“Regression to the mean”, if allowed by politicians and regulators, will take care of the plutocrats, in due time.

Sir, Paul Marshall in “Blame the rise of the plutocrats on politics not capitalism”, January 9, holds that we need Schumpeter much more than Marx.

As you could deduct from my letter “Long-term benefits of hard landing” and which you kindly published, before you decided to name me a persona non-grata at FT, I totally agree with him

I have never been too much concerned by the rise of plutocrats, since I have always figured that, mostly, it was the result of something good… and I have always counted on the “regression toward the mean” theory, aka “reversion to the mean”, or aka “reversion to mediocrity”, to take care of the problem of the same plutocrats reigning into eternity.

But for that “regression to the mean” to happen, anyone that has that in him to be a plutocrat needs to be able to become a plutocrat… and that requires not only fair access to education as Marshall rightly puts forward, but almost foremost fair access to bank credit. And credit-risk weighted capital requirements for banks which operate in favor of those who have made it; and against those risky who have yet not made it, and who probably most of them will fail while trying to make it; blocks that fair access to bank credit.

And then of course, for the “regression to the mean” to happen, losses need to flow freely, and not be contained by QE dams, which quite often help to make the plutocrats even more plutocrats.

PS. There are some other issues related to the rise of plutocrats that need to be more closely looked into. One is intellectual property right. Why should income from a shielded property right be taxed at the same rate than those profits coming from competing bare-naked in the market?

In much current banking is just an intimate communistic relation between bank labor and the State

Sir, Karl Stenberg In “Karl Marx would have been proud of the City’s bankers”, November 11, writes “Banks’ most important domestic function is to channel saver’s money to business for investment”.

Precisely, and precisely that is the problem with current bank regulations. When regulators set different capital requirements based on perceived risk, more risk more capital, less risk less capital, to a very large degree they preempted with their own biases, how the banks were going to execute that resource allocation. 

Before these discriminating regulations banks channeled the funds based on how much they expected the borrowers to produce a risk-adjusted return on equity for them. Now, it is based on how they expect a particular borrower to produce a risk adjusted return on the particular equity banks need to hold when lending to him. 

And therefore, since lending to “The Infallible” allows banks to hold much less equity than lending to “The Risky”, banks naturally channel all their lending to “The Infallible” “The Party Members,leaving “The Risky”, “the plebeian”, like the small businesses and entrepreneurs, out in the cold. 

By the way, when Sternberg says “Karl Marx would have been proud”, he is much more correct than he imagines. For instance, when banks lend to the infallible sovereigns, thanks to the regulators, "the party bosses", they do not need to hold any capital at all, and so in that there is absolutely no capital or shareholders involved, it is just an intimate affair between bank labor and the State.

The problem with Marxism is that it does not have an owner like Coca Cola

Sir, if we look at how globalization like a sunflower that looks for the sun orients its production facilities towards low salary environments and if we instead of the ownership of physical productive capital assets think about intellectual property rights and other modern means to acquire the control of markets that allows for the extraction of surplus rents, well then of course John Thornhill could argue his rebirth of Marxism in “Behold Marx’s twitch” December 28. But, we also need to remember that is we really set our mind to it we could in fact take any philosophers book or treaty and twitch and read anything we want into it.

Coca Cola was launched after Karl Marx death but long before the last volume of Das Kapital was published and it contained cocaine; was sold in fountains; bears very little resemblance to today’s vanilla coke but is still 100% more Coca Cola than what today’s so many Marxism are an original or even a Classic Marxism… whatever that now signified. The problem with Marxism is that contrary to Coca Cola there is no owner of the brand and so anyone is allowed to lift his hand up and proclaims himself a Marxist or a communist and, if he finds enough people to scare and are willing to serve as his amplifiers, then he can bask in the shine of a historical movement and sell himself as an ideologue with a vision.

Of course we all know it would be difficult for politicians to market themselves as brittneyspearists even when such a label could be more indicative of their movements but, as so many real problem exists out there in the world and for which so many new solutions have to be developed, it really behooves us all not to make things more difficult by allowing for the use of misleading labels. Marx missed his train, it is over, let us now please move on.

Thornhill Marxism IPR