Is Socialism bad?

I have been following the debate over the US Presidential elections off late, and the fight between the Republicans and Democrats has come down to Capitalism vs Socialism, with Bernie Sanders being the most vocal proponent of Socialism, along with Hillary Clinton and Donald Trump and the Republican candidates being the most vocal proponents of Capitalism.

I have not seen a lot of people talk of the virtues of Capitalism on the media so far but I have seen a lot many attacking Socialism. If you find main stream media talking of virtues of Capitalism, please feel free to correct me. 

To go to the definition of Socialism, I would refer to the book "The Audacity of Hope" by U.S. President Barack Obama where he states that socialism is derived from an idea of there being a social safety net, to protect people and businesses from failure. The Wall Street bailouts in 2009, TARP bailouts for businesses such as GM around the same time, the health insurance plan proposed by Obama and the US Social Security are all based on this Socialist ideal.

The arguments against Socialism are based on the model of Greece, Portugal , Italy and Spain - debt ridden economies of the EU that have run such high government deficits from socialist policies that the tax levels needed now are unbearable for the businesses to survive.

I think the fair question to ask is what is the fair value for the cost of social good derived from Socialism? Clearly the EU model is too expensive. It will be for the governments to decide where they tax their businesses, but one thing is for sure - Socialism is not bad and just needs to priced right to make it marketable to businesses.

IT delivers on productivity

I think this needs to be said now more than ever. In the global macro environment, where there is a lot of demand uncertainty owing to lack of macroeconomic stimulii from various central banks, businesses can still deliver on results through the use of technology in general and Information Technology in particular. I would like to talk a little about this topic here.

There are a number of case studies listed on the Nucleus Research web-site that study the Return on Investment for Information Technology based investments, a lot of which are free. Here is a reference to an interesting case study from Nuclear Research stating that investments in BI and Analytics can give up to 1300% ROI.

Here is a link to another interesting case study from Nucleus Research stating that investment in Google Apps based cloud IT infrastructure gave 830% ROI to 2nd WIND. 

You will find a number of other examples on the Nucleus Research web page describing how investments in IT have paid good dividends to some of the most competitive companies. Through the strategic use of IT, businesses can take their operations to the next level of performance and deliver results.

Where to find growth in the post QE era?

The market turmoil over the last few weeks has indicated that businesses are uncertain where they will see growth, now that the QE has ended in America and the interest rates are on the rise. The Chinese economy which had overheated, is now cooling off and the demand for oil, iron ore, copper and other commodities are dropping along with their prices. China is suffering from an over-capacity problem right now.

I think in this environment, the input costs for manufacturers would be very low since the price of oil is at an all time low and the price of copper and iron ore are also close to their all time lows. This should boost the margins for the manufacturers if their sales are constant. So all else being same, the manufacturers should be able to report better profits. 

But the demand side is weak as the consumer is not spending a lot of money. This is due to the fact that they are cautious in this uncertain environment. In this situation, lowering the prices could be a good solution to increase sales. Considering the low input prices, manufacturers of goods should be able to sell their goods at a much lower price now vis a vis one year ago. Price of oil has dropped from the $50-60 range in 2015 to $30 per barrel today.   Iron ore prices have dropped to a third of where they were one year ago.  Copper prices are down 8% year over year. 

There could be demand for commodities from building heavy infrastructure such as a rail road in Afghanistan or solar power farms in Sahara in Africa. India, which is facing a power deficit right now, is planning to build 5 new nuclear reactors in collaboration with the French. I think there are business opportunities and investing opportunities present today that could yield dividends going forward.