as directly and surely the result of bad leadership and management as it is in any commercial enterprise." This is a severe criticism also of the kind of experts and consultants used, and of the way they are used. "The quality of one's experts and whether and how their expertise is used, and applied, are of decisive importance."

A crisis in an affected enterprise is likely to have been caused or aggravated by inadequate management and administration, so resources including capital are being used ineffectively and are often wasted. In such circumstances one looks closely at the quality of the leadership, of those who direct, of those who manage, one looks at the way resources are being used.

For example, reducing wages (or cutting essential community services) merely makes the workforce (or the community) pay the bill for inadequate management, allows the management to carry on just as wastefully as before at the expense of the standard of living of the workforce.

Demanding a fair return for one's investment (shareholders' investment, bank loans, money provided by the community in various ways) wakens up management to its responsibilities, encourages and rewards good management.

From report:
Inflation, Balance of Payments and Currency Exchange Rates
(Including: Quality of National and Local Government and Worldwide Inequality)
,


Government Income and Spending

The government spends for the community the money it receives from the community, collecting it through taxation. If it spends more than it collects, then it has to make good the shortage, say by borrowing and/or by printing more money. Debts have to be serviced and repaid so that borrowing increases future spending, absorbs income, increases the difficulties. But it is clear that to reduce and eliminate the deficit we need to increase income or reduce spending, or both.

Governments which spend more than they receive, then attempt to reduce or to make up the difference by borrowing internally and by borrowing abroad. The remaining difference between what is coming in and the amount the government wants to spend can then be made up by printing more money.

See Figure 2 'Making Ends Meet' in
Inflation, Balance of Payments and Currency Exchange Rates.  

This illustration shows how printing more money increases the amount of money which is circulating and we can see that this, like increasing interest rates, causes inflation and how it does so.

In such circumstances there is usually much talk about reducing inflation by balancing income and expenditure. In other words, we are told that to reduce inflation we have to reduce the deficit and that the way to do so is to reduce government spending, that less has to be spent on essential services to the community such as on education, health services, unemployment benefits, social security payments and social care.

It is clear that to reduce government expenditure by cutting social services is one-sided. Why should community services be cut in preference to cutting the vast sums which are collected from the people, that is from the community, and handed over annually to a select few, to owners, shareholders and to those who control financial institutions? These enormous sums, which are handed over annually, increase the wealth and power of a very small number of people without any corresponding return to the community. They are generally given without obligation to repay, without a corresponding transfer of ownership and control to those who provided the money.
See   Understanding How Society is Organised for Controlling and Exploiting People

No banker, no financial institution, no shareholder would dream of giving away their capital without making sure of retaining ownership and control over this money, through the transfer of corresponding securities and ownership rights, and of direct and indirect participation in the resulting profits.

Very large sums are involved. The array of investment grants, depreciation allowances, grants in aid, tax allowances, tax-free benefits, tax reductions, loans at favourable terms and other ways of financial support to various enterprises in industry, agriculture and services, speaks for itself.
See   Understanding How Society is Organised for Controlling and Exploiting People,
and see   Taxing the Population for Private Profit

How come that the people's money is distributed in such a fashion? How come that corresponding ownership rights are not transferred to those who work in the enterprise, on behalf of the community?

Hence while on the one hand one can consider cutting essential community services, on the other hand one can also cut the flow of capital from the community to the select few and in any case can expect a fair commercial and social return to the community for the enormous sums which are annually handed over in this way.

And why is our government not making ends meet, balancing income and expenditure, which is supposed to be its duty? Why is the government continuing to borrow at our expense, why are they not planning effectively (budgeting effectively) to make ends meet?


So-called 'Financial Crisis'

When some very large financial business institutions were apparently engaging in unsound business, commercial banks seem to have considered them unsafe and refused to lend them further moneys.

However, government officials and their experts then came in, seemed to throw the public's, the community's, hard-earned moneys at them, apparently to bail them out (make good their losses) and to keep them afloat, apparently burdening us and our future generations with debts which appear to have nothing to do with us or with our well-being.

So this so-called crisis, and similar crises, are not our, the people's, the community's, concern and not our responsibility.


Following in the footsteps of financial institutions, other large multinationals, professional institutions and even countries, began to ask for aid in what was then beginning to be called an 'economic' crisis, apparently so as to benefit from such vast government handouts.

Who or what is responsible for this crisis?


Absence or shortage of factual, objective and reliable information could lead one to imagine that the crisis (crises) may have been engineered for the sake of vast aid moneys, at our expense.


