Hot off the press
https://www.opendemocracy.net/transformation/kate-raworth/seven-ways-to-think-like-21st-century-economist

er... I'm still looking for the bit about the thieving, conniving, corrupt bankers ??

gg

I doubt this author has done any hypothesis/testing, any more than the whole superstructure of mainstream economics has been subjected to, the last 170yrs-plus. It's all a bunch of ideas, not a science, any more than 'political science' is.

I'll tell you when I've read it. I discovered the snag of being plugged-in to the latest - it costs launch-hardback price, not Amazon 'new and used' cheap paperback price!

That's a good resource - I'll check out my favourite renegade authors.

How goes the studying, Tom?

Herr Monbiot is enthusiastic:

"I see her as the John Maynard Keynes of the 21st century: by reframing the economy, she allows us to change our view of who we are, where we stand, and what we want to be."
https://www.theguardian.com/commentisfree/2017/apr/12/doughnut-growth-economics-book-economic-model

I suspect an element of confirmation bias there, though - since he seems to engage with the rhetoric rather than looking at any analysis.

Just reading Monbiot's boil down, I like the idea. Basically she (or is it Monbiot) seems to be saying that

1) just measuring "growth" is a bad idea. We need to measure a much larger number of variables.
2) Rather than aim for Maximizing or Minimizing a variable we need to aim to keep them within a range that does not force people into poverty at one end or damage the environment (physical, social etc) at the other.

Not read any more than Monbiot, but that in itself would be a huge step forward. It's something that some politicians have even paid a tiny bit of lip service to e.g. Cameron's "happiness" drive...(cynical though that was)

Nice poser in Doughnut Economics (Sunday Times no.6 bestseller):

"No country has ever ended human deprivation without a growing economy.
And no country has ever ended ecological deprivation with one"

"We have an economy that needs to grow, whether or not it makes us thrive.
We need an economy that makes us thrive, whether or not it grows".

Indeed - the assumption that growth is good and that even running on an even keel is failure has been (well still is) established doctrine for a long time. I can see arguments for growth in less developed nations to help bring standards of living up but at some point you have to ask when is enough enough.

Posted By: fostertomHow is that interest paid? By growth. No growth, no interest paid,

Yep, that's the bit that makes my head hurt (even more than other bits of economics/finance). What's special about renting money, as opposed to, say, people or land, which needs growth for payment? Is it that with a fixed amount of money you'd eventually have all of it being paid as rent on itself and none doing anything useful? So you need to be adding more money. So you have to have growth otherwise you'd have deflation and nobody would want money then?

Is part of it that you need growth so that the bottom 10% or whatever have some hope and don't get so pissed off they become revolting?

This stuff puzzles/confuses/frustrates me no end.

And, yes jfb, more people asking when enough is enough is big part of what we need.

For the planet to live without growth, the money system would have to change radically - we can only live in hope.

Is that going to help people like George Osborne, do you suppose?

This long scan, from
https://www.amazon.co.uk/Throwing-Rocks-Google-Bus-Prosperity/dp/0241004411/ref=sr_1_1?s=books&ie=UTF8&qid=1495227270&sr=1-1&keywords=throwing+rocks+at+the+google+bus
explains it so even I can understand:

Before the invention of central currency, money’s primary purpose was to help people exchange goods with one another more effi ciently than simple bartering allowed. Anything that promoted the circu lation of goods between people was considered a plus.

In fact, prior to the emergence of the bazaar, most people didn’t have any need for money, anyway. They were peasants and farmed the land of a noble in return for a bit of the crop for themselves. The only money was precious-metal coin, either left over from the Roman Empire or issued by one of the trading centers, such as Florence. A bit more currency was issued to pay for soldiers during the Crusades, and some of this returned home with the survivors, along with the crafts and technologies of foreign lands.

As we saw, this gave rise to the bazaar, where locals traded crops and crafts with one another and purchased spices and other “imports” from the traveling merchants. But there wasn’t enough gold and silver coin in circulation for people to buy what they wanted. Precious metals were con sidered valuable in their own right. What little existed was hoarded, often by the already wealthy.

People bartered instead, but barter just wasn’t capable of handling complex transactions. What if the shoemaker wants a chicken but the chicken farmer already has shoes? Barter facilitators arose to negotiate more complicated, multistep deals, much in the style of multiteam sports trades. So the shoes go to the oat miller, who gives oats to the wheelwright, who makes a wheel for the chicken farmer, who gives a chicken to the shoemaker. But the relative values of all these items were different, mak ing the brokered barter system incapable of executing these complicated transactions with any efficiency.

That’s when clever merchants invented currencies based on some thing other than precious metal. Instead, vendors whose sales over the course of a market day were fairly regular could issue paper receipts for the chickens or loaves of bread they knew they would sell by the end of the day: “This receipt is redeemable for one chicken at Mary’s chicken stand.” Market money could be issued by any merchant whose sales were stable enough to engender trust.

