How Profit Maximization Disrupted The Natural Balance of Economies

The industrial revolution in Europe in the 19th century allowed mass production which then allowed huge profits for those who invested in them.

This prevalence of profits then led to concept of profit maximization taught in universities under the Marginal Revolution of the 1870’s.

• Profit maximization is a concept from Mercantilism, which was denounced by the new science called Political Economy.

The Marginal Revolution, however, enshrined it.

• This created the new field of microeconomics.
• The Political Economy was then converted into another field called macroeconomics.

Thus:

• The Political Economy was renamed Classical Economics
• The micro and macroeconomics led to a new science called Neoclassical Economics.

Instead of treating microeconomic profits as a bad thing that sucked wealth into private hands, it was changed into something good. Any bad effects would then be corrected by macroeconomics.

Everyone was then taught to keep on maximizing and increasing private profits. The great big problem is that high profits are only natural in backward economies:

As a country became developed, profits natural declined. The obsession with high profits made investors stop investing in low-profit ventures, focusing only on high-profit ones.

The great big problem again is that high-profit ventures in a low-profit environment is inherently more risky and speculative.

Thus, the doctrine of profit maximization:

• starved the low-profit parts of the economy (which is now the majority) of its money-lifeblood
• oversupplied the speculative, non-essential parts.

This led to an imbalance which resulted in a crash, followed by a recession which represents the starvation of value.

Under Classical Economics, low prices during a recession would prompt both businesses and consumers to invest and spend to revitalize the economy again.

However, in a Neoclassical profit-maximizing economy, the people still do not invest nor spend, since they have been programmed to go for high returns only.

This prolongs the starvation of value, causing the Great Depression of the US in the 1930s.

The Wrong Solutions of Keynes

In the Neoclassical playbook, this was supposed to be corrected by macroeconomics.

The 2 main solutions of the British economist John Maynard Keynes to the Great Depression were:

• deficit spending
• open-market operations

Deficit Spending

Deficit spending is a fiscal solution wherein the government spurs the economy by doing the spending and investment.

• This now manifests as big public works projects.

This then jumpstarts the economy through ‘multiplier effects’:

Where does the government get the money to spend? By borrowing from private people through bonds. This unlocks the money made static by profit maximization. The fact that this plan worked proves that, in the Negative Force, the instinct for self-preservation is superior to the desire for luxuries.

The fact that this plan worked proves that, in the Negative Force, the instinct for self-preservation is superior

Open-market operations

Deficit spending sucks idle money from profit-maximizing people in order to provide employment and give money to employees.

• Those employees would then spend that money to buy things, effectively employing other people.

However, this dynamic flow of money might be too slow to spread throughout the economy.

Open-market operations, as a monetary solution, speeds this up by selling back the money that governments got from issuing bonds.

• This now manifests as quantitative easing.

The Flaws of Both Solutions

Open-market operations forces idle money into speculation namely:

• stock buybacks
• tech startups
• rise of housing prices
• privatization

These defeat the goals of sustainable economic growth. Accordingly, the quantitative easing from 2008 in the United States led to many imbalances from 2015-2019 until everything came apart in 2020 during the pandemic.

Deficit spending funnels taxpayer money into projects that are run by private corporations which charge a premium for those projects compared to those run by state-owned enterprises.

So both solutions do not strike at the root cause. Instead, they merely replaced a quick decline with a slow one, stretched over many years.

• The decline from the 1929 crash was slowed down until the great collapse from WWII from the 1940s
• The decline from the 2008 crash was slowed down until the great collapse from the 2020 Pandemic and subsequent shrinkflation

The Supereconomics Solution to the Great Depression: Essential Barter and Deficit Investment

Supereconomics would resolve the Great Depression through the following steps:

1. Implement a barter system to maintain the essential parts of the economy.

This is opposed to monetary solutions and will prevent inflation and the cannibalization of the economy.

2. The government raises bonds to acquire failing companies that are essential to the economy

A collapse of an essential corporation, such as those in utilities and public transportation, would lead to a domino effect.

The government should intervene by buying those companies at a discount and then propping them up with taxpayer money. When the economy recovers, they can sell some of the shares back to the market.

This is opposed to deficit spending, since it will be “deficit investment”.