Deficiences Of Capitalism

I just finished reading Jeremy Grantham's February 2012 GMO quarterly missive, The Longest Quarterly Letter Ever (pdf).

Now, I've always taken what most prominent and heralded money-managers say with a grain of salt because it's their job to attempt to marginalize the individual investors' abilities to achieve success on their own. Especially when they say things like - "If you cannot resist temptation, you absolutely MUST NOT manage your own money." or "Only a handful of the hundreds of senior economists and bankers seemed to see what was coming."

It's imperative to remember that fund managers' success in business isn't fully dependent upon their investment successes, but rather, their ability to convince you that they can invest your money better than you can do it yourself. In actuality, most cannot. They're salespeople, and they generate their income from fees charged to assets under management, regardless of performance.

But, I digress.

The reason I mention Mr. Grantham's letter is because I agree with Part II: Your Grandchildren Have No Value (And Other Deficiencies of Capitalism) and his criticism of some the aspects of capitalism as it stands today. It provides great food for thought, and criticism often leads to greater awareness.

One paragraph excerpt that I especially found insightful is -

It gets worse, for what capitalism has always had is money with which to try to buy influence. Today’s version of U.S. capitalism has died and gone to heaven on this issue. A company is now free to spend money to influence political outcomes and need tell no one, least of all its own shareholders, the technical owners. So, rich industries can exert so much political influence that they now have a dangerous degree of influence over Congress. And the issues they most influence are precisely the ones that matter most, the ones that are most important to society’s long-term well-being, indeed its very existence. Thus, taking huge benefits from Nature and damaging it in return is completely free and all attempts at government control are fought with costly lobbying and advertising. And one of the first victims in this campaign has been the truth. If scientific evidence suggests costs and limits be imposed on industry to protect the long-term environment, then science will be opposed by clever disinformation. It’s now getting to be an old and obvious story, but because their propaganda is good and despite the solidness of the data, half of the people believe the problem is a government run wild, mad to control everything. So the “industrial complex” (or parts of it) fights to increase the inherent weaknesses of capitalism. They deliberately make it ever harder to reach the very long-term decisions that will serve us all. The influence of the Tobacco companies in deliberately obscuring the science to protect profits at a huge cost to society in health costs and lives is a perfect analogy to the energy industries that work hard to confuse the public on scientific measures of damage to health and the environment. Yet it is one that is surprisingly forgotten.

Make sure to take the time to read at least Part II in it's entirety.