So at the beginning of the market, the chicken farmer could spend her chicken receipts and the shoemaker could spend his shoe receipts on the items they needed, jump-starting the whole marketplace. The receipts would then circulate through the market throughout the day—just like money—until they got into the hands of people who needed chickens or shoes, at which point they would be exchanged with the original merchant for goods. To make matters even easier, the receipts would have a declared value stamped right on them—the market price of the products they rep resented. At the end of the day, extra receipts would be brought back to the merchants who issued them in return for metal coin, or saved for the next market day. The purpose of the money was not to make the issuer rich but to promote transactions in the marketplace and make everyone prosperous by getting trade moving.

Almost anything could be represented as currency. Another very popular, longer-lasting form of money was the grain receipt. A farmer would bring his crop to the grain store and receive a written receipt for the amount of oats or barley he brought in. The receipt might be for a hundred pounds of grain, which had an equivalent numerical value in coin. It would usually be printed on thin metal foil, with perforations on it so that the farmer could tear off a piece and spend a portion at a time.

Since the grain was already banked and in a facility that wasn’t going anywhere, grain receipts tended to have a bit more long-term value. But they couldn’t be hoarded like precious metals. Instead of gaining value over time, grain receipts lost value. The people running the storage facil ity had to be paid, and a certain amount of grain was lost to spoilage and vermin. So the issuing grain store reduced the value of the receipts by a specified amount each month or year. A hundred-pound receipt in March might be worth only ninety pounds of grain by December.

Again, this wasn’t so much a problem as a feature of this money. People were incentivized to spend receipts as soon as they received them. Money moved through the economy quickly, encouraging transac tions. Ideally, someone who needed grain ended up with the receipt just before its next date of reduction and redeemed it for the oats.

These local moneys worked right alongside the long-distance precious- metals currencies. Gold coins and silver pennies were still required by traveling merchants, who had no real use for stored grain or a future pair of shoes. They also provided easy metrics through which to denominate all those local currencies. The declared value of a loaf of bread on a bread receipt could be some fraction of a gold coin, making it easier for consumers to negotiate transactions, as well as for issuers to reconcile unredeemed re ceipts with one another at the end of the day.

The lords and monarchs tolerated all this trade for a while but began to resent people putting real monetary values on their self-issued curren cies. Besides, the more people traded laterally, that is, with one another, the less dependent they were on the aristocracy. The peasants were getting wealthy from the bottom up, in an economy whose strength was based on the robustness of its transactions. Growth, a happy side effect of their increased capacity to transact, had to be appropriated. In doing so, it was turned into a financial weapon.

The nobles hired financial advisors—mostly Moors, who had more advanced arithmetic techniques than the financiers of Europe—to come up with monetary innovations through which the wealthy could retain their class advantages over the rising middle class. We already saw how the chartered monopoly would give royals the ability to assign entire industries to particular companies in return for stock in the enterprise. But not every industry was that scalable—at least not back then. Kings also needed a way to extract value from all those little transactions between people and, ideally, to slow down all that economic activity so that the middle class did not overtake them.

So one by one, the monarchs of the late Middle Ages and early Renais sance outlawed local currencies and replaced them with what amounted to coin of the realm. By law, people were forbidden to use any other currency—a rule officially justified, ironically, by the fact that the non- Christian icons of the Muslims appeared on some of the coins people had been using since the Crusades. The real reason, of course, is that with absolute control over coin, monarchs could exert absolute control over their economies. People protested and much blood was shed, but they lost the right to issue their own currencies. Instead, all money would be coined by the king’s treasury. As many economic historians have noted, this al lowed the monarch to tax the people simply by debasing the currency and keeping the extra gold. What these same historians seem loath to point out, however, is that monarchs made money simply by issuing coin. The monetary system itself gave those who owned capital a way to grow it.

In a practice analogous to the way central banks issue currency to this day, monarchs created coin by lending it into existence. If a merchant wanted cash to purchase supplies or inventory, he needed to borrow it from the king’s treasury, then pay it back with interest. It was a bet on future growth. Unlike market money, which had no fees, or grain receipts, whose fees went toward a working grain store, central currency cost money. If people wanted to use money, they would have to pay for the privilege.

This was a brilliant, if exploitative, innovation: money whose core func tion was to make wealthy people more wealthy. Since the aristocrats already had wealth, they were the only ones who could participate in the new supply side of money lending. If people and businesses in the real economy wanted to purchase anything, they would have to get some cash from the central treasury. Then they’d have to use that money to make some deals and somehow end up with more money than they started with. Otherwise, there was no way to pay the lender back the principal and the additional interest.