Government Officials and their Actions

Say 'money lenders' are those who are lending to the government the vast funds now being made available or distributed by government as 'aid' moneys. Then it appears that government officials are mortgaging the future of their populations, are handing over to 'money-lenders' the value of the future work of their populations, as it is the population who would have to pay the interest due on these 'loans' and would have to repay the loans, from future earnings.

One is reminded of the story once told by a high-level manager, that his Board of Directors had just spent an hour and a half discussing the quality of toilet paper in the staff toilets, and then nodded through a complicated, involved and risky multi-million GBP project in a matter of minutes. Reminded, that is, by the statements and actions of officials and experts who seem to have no real specific or clear information to give, or seem to have but little understanding of the consequences of their own proposals, or seem unable to communicate real information and understanding to us in clear language.

What stands out is that we were not asked to decide whether, why and how these aid-moneys should be borrowed and granted, and that our democratically elected government is not entitled to, has not been authorised by us, to commit our future and that of our children, in such ways and for such purposes.

Why should we, our future and the future of our children (following generations) be burdened on such a large scale by government without our having instructed government to do so, and without our agreement.


Democracy under Attack: The Struggle for the Right to take the Decisions, and for Social Accountability


Mortgaging our National Future

Government will presumably have to borrow very large sums of aid-moneys which are now being requested by banks, public bodies, professional institutions and the like. And government would presumably have to pay interest on the moneys it borrowed, possibly even borrowing back moneys it had had to pay to countries from which it imported sources of energy.

Remember that recipients of 'aid', that is of government funds, would be paying to the government any payments due on these aid-moneys. And that they would most likely first collect these payments from us, their customers, including them in what we are being charged for their products and services, before paying the government.

So we are apparently mortgaging our national future by borrowing the large sums which are to be handed out as 'aid', and would also in effect be paying the interest and capital repayments demanded from recipients of 'aid' moneys.


The government and its officials are apparently making available vast sums of money which are borrowed from money lenders, to unspecified people for unspecified purposes.

However, governments and government officials do not have the authority or right to hand over to money lenders the value of the future labour of the people, of the community, in this way committing the people to servitude and financial dependence.


We Need Factual Information

Ask questions, demand precise answers and information.

Do not allow yourself to be blinded by vague phrases!
See   Using Words to Communicate Effectively

And demand clear, specific, unambiguous answers in meaningful language.


What is needed is precise information and this does not seem to have been provided by the government or by others, to the citizens, to the general public, to those whose future income is being committed for no apparent good reason. Information in plain, clear, precise, unambiguous and meaningful language, giving relevant facts and figures to enable us, the citizens, decide whether we want to mortgage our own future and that of our children for the benefit of what appear to be a very small group of very rich and well-paid individuals.


For example, when financial and commercial institutions are asking us for enormous sums of aid-money (to keep them in business) from us, which even our governments do not have and would have to borrow, where precisely does the suddenly available wealth which our government borrows from unspecified sources, come from?

And under what terms are government officials borrowing such enormous sums and disposing of them in vague ways for undefined purposes?


Precise information is required on all counts. We need factual and clear answers to questions such as:


Tax Burden, Income Tax
     
1     'Who contributes how much?', to see how the tax burden is shared among different sections of the population.
     
2   Who should have contributed but does not?
     
3   Who ought to contribute more?
     
4   'Who benefits at whose cost?' from this system of distributing the tax burden and of handing out the benefits.
     
5   What is the cost to the community of the deficit which results from this way of distributing the load among the different sections of the population?
     
6   Can we afford to give away such large sums to enlarge the wealth, power and patronage of a very small section of the population at the expense of the whole population?
     
7   Can we continue to afford to do so at a time of crisis?


Sources of 'Aid' Funds

Governments are keeping interest rates down so as to keep share prices up, to prevent share prices from collapsing.

Their response to falling share prices has been to keep on lowering interest rates so as to boost share prices.

But why should people lend at such low interest rates, at interest rates which approach zero?

And yet our governments seem to have no difficulty in obtaining long-term loans, borrowing enormous sums from unknown (to us) lenders.

Who are the unknown lenders who so amazingly have the vast riches available to bail out the USA, EU, Germany, Great Britain, and the rest of the world?

Where precisely do these funds come from, who is lending them, and under what terms? In other words:

Who, dollar for dollar, euro for euro, GBP for GBP, are these nameless 'lenders'?

