Tag Archives: economics

Doughnut Economics – A Review

 

Kate Raworth’s book on economics is a very readable and useful text. The odds are, if you’re reading this blog that you are the sort of person to question conventional economics. You’ve likely noticed that the constant growth model doesn’t make any sense and that GDP doesn’t measure anything useful. But now what?

The Doughnut, is the safe space for humans that meets everyone’s basic needs without compromising the planet.

In Doughnut Economics, Kate Raworth lays out the history of the subject, explaining how we got to this current set of beliefs about the role and functioning of money. There is nothing natural or inevitable about where we are and it is not underpinned by any real laws. What has happened, is that the people making policy and working with money have adopted the stories of economists and to some degree, made them true. That’s not the same as making them work. The exciting thing in all of this is that economic stories can change, which in turn would change our relationships with each other and the planet.

What’s particularly good about this book, is that it doesn’t just offer top-down solutions for fixing things. There’s a lot here we can take onboard as individuals and within small community groups. For anyone who wants to be part of changing our collective story about economics, there are tools here for your kit box.

This is an excellent book to read alongside Ecolinguists (which I reviewed here – ecolinguistcs-a-review ) because the stories we tell about money, finance, taxes, and the economy are both economics issues and ecolinguistic issues. How we are influenced by the language of these is really important. There is power in understanding that language – firstly the power to step out of the story and see yourself differently. Secondly we have the power to influence each other through the economic stories we tell and the language we use to tell them.

And if that doesn’t make your bardic heart beat a little faster, or swell with hope and possibility…

More about Doughnut Economics here – https://www.kateraworth.com/doughnut/

 

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Just being naive

You don’t live in the real world, they tell me. You don’t understand how it really is. You’re naive and an idiot. Well, maybe I am. But nonetheless I continue to believe that the world of soil and trees is the real world, while the world of economics, is fantasy. I believe that most people are ok, and that if you treat people kindly, most of them will be able to be kinder people.

The thing about my naivety is that the evidence backs it up. Under austerity, crime has gone up because more people are desperate. Resources are in fact finite where the logic of economics involves infinite growth. Everywhere universal basic income has been trialled, all kinds of social benefits follow. Both crime stats and hospital admissions go down.

What we do when we are grasping, and cynical about each other, living in the dog eat dog logic of a brutal real world, is we make everything worse. We make our own reality, collectively, and if we push this way, this is what we get. It is not inevitable, or necessary, it is a choice.

Other choices are available.

If we choose to be kinder to each other and to other species, things would be different. If we choose to live responsibly and within our means, we could change our relationship with the planet. From the dog-eat-dog perspective that would just be setting ourselves up to be beaten by other countries, passed by their willingness to exploit more than we do. We’d be weak, the underdog, the dog who is eaten in the dog-eat-dog world. Step back a moment and this looks more like a choice between destroying ourselves to ‘win’ some imaginary game that delivers nothing in terms of happiness, and not doing that.

The UK is the 5th biggest economy in the world, and yet we cannot, apparently, feed our hungry, home our people, keep our children out of poverty or protect our landscapes. It’s an odd sort of wealth that cannot achieve these things. It makes me ask what on earth a measure of wealth means given that life expectancy has gone down of late. From where I’m sat, it doesn’t look like wealth at all, it looks like terrible poverty and misery for many people. But hey, keep telling me about this real world you live in.


Economics is more philosophy than maths

There’s a bold assertion to start a Monday morning with. It comes out of the difficulty of discussing alternative economic approaches with people who aren’t green. The argument always, always goes ‘but where does the money come from? It doesn’t add up? You can hardly run a country if you can’t do basic maths’.

The current economic models defining how our financial world works can all be traced back to people. John Stuart Mill and John Keynes have always been the poster boys, but there are plenty of other people with ideas in the mix. From the outset there have been countering voices, speaking against our current economic models. This is theory, not science.

The mistake we are encouraged to make, is to believe that our current economic system isn’t theory, but truth. That it is a science based on numbers, and therefore beyond question, is an understanding that serves to keep the current approach in place. The numbers follow the philosophy, not the other way round. If you require alternative economic theories to be measured by the dominant one’s standards, of course they don’t hold up, because what you get is a numbers game, not a conversation about the underlying philosophy driving the numbers.

