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THE GREAT FINANCIAL FLOOD
By Erkan Öz
THE GREAT FINANCIAL FLOOD
1st Edition: DECEMBER 2014
Copyright © 2014 by ŞİRA YAYINLARI All Rights Reserved
Published by ŞİRA YAYINLARI
REKLAM ve PRODÜKSİYON HİZ. TİCARET – YILDIRAY YILMAZ
Cemal Nadir Sk. Büyük Milas Han No: 24-26 Daire: 161-162
Cağaloğlu – Fatih İSTANBUL
Tel: 0 (212) 256 21 08
PUBLISHER SERTIFICATE NUMBER: 12858
EDITOR IN CHEIF: YILDIRAY YILMAZ
EDITOR: PAUL S. GRIEVE
ADMINISTRATIVE AFFAIRS: AHMET ÇİMEN
COVERPAGE CONCEPT: YILDIRAY YILMAZ
COVERPAGE PICTURE: ROYALTY FREE STOCK PHOTOS
Printed in KAYHAN MATBAACILIK SAN VE TİC. LTD. ŞTİ.
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Thanks and Acknowledgements
This book is based on a presentation held at Istanbul Nişantaşı University during the ‘Economy Day’event on May 21, 2014.
I would like to express my deep gratitude to the President of the Board of Trustees Levent Uysal, Principal;Professor Kerem Alkin and General Secretary Can Uysal;for providing the opportunity for me to address acade-micians and students of the university along with some;distinguished Turkish economists; Ak Securities International Markets Manager Gökhan Şen, Garanti Securities;Chief Economist Gizem Öztok Altınsaç and Destek Securities Strategist Ahmet Mergen.
I would also like to thank Gökmen Bayın from Ihlas; News Agency, Hamza Yardımcıoğlu from Al Jazeera; Turk and my long-time friend Barış Burgalak for encouraging me to write an English book.
I would like to thank Forbes columnist Jesse Colombo, RT America anchor and Boom Bust host Erin; Ade, 24 TV anchor Zeliha Saraç, CNBC-e Turkey anchor; Zeynep Erataman, Dow Jones Newswires Istanbul reporter Yeliz Candemir Kazan and former the Wall Street Journal Turkey editor Bilgin Gözel and all others who;joined my campaign at Twitter and helped me for deciding the title of this book.
I would also like to express my grateful appreciation; to my editor Paul Sean Grieve for his great effort in proofing and editing the manuscript and polishing cover;texts.
I would also like to extend my thanks to my publisher Yıldıray Yılmaz for making it possible for me to publish this study and for designing book covers.
I would also like to thank my inspiring-nymphs and; ‘Angel Airlines’ which brought them to me.
Finally, I wish to thank my late father Mahmut Öz; for making my education a top priority and, for their;support and encouragement throughout the writing process, I wish to thank the rest of my family; my mother; Hanım Altın Öz, my brothers Ahmet Öz, Hakkı Öz, my sister Belkıs Zeynep Öz Hiçdurmaz and their lovely;spouses.
About the Author
Economic journalist Erkan Öz was born in Istanbul Turkey, in 1976. His family is from the north eastern Turkish cities of Trabzon, Rize and Samsun. Mr. Öz studied political sciences at Istanbul University and journalism at Marmara University. He has worked for international news organizations like IHA, Dow Jones Newswires and The Wall Street Journal, in turnsas a reporter, an editor and an administrator. He currently works for Al Jazeera Turkey as a producer. Erkan Öz also published a Turkish book named ‘2020 Yeni Ekonomi’ (2020 New Economy) in October 2013.
To my mother Hanım Altın (Lady Gold),
who always took care of me
through my hard times.
The greatest economic transformation in the last three centuries has already begun. The money economy has been replaced by the information economy. This giant tectonic movement invites dangerous threats, huge crises and great opportunities.
My name is Erkan Öz. I am an economic journalist,author and keynote speaker. I formerly worked for international news organizations like Dow Jones Newswires and the Wall Street Journal.
