Challenging Economics – headlines

March 24, 2014

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The truth is out: money is just an IOU, and the banks are rolling in it

David Graeber, The Guardian
The Bank of England’s dose of honesty throws the theoretical basis for austerity out the window

Back in the 1930s, Henry Ford is supposed to have remarked that it was a good thing that most Americans didn’t know how banking really works, because if they did, "there’d be a revolution before tomorrow morning".

Last week, something remarkable happened. The Bank of England let the cat out of the bag. In a paper called "Money Creation in the Modern Economy", co-authored by three economists from the Bank’s Monetary Analysis Directorate, they stated outright that most common assumptions of how banking works are simply wrong, and that the kind of populist, heterodox positions more ordinarily associated with groups such as Occupy Wall Street are correct. In doing so, they have effectively thrown the entire theoretical basis for austerity out of the window…
(18 March 2014)
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Limits to Investment

John Fullerton, Great Transition Initiative
"The true nature of the international system under which we were living was not realized until it failed." ~ Karl Polanyi

A transition to a sustainable economy requires not only population stabilization, breakthroughs in resource productivity, and checks on material consumption, but also constraints on aggregate investment. Built into the DNA of finance is the goal of optimizing relatively short-term returns on investment, which, when successful, induces exponential growth in the aggregate stock of financial capital. When that expanding stock of financial capital is then reinvested, it spurs ever-increasing demands for natural resources and pressure on waste sinks. The contradiction between the finite scale of the biosphere and the endless growth of finance capital will be resolved either through crisis or, as advocated here, through foresight and remedial action. Shifting the economic system demands a fundamental transformation of finance, at least for the real investment decisions of the largest actors in the economy. We must view this profound shift as a critical national and global security priority that will require unprecedented intervention by governing institutions on the public’s behalf…

Context | The Impact of Investment | From the Firm to the System | The Way Forward | Endnotes
(February 2014)

Gar Alperovitz and Michael Albert: A Conversation on Economic Visions

Gar Alperovitz and Michael Albert, Truthout
Gar Alperovitz and Michael Albert have been at the forefront of efforts to design and build an economy beyond capitalism for decades – efforts that have become even more relevant in our age of economic and ecological crises. Albert’s Participatory Economics (Parecon), developed in collaboration with Robin Hahnel, outlines a comprehensive vision of an ethical economic system, in which bottom-up democratic decision making takes the place of market-driven competition. Gar Alperovitz’s Pluralist Commonwealth model extrapolates from existing experiments in the democratization of wealth to build a systemic and multilayered answer to the urgent systemic challenges we are facing as a society. While both share a fundamental commitment to real democracy and true economic justice, the differences between Alperovitz and Albert’s respective models help illuminate what’s really at stake in system change. They recently sat down to better understand where their trajectories intersect or diverge; below is a transcript of the highlights of their conversation:…
(21 March 2014)

Alive in the Sunshine

Alyssa Battistoni, Jacobin
There’s no way toward a sustainable future without tackling environmentalism’s old stumbling blocks: consumption and jobs. And the way to do that is through a universal basic income…

…A “green economy” can’t just be one that makes “green” versions of the same stuff, or one that makes solar panels in addition to SUVs. Eco-Keynesianism in the form of public works projects can be temporarily helpful in building light rail systems and efficient infrastructure, weatherizing homes, and restoring ecosystems — and to be sure, there’s a lot of work to be done in those areas. But a spike in green jobs doesn’t tell us much about how to provide for everyone without creating jobs by perpetually expanding production. The problem isn’t that every detail of the green-jobs economy isn’t laid out in full — calls for green jobs are meant to recognize the fraught history of labor-environmentalist relations, and to signify a commitment to ensuring that sustainability doesn’t come at the expense of working communities. The problem is that the vision they call forth isn’t a projection of the future so much as a reflection of the past — most visions of a “new economy” look a whole lot like the same old one. Such visions reveal a hope that climate change will be our generation’s New Deal or World War II, vaulting us out of hard times into a new era of widespread prosperity…
(January 2014)

Currencies teaser image via Creative Commons 2.0 License.

Tags: economic trends, finance, money