So, what is the underlying philosophy? It is about value. Money is a system for recognising value, and we understand value as that which can be bought and sold, and we understand profit as good. Starting from this position, growth is good, and more trade is good, more consumption is good. Our system tells us that only that which we can sell has a value. Health only has a value in terms of ability to work, or to sell health care. Beauty only has a value if someone will pay to look at it. Unpaid work has no value, eco systems are assumed to have no value. The future has no value, your unborn descendents have no value and your quality of life has no value. It is possible to value things you cannot buy and sell. We need to reclaim that.

If your system is only interested in how to move money around, it does not even properly think about resources. It’s a very short term growth economy that we have – as we run out of resources, there’s no long term thinking about how to be viable in the future.

Our system treats work as a moral virtue for those who are poor, and as unnecessary for those who are rich. Anyone who is poor and unwilling to work is lazy and stupid. Anyone who is rich and unwilling to work is virtuous and clever – we are not considering the value of the work to the society in this, we are assuming money to be inherently good and having it to mean something. Thus a person who has never done anything useful because their parents are rich and they don’t need to, is loved, and a person who has never done anything useful because they belong to a culture of low aspiration, is hated. This is about valuing and belief, not about maths, because either way there’s a person who does no useful work, but attitudes to it are radically different.

If you start to question what value means, you need a totally different conversation about how economics might work. If you want to factor in your grandchildren (or someone else’s) your happiness, the condition of the oceans and the wellbeing of bees, you need a whole other philosophy. No one is buying or selling the wellbeing of bees, people are buying and selling the chemicals that kill them. This creates an inevitable bias if all you value is that which can be bought and sold.

For anyone interested in a grass roots approach, I’ve been wondering about how we act in our own lives to challenge this. My personal answer is that some of the best things I do are not and will never be for sale, and I watch myself for any evidence that I am letting the price tag influence my value judgements.


Questions of worth

We live in a culture that values people based on their economic power. It is not the value of how that money was earned, or how it is deployed, but the money itself. This is how we are able to entirely respect people whose wealth came to them by chance – via inheritance, by gambling, by using money to make money out of other people’s money. To make a fortune from share dividends is perfectly socially acceptable. Never mind that the pressure to create dividends pushes down wages and quality in order to cream off a layer, and undermines scope for re-investment. Never mind that the desire to make money at all costs is trashing the planet.
If we valued people in terms of the actual contribution they make to society, we might be able to look at whether the massively rich are as useful as they claim to be. We are told that affluence trickles down (I see Smaug on his pile of gold jealously watching the one coin bounce away). We are told that the wealthy create jobs and affluence for others. Only if we stop assuming this to be a truth and start looking at it will we be able to see whether or not its the case, but I have my suspicions. The gap between richest and poorest is growing all the time. If wealthy people were good for us all, surely we should all be gaining materially at about the same pace, not seeing a widening gap?
Money, as economist Molly Scott Cato has been pointing out a lot recently, is a social contract. It is about trust, and the means to move resources around in a community. Money exists to get things done, and can be very useful indeed in this regard. We can use it to measure how much we value something, and it saves having to get the right number of chickens when you fancy a new rug. Money as an expression of exchange can be a great social enabler on many levels.
On those terms, valuing a person in relation to their money makes sense. They are worth what the people around will pay for the things they make or the things they do. Money could therefore be expected to flow towards a person who is really useful and highly valued. However, what we’ve been able to do as a culture, is manufacture scarcity. When things are hard to get, exclusive, or rare, their value goes up. The person who can control the flow of resources can therefore create extra wealth. Not by adding more value to the world, but by artificially pushing up the cost. Keeping land vacant can be a way of pushing up land prices to make more money off it, for example.
We have the resources to feed, clothe, educate and power everyone, modestly. However, that doesn’t allow a minority to stockpile wealth. The desire for wealth has broken the trust-contract that money was created to represent. We don’t move things around fairly, and we push up the prices to make profits, and squeeze down wages, and that is having the effect of starving cash flows in our economies. We need to look very hard at our system that allows people to make money by moving money about, rather than by doing something useful. If we valued what people contribute a bit more, and valued their bank balances a bit less, we might have a cultural revolution on our hands, quietly and with no bloodshed.

A Druid economy

Of course these days as a Druid you do not get to talk sense to those in charge in any kind of structured way, so I’m just going to vent theories on the blog.

