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Running an economy without "social and recurring costs" requires the implementation of the Concept of Zero Cost Economic

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Message Farid Khavari

Conservatives believe that running an economy should be run like a business by maximizing the profits, because an economy is the sum of businesses.

This is a totally absurd and wrong perception. All economies will fail under this concept, which is known as capitalism. Under present traditional economic concepts -- Marxism, Keynesianism and Monetarism -- it will always require elements of socialism to run an economy in order to prevent it from an abrupt collapse.

Here is why, whether we like it or not.

Any economy run on traditional economic concepts suffers mainly from "social costs" and "recurring costs" of all kinds. Unfortunately, these two groups of costs must keep rising continuously in order to maintain their values in real terms compared to the previous year, assuming that there is no increase in demand.

An economy is not a sum - as economists use the word - "aggregate" of businesses, because businesses are only one of the many elements of an economy.

An economy consists of four main groups that lead to rising social costs:

1) The first group consists of socially and financially deprived people such as disabled people, unemployed, poor people, veterans, retirees, students, prisoners, etc.

2) The second group of people consists of government employees from the highest to the lowest offices, such as president, secretaries, senators, congressperson, governors, mayors, all the way to cops, fire-fighters, military personnel, lawyers, politicians, doctors, etc.

3) The third group consists of buildings, facilities and equipment for the second group to operate, in addition to parks, public schools, and other community services.

4) Multi-national corporations and their CEO's who exploit the economic-political system to enrich themselves by influencing politicians by controlling the political system in their favor.

Consequently, running an economy is always associated with social costs of all kinds, many of them needed, such as cops, fire-fighters, etc. Others are necessary for education, entertainment, hospitals, etc. in the interest of the people and economy. Politicians, multi-national corporations and CEO's are a drain on the economy and the worst types of social costs!

Companies that rely on "recurring revenues" are the worst ones for the economy, because their reliance on "recurring revenues" has a series of negative effects on the economy as whole:

1) It leads to rising inflation because "recurring revenue" for one company leads to "recurring costs" for a lot of people, which is inflationary. This process is triggered due to the need to maintain the revenue in real term at least compared to the previous year. This further stirs up another process of demand for a raise of income by the consumers from their employers, or many of them would fall back on their savings. Neither one of these processes could last for too long before it all collapses.

2) Relying on "recurring revenue" hampers innovation, which are affected by neglecting innovation due to costs involved; consequently resulting in losing the potential of creating new sources of revenues.

As a result, no economy can be run effectively based on the concept of Capitalism, because it fails to distribute the wealth adequately in the interest of their own existence. Therefore, running an economy will always require the need to implement elements of socialism because many of them could not exist on the principals of Capitalism unless all the groups above (such as poor people, veterans, retires, disable and unemployed people and the rest) are packed in a boat and dumped in the middle of Atlantic Ocean making sure that they drown; otherwise, rising social costs will be the dominant part of an economy. And, socialism will always be present!

To deal with the effects of the recurring revenue, we need to move toward more innovation and promote it as if our lives depended on it--definitively, our future does!

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Farid A. Khavari, Ph.D., is a noted economist and independent candidate for Florida governor in 2014. He is the author of 10 books including Environomics: the Economics of Environmentally Safe Prosperity (1993) and Toward a Zero Cost Economy (more...)

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