"If we can move on from Adam Smith’s 300 year-old flawed analytical system to a proper understanding of the powers and public goods we have, due to ignorance, outsourced to the private banking sector – then perhaps as both economists and citizens we might finally be able to understand the creation of money – by both central and private banks – ‘out of thin air’. Only with this understanding will it be possible to devise policies, regulation and strategies to tackle and once again subordinate global finance to the interests of society and the ecosystem." (Source: Open Democracy)
Brilliant but sometimes a bit technical analysis by Ann Pettifor of the role of money and credit in the current economic crisis. Must-read article for anyone interested in how to tame the financial sector.
"I address this subject having been convinced that the growth paradigm has no future and that some alternative vision is therefore needed as humanity begins its inevitable transition to a world beyond growth. I put forward the sufficiency economy as the most promising alternative model, although it is one that I believe may ultimately be imposed upon us whether we want it or not, for reasons that will be explained. We can go the easier way or the harder way, so to speak, depending on our attitudes and actions. " (Source: resilience.org)
Absolute must-read analysis by Samuel Alexander of the real economic alternative to the crisis.
“My point is that the sufficiency economy described above is not about turning off the lights and taking shorter showers. It is about embracing a fundamentally different way of life and a fundamentally different economy. If we do not voluntarily embrace these differences, however, and instead persist with the goal of universal affluence, then soon enough ecological and / or economic systems will collapse and we will be faced with fundamental change all the same, only with much more suffering. As I noted earlier, we can go the easier way (which will not be easy), or the harder way (which will be unspeakably tragic), depending on our attitudes and actions. We are free to choose our fate, and presently we are in the process of doing so.”
“Our problem is not lack of growth but too much of it,” Sedláček said. An economy that uses debt to grow must continue to do so by taking on more and more debt or, alternatively, face a slowdown that will lead to bankruptcy. It is like owning a car that explodes when it stops, argued Sedláček." (Source: CFA Institute)
Brilliant presentation at the Fifth Annual European Investment Conference in Prague by Czech economist Tomáš Sedláček, who was an advisor to Vaclav Havel in the past.
The full presentation which question our political obsession with economic growth is available in livestream via the Conference website.
Sedláček’s speech at the European Investment Conference is not the only sign that some of the more daring economists are waking up to the reality of a post-growth society.
Last week, the Financial Times (the Church of Economic Growth?) published an interesting article by Satyajit Das addressing the same issue. Referring to the movie “A Few Good Men”, Das says that our “politicians and policy makers seem unable to handle the truth – the prospect of little or no economic growth for a prolonged period.”
Analysing how the financialisation of the economy used debt to create demand and growth, Das claims that “expansionary fiscal and monetary policies may only provide termporary palliative relief, but cannot restore the health of the real economy”.
His conclusion is so on the money: “A return to strong growth remains an article of political and economic belief. But as philosopher Michel de Montaigne asked: “How many things we regarded yesterday as articles of faith that seem to us only fables today?”
"Our decision-making elites may tacitly understand that growth has become uneconomic. But they have also figured out how to keep the dwindling extra benefits for themselves, while “sharing” the exploding extra costs with the poor, the future, and other species. The elite-owned media, the corporate-funded think tanks, the kept economists of high academia, and the World Bank — not to mention GoldSacks and Wall Street — all sing hymns to growth in harmony with class interest and greed. The public is bamboozled by technical obfuscation, and by the false promise that, thanks to growth, they too will one day be rich. Intellectual confusion is real, but moral corruption fogs the discussion even more." (Source: Energy Bulletin)
Herman Daly (ex-World Bank economist) provides another must-read article on the fallacies of economic growth and explains why the potential for "decoupling" is limited and why economic growth has become "uneconomical".
"… in any given year, maybe one per cent of the financial economy has anything to do with the production of real, nonfinancial goods and services.
The rest? It consists of ways to make money from money. That seems innocuous enough, until you remember what money actually is. Money is not wealth; it’s a system of abstract, culturally contrived tokens that we use to manage the distribution of real goods and services. A money system can simplify the process of putting energy, raw materials, labor, and other goods and services to work in productive ways; that’s the reason we have money, or rather the reason most of us are prepared to discuss in public. That’s not what the other 99% of the world’s financial assets are doing, though. They are there to ensure that the people who own them have disproportionate, unearned access to real, nonfinancial goods and services." (Source: Energy Bulletin)
John Michael Greer’s brilliant and must-read analysis of the current financial crisis with some very valid lessons and predictions for the Eurozone. Here are a few more interesting extracts from this fascinating article:
“Since the crisis dawned in 2008, EU policy has demanded that every other sector of the economy be thrown under the bus in order to prop up the tottering mass of unpayable debt that Europe’s financial economy has become. As banks fail, governments have been strongarmed into guaranteeing the value of the banks’ worthless financial paper; as governments fail in their turn, other governments that are still solvent are being pressured to fill the gap with bailouts that, again, amount to little more than a guarantee that even the most harebrained investment will not be allowed to lose money. “
“the financial industry has done a superb job of convincing people that what they do is important to the rest of us. It’s true, to be sure, that having currency in circulation makes economic exchanges easier, and the kind of banking services that people and ordinary businesses use are also very helpful, but governments used to produce and circulate currency without benefit of banks until fairly recently, and banking services of the kind I’ve just mentioned can be provided quickly and easily by a government that means business…”
“So the downside of any financial crisis, however grandiose, can be stopped promptly by proven methods. Then there’s the upside. Yes, there’s an upside. That’s the ultimate secret of the financial crisis, the thing that nobody anywhere wants to talk about: if a country gets into a credit crisis, defaulting on its debts is the one option that consistently leads to recovery. “ (see Argentina and Iceland).