Austerity. It doesn’t work. The UK is still borrowing a lot of money and not paying off its debts, and at the same time the poorest are suffering. Apparently millionaires are poised to get tax breaks, because we all know how much those folks are hurting… (gah). Now, the poorest people in the UK are not just unemployed or too ill to work, but also include a lot of people in part time and low paid employment. Rising rents and council tax, rising fuel costs and amenities (while companies make profits) put the squeeze on incomes that are not rising. People pay for the essentials, and they buy cheap because they have to, in order to survive. The more pressure you put on the poorest in society, the less economically active they become. Oddly enough, high streets are increasingly dominated by pound stores and charity shops, while big chains close an average of 20 stores a day across the country. Every store closed represents more job losses, more people needing a hand, and having less money. And so the squeeze extends.

The way things are set up, economies depend on movement of money. GDP is simply a measure of movement. The faster the money moves the more everybody appears to have. It’s a funny old world. However, reduce the incomes of the poorest, and they stop buying those luxuries like books and music. They stop going down the pub, for a night out. When enough people stop doing that, pubs close, and ooh look, HMV has just folded. (Music, for anyone unfamiliar with them.) In this climate, only bargain basement stores selling dodgy horse burgers are going to thrive.

There’s no political will to cap rents. We hear a lot about how people on benefits are scrounging off the state, and nothing at all about how much public money ultimately finds its way into the pockets of private landlords. So run that past me again about who is scrounging here? People in work get tax benefits because in the current climate, the minimum wage is not enough to live on. We’re not talking heady luxuries, we’re talking bare essentials. No one is talking about how private employers ought to be paying workers a living wage rather than the state picking up the tab. Remind me about who the scroungers are, please. In the last decade or so the private sector has not invested in growth or jobs. It’s just paid fat dividends to shareholders and ever more obscene bonuses to management while the people who do the work struggle on a not-living wage. Then, thanks to that lack of investment, business in the UK does not thrive, jobs move overseas, businesses fail to pay their fair share of taxes. The rich underpay the poor, decline to pay their own taxes, pay themselves huge bonuses… Meanwhile those with no hope, no prospects, no opportunities and no money sink into despair, and when the government notices the total apathy out there, they ascribe it not to depression or futility but to laziness.

If we had a level playing field and all you needed to do was work hard and you’d succeed, then berating the poor for not making an effort would be fair enough. That’s not the score. But it’s not at all clever, because the more money you take out of the pockets of the poor, the less money you have moving around. Those people sat on huge wads of cash are not spending it to drive the economy. Squeezing the poor does not make for a healthy economy. How about paying a living wage, providing work opportunities, having business invest in business rather than creaming off the profits all the time… we could have something that works passably well.

Perhaps David Cameron wants to bring back feudalism, picturing himself as mighty ruler of Great Britain. The trouble is Mr Cameron, go on this way and you will have total power over all your serfs, but all you’ll get is to be King of a pile of dirt, dressed in a ragged and filthy robe of state, with a crown made out of rusty spoons. We got rid of feudalism for a reason – we were tired of the Dark Ages. Go back there if you want to, get into re-enactment or something, but for pity’s sake, stop trying to take the rest of us with you.


Earning it

We hear a lot from the government about workers and shirkers, the hard working who deserve their money and the scroungers who deserve nothing. By this we are to understand that wealth itself is evidence of effort while poverty indicates laziness. That would be a very convenient explanation, skipping over how much wealth is earned and how much inherited. Wealth buys opportunity, education and connections, but if you acknowledge that, you have to recognise that massive earning differences have nothing to do with worth.

Now, if someone is out there saving lives, then it would be hard to over value their worth. Firemen would be a fine case in point. Would any of us argue with massive pay rises and bonuses for firemen, who risk their lives on a regular basis to save the lives and property of others? Firemen are heroes. We will never be able to thank them enough for what they do. But, compare that to bankers who take other people’s money and effectively gamble with it, and seem to get paid whether they make money for their bank, are mediocre or actually bankrupt a country. I’d love to know how that works. The guy at Barkleys Bank wisely declined his obscene bonus this week, perhaps recognising it might not be politic to take what he clearly hadn’t earned.

