I found this comment in the Finance Professionals forum of the BBC website.



Added: Saturday, 11 October, 2008, 06:35 GMT 07:35 UK

Economics as we know it is dead. The economics we will live under in ten years will be radically different.

Our planet can not sustain our species unless we stop acting like a cancer and begin acting responsibly. In short we need an economics based on sufficiency and need and not one based on greed.

As a qualified registered representative of the London Stock Exchange with further qualifications in Investment Analysis and Regulation and Compliance in the securities industry, I am not saying this as a sandal-wearing woolly-headed hippy.

Facts are facts: we live in a finite world yet have an economics based on never ending compound growth.

7% growth per annum in the use of any commodity means that in any ten year period more of that commodity will be used than has been used in the whole of human history.

This is the fundamental equation behind the current financial crisis: we have been living on borrowed time and the resources of our grandchildren's grandchildren.

[The_Stock_Guru], London, United Kingdom





This comment just hammers home that capitalism is an unsustainable pyramid scheme doomed to crash to destruction. To my mind the problem to be worked on now is how to replace it. It seems that a much higher level of nationalisation is inevitable in the near future.



In the past when I've looked at zero growth theories like Douthwaite's The Growth Illusion, I've not been convinced. Does anyone believe that "non-growth" capitalism could be achieved, and it not, what are the alternatives?







http://www.communitycurrency.org/Purpose.html

We had the mathematical explanation for this here on MN courtesy of Professor Albert Bartlett and his exponential function. Link later.

Aragon wrote:

We had the mathematical explanation for this here on MN courtesy of Professor Albert Bartlett and his exponential function. Link later.

Yes, I remember that Aragon.

The idea of leverage of 100:1, and what that would demand in terms of growth to service it, is clearly delusional.

I'd have to disagree with the finality of this thread title. Economics is never dead as long as humans still exist.

Ard-Taoiseach wrote:

I'd have to disagree with the finality of this thread title. Economics is never dead as long as humans still exist.

Perhaps it needs to be reborn.

cactus flower wrote:

Ard-Taoiseach wrote:

I'd have to disagree with the finality of this thread title. Economics is never dead as long as humans still exist.

Perhaps it needs to be reborn.

I'd say it just needs to be shook down for the next few years, retaught a few home truths and the situation will be better again. The system is malfunctioning, but it still ain't broke.

Good night Ard Taoiseach. Onward and upward.

cactus flower wrote:

Good night Ard Taoiseach. Onward and upward.

Good night cactus flower. Onward(from 40,000 posts) and upward(from my now 4,000 posts).

Certainly neo-liberalist economics is dead. Some just haven't got the message yet. But as to what will replace it........................something different is needed because Keynesianism in its purest form won't work and the voodoo economics of Friedman demonstrably hasn't worked.

Slim Buddha wrote:

Certainly neo-liberalist economics is dead. Some just haven't got the message yet. But as to what will replace it........................something different is needed because Keynesianism in its purest form won't work and the voodoo economics of Friedman demonstrably hasn't worked.

Neo-liberalism is the stuff we are seeing now is it - massive leveraging of money and assets, based on very positive world growth projections? Spending the future now, mortgaging it.

Friedman I'm not familiar with.

Our economies are based on production, supply and demand and all those price theories are just that - price seems to be more based on magic than anything else; the market does seem to work for some things though - televisions and other electronics mostly, yet there is always need for property which as we see can be a very dangerous market if left to the free version.

On top of that there is sustainability and social justice, which have to be addressed but the market hasn't the machinery to do this, really has it? Much more transparency from government of numbers and figures, much more input from the people. Giving people more responsibility for decision-making would see a much more mature electorate in the long run, I'd hope. Democracy is static but should grow in sophistication and dignity.

Here is a quote from the Pin this morning

Dom K. Morgan wrote:

yoganmahew wrote:

Where does it all go? If this was a bank it would be bust. If it was the private sector in any shape or form it would be bust. If it was an individual they would be going to MABS who would advise them they are bust. The government needs to keep a detailed spending diary and put it up for all to see. Every frickin' penny. The public accounts that are published are as bad as the income/expense statements the banks look for when giving NINJA loans. They don't mean anything.

