Coming just five weeks after Warren Buffett’s annual letter to Berkshire shareholders, JP Morgan CEO Jamie Dimon has published what CNBC has described as the “second-most anticipated CEO missive of the year”. In this year’s letter to JP Morgan shareholders, Dimon followed a familiar format: First touting the banks record revenue and earnings in 2018 (noting that the bank’s profits are at an all-time high, even without the boost from the Trump tax cuts), warned that the bout of market volatility in Q4 may be a “harbinger” of things to come, inveighed against the forces threatening the “American dream”, and articulated a passionate defense of capitalism as a “force for good.”
After US stocks started the year with one of their best quarterly advances in years, shrugging off signs that global fundamentals are deteriorating amid an environment of looming political risks (the US-China trade war, Brexit, the looming US debt ceiling battle), Dimon commented that though everything is awesome right now, the volatility in Q4 might be a “harbinger of things to come” – though he of course remains “optimistic” about the long-term outlook for markets.
In the second section of this letter, I comment on important forward-looking issues. While we remain optimistic about the long-term growth of the United States and the world, the near-term economic and political backdrop is increasingly complex and fraught with risks — both known and unknown. And we face a future with less overall confidence in virtually all institutions, from corporations to governments to the media. The extremely volatile global markets in the fourth quarter of 2018 might be a harbinger of things to come — creating both risks for our company and opportunities to serve our clients.
Tapping into the political zeitgeist, where the debate about the growing popularity of so-called “Democratic socialism” has been raging since Democrats took back the House, Dimon offered a principled defense of capitalism as the most successful economic system in the history of the world, while condemning socialism as a road to authoritarianism and mass-poverty. That’s not to say that the social democracies in the Nordic countries have a model that works for them, and that capitalism as the US practices it can’t be improved – rather, socialism in its true form – that is government control over the economy – would be an unmitigated disaster, as history has repeatedly demonstrated.
There is no question that capitalism has been the most successful economic system the world has ever seen. It has helped lift billions of people out of poverty, and it has helped enhance the wealth, health and education of people around the world. Capitalism enables competition, innovation and choice. This is not to say that capitalism does not have flaws, that it isn’t leaving people behind and that it shouldn’t be improved. It’s essential to have a strong social safety net – and all countries should be striving for continuous improvement in regulations as well as social and welfare conditions.
Many countries are called social democracies, and they successfully combine market economies with strong social safety nets. This is completely different from traditional socialism. In a traditional socialist system, the government controls the means of production and decides what to produce and in what quantities, and, often, how and where the citizens work rather than leaving those decisions in the hands of the private sector. When governments control companies, economic assets (companies, lenders and so on) over time are used to further political interests – leading to inefficient companies and markets, enormous favoritism and corruption. As Margaret Thatcher said, “The problem with socialism is that eventually you run out of other people’s money.”
Socialism inevitably produces stagnation, corruption and often worse – such as authoritarian government officials who often have an increasing ability to interfere with both the economy and individual lives – which they frequently do to maintain power. This would be as much a disaster for our country as it has been in the other places it’s been tried. I am not an advocate for unregulated, unvarnished, free-for-all capitalism. (Few people I know are.) But we shouldn’t forget that true freedom and free enterprise (capitalism) are, at some point, inexorably linked.
Though it has been unduly vilified by some on the left, private enterprise remains the true engine of growth and prosperity in any successful country.
Private enterprise is the true engine of growth in any country. Approximately 150 million people work in the United States: 130 million work in private enterprise and only 20 million people in government. As I pointed out earlier in this letter, large, successful companies generally provide good wages, even at the starting level, as well as insurance for employees and their families, retirement plans, training and other benefits. Companies in a free enterprise system drive innovation through capital investments and R&D; they are huge supporters of communities; and they often are at the forefront of social policy. Are they the reason for all of society’s ills? Absolutely not
Read Dimon’s letter below:
Ceo Letter to Shareholders 2018 (1) by Zerohedge on Scribd
via ZeroHedge News https://ift.tt/2G0CI9x Tyler Durden