From whom, and at what cost, terms and conditions, are our governments obtaining (borrowing) the almost unimaginable vast funds they intend to borrow?


'Aid Fund' Receivers
What precisely were the risks which the commercial banks refused to accept when they stopped lending moneys to the financial institutions?

Where did 'lost' money disappear to?


Who are the real owners of these aid-requesting enterprises, organisations?

Who engaged in the risky business and are they being held to account for doing what they did or for not doing what they should have done?

Are we being asked to pay the enormous debts of business enterprises, debts perhaps caused by inadequate or incompetent individuals? And if so, who appointed them and let them carry on unchecked?


What are the terms and conditions under which the sums are to be provided?

Who receives, and who benefits from, these vast so-called aid moneys?

For whom precisely are these vast sums intended?
Who will receive them (by name and amount)?

Who decides what is to be done with the aid-money?


Why precisely are these moneys required?

What exactly will this aid-money be spent on?

How will the aid-money's spending, and use, its spending by whom and what for and for what purpose and for whose benefit, be checked and approved and by whom?



Aims and Objectives: The Social Struggle
for the Right to Take the Decisions which Affect Our Lives, and
for Social Accountability

What underlies democracy is decision-taking by the people at the level of the people. But what we see is top-level leaderships trying to take over decision-taking from the population.

A company, corporation, government or government officials, multinational organisation or multinational meeting, can serve as a front behind which those who take key decisions can hide, as a front for owners, directors or top-level individuals.

All multinational and so-called 'summit' meetings are suspect. Suspect are also multinational, international, global organisations, too often run by unelected self-perpetuating hierarchies, holding secretive meetings arriving at secretive social, economic or military agreements and treaties.

Secretive top-level multinational meetings and agreements negate democratic government and decision-taking, without having overriding authority or right to do so.
See   Multinational Summits and Agreements (Top-level Decision-taking and Democracy)

What we see are consequences of decisions made at the top, and the results of putting them into effect. Results and consequences which at times make the decisions seem so brutal that they appear inhuman.


No elected representative, government or government employee has the right or authority

  1. to hand over to corporations (that is to those who own and control them), or to any other organisation or to anyone else, an overriding control over the present or future, economic or social, welfare of the people, or

  2. to sign away democratic rights of their people for the self-determination of key fundamental aspects of their lives.

See   Multinational Summits and Agreements (Top-level Decision-taking and Democracy).


Socially responsible and caring governmental legislation has to take precedence over the profit-motivated activities of corporations (including financial institutions).

And representatives, governments or government officials do not have the authority or right to override, reduce or sign away the participative (democratic) rights of the electors, of the population.


Decision-taking by 'leaderships' has to be replaced by decision-taking at the level of the people.

The real struggle is not between political left and right, but is a struggle for participation (the right to take decisions).


Directors, top-level financial managers and advisers, and those whom they consider to have been responsible, should be held accountable for the present crises, for the decisions they took or should have taken, should be accountable for the problems their seeming lack of foresight caused and is causing for citizens.

Leaderships fear bad publicity, fear public awareness of socially irresponsible behaviour and consequent impact on sales and market share, on an individual's career or on an organisation's reputation and credibility.

So an effective control of corporate and top-level irresponsibility is publicity about what is being planned or being done, making the public aware of who did or is doing what, and of who condoned or omitted to restrain, antisocial or antidemocratic activities.

Particularly so when publicity names those responsible for making antisocial decisions, and those responsible for condoning, or for omitting to restrain, antisocial activities.

See   Understanding How Society is Organised for Controlling and Exploiting People

And see   Multinational Summits and Agreements (Top-level Decision-taking and Democracy)


To me it seems that government should set an example of good housekeeping by giving each citizen the choice of opting out of contributing (donating) to the government's charitable aid-funds for needy privately-owned corporations and financial institutions (that is, to their owners, directors, senior executives).


Also See

Title   Description
     
Inflation, Balance of Payments and Currency Exchange Rates   For a full statement and discussion of the alternative ways of balancing national accounts, in meaningful language and with clear diagrams and illustrations, see this report. It is about National Accounts and the national Balance of Payments, in effect about good national financial management, and was first published in 1981. Its analysis and methodology are now widely accepted, world-wide, and can help a great deal when considering the causes and effects of these crises.

Describes, reviews and illustrates the underlying relationships. How inflation affects currency exchange rates and trade. How interest rates determine share prices and pensions, and thus also the extent to which pension funds are in surplus or underfunded. Discusses multinational operations such as transfer pricing, inflation's burdens and worldwide inequality. Clear diagrams and worked examples.