The lucky people of Oregon have what is called the Taxpayer's Bill of Rights. Every significant increase in tax must be validated by a referendum and a detailed case must be presented by the government beforehand. That is a good way of avoiding building two thirds of a tram system at 3 times the budgeted price (with the govt Minister in charge subsequently going on the national TV to tell us all the Luas was on 'the Tender budget' - fuck the feasibility study, if ever there was a proper one); or blowing hundreds of millions on software systems that don't work; or pouring billions into the health system with little to show for, etc. You get the point.

If I were to advise my client that something will cost him $3m and then tenders come in at $9m I'd be out of work. The govt fuckers responsible for the waste during the boom years should be on the dole. Only after that the government can come and ask for another couple of grand from me and my family.

Lenihan to batter middle classes in budget: Sunday Times

Ard-Taoiseach wrote:

cactus flower wrote:

Good night Ard Taoiseach. Onward and upward.

Good night cactus flower. Onward(from 40,000 posts) and upward(from my now 4,000 posts).

Four big cheers to you!

Slim Buddha wrote:

Certainly neo-liberalist economics is dead. Some just haven't got the message yet. But as to what will replace it........................something different is needed because Keynesianism in its purest form won't work and the voodoo economics of Friedman demonstrably hasn't worked.

Is it possible that we can have an economy that works to fulfil at least basic needs for everyone and to stay within the environmental capacity of the planet ? Is capitalism not always a bubble followed by a collapse? As Squire says, capital that is not invested and making a return is "dead money" - if it is invested it demands growth to pay the interest. Consistent indefinite growth as the OP says is not feasible.

cactus flower wrote:

Slim Buddha wrote:

Certainly neo-liberalist economics is dead. Some just haven't got the message yet. But as to what will replace it........................something different is needed because Keynesianism in its purest form won't work and the voodoo economics of Friedman demonstrably hasn't worked.

Is it possible that we can have an economy that works to fulfil at least basic needs for everyone and to stay within the environmental capacity of the planet ? Is capitalism not always a bubble followed by a collapse? As Squire says, capital that is not invested and making a return is "dead money" - if it is invested it demands growth to pay the interest. Consistent indefinite growth as the OP says is not feasible.

It is necessary and it is possible to have that sort of economy. Capitalism is clearly showing itself to be unsustainable. The problem is we would all have to go back to a basic point of equality. This would mean a great loss of capital, lifestyle and luxury for a lot of people in order to rebalance. I don't see this happening without a fight to be honest.

floatingingalway wrote:

cactus flower wrote:

Slim Buddha wrote:

Certainly neo-liberalist economics is dead. Some just haven't got the message yet. But as to what will replace it........................something different is needed because Keynesianism in its purest form won't work and the voodoo economics of Friedman demonstrably hasn't worked.

Is it possible that we can have an economy that works to fulfil at least basic needs for everyone and to stay within the environmental capacity of the planet ? Is capitalism not always a bubble followed by a collapse? As Squire says, capital that is not invested and making a return is "dead money" - if it is invested it demands growth to pay the interest. Consistent indefinite growth as the OP says is not feasible.

It is necessary and it is possible to have that sort of economy. Capitalism is clearly showing itself to be unsustainable. The problem is we would all have to go back to a basic point of equality. This would mean a great loss of capital, lifestyle and luxury for a lot of people in order to rebalance. I don't see this happening without a fight to be honest.

There'll probably be a fight anyway, as the alternative is for the rich to drive the rest down. 33 million people have gone from poverty to actual malnutrition so far this year, the UN says. It would be a good thing to have a clear idea of how to replace capitalism. Is the central command economy any better, and are there any other alternatives?

There's always beingism

floatingingalway wrote:

There's always beingism

That's good stuff floatingalway. Do they have an economic theory.

I agree that liberalism and not economics is dead. Economics is everything now - it is on the verge of deification with the position it has asssumed in the citizen's mind.

Liberalism is not the sole reason for our misfortune though. The reason is ignorance of how technology and modern company organisation has changed how organisations work.

Big organisations operate based on processes. These processes seek to produce as many units of output ("Mas") as possible. The liberal model lets them try to be as profitable as possible by creating a market for their output. The banks automated lending and risk analysis and then set about lending as much as possible to maximise profit. They created a false market.

The newspapers streamlined advertising into property supplements and then set about getting as much advertising revenue as possible by promoting that market. The estate agents, accountants, builders, architects, solicitors, local councillors, creche owners, out-of-town retailers, engineers and everybody else with an interest in the property market promoted development in their talk and in their actions because it provided profit. They sinned in their thoughts and in their words, in what they did and in what they failed to do. St. Paul saw this coming saying that the good man would fall down 70 * 7 times per day!