We have a system based on ideas of growth, market development, investment and whatnot. Now, skipping over the issue of infinite growth with finite resources…. I learn from the Guardian that the economic boom of the noughties was an illusion. Businesses were not investing or growing, and most of the money came from borrowing against inflated house prices. FTSE top 100 companies grew by 2.6 % on average per year while executive bonuses went up by 26 % a year, on average. My ten year old can do the maths. It’s insane. If a person gets paid way beyond what they earn, or generate for their company, they have not earned it. A bonus based on actual profits, actual development would make some kind of sense, but this doesn’t. It’s all about those in high places having the power to set their own pay scales and enough friends also in power to back them up. If you can’t show your company is thriving, you haven’t earned a bonus, and the only bonus you could earn would be in line with company profit. Anything else is TAKEN, not earned.

Let’s backtrack to those thought forms about hard work and earning your money. No company could survive without the people who do the work. The makers and builders, the ones on the shop floor, the ones talking to customers. These are the people at the bottom end of the pay scale, least valued by the company and they aren’t paid bonuses, in the normal scheme of things. Why assume if a company thrives that it is only due to the efforts of the management?

What I’d like is legislation that requires bonuses and pay rises to be linked directly to profitability in a meaningful way. (Not think of a multiplier and use that). I think there should also be a requirement that bonuses be paid out to every employee, not to managers alone, in situations of profit and success, and that people who are discernibly doing a mediocre job, or failing, should not get pay rises. Workers don’t get pay rises if their annual review doesn’t see them as being valuable. Why should bosses be different?

The irony here, is that this would be a system to drive genuine growth and investment. Full on capitalism. The people who claim to be capitalists evidently aren’t – rewarding failure and not investing to grow do not a capitalist system make. It’s not about the market, it’s simply a leech culture. And here’s me, anarchic and anti-capitalist with a vision that, although it alarms me to say it, is really speaking more innately capitalist in principle than what the capitalists are doing.

Yes Mr Cameron, we do have a culture where there are hard working people, and scroungers. Generally speaking, the scroungers are doing really well at bleeding the economy dry for their own benefit, while the hard workers are not anything like as well paid as they deserve to be. This is because we have a system that rewards power, not effort, or achievement. Just power. But that’s probably not worrying you, given that you are quite definitively In Power. However, as every leech knows, if you bleed a thing dry, you starve. A little enlightened self interest might not go amiss


Beating the system

I’m watching the economic and social justice memes floating about on the social networking sites. The sheer joy of seeing the blindingly obvious being stated. You cannot run a system purely to serve those at the top, it will break and fall apart. Economics is more make believe than proper science. What we have doesn’t work. And that other one, the 100 richest people in the world could end extreme poverty four times over with what they raked in last year. I’m not going to say ‘earned’ because there is nothing that could merit that kind of wealth. People are recognising and saying that money earned does not equate to hard work, or effort, or value of what you do. It equates to the power you had in the first place. The Emperor has no clothes on.

The thought I keep coming back to, is that I do not want to contribute to the bank balances of the super rich. Watching the immoral, illogical behaviour of my own government, I’m not mad keen to give them cash either, they clearly cannot be relied upon to make good choices in how they use it. So what does that leave me? I can’t decline to pay taxes.

Or can I?

Small businesses and lone traders do not, if their turnover is very low, have to register to pay VAT. If I stay away from products with duty on them, that’s more money that isn’t going to the government. If I buy second hand, from charity shops, that’s all kinds of sticking a finger up at the system. If I buy from a creator then I know at least in the short term, my money goes to them. If I buy a small brand not a big name, use a local shop not a supermarket, and so on. Basically, if I can see the person who made the thing, or grew it, or undertook it, and I pay them, I have some idea where my money went.
If I make my own alcohol and give it away.

Giving things away is really powerful. No tax. No engagement with the money systems at all. I used to use freecycle, and when I’m not on the boat, I will again. I just gave away my poetry. I give away my time for good causes, and my ideas in the form of this blog. I can do more.
There is no way I can extricate myself entirely from a system that sends cash to people who have way too much of it already, but if all of us just made a few token gestures at non-cooperation we’d make some interesting progress.

Money appears to be what our government cares about. Protesting doesn’t bother them. Vote and you get different faces and the same shit. But hit them in the bank account, take away even a little bit of power from their economic systems, and they become vulnerable. They can’t legislate into making us give money to Rupert Murdock rather than going to a live gig. They can’t make us buy fuel rather than walking. You can’t lock people up for not buying lager, or for giving away clothes they don’t want any more, and yet the power to destabilize the whole system is there, in those small acts of rebellion.