See 'Press Notices'.
     
Using Words to Communicate Effectively   Shows how to communicate more effectively, covering aspects of thinking, writing, speaking and listening as well as formal and informal communications. Consists of guidelines found useful by university students and practising middle and senior managers.


Some Highlights (Insights) from the Report

How individuals in responsible positions or authority, in local and national government, are managing our affairs on our behalf and for us, is of crucial importance to every citizen.

Government has to make ends meet, has to bring about a rising standard of secure living, social security and an increasing quality of life for its citizens. To these ends do we elect governments and these objectives do we expect our government to achieve.

A government needs to balance income and expenditure, and generate a surplus, just like ordinary people, enterprises or organisations. There can be ups and downs but, says Manfred Davidmann, "failure to make ends meet is just as directly and surely the result of bad leadership and management as it is in any commercial enterprise."

This is a severe criticism also of the kind of experts and consultants used, and of the way they are used. "The quality of one's experts and whether and how their expertise is used, and applied, are of decisive importance."


Employers should pay wages which will provide a good life for employees and their families. But the lower the wage paid, the higher the profit. And there will be employers who are more interested in their own profits than in the welfare of their employees.

Some employers may then pay wages which are so low that employees are forced to work long hours merely to survive. A government may then make up such wages with income-support benefits to a poverty-existence level. Which is apparently what happened in the UK while minimum-wage requirements ceased to be applied. And which is also being done in Germany.

In such ways taxpayers' moneys are used to subsidise the profits of companies (corporations), of their owners.


Prices used to be based on 'cost plus reasonable mark-up', and unhindered competition was meant to ensure that the mark-up was reasonable. Prices are now based on what people can be persuaded to pay for what they can be persuaded to buy. The mark-up between producing in a low-wage country, and then selling in a high-wage country, can be enormous.

It was Manfred Davidmann who twenty years ago demolished the then-current economic myths about 'Price Inflation' and 'Wage Inflation', and about inflation and unemployment. He coined the phrase 'Exporting Employment and Importing Unemployment', and pointed to, and warned about, the social and economic consequences of what is now often euphemistically called 'outsourcing' or 'globalisation'.

And in 1991, Manfred Davidmann showed that multinational companies were minimising their liability for corporation tax by transfer pricing, that is by making book entries which transfer profits to the country with the lowest corporation tax.

Say a multinational has increased its profits in such ways. As the government's expenses have not changed it must make up this shortfall elsewhere. From its other tax payers, say from its citizens. So its citizens pay more tax, the government can now spend the same amount as before, the multinational's profits have increased.

This tax avoidance is legal and governments have not legislated to prevent this practice.

The multinational, and this means the owners and directors of the multinational, are thus in effect taxing the country's citizens, its population, in this way increasing the multinational's profits and thus their own incomes and wealth.


Profits can be increased by reducing labour costs, for example. Those wishing to increase profits regardless of the cost to others, will thus aim to reduce the standard of living of the working population, will aim to increase the needs of the working population so that people will work for less.

But reducing wages (or cutting essential community services) merely makes the workforce (or the community) pay the bill for inadequate management, allows the management to carry on just as wastefully as before at the expense of the standard of living of the workforce.

Demanding a fair return for one's investment (shareholders' investment, bank loans, money provided by the community in various ways) wakens up management to its responsibilities, encourages and rewards good management.


It is clear that to reduce government expenditure by cutting social services is one-sided. Why should community services be cut in preference to cutting the vast sums which are collected from the people, that is from the community, and handed over annually to a select few, to owners, shareholders and to those who control financial institutions? These enormous sums, which are handed over annually, increase the wealth and power of a very small number of people without any corresponding return to the community. They are generally given without obligation to repay, without a corresponding transfer of ownership and control to those who provided the money.

No banker, no financial institution, no shareholder would dream of giving away their capital without making sure of retaining ownership and control over this money, through the transfer of corresponding securities and ownership rights, and of direct and indirect participation in the resulting profits.

Very large sums are involved. The array of investment grants, depreciation allowances, grants in aid, tax allowances, tax-free benefits, tax reductions, loans at favourable terms and other ways of financial support to various enterprises in industry, agriculture and services, speaks for itself.

How come that the people's money is distributed in such a fashion? How come that corresponding ownership rights are not transferred to those who work in the enterprise, on behalf of the community?

