Real vs. Phantom Wealth
Part I: The Nature of Money
Trends in Money & Finance
Financialization: Money, Debt, Scarcity and Waste
Part II: Culture, Quality and the Value Revolution
Indicators of Genuine Wealth
The Information Economy & Qualitative Development
Community, Education & Activism
Part 1:
Trends in Money & Finance
What is Money?
What is Wealth?
Debt, Waste and Scarcity
Financialization: Hijacking the
Information Revolution
Decommodifying Money
Money Basics
• Impersonal: allows transactions
to be extended over time and
space.
• Trust essential
• Most prominent initially in
external trade.
• Capital: money increased in the
process of exchange.
Main Characteristics of Money
1. Means of Exchange
money as information,
a symbol
2. Store of Value
a commodity, a thing-in-itself,
a source of power
The evolution of money: growing
importance of the means-ofexchange function
The Disintegrative Power of Money
• rooted in the impersonality of money
• internal concerns with alienation of land
& labour
• money-trading: long considered an
unsavoury occupation.
• related concerns with bourgeois
competitive individualism
• major breakthrough--Capitalism: the
means of production become forms of
money.
– increasing production means increasing
money—and vice versa.
• money becomes industrialism’s main
measure of wealth.
certificates of
deposit
coins
private & public
fudiciary currencies
“fractional reserve”
gold standard
Breton Woods
Currencies
metals
The Paper Economy
“gold-exchange
standard”
“Interest Rate Standard”
wheat, cattle,
tools
Casino Economy
community currencies
Money as Information: “Money is an
information system used to deploy human
effort.” (Linton)
The Dematerialization of Money
The Industrial Definition of Wealth
Money
Material
N.B.: Perpetuation of the System demands the perpetuation of
this definition
Industrialism: Accumulation
• Production-for-production’s-sake
• Invisibility of key factors
• Centralization of production, massive
upfront investment
• Focus on labour productivity : resources
substitute for human energy
• Cog-labour: humans as component parts
• Regulation: controls as limits
• Scarcity-based: role of waste since WWII
• Globalization: free trade & intellectual
property
Postindustrialism: Regeneration
• New relationship of culture to economics: centrality of
human development
• Substitution of human creativity for resources
• Direct targeting of human need: conscious consumption
• Human-scale technologies: production ‘distributed’ over
the landscape ; Integration: ALL places are places of
production
• Qualitative Wealth is PLACE-BASED
• Distributed regulation: incentives for positive action
throughout economy.
• Self-reliance / interdependence:
“Trade recipes, not cookies”
Industrialism: The Divided Economy
Invisible
Use-value
“Consumption”
People
Unpaid
Women
Informal
Private
Visible
Exchange-value
“Production”
Things
Paid
Men
Formal
Public
Scarcity & Class
... inequality & relative
scarcity:
1. control of scarce
resources & ...
2. monopoly of high
culture
...by a minority.
Markets and Material
Connection between needs,
wealth & markets.
the Invisible Hand: worked...
1. for an economy focused on
meeting primary needs—
simplicity.
2. in a situation of relative scarcity
3. in the absence of sophisticated
information technology
The Threat of Abundance
• Productivity boom of the Roaring Twenties
– output outdistances worker wages
• Crisis of effective demand & structural
overproduction: Great Depression as a
reaction to potential abundance.
• White-collar work, universal education: the
threat to cultural monopoly.
– increasingly social character of production; rise of
industrial unionism
The Post WW II Waste Economy
Permanent War
Economy
The Suburb Economy:
Oil / Autos /
Subdivisions
Note the gender and racial subtext of
sprawlaaa
“The greatest misallocation of resources in
human history.”
…James Howard Kunstler
Keynesianism & the
Crisis of Effective Demand
• Baran & Sweezy: crisis of profitable investment outlets
for capitalism.
• Money: a tool of national economic planning. Strong
domestic multipliers.
• The Paper Economy: growing disjunction between the
real & financial economies
• Planned Inflation & Purchasing Power
• re-redistribution of income: offsetting wage hikes in the
unionized sectors
• Debt & the Economic Treadmill: Work-and-spend
Fordism & the Reinforcement of
Industrial Wealth
Matter
Money
Waste
Debt
Fordism
Keynesianism
Suburbanization/
Consumer Economy
War Industry
Paper Economy
Planned Inflation
New forms of creditmoney
1970s: End of the Line for the
Fordist Waste Solution
• saturation of markets
• social & environmental costs coming due:
fiscal crisis of the state
• limits to inflationary strategy
• Vietnam war, decline of the dollar,
German/Japanese competition
• OPEC & the energy crisis
– Petrodollars & Currency Crisis
Post-Fordist Casino Economy
• floating exchange rates: “interest rate standard”
– Eurodollars & Petrodollars
• new technologies & Megabyte Money
• financial sector: 30-50 times (?) larger than the
material economy
• Speculation: Stomp the weak / Get rich quick
• Empty wealth creation: de facto redistribution of
wealth.
