Trust: Capitalism's First Requirement

[Glenn Black]

Fraud and scams are out of control across the board. US, China, everywhere money flows. Capitalism can't succeed when there is no trust left. It's at every level of society. What used to be considered criminal has become the accepted norm.

Another thread (quoted above) suggested that trust is a necessary but insufficient ingredient for capitalism to work.

So what is trust?

A study at University of Windsor, Ontario, Canada (circa 2004) found that trust required 4 factors to exist:

• Benevolent best interest in the other party
• Open & honest communication
• Predictable behavior
• Competency

I accept that these 4 factors of Trust are self-evident. If you are not convinced, use some simple thought experiments to prove them as sufficient to explain Trust.

For example, assume an organization has a small problem. Instead of disclosing the issue to their customers, they attempt to hide the problem, and deny it occurred. Is hiding it from customers and regulators in the company's best interest, or the benevolent best interest of all the others concerned (ie. hiding it from customers so that the customers don't needlessly worry)? When they hide something, is this open & honest communication? When you have a problem occur, is this the hallmark of competency? If a customer is expecting "X", but gets "Y", is this in-line with predictable behavior? We can see that all four factors for Trust have been breached in this simple case.

"If a man makes a mistake, and fails to correct it, he has made two mistakes." Confucius

If we accept this research on Trust, how is Wall St. and the Banksters doing on all 4 of these factors for Trust?

What changes need to be made to FIRE so that all 4 factors for Trust are protected and reinforced by each transaction, and scoundrels are quickly exposed?

Secondly, how is the government (Federal, State, Local) doing on these 4 factors for Trust? If they are supposed to be a shining example for all others to follow (Wall St. included), how are they doing? Any anecdotes you are willing to share?

If we are to ever get out of this current mess, perhaps this simple concept of Trust can be used to point the direction to a better designed system, one that will work for us all, instead of enabling the 1% who like to rape and abuse the other 99% of the citizens, as has been occurring up till now.

"During the life of both organizations and individuals, many mistakes will be made and opportunities lost, but you can lose your reputation only once" Unknown

[Chris Coles]

Re: Trust: Capitalism's First Requirement

As I see it; we are at, or very close to, a very important point in the history of mankind. We are watching a new market develop. Instead of banksters, we will get a return to the benevolent investor that, say, in Victorian times here in the UK, built hospitals or model towns for their employees.

Every bottom brings the potential for a change. All markets develop until they collapse and are then replaced with what the real, free market - can then see what it wanted all along.

There are great opportunities on the horizon; we simply have to have the courage to step forward and address them.

[Scot]

Re: Trust: Capitalism's First Requirement

As I see it; we are at, or very close to, a very important point in the history of mankind. We are watching a new market develop. Instead of banksters, we will get a return to the benevolent investor that, say, in Victorian times here in the UK, built hospitals or model towns for their employees.

Model towns? I wish. Investors abandoned model towns when they discovered that after having built them, they had essentially no more say in how the town was run. Anyone building a model town will have it stolen from them through the political process.

[Chris Coles]

Re: Trust: Capitalism's First Requirement

Model towns? I wish. Investors abandoned model towns when they discovered that after having built them, they had essentially no more say in how the town was run. Anyone building a model town will have it stolen from them through the political process.

With the very greatest of respects, perhaps you come from the wrong nation to know the full story and this might help you. http://en.wikipedia.org/wiki/Model_village

And this is a very good example of what I was trying to get across. http://en.wikipedia.org/wiki/Bournville

[Glenn Black]

Re: Trust: Capitalism's First Requirement

As I see it; we are at, or very close to, a very important point in the history of mankind. We are watching a new market develop. Instead of banksters, we will get a return to the benevolent investor that, say, in Victorian times here in the UK, built hospitals or model towns for their employees.

Every bottom brings the potential for a change. All markets develop until they collapse and are then replaced with what the real, free market - can then see what it wanted all along.

There are great opportunities on the horizon; we simply have to have the courage to step forward and address them.