"The current crisis of global capitalism provides a unique opportunity to chart an alternative to the complicit collusion of central states and free markets that characterise liberal political economy. From this perspective, the proposed shift of focus from a self-interested pursuit of power or wealth (or both at once) to the quest for the common good opens the way for transforming modern economics. The alternative that this essay has outlined is a ‘civil economy’ whereby markets and states are embedded in the social relations and civic bonds that constitute society." (Source: OpenDemocracy)
At OpenDemocracy, Adrian Pabst sketches the contours of an alternative economy beyond free market and state, beyond austerity and neo-Keynesianism.
“The notion of ‘civil economy’ raises fundamental questions about the complex links between markets, states and civil society. Worldwide protests since 2011 reflect an implicit, inchoate awareness that ‘big government’ and ‘big business’ have colluded at the expense of the people. Both central bureaucratic states and unbridled free markets are largely disembodied from the mediating institutions of civil society, which in turn are subordinated to the global ‘market-state’.”
"Since the financial crisis of the late 2000s, most analyses have placed the failure of markets on a lack of information: traders lacked the skills to interpret complex algorithms; regulators lacked awareness of the risks banks were taking with capital reserves. Few analyses have explored the usefulness of those limits to stakeholders who had something to gain from purporting the crisis was unperceivable or understandable until it happened – or even after it happened." (Source: Open Democracy)
Very interesting analysis of the financial crisis from a different perspective based on the work of great French writer George Bataille. Worth a read.
“Overdeveloped countries, including the United States, need to adopt a strategy of economic "degrowth" to limit ecological collapse and severe climate shifts. This does not mean stagnating economic development; it means cutting down on waste and overcoming the social pressure to accumulate material wealth at the expense of others’ well-being.” (Source: ipsnews)
Short summary of the Worldwatch Institute’s “State of the World 2012: Moving towards Sustainable Prosperity". The publication will officially be launched on 11 April.
“As the world economy crashes against debt and resource limits, more and more countries are responding by attempting to salvage what are actually their most expendable features—corrupt, insolvent banks and bloated militaries—while leaving the majority of their people to languish in “austerity.” The result, predictably, is a global uprising. This current set of conditions and responses will lead, sooner or later, to social as well as economic upheaval—and a collapse of the support infrastructure on which billions depend for their very survival.”
Nothing less than brilliant longer essay by Richard Heinberg of how the world is heading for class war revolution with political and economic elites trying to shield their constituencies from the coming collapse and the need for resistance and decentralisation.
A few remarkable quotes from this hard-hitting analysis:
“The decentralized provision of basic necessities is not likely to flow from a utopian vision of a perfect or even improved society (as have some social movements of the past). It will emerge instead from iterative human responses to a daunting and worsening set of environmental and economic problems, and it will in many instances be impeded and opposed by politicians, bankers, and industrialists. It is this contest between traditional power elites on one hand, and growing masses of disenfranchised poor and formerly middle-class people attempting to provide the necessities of life for themselves in the context of a shrinking economy, that is shaping up to be the fight of the century.”
“General economic contraction has arguably already begun in Europe and the US. The signs are everywhere. High unemployment levels, declining energy consumption, and jittery markets herald what some bearish financial analysts describe as a “greater depression” perhaps lasting until mid-century (see, for example, George Soros’s comments in a recent Newsweek interview). But even that stark assessment misses the true dimensions of the crisis because it focuses only on its financial and social manifestations while ignoring its energy and ecological basis.”
“movements to support localization—however benign their motives—may be perceived as a threat by national authorities. This is all the more likely as the Occupy movement organizes popular resistance to traditional power elites.
Where national governments see local citizens’ demands for greater autonomy as menacing, the response could include surveillance, denial of public assembly, infiltration of protest organizations, militarization of the police, the development of an increasing array of non-lethal weapons for use against protesters, the adoption of laws that abrogate the rights to trial and evidentiary hearings, torture, and the deployment of death squads.”