So if a merchant borrowed a thousand coins from the treasury or its local agents, he might have to pay back twelve hundred by the end of the year. Where did the other two hundred come from? Either from someone else who went bankrupt (and was therefore facing debtors’ prison) or, in the best case, from some new borrower. As long as there was more new business, there was more money being borrowed to pay the interest on the money borrowed earlier. This was great for the wealthy, who could sit back and earn money simply by having money.

Participants in the bazaar didn’t fare so well. This new money was still scarce and expensive. Where market money was as plentiful as the demand for goods at the market, central currency was only as abundant as the participants’ credit. Merchants who used to cooperate now com peted against one another for coin in order to have enough to pay back their loans. Frequent currency debasements also led people to hoard money out of fear that current coin had more gold in it than whatever was coming next. Moreover, everything in the market now cost more, because money itself was extracting value from people in the form of interest. They weren’t just paying for a chicken, but also for the chicken farmer’s debt overhead. If they were participating in growth businesses, they might have stood a chance of keeping up with the cost of capital. But these were largely subsistence enterprises.

In country after country where local moneys were abolished in favour of interest-bearing central currency, people fell into poverty, health de clined, and society deteriorated by all measures. Even the plague can be traced to the collapse of the marketplace of the late Middle Ages and the shift toward extractive currencies and urban wage labor.

The new scheme instead favored bigger players, such as chartered monopolies, which had better access to capital than regular little busi nesses and more means of paying back the interest. When monarchs and their favored merchants founded the first corporations, the idea that they would be obligated to grow didn’t look like such a problem. They had their nations’ governments and armies on their side—usually as direct inves tors in their projects. For the Dutch East India Company to grow was as simple as sending a few warships to a new region of the world, taking the land, and enslaving its people.

If this sounds a bit like the borrowing advantages enjoyed today by companies like Walmart and Amazon, that’s because it’s essentially the same money system in operation, favoring the same sorts of players. Yet however powerful the favored corporations may appear, they are really just the engines through which the larger money system extracts value from everyone’s economic activity. Even megacorporations are like competing apps on a universally accepted, barely acknowledged smartphone operat ing system. Their own survival is utterly dependent on their ability to grow capital for their debtors and investors.

Central currency is the transactional tool that has overwhelmed busi ness itself; money is the tail wagging the economy’s dog. Financial ser vices, slowly but inevitably, become the biggest players in the economy. Between the 1950s and 2006, the percentage of the economy (as measured by GDP) represented by the financial sector more than doubled, from 3 percent to 7.5 percent. This is why, as Thomas Piketty demonstrated in Capital in the Twenty-First Century, the rate of return on capital exceeds the growth rate of the economy. Money makes money faster than people or companies can create value. The richest people and companies should, therefore, position themselves as far away from working or creating things, and as close to the money spigot, as possible.

The reality of UK currency is of course that it had 92.5% silver content as recently as 1919. And 50% silver content until 1947. Isaac Newton was among many Masters of the Royal Mint who ensured the currency wasn't debased and was worth what was stamped on its face.

https://www.jstor.org/tc/accept?origin=/stable/pdf/42686170.pdf

I have no idea how that squares with the pontifications above.

Hoarding money causes inflation to decrease, and in extreme cases deflation.
An individual will still have to work just as hard though, so nothing really changes.

Thanks Tom, interesting read. Nothing terribly surprising but helps crystallize understanding a bit. Have bookmarked and will re-read in a few days.

Has what exactly in line 2 ever happened? You mean 'ending ecological deprivation'?

Whatever that means to you - to me I think it means
'a country's human society re-inserting itself into stable (though evolving), self-sustaining integration with the ecosystem that surrounds it - from which it had hitherto, catastrophically, imagined itself separate.
https://www.amazon.co.uk/Collapse-Societies-Choose-Fail-Survive/dp/0241958687/ref=sr_1_1?ie=UTF8&qid=1495386088&sr=8-1&keywords=collapse

Many indigenous, steady-state economies have achieved that stable (though evolving) integration over millenia. Others have lost the plot and slipped out of that integration.

The suggestion is that no growing economy has ever maintained that integration, still less managed to re-integrate, having lost it.

The question for us is - whether for the first time ever, humans have become wise and aware enough
a) to achieve such re-integration, and
b) to do that by deploying our new capabilities i.e. scientific understanding including ecological/systems understanding, and technology wisely used accordingly.

The Permaculture and the Transition Towns movements are at the forefront of that hope.

The classic book on the subject, ref'd above, is essential but doesn't make it quite, because the guy is a leading Geographer speaking from his silo of specialist knowledge - not good enough.

Yes, Permaculture, Transition, also Green Party are pretty fluffy 'out in the field', even lost their way a bit I'd say, Green Party stuck in the issues of the 1990s - but there's serious work going on at their core.