Good for you. A very positive spin on the brave new world we will soon be entering. How does your crystal ball see the major steps towards this new future? What are the key phases? How do we help prepare the way, so we stop at these necessary equilibrium spots of "greater good", with minimum risk of overshoot, or leaving the tracks all together?

[Chris Coles]

Re: Trust: Capitalism's First Requirement

Good for you. A very positive spin on the brave new world we will soon be entering. How does your crystal ball see the major steps towards this new future? What are the key phases? How do we help prepare the way, so we stop at these necessary equilibrium spots of "greater good", with minimum risk of overshoot, or leaving the tracks all together?

The first thing is the need for a return to the principles of high ethical standards in all forms of public life. I set those out in chapter 12 and 13 of: The Road Ahead from a Grass Roots Perspective www.chriscoles.com/page3.html but those chapters are particularly targeted at my ongoing debate with the US government and the exploitation by various US agencies of some telecom patents that I own, (or more correctly, are for sale at the moment).

So the starting point is for those who understand the need for ethics, to step forward to start the process of change. And by change, I do not mean more words. Actions and deeds are the only viable currency in that debate. Saying so, is not doing so.

Then we must return back to a recognition of the need to invest all local savings, not into the existing FIRE economy, but into new business and thus job creation in every one of our "local" communities. That all savings must first be used to benefit the local community .... and then, and only then; once stability is reached, may their use go beyond the perimeter. (We seem to have forgotten that many of our woes started with the idea back in the 1960's that we can invest our surplus into stocks and shares .... which led, over time, into every corner of the FIRE economy that grew on the back of those first beginnings.

We no longer have any surplus, and those that still have a pension, for example, are going to find even that will be taken to try and pay off the debts of the primary players in the FIRE economy. So this will become the inevitable starting point for the end of the FIRE economy. (They have nowhere to go when the flow of savings stops; as it inevitably will have to, to enable the "Restart" of the economy).

Much of what needs to be done is set out in my response to the UK government Green Paper Financing a Private Sector Recovery that was placed up on iTulip last year.
http://www.itulip.com/forums/showthr...ector-recovery

In essence, I intend to get my hands on, at least, a part of the embedded value of my telecom IP and use that to pump prime The Capital Spillway Trust. (No one else will do that). and then I intend to raise the £450 billion to use as set out to create 6 million new jobs here in the UK and, if there is real assistance from the US government, another 30 million new jobs there also which will require raising ~ $1.2 trillion. And yes, mad as a hatter. But as they say, I have a plan. I think I can see how to raise those sums of money, not immediately, but as the whole edifice collapses; there will be a time when all that dross paper, almost worthless, might be exchanged to create new jobs...... More on that later.

A return to high ethical standards in public life.

A recognition that the existing FIRE economic model has failed.

A detailed plan to invest into millions of tiny new companies to replenish the underlying prosperity of the grass roots of any nation that sincerely wants to change course and try something different.

Raise the funds, by making an attractive offer to the people and institutions holding almost worthless "paper" that in other circumstances will vapourise shortly thereafter.

Think positive and bring others on board that are also able to contribute their knowledge and expertise.

Never, NEVER; give up.

[c1ue]

Re: Trust: Capitalism's First Requirement

As I see it; we are at, or very close to, a very important point in the history of mankind. We are watching a new market develop. Instead of banksters, we will get a return to the benevolent investor that, say, in Victorian times here in the UK, built hospitals or model towns for their employees.

That's an admirably optimistic view.

On the other hand, there are those like myself who say that the present bankster takeover of government, economy, and culture is not in any way being counteracted by any other force visible on the national stage.

[drumminj]

Re: Trust: Capitalism's First Requirement

the present bankster takeover of government, economy, and culture is not in any way being counteracted by any other force visible on the national stage.

Who says it has to be counteracted on the national stage?

There appears to be this presupposition that the only solution to this national/global problem must be a large force that's visible at the same level.