• The End of Mass Consumption & rise of new
“producer services”: new forms of ‘effective
demand’.
• Polarization of work and society
– end of social contracts: attack on Welfare State
– the growing gap between rich and poor
Debt & Forced Economic Growth
1. Competition for
money
2. Lack of purchasing
power
3. Wage dependency
equals
Export warfare
“The main point that needs to be
understood is that in order for money
to come into circulation, someone
must go into debt to a bank. If there
were no bank debt, there would be
virtually no money—it’s as simple as
that. Since banks charge interest on all
this debt, and since the money to pay
the interest can come only from further
debt, debt grows like a cancer within
the global economic ‘body.’ This debt
imperative creates a growth
imperative that is forcing us to destroy
the life-support systems of the planet.”
– Thomas Greco
Debt in the US Economy
• 1970s: debt 1½ the size of GDP
• 1985: twice the size of GDP
• 2005: 3½ times the size of GDP
Source: Magdoff , 2008: calculated from tables L.1 and L.2; Flow of Funds Accounts of the US; and table B78 from the 2006 Economic Report of the President
The Global Casino: Hijacking the
Information Revolution
• expansion of employment in
speculative industry
– Wall St.: more advanced technologically
than the military.
• Bubble Economies: last ‘frontiers’ for
capitalist growth.
-stock crash of 1987
-tech stock bubble of late 90s
-housing bubble of 2001-07
• Housing speculation: most destructive
& exploitative of the poor & average
people.
Decommodifying Money
•
diversification of forms of everyday
exchange
– supporting the informational character of
currencies.
– undercutting the scarcity-power of money.
•
financial industry restructured as public
utility and/or service industry.
– money directed to priority areas of green
development
– transition: green Tobin tax
•
new forms of remuneration
–
•
direct consumption; basic incomes; accountmoney; free food, health care & housing
gradually enlarging the sphere of gift
relationships
–
consistent with new productive forces based in
mass collaboration
...or turns them into service workers
Living in De-Material World
Redesign not controls
Direct focus on human (& environmental)
need
The Service Economy:
Extended Producer Responsibility (EPR)
encouraging provision of services not
stuff.
Servicizing (voluntary EPR).
The “Lake Economy”: economic biomimicry:
sectoral orientation: regenerative food, energy,
manufacturing, c ommunications.
New forms of economic security
Conscious support of the Commons
Disarming the autonomous power of money
Building a community/ecosystem base:
localization.
Security in Gift Economies
"In that way, the giving of surplus to
friends and neighbours is not very far
from the giving of surplus to the
cashier in a bank. The quality of
integrated society, like the legal rules
of banking, guaranteed that the gift
would not be forgotten and a future
claim ignored.”
--Hugh Brodie on Irish rural life
Dematerialization & the
ESCO model
• Savings as a virtual source of energy
• The Green Economy: creates Wealth through
savings (or dematerialization)
• Savings as a source of Investment
Challenge of financial design: dealing with first costs
Part 2:
The Value Revolution in
Economics
Wealth, Indicators &
Accounting
Redefining Wealth
Quantitative:
Money & Material
Accumulation
Qualitative:
Well-being
Regeneration
Quantification & Value
• What is measured gets done
• What gets counted is valued;
What is valued gets counted
Indicators
“[If it is to be achieved, the new
economic system] will result from
our becoming better ecological
accountants at the community level.
If we must as a future necessity
recycle essentially all materials and
run on sunlight, then our future will
depend on accounting as the most
important and interesting
discipline.”
Wes Jackson,
Becoming Native to This Place
Indicators & Value
• Expression of potential for a knowledge-based
economy
• Centrality of end-use: requires more
sophisticated monitoring of human need.
– also required by the centrality of creativity to
qualitative economic development.
• Radical potential of eco-literacy:
– Murray: Fordist Waste Economy depended as
much on deskilling of the consumer as deskilling
of the worker.