The same problem has been allowed to fester in the global oil industry, in the global motor industry and in the global fishng industry to name a few other salient examples. The profit motive is inefficient when it starts to skew mass production and macroeconomic structures. The proposed reforms do not explicitly accept that. If they did then shares would become valueless.

However, that is the inescapable conclusion. In a situation of unsustainable population growth and resource consumption, the only sectors where profit should be allowed to skew the market is where it will provide what we need in the future, i.e., environmental improvement, education and (possibly) national security.

Liberalism is dead. Profit is dying. Freedom lies bleeding. Economics is plunging its dagger into the heart of Morals and Narrative and is ascending to the throne. Either Economics will assume the throne or Narrative will shoot Economics in the back with the silver bullet of global war (bringing us all down together in glorious futility - the ultimate suicide bomber).

The next few years are crucial as they could be the one chance the world gets to reform human behaviour to be sustainable. If relations break down then the opportunity will be lost for too long to repare the situation.

Another deep one Zhou. What comes jumping out at me is that our enormous productive capacity that you write about must be potentially a very good thing, if we can only use it in the right way. But the market surely is there only to make a profit, and for no other reason?

Quote :

The next few years are crucial as they could be the one chance the world gets to reform human behaviour to be sustainable. If relations break down then the opportunity will be lost for too long to repare the situation.

Agreed.

cactus flower wrote:

Another deep one Zhou. What comes jumping out at me is that our enormous productive capacity that you write about must be potentially a very good thing, if we can only use it in the right way. But the market surely is there only to make a profit, and for no other reason?

Thae market is a mechanism of organizing economic activity to maximise efficiency by providing a profit motive and also, for americans, to guarantee individual autonomy and freedom.

It is now apparent that the market cannot guarantee efficiency where it is needed most. It is also apparent that most people consider that freedom is of no use without survival.

I hope I'm not shining a bright ray of light on the general gloom. (Btw, when we mere plebs are at our utmost despair - and I include myself - it's often when things turn around a wee bit).

The simple fact of the matter is that humanity has the means, through technology and general know-how, to feed, clothe and house everyone on this planet. For some reason, beyond my own limited reckoning, we choose not do do so.

As for the real world. The big economies of the world have committed themselves to re-inflating the deflationary spiral of debt/credit destruction. I expect a temporary reprieve from the worst excesses of the debt/credit destruction in the very short term. However, the piper will have to be paid at some point. The next couple of years will be hard on the average punter whilst the rich won't feel a thing.

We are witnessing the greatest socialisation of financial costs in the world's history. Of course, the profits have been privatised and those that made the huge profits are now sitting on the sidelines until the dust settles and they can begin the "invest" with some certainty in the future. In the meantime, the vast amount of money being pumped into the markets via goverment schemes at tax-payer's expenses and risk should put a floor under the value of the assets/collateral of the wealthy until they find a suitable risk/reward ratio where they can re-enter capital markets in order to invest.

Predictions: Dollar hegemony is over. It may take some time but geo-political consideration after a world recession will enable the Far East, the Middle East and Europe to refuse to fund US govt debt. Most likely the Euro will become the world's currency. This should provide a one-time boost to the wider European economy before the necessity to prop up the currency during every emergency becomes onerous.

The avergage wage earner, and especially those on the min/max scale, will bear the brunt of short-term lifestyle changes. Some of the new middle class will feel the brunt as well but should recover some vibrancy in the medium term.

Lisbon will be passed in the climate of economic short term stagnation. A unifed European message to deal with the global economic downturn will become too appealing to ignore.

Vast swathes of humanity will remain in dire poverty, hunger and want in the long term.

Rocky - you are suggesting that the rich are immune to the downturn, that the lower to middle income classes will bear the brunt, and that the socialist dialectic between the bougeoise and the proletariat will continue.

I can't agree. 99% of "the rich" re-invested in businesses, employment, technology, assets and stocks and shares. The middles classes are up to their necks in debt do not have cash assets that will let them ride out unemployment or seriously reduced earnings without big sacrifices.

The dialectic is over - Marx has been overtaken by the integration of all aspects of economic activity. Bar the super-rich, whom we can always lynch if we feel like it, we are all in this together.