The return to ethical behavior and focusing on your immediate local community is not something that would be visible 'from above' as it were. It's a slow movement, where one by one people will join. It may simply require individuals leading by example, rather than the masses being led by a national figure.

[c1ue]

Re: Trust: Capitalism's First Requirement

Who says it has to be counteracted on the national stage?

There appears to be this presupposition that the only solution to this national/global problem must be a large force that's visible at the same level.

The return to ethical behavior and focusing on your immediate local community is not something that would be visible 'from above' as it were. It's a slow movement, where one by one people will join. It may simply require individuals leading by example, rather than the masses being led by a national figure.

When the 'local community' is able to stop paying taxes as well as able to stop the currency it uses from being devalued, then perhaps the slow movement can succeed.

Similarly how well will local communities succeed when the banksters control all aspects of government - from the executive branch to the legislative branch, from the judicial branch to the military and national law enforcement offices?

The goal is admirable.

I am unconvinced that merely 'going local' is going to fix the problem.

[drumminj]

Re: Trust: Capitalism's First Requirement

When the 'local community' is able to stop paying taxes as well as able to stop the currency it uses from being devalued, then perhaps the slow movement can succeed.

It sounds like we're looking at the problem from two different perspectives. Certainly the amount of taxation done at the federal and state level (which gets re-distributed back locally) is an issue, as is currency devaluation. However, I don't think those are roadblocks to at least getting to a place where the tide is going in the other direction.

Supporting community banks and paying cash rather than credit cards will diminish the power of the banks and keep the money local. Being self-sufficient and honest in your transactions, and striving to have transactions where both sides benefit would help help eradicate the "screw you - I got mine" mentality that undermines any sense of community and also leads to our current governance, where people don't think about the fact the tax dollars they get back for a "tax credit" are actually coming from the pocket of their neighbor.

Will this make everything "all better?" Of course not - there are myriad problems with both our society and our governmental structure. But even if the banks would disappear tomorrow and our currency were backed by gold, nothing will fundamentally change unless the attitude, outlook, and expectations of the individuals change. We'll simply end up back in the same place in short order.

[Glenn Black]

Re: Trust: Capitalism's First Requirement

Wow!

The things you learn when you throw a few ideas out there.

I have been trying to do something about local shopping, so as to enhance the local economy. I understand that every $1.00 spent locally, there are spin-off effects that are often worth as must as $3.00 thereby equating to a total overall effect of $4.00

I have developed a simple Excel spreadsheet into which you can enter the prices from local to as far away as the other side of the planet. The governance of each organization can enter their Policy Factors (0% - 100%) for each sub-group. If you choose all 0%, then a price from a Chinese supplier is equal to the store next door. If you choose 10%, then the local supplier is preferred if their price is within 10% of those from the same region, state, or country; as you please. Using this, you can quickly determine which supplier to buy from. Local suppliers learn not to gouge (ie. thinking they have a local monopoly), as they will become non-competitive in pricing.

[Glenn Black]

Re: Trust: Capitalism's First Requirement

It sounds like we're looking at the problem from two different perspectives. Certainly the amount of taxation done at the federal and state level (which gets re-distributed back locally) is an issue, as is currency devaluation. However, I don't think those are roadblocks to at least getting to a place where the tide is going in the other direction.

Supporting community banks and paying cash rather than credit cards will diminish the power of the banks and keep the money local. Being self-sufficient and honest in your transactions, and striving to have transactions where both sides benefit would help help eradicate the "screw you - I got mine" mentality that undermines any sense of community and also leads to our current governance, where people don't think about the fact the tax dollars they get back for a "tax credit" are actually coming from the pocket of their neighbor.

Will this make everything "all better?" Of course not - there are myriad problems with both our society and our governmental structure. But even if the banks would disappear tomorrow and our currency were backed by gold, nothing will fundamentally change unless the attitude, outlook, and expectations of the individuals change. We'll simply end up back in the same place in short order.

Some interesting ideas.

