Most experts agree that we no longer live in a corporate-based economy, were giant corporations favored by our governments ran the economy, whilst our elected governments managed our money. This is due to the rescue of many toxic, and failed giants like our banks.
In the USA alone after a range of bailouts, stimulus packages and takeovers, an estimated 58% of Americans are dependent in some way on the US government for their income. In Europe, this percentage is much higher, especially in countries in France and Germany.
In theory we are the government, after all we elect the representatives who decide how our countries are run, whilst our taxes are for the services our government offers, and the base salaries of our elected officials. However in practice, often many of us feel, we are separated from the government, and have no real influence on how our governments are run.
The New Economy that has grown out of the market crash of 2008, illustrates this point. As State and National Governments now technically, own many of our homes and banks, after bailing out them out. In reality, this crash created a government- based economy.
An economy were we pay and elect who represents and works for us, but at the same time are dependent on ensuring our own mortgages, business loans and debts are paid to keep these governments running.
And this trend is not going to change. By 2015, some economists agree that the USA, the once Father of Free Market capitalism, may directly or indirectly have 67% of Americans dependent on them for their incomes. In Europe the scenario could be far worse.
The question is as private wealth declines, and we become dependent on State-wealth to stimulate our economies.
How does this change affect us?.
Small business owners may become ever more dependent on Government sponsored grants, and tax breaks to survive. Banks will have to become more rational, and hardball about who they loan to. Governments already saddled with huge debts, may pass them on in increasing taxes, and exchanging international debts for trade.
Mortgages in effect become “de-facto” rent-buy housing from our Governments, who collect the monthly payments through the Banks they bailed out.
Businesses will become dependent on grants and stimuli packages to survive. As governments fighting the scourge of unemployment encourage business start-ups by offering financial help. Once example of this can be seen in Europe:
The European Union award grants to new businesses, often in the guise of a basic monthly wage to allow the business to run, until profits allow the business to become independent. Often this “grant” is for two years.
A good idea, right?
In most cases, after the two year period, these new businesses close their doors for good. One example was a Spanish town were the town center was turned into a scenic shopping area. After two years this area became a ghost town, as small businesses closed, once the grant ran out. These businesses became over-dependent on the European Union to finance them, and could not exist without this grant.
Dependency on large favored corporate giants caused the current effects on our economy, but a State dependent economy may also not be the answer. A third more flexible way to run an economy may be needed, that is not only dependent on big business or big government to run our economy.