I would be classified as well off by your average journalist, artist or socialist worker. I and my ilk, mostly the product of a well educated and hard working middle class, are all going to be affected.

I can't see any basis for your assertion that the well to do will get away scot free as ever. I think that is the problem here. People are reverting to outdated theories and prejudices instead of addressing what has led to the systemic failures. People are reverting to narratives over analysis. Marx must be turning in his grave.

Everyone is entitled to their opinions Zhou. The fact of the matter is that trillions of dollars (Euros, whatever) in wealth has been sitting on the sidelines for months now whilst banks and other institutions have gone to the wall. Many, many billions of this money has been made by the very people who set up the derivatives markets etc. These are economically and politically savvy individuals who constructed the game and won the game. Meanwhile, back at the farm, the tax payer picks up the tab.

Why didn't these stalwarts of capitalism come riding into the rescue? They have the cash and they have the know-how. Because, they knew the assets and the leverage on the assets were way over-valued. A re-adjustment in the asset prices has to take place and they're going to protect their billions in any manner necessary.

Fyi, I have a business degree from one the US's top business schools and would considered to be firmly in the "middle classes" although I do my best to avoid such outdated classifications.

Even dear auld Soros doesn't claim that communism (an ideology I don't espouse or predict will return) was inherently evil and incorrect but that the people who ran communism failed to live up to their ideals. He also feels the same way about the people in charge of capitalism today.

PBS in the US, via Bill Moyer's program, has a very good interview with Soros.

http://www.pbs.org/moyers/journal/10102008/watch.html

I didn't intend to come across as aggressive rocky. I know I look a bit smug in my picture but that isn't the way I am .

I'm not up on who has cleaned up in these bad times and I think the analysis has yet to be completed. I woul dhave thought the wealthy Chinese would have been laughing their cash-filled-safes off but seemingly not. What must be noted is that these systemic failures developed and got out of control in western democracies with all the in built checks and balances that one could wish for. Why is that? Because of the rich and the powerful or because of the nature of human activity in the age of technology. I suggest it is the latter. I suggest that if it were simply the former then the educated middle classes would have stopped it!

Zhou_Enlai wrote:

I didn't intend to come across as aggressive rocky. I know I look a bit smug in my picture but that isn't the way I am .

I'm not up on who has cleaned up in these bad times and I think the analysis has yet to be completed. I woul dhave thought the wealthy Chinese would have been laughing their cash-filled-safes off but seemingly not. What must be noted is that these systemic failures developed and got out of control in western democracies with all the in built checks and balances that one could wish for. Why is that? Because of the rich and the powerful or because of the nature of human activity in the age of technology. I suggest it is the latter. I suggest that if it were simply the former then the educated middle classes would have stopped it!

That's just it!! There were no checks and balances! Since 1980, neo-liberalists have insisted on less and less regulation of financial markets. It was classic Friedmanist economics. Get rid of the government in all of its manifestations. And the Republican Party in the US and the Conservatives in the UK did exactly what was asked of them/what they were told. What we are seeing is the end-result of 28 years of sustained deregulation.

If I was a cruel and vindictive person ( and when it comes to the US Republican Party, I am) I would say that the economic horrors being visited on the financial sector is simply " the market correcting itself" and "not to interfere with this process". Instead what we have is government taking taxpayers money to give to the banks so the banks can lend it back to us at 7% APR.

What a "solution"!!!!!

There were numerous checks and balances:
1. Democratically elected governements
2. Parliamentary economic and finance committees in every western democracy
3. An EU Commissioner for Markets
4. EU think tanks
5. University educated economists
6. Free press
7. Civil servants in Departments of Finance in every democracy
8. Central banks in many democracies
9. Finanacial Regulators in many democracies
10. International Auditing and Financial standards approved by professional bodies, industry and Governments
11. Laws specifying the fiduciary obligations of Directors
12. Laws specifying the legal capacity of corporations
13. An independent Judiciary
14. Accountant and lawyers with personal liability advising the financial industry
15. Armies of actuaries employed by banks and insurance companies providing performance bonds and debt insurance


The list is effing endless. We had all the regulation that one could have and the elephant waltzed through the room in the invisibility cloak of profit and market fundamentalism. That is because that is the way the system works in the modern age. We weren't all hoodwinked - we all acted in our interests by the means available to us within the system we subscribed to.

Thanks for the link to Soros rocky. I agree with just about all of what he says.