There is increasing dissatisfaction across the globe with the incompetency, corruption and malpractice of the interdependent finance sector, especially after the Global Financial Crisis in 2008 that crippled national economies all over the world and sent millions of people into unemployment. Thousands also lost their homes, as well as huge portions of their superannuation, whilst the commercial banking sector was bailed out of the mess that they created with trillions of dollars of Quantitative Easing (QE) central bank cash injections.
Invoking more anger is that this approach hasn’t even solved the problem; it has only prolonged and amplified it. There have been no real legislative, structural or policy changes, so we are now faced with even greater threats by massive global bubbles in derivatives, real estate and assets, such as stocks. It looks like there is even the potential to have a greater reset then the great depression of 1929.
While governments and corporations remain focused on failing models of perpetual economic growth, millions of people across the world are on food stamps, dependent on government subsidies to stay above the poverty line. Income disparity has never been so vast. Profits for corporations, particularly the multinationals, are near all-time highs, whilst wages have remained stagnant. High unemployment is epidemic and is much more severe than what official figures represent.
Clearly, trickledown economics simply does not work, regardless of what the delusional so-called experts would have us believe. Effectively businesses – not society or individuals – are the beneficiaries of the current economic system. There’s simply too much unfounded faith in the current system, especially when the evidence clearly indicates that we need an alternative.
The truth is, there are other models that the mainstream economists and our politicians are not taking seriously.
For example, Steve Keen, Head of the School of Economics History and Politics at Kingston University (London), has developed an alternative economic model called Debt-Deflation, while economists such as Bill Mitchell, who is an Economics Professor at the University of Newcastle (Australia), advocates for Modern Monetary Theory (MMT).
Of course their models do differ in some ways (which is representative of the ‘spirit’ of the Redesigning Society series of which this article is a part). This is a discussion of legitimate alternatives which do exist, not a detailed account of the exact approach we should take. Our governments should prioritize this debate so that we can truly develop a model that resolves the problems which plague our economy and that cause widespread suffering as a result.
However, the model’s offered by Keen and Mitchell do align on some key points. For starters, along with 17 other economists, they both signed a letter published at the Financial Times in March 2015 asking that the European Central Bank adopt an alternative policy approach to boost the economy. Instead of QE for the financial sector, they’ve insisted that they inject that money into the bank accounts of citizens in the Eurozone. Steve has coined this ‘QE for the People’. Yes, that means instead of giving away free money to the elite, it’s given to the people. The masses, especially the poor, would have a field day if they knew this was a potential option.
They also both advocate that governments should have a greater role in managing the central banks in their country. That’s right, if you didn’t know already, the central/reserve banks are privately owned and operated by banking families who inherited this responsibility, instead of being elected with it.
In the following quote, Professor Mitchell explains the role of a truly independent government:
“A basic starting point from Modern Monetary Theory is that a government that issues its own currency, that has its own central bank, so it controls monetary policy (and the) setting of interest rates, and doesn’t sell any debt in a foreign currency … can never go broke. The idea (is) that it can never run out of money”. [source]
Basically this proposes that if individual nations took back their power to manage their own money they can create as much money (ie. economic stimulus) as required, whilst still accounting for applicable economic principles and direct it to where it’s needed most. In one fell swoop, there goes the poverty of a nation, so given this is a legitimate option our governments need to step up and action it now. Otherwise, the suffering of the people is on their hands.
The Solution? Regulate Central Banks, Living Wages and Quantitative Easing … for the People
An interview with Professor Steve Keen
Professor Steve Keen is Head of the School of Economics, History and Politics at Kingston University in London. Considering himself as a post-Keynesian economist, he criticizes neoclassical economics as inconsistent, unscientific and empirically unsupported. His highly successful book Debunking Economics is a must read for those who want to get into the details of this issue.
In the interview presented below, we discuss the shortfalls of mainstream economic theory and practice, as well as their potential solutions. The way that we economize our society is an area that is so fundamental to how we organize and interact that it really deserves a better critique than what has been pursued by our politicians, as well as mainstream economists for that matter.
Don’t fear though – we’re not going to get too technical in this topic, it’s more of an honest discussion about the problems that emerge from our current economic model and some out-of-the-box solutions for them.
Essentially, Steve disagrees with mainstream economists. He believes his work with physicists and mathematicians has disproved some of the neoclassical formulas that the orthodox economics community ‘believe’ in.
He emphasizes the lack of focus that his competitors have on ‘private debt’ when crunching their numbers, something that he says strongly indicates why he was able to see the GFC of 2008 coming, and they didn’t. This aspect of the economy deserves to be deeply embedded into economic theory, he says, including how central banks design monetary policy, which should be highly influenced by our governments or elected officials. This is his basis for a modern debt jubilee or QE for the People.
He also goes into why a universal wage is justified – “I see a systemic argument in favor of that as well as an individual argument”. Essentially this means it’s intelligent because it cares for the economy and it’s ethical as it cares for the people. At the minimum, each person in our society should have a living wage that helps them to overcome poverty, increase their education and contribute back to our society in positive ways, including adding to the economy through a greater purchasing power.
Obviously there would need to be complimentary programs to assist those with issues of mental illness and addiction, among other issues; however those are details that could be resolved through time. The point is that fighting just to survive and have our basic needs met can be a thing of the past if we redesign our economy in the right way.
Please note: This article is part of the Redesigning Society series. Over the coming weeks, this series will present a range of expert perspectives on the current state of societal affairs, as well as the collective changes we desperately need both philosophically and practically. Details of upcoming and past guests and topics can be viewed here. You can subscribe to The Conscious Society Youtube Channel to get early access to each interview in the series.
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