Today I wil tel you the story of the greatest financial crisis in history. It has not arrived yet but it is on its way.
When the unprecedented catastrophe hits; ‘the world as we know it’ will be destroyed.
However, you do not need to be afraid. In the coming couple of hours, you wil learn how to survive this ‘Great Financial Flood’. You wil also see that by means of some simple measures, you can even turn this approaching crisis into an opportunity to become rich.
The basic cause of this great financial crisis is not greed, immorality or mismanagement, but rather radical changes in the economic environment, to which we can refer in brief as the contemporary ‘New Economy’.
‘New Economy’ is a term that refers to the impact of new technologies on existing economic structures. For example, inventions like electricity, oil refining and the automobile significantly increased industrial output in the early 20th century and ushered in a period of new economic development.
The latest period of the New Economy started in the 1960s with the invention of advanced microchips. It continued with the introduction of other innovations like personal computers, the internet and cell phones etc.
However, the latest period of the New Economy, one that that still continues, has exerted a radical impact on the economy compared to the previous ones. It induced a change not only in the quantity of production but also on the manner in which production takes place.
In the last three centuries, the dominant type or mode of production in the world has been the money-based economy or, simply, capitalism. However, since the 1960s, capitalism has been aging or even dying in developed countries while a new mode of production, the information-based economy, or “informationism,” is rising.
We can summarize the New Economy of our era as follows:
In Developed Countries:
Death of Capitalism – Rise of Informationism
In Developing Countries:
Rise of Capitalism - Rise of Informationism
Europe, the United States of America (the US), Japan, Russia
China, India, Brazil, Mexico, Nigeria, Indonesia,Turkey etc.
Developed countries are the countries in which the money-based economy and industrialization developed earlier than in other parts of the world. Capitalism and industrialization was first seen in Western Europe. Later it spread to the US, Japan and finally to Soviet Russia.
These countries now have mature money-based economies. Meanwhile, due both to their social structures and suppression by developed countries, other parts of the world entered into money-based economies and industrialization much later.
Capitalism – Money Economy:
The mode of production in which production is organized by money
Informationsim – Information Economy:
The mode of production in which production is organized by information/knowledge
Modes of Production
Some social scientists classify societies by modes of production. A mode of production is a specific combination of human labor, equipment, information and human relations with respect to production.
Here is my classification of societies by modes of production in a very simple form:
At the beginning, there were hunting-gathering societies. People were hunting animals and gathering different kinds of plants for living.
Later in history, hunting people turned into nomadic societies. Nomadic societies disco-vered that feeding and breeding animals had advantages compared to merely hunting them. Nomads possessed not the land but animal herds and clans of people.
On the other hand, plant gathering people discovered agriculture. Therefore agricultural societies possessed land. Initially, agricultural societies were organized around small villages. As time went by, these villages grew and turned into towns and cities.
After thousands of years, many people lost their belongings or properties and turned into slaves. Rulers of societies started to possess slaves and slavery became a mode of production. Ancient Mesopotamian and Egyptian societies were examples of the slave mode of production in which slaves were possessed by the state. Ancient Greece and Rome were slave-owning societies in which slaves were held by private people.
When utilizing slave labor became too expensive, slaves turned into serfs and the feudal mode of production emerged. Serfs were villagers who owned small pieces of land or nomads who possessed a little herd but also worked for their feudal masters. Those feudal masters owned large tracts of land or substantial animal herds and by feudal relationships they controlled large numbers of people.
In the feudal mode of production and other older production modes, money was not used so much. Most of the people produced items not for the purpose of selling on the market, but rather for their own direct needs.
A villager controlling a small piece of land or a nomad keeping a little herd could grow plants or breed animals to feed himself and his family. Villagers produced their own tools, dishes, clothes etc. Futurist Alvin Toffler cal s this kind of production “consuming-production.” Even when the villager/nomad would pay tax tofeudal masters such as lords, barons, khans, kings or sultans, in most cases payment was made not by money butwith a product like grain or sheep.
