Why did the Global Financial Crisis actually happen? The best explanation I have come across was when about this time last year Canadian professor Jim Stanford came to speak at my uni – he tries to demystify the economy by explaining the concepts and jargon in a simple, easily understandable way.
What is the economy? It is WORK. ‘The total sum of work we do to meet our needs and wants.’ The economy is about meeting human needs.
Jim separates the economy into:
1. the “real economy” – that is, jobs that create physical value.
2. the “paper economy” -that is, jobs that trade paper. These jobs are based on speculating on the real economy, and make money from others’ debt.
In our present system, the paper traders are getting richer as the physical traders get poorer. For every $1 of real economy, $100 of paper economy is traded. That means $100 is circulated by people speculating on that $1, and essentially getting paid to do nothing of real value – just buying and selling financial assets.
It makes sense when you think about it. What jobs pay the most in our society? Stock traders. Finance. Bankers. Business. That’s why Dads like mine want me to study Business and work my way up the ladder of a big corporation – it equals money and security. But what else does it mean? What value am I adding to society if I do this?
Where do our foods, clothes, housing materials come from? Who gets paid the least down the chain of production? The people picking the raw ingredients that make these things, and the people that put the goods together. People getting paid almost nothing (if not completely nothing) for their work.
When you get a big profit from trading on the stock market – where is that money coming from? I’m not pointing fingers at those who trade or own shares, saying, “ooooo you’re such a bad person.” I have shares too. Actually any of us who have bank accounts or superannuation funds, have shares on the stock market. Our shares contribute to the problem but I am part of the 85% of the population of developed capitalist countries who is paid for my employment, more or less economic slaves to the system as I need to earn money to pay my rent, my credit card bill, and pay for my next holiday. It is logical that when we invest in shares, or play with shares on the stock market, we hope that we will gain the greatest possible profit from our investment of time and/or money. These are the rules of the game we presently play.
These rules also define the responsibilities of CEOs to make the most profit they can, without regard for people and our planet, and pay these big boys very big bucks to do so. The main problem with this system lies with the 2% of the population of developed capitalist countries who own large majorities of the paper wealth in the world, with banks at the top given their license to print money and lend it out in debt. (Side noting that the other 13% work as farmers or in their own small businesses).
Jim says it isn’t fair that the workers suffer every time the system collapses as we didn’t cause the problem. It was the rules of the system that caused it, and unless we change the rules, it will continue to happen again and again. Jim says we need to ‘hold the banking system accountable to meeting society’s need for steady credit, or step in and do it ourselves’ (we can print money too).
1. Demystify economics – explain where the crisis came from and understand why something needs to change.
2. Redeem the value and legitimacy of real work and production – based on a new model of growth / stability.
3. Don’t let the bank make us pay for their mistakes:
– re-regulate finance
– socialise credit creation (ie learn to do it ourselves through public banks and credit unions)
– look for comprehensible credible alternatives that also address global problems of poverty and pollution
– get rid of useless industries
– stop making shit
Jim explains it far better than these rough notes I took from his lecture.
There are more of his lectures on youtube – well worth a watch. Or his book:
Also, although this wasn’t from my notes from Jim’s lecture, I think surely we need to do something about the tax havens. Did you know that half of all world trade currently passes through tax havens? Apparently they ‘allow rich people and corporations to stash trillions in assets that could provide governments with at least $250 billion a year in tax revenues.’
Look, I don’t like paying tax, I believe I still own a few shares (while they’re probably not worth much any more) and I can’t complain that my job is based on processing information (I’m not really sure if universities count as paper economy or real economy…) but I do not like the fact that the richest pay the least tax and the poorest pay the most…
According to the book called Conspiracy of the Rich I’m listening to at the moment by Robert Kiyosaki (author of Rich Dad Poor Dad) if you can’t change the system, you can still opt out of playing their game.
“Is the love of money the root of all evil? Or, is it the ignorance of money? What did you learn about money in school? Have you ever wondered why our school systems do not teach us much—if anything—about money? Is the lack of financial education in our schools simply an oversight by our educational leaders? Or is it part of a larger conspiracy? Regardless, whether we are rich or poor, educated or uneducated, child or adult, retired or working, we all use money. Like it or not, money has a tremendous impact on our lives in today’s world.” 
ALSO SEE BLOG ENTRIES:
 Susan George, ‘We Must Think Big’, New Scientist (18 Oct 2008). p. 51.
 Robert Kiyosaki, www.conspiracyoftherich.com/ReadTheBook.aspx
Photo: Graffiti in the back streets of Sydney.