"Government big enough to supply everything you need is big enough to take everything you have ... The course of history shows that as a government grows, liberty decreases." Pres. Gerald Ford President Gerald Ford to the US Congress (12 August 1974)

I agree with you. Do governments think they are all-powerful, or that we citizens are all incompetent, or both? Should not governments be limited to co-ordinating, facilitating, and communicating the actions of citizens who wish to work together co-operatively, then get out of the way so the citizens can work with other citizens to achieve their shared goals?

[drumminj]

Re: Trust: Capitalism's First Requirement

I agree with you. Do governments think they are all-powerful, or that we citizens are all incompetent, or both? Should not governments be limited to co-ordinating, facilitating, and communicating the actions of citizens who wish to work together co-operatively, then get out of the way so the citizens can work with other citizens to achieve their shared goals?

I don't think you can treat "the government" as a singular entity. I do think that many people in government (and who vote for governments) feel they know what is "right" or "best", and act accordingly, without considering it may be best for them but not everyone.

Personally, I agree with the description of the responsibilities of governments you have presented. It doesn't seem like that's up for debate here.

Back to the original topic, I would argue that governments - both local and federal - are failing pretty miserably. I certainly don't feel I'm represented by my government (my political views are in the minority). I certainly don't feel they're open about their intentions, dealings, or influences, nor do I feel they're predictable. I think that's a HUGE problem for the US.

From my point of view, limiting the scope and size of government is a means of marginalizing that issue (along with many others). The less power government has, the less damage it can do (Of course the flip side of that is it can do less "good" as well.) The less influence or power any individual entity has, the easier it is to avoid dealing with them if you don't trust them.

[Chris Coles]

Re: Trust: Capitalism's First Requirement

The drive for change is certainly not very visible at the highest level, but, for example, if you take a wider view of the Arab spring; that is surely a good example where ordinary people, at the grass roots level, are saying: "enough is enough!" So, in effect, the change is occurring, but from an entirely unexpected direction. The Arab Spring is going to have a spectacular effect upon every government due to the associated collapse of their foreign policies, driven in large part again by the now apparent failure of the long term policies of the respective governments...... that also drive the economy. Both sides of the equation are linked.

All local communities are seeing the same effects, and it is the effects that will drive change. I once built a small car park, (Parking Lot), in Salisbury in the UK and discovered that just a tiny amount of cost to the customer would determine whether or not they parked with me. It was a true revelation to see the huge difference when I was ever so slightly cheaper than the District Council parking close by. Empty to full, almost over night. Ordinary people are much more switched on to their own "local" market, than we normally imagine. But as things stand, they do not have the means to make those changes themselves.

What they need is a mechanism for change, and in my case, I believe that mechanism is the ability to create new jobs under free enterprise rules. Only time, and the chance to try, will prove me right or wrong.

[c1ue]

Re: Trust: Capitalism's First Requirement

The drive for change is certainly not very visible at the highest level, but, for example, if you take a wider view of the Arab spring; that is surely a good example where ordinary people, at the grass roots level, are saying: "enough is enough!" So, in effect, the change is occurring, but from an entirely unexpected direction. The Arab Spring is going to have a spectacular effect upon every government due to the associated collapse of their foreign policies, driven in large part again by the now apparent failure of the long term policies of the respective governments...... that also drive the economy. Both sides of the equation are linked.

The Arab Spring is an extremely poor example.

The poorest nations saw some change - cosmetic in the case of Egypt and Yemen (Army/warlords/a tribe still in control, just without figurehead), possibly some real change in Tunisia, but crushed and/or bribed in far wealthier Bahrain and Saudi Arabia.

The point I have been making is that attempts to 'go local' cannot survive in the face of overarching governmental policies.

For example: The American Civil War is a fine example of 'going local' writ into a huge section of the United States. Similarly even during the early days of the American Revolution - Shays' Rebellion was another example of 'going local' getting squashed by even a nascent central government.

Grass roots change needs political and economic space in order to thrive.

In cases where there are active opponents such as with labor reform, this space for change can only occur via direct confrontation, because anything else gets beaten into submission.