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Wednesday, 12 February 2014

Our Middleman-Skimming Economy

Of Two Minds
Charles Hugh-Smith

The Internet is enabling sellers and buyers to bypass the predatory State and the parasitic middlemen the State enforces.
Why do we read commentaries and analyses? To understand why the Status Quo is dying and to have a hand in shaping the new way of living that will replace it. Longtime correspondent Zeus Y. recently encapsulated the core dynamic of our era:
"Here's the deal between the two worlds right now: the Status Quo is dying but trying to take everything with it and the other is trying to hold the old world up enough to avoid complete collapse, buy time, and construct the airplane of the new world, all while flying."
Humans avoid changing current arrangements until there is no choice left but to change them--usually when the arrangement collapses in a heap. Greece is an interesting example of just this dynamic: the political parties left, right and center are desperate to keep the corrupt Status Quo intact, while those whose slice of the swag has vanished have already moved on to new arrangements that no longer depend on Central State swag or the many layers of middlemen that skimmed off most of the wealth for various monopolies, cartels and Elites:

After Crisis, Greeks Work to Promote ‘Social’ Economy

Here's the Status Quo arrangement: the Elites trying to take everything they can before their vast skimming arrangement finally collapses:
Corruption in the EU and Greece (Acting Man) 

Greek official bribed 'more times than he can remember'
At the time, Mr. Kantas, a wiry former military officer, did not actually have the authority to decide much of anything on his own. But corruption was so rampant inside the Greek equivalent of the Pentagon that even a man of his relatively modest rank, he testified recently, was able to amass nearly $19 million in just five years on the job.
Corruption across EU 'breathtaking' (BBC)
It's instructive to study the key strategy in Greece's social/community economy: get rid of the middleman.
There's a couple of things we need to understand about middlemen before we can grasp the revolutionary nature of a social/community economy. 

A middleman adds value to both supplier and buyer by making transactions faster, easier and cheaper. A bank, for example, clears payments made with checks, and takes depositors' savings and loans the money out at interest to borrowers. Both of these transactions are fraught with various risks and complications, and the bank charges a fee for taking on the management of the transactions. 

A wholesaler adds value by providing a market for both sellers and buyers that enables a transfer of risks and transaction costs to the wholesaler in exchange for lower prices to the seller and higher prices to the buyer. 

The keys to this middleman economy are transparency, voluntary choices and the competition that arises in transparent voluntary markets. Middleman economies function for both sellers and buyers only as long as all transactions are voluntary and the costs and risks of using middlemen are transparent to all participants. 

The problem, as Marx foresaw, is that profits are always at risk in such a competitive marketplace. Middlemen who raise their prices enough to skim big profits are soon abandoned by sellers and buyers who can get lower transaction costs elsewhere. 

The ideal system for middlemen is the exact opposite of an open competitive market: low-risk fat profits flow to monopolies or cartels that obscure costs, and turn sellers and buyers into involuntary participants who have no other choice but to give money to the middlemen. 

This is the middleman-skimming economy, in which middlemen are free to skim enormous profits from participants who've been left no other choice.

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