Hence while on the one hand one can consider cutting essential community services, on the other hand one can also cut the flow of capital from the community to the select few and in any case can expect a fair commercial and social return to the community for the enormous sums which are annually handed over in this way.

And why is our government not making ends meet, balancing income and expenditure, which is supposed to be its duty? Why is the government continuing to borrow at our expense, why are they not planning effectively (budgeting effectively) to make ends meet?


MAI stands for 'Multilateral Agreement on Investment'. But its name does not reflect those aspects which are of deep concern. What is disturbing are not only the provisions of this proposed treaty but also that the provisions were debated in almost complete secrecy. It appears that under MAI the national governments would have handed over control, that is authority to act, over much of the economic and social welfare of their citizens to multinational corporations (that is to those who own and direct these corporations), if they had agreed to this treaty.

In other words, multinationals would have been given overriding authority over democratically elected governments.

A company, corporation, government or government officials, multinational organisation or multinational meeting, can serve as a front behind which those who take key decisions can hide, as a front for owners, directors or top-level individuals.

All multinational and so-called 'summit' meetings are suspect. Suspect are also multinational, international, global organisations, too often run by unelected self-perpetuating hierarchies, holding secretive meetings arriving at secretive social, economic or military agreements and treaties.

Secretive top-level multinational meetings and agreements negate democratic government and decision-taking, without having overriding authority or right to do so. And what we see are consequences of decisions made at the top, and the results of putting them into effect. Results and consequences which at times make the decisions seem so brutal that they appear inhuman.


What underlies democracy is decision-taking by the people at the level of the people. But what we see is top-level leaderships trying to take over decision-taking from the population.

However, socially responsible and caring governmental legislation has to take precedence over the profit-motivated activities of corporations (including financial institutions).

And representatives, governments or government officials do not have the authority or right to override, reduce or sign away the participative (democratic) rights of the electors, of the population.

No elected representative, government or government employee has the right or authority

  1. to hand over to corporations (that is to those who own and control them), or to any other organisation or to anyone else, an overriding control over the present or future, economic or social, welfare of the people, or

  2. to sign away democratic rights of their people for the self-determination of key fundamental aspects of their lives.


Decision-taking by 'leaderships' has to be replaced by decision-taking at the level of the people.

The real struggle is not between political left and right, but is a struggle for participation (the right to take decisions).


Many underdeveloped countries find themselves working to an increasing extent for those who lent them money in the past, or for those who provided essential goods such as oil at high prices, working very hard to export more and more merely to pay interest and repay loans granted in the past instead of bettering their economic capability and the standard of living of the people.

And our government and its officials are apparently making available vast sums of money which are borrowed from money lenders, to unspecified people for unspecified purposes. So we are apparently mortgaging our national future by borrowing the large sums which are to be handed out as 'aid', and would also in effect be paying the interest and capital repayments demanded from recipients of 'aid' moneys.

What stands out is that we were not asked to decide whether, why and how these aid-moneys should be borrowed and granted, and that our democratically elected government is not entitled to, has not been authorised by us, to commit our future and that of our children, in such ways and for such purposes.

Why should we, our future and the future of our children (following generations) be burdened on such a large scale by government without our having instructed government to do so, and without our agreement.


To me it seems that government should set an example of good housekeeping by giving each citizen the choice of opting out of contributing (donating) to the government's charitable aid-funds for needy privately-owned corporations and financial institutions (that is, to their owners, directors, senior executives).



Manfred Davidmann

Manfred Davidmann is an internationally well-known and respected scientist and author of a number of books and reports which have had and are having considerable impact. His work usually breaks new ground and opens up new understanding and is written in meaningful and easily understood language. Outstanding is that his work is generally accepted as factual, objective and unbiased.


Subject Index Pages and Site Overview


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Updated    2014


History: Published previously in separate parts, as follows:

Date   Title
     
21/03/2009   Community Economics and the Quality of Managers
     
25/04/2009   Balancing National Income and Expenditure in the Real World;
Multinational (Global) Operations and the Balancing of National Accounts
     
02/05/2009   Multinational (Global) Operations,   and
Government Of, By, and For the People
     
11/05/2009   Multinational (Global) Operations,   and
The Hidden Faces of Crises and Recessions
     
16/05/2009   Multinational (Global) Operations and
Financial and Economic Crises and Recessions:
Democracy under Attack: The Struggle for the Right to take the Decisions,
and for Social Accountability