Before capitalism, money was used as a medium of exchange or a good to store value. Capitalism is the mode of production where money is used as the primary tool in organizing production. In the slave mode of production, owners of slaves managed the production process.
In feudalism, feudal masters did this. Sultans, khans,kings or barons decided who would produce what, how much of it would get produced and how much tax people would pay.
In capitalism, owners of money organize production. This can only be achieved if money can buy everything in the production process, especially work power or labor. When owners of money become able to purchase raw materials, machines, labor and etc. by money, they can also decide who will produce what, where and how much etc.
By the 16th - 17th centuries, people who owned significant amounts of money emerged in Europe. In the following centuries, for various reasons, many vil agers lost their lands, so there was a lot of available labor. Now,money was able to purchase this man power. Thus, money became able to purchase every part of the production process. In the earlier stages of history, ownersof money could buy production equipment, land etc. but could not purchase the labor of vil agers. Those vilagers were strictly bound to their feudal masters by feudal relations.
When money was able to buy everything in the production process it turned into ‘capital’ or the money which organizes production. This new money-based production mode which was cal ed ‘capitalism’ was superior to feudalism. It utilized sources more effectively and created much more economic value.
By continuously developing production forces, by the end of the 18th century the money-based economy, or capitalism, caused the industrial revolution to emerge in England. In the first stage, this new way of life was spread to the rest of Western Europe and later America.
I will refer to these countries as ‘the West’ from now on. Later, capitalism went to Japan and, in the following decades, to Russia.
Communism in Russia was also a form of organized production using money. However, money or capital was owned and controlled by the state in Soviet Industrial Society. This was contrary to the way the economy worked in the West and Japan, where money is controlled by private entrepreneurs.
As I mentioned earlier, Europe, the United States of America, Japan and Russia are the places where money based economies or capitalism developed first. Capitalism developed production forces and quickly led to industrialization, so these countries are the oldest capitalist industrialist societies on the world. As we saw above, we can call them ‘early industrialized societies’ or ‘old industrialized societies’.
Money-based, capitalist, industrial society is a mass society. Everything is produced by large amounts of money and mass labor.
Before the money-based economy, most of the goods produced were made at home by family members for their own use. Each product addressed the needs of a unique person so none of the products had to be the same as any other.
At the beginning, a money-based economy intensively increased the effectiveness of utilization of resources in production. This effectiveness paved the way for development of machines, which replaced body power in the production process. These big machines, like steam engines, were located in large factories, unlike the small scale machines or tools used during feudalism, which were generally in houses or small ateliers.
Centralizing big machines in factories rather than homes brought centralization to the money-based society. Centralized bureaucracy, centralized state and central banks emerged. The new emphasis on work away from home also turned large families into nuclear or elementary families.
In a capitalist-industrial society, most of the production is made by workers in factories. Products are standard. Each unit is almost exactly the same any other.
They are produced on a mass scale. Just like products, people also become standardized.Every person starts to look the same as others in terms of clothing, lifestyle, habits etc. Life gets fast and timing becomes critical in the factory environment.
Mass production’s factory model is copied to all other fields of society. Schools, hospitals, offices etc. are all established according to the factory production system. Schools educate children out of their homes by collecting them in large groups and hospitals treat patients the same way. Thus, mass production leads to mass education, mass transportation, mass media, mass consumption and weapons of mass destruction.
A money-based economy also facilitates centralized and massive energy production and consumption. This kind of energy system requires fossil fuels in order to function. For example burning coal in every house to produce electricity would be inefficient compared to a massive coal power plant established according to the factory model.
In feudalism people were identified much more closely with faith and religion. Feudal relations were based on positions largely defined by religious affiliation.
Kings, sultans, popes or caliphates attributed their authority to God. However, in a money-based, capitalist economy, people think with their rational minds. Rationalism envisages that everything can be measured, calculated and tested. This way of thinking leads to positivism and determinism. Thus religion is pushed back and its leading position is replaced with secular ideologies.
Let’s summarize the specifications of Capitalism - Money Economy:
Factory production model
Centralization and monopolization