• Deflating Financialization: potential to replace
money as key determinant of value
– decommodifying money: money as pure
information
Indicators & real wealth
• Qualitative Wealth is far more complex:
requires more quantification
• Qualitative Wealth is place-based or
specific to circumstances
• Qualitative Wealth is needs-based,
requiring examination of consumption.
• Accounting takes place on many levels in
terms appropriate to that level
A Dashboard for the Cockpit
• The ‘Family’ of indicators:
–
–
–
–
–
–
–
–
Urban Metabolism or regional mass balance
Green GDP (e.g. Genuine Progress Indicator—GPI )
Ecological Footprint
Carbon accounting / carbon footprint
Life-cycle Assessment (products, processes, landscapes)
Industry-based accounts: food, building, forestry, etc.
Local Development Standards
5 ‘capitals’: personal, professional, spiritual, environmental
and financial
– Firm sustainability accounting
– Sustainable Community Indicators
– Risk Assessment, EIA, etc.
Indicators & Trends in Regulation
• Raw material for certification
systems
• Regulation as more civil
society-based
• Markets as ‘values-driven’
• FSC wood / LEED building /
etc.
• integrated evaluation /
regulation / marketing
systems
Entrepreneurial Value Creation
Local Food Plus:
valuation
regulation
marketing
education
1
The Evolution of Indicators
• Difficulties with many early indicator
sets:
– Wish-lists, divorced from solutions or
relationships
– Either too detailed or too aggregated
/oversimplified
• Next Generation of Indicators:
from “librarians” to “plumbers”
Indicator Design
• organized around a purpose
• highlight important trade-offs
• Varieties: those that…
– cause an outcome (e.g. reduce air
pollution)
– document the outcome (e.g. amount of
smog)
– react to the outcome (air pollution
legislation)
Genuine Wealth Assessment
Life-cycle
Business-related Applications
Internal accounts
Natural Step, ISO 14000, Eco-footprint,
Sustainability Reporting
Government Regulation
Alternative Industry Standards
--LEED green bldg.; FSC wood ; B Corporation ;
Innovative Business Models:
-- B Corporation
-- McDonough/Braungart Protocol
--Local Food Plus
Business Applications-II
• Builds external costs into firm decisions
• Essential to Triple Bottom Line
• SBLS: can be translated into financial
bottom line
• Crucial to Stakeholder relationships
• Made easier by network support:
--market transformation
Business Applications-III
• Sustainability accounting : Global
Reporting Initiative
• Triple Bottom Line accounting
• Social accountability reports
• Outcome-based reporting & mapping
• etc.
Genuine Wealth Applications
• All 5 “capitals”: financial, built, natural,
social, human
• Balance sheet for each
• Full-cost sustainable income statement
• Progress indicators
• Genuine Progress Report
LCA and Product life-cycles:
Environmental Lock-in over a Product’s
Development Cycle
Economic Transformation in the
Solar Age
• Get regenerative enterprises, work and wealth creation
going in every sector of the economy
• Complete the evolution of money into a pure information
system
– Decommodify it: make it no longer a ‘thing-in-itself’
– Money as a means-of-exchange
• Embed social & environmental indicators into both
markets & planning as the primary sources of value.
– “Market Transformation”: design social & eco- values into
markets as driving forces.
– 3rd party certification
• Reorient finance to regenerative production
Economic Transformation II
• Rethink remuneration in terms of the real wealth created.
– support of social- and eco- work outside of the cash economy.
• Free creativity from the pressures of scarcity: accountmoney systems, Basic Incomes
– create a culture of abundance: free education, health care,
housing, ...even food.
• Redefine ownership to support equality, participation and
stewardship.
– extended producer responsibility (EPR): internalizing costs in a
positive way
• Support democracy, equality and participation in every
area of the economy and community.
Business in Transformation
• needs to reorient to the needs of
community and planet in its goals and
means.
• needs to expand its moral and legal
status to include its workers and all
stakeholders affected by its actions.
• needs to support positive business
activity in every community.
• special difficulties of small business in
the existing economy.
– need for a fundamental shift in economic
resources from the Wal-Marts to the SmallMarts.
Labour in Transformation
• needs to reorient to the nature of wealth, not just
its distribution.
• needs to acknowledge productive activity
everywhere: non-cash economy, etc.
– needs to defend community & worker interests
everywhere: marginalized communities, etc.
• needs to recover & defend the quality of work
life—craft, etc.
• needs to support the democratization of work life
– co-ops, etc.
• needs to support regenerative small business
while defending worker interests.