It was a lightbulb moment that caused me to write a book, SHORT-CHANGED! How the rich and powerful extract wealth from the real economy and what WE can do about it.
Until then, like almost everyone else, and more importantly both of our main UK political parties, I had believed that the model on which our economy was based made sense. Why wouldn’t I? I had happily lived in it for more than 70 years and even prospered by it.
However, in retirement I had set myself the task of trying to understand the root cause of the financial crash of 2008 and what could be done about it. This was because I had not been surprised that it had happened and couldn’t see anything being done that would stop it happening again. I had been particularly concerned about the build up of both public and private debt in the early noughties.
I started by reading Adair Turner’s BETWEEN DEBT AND THE DEVIL followed by Mervyn King’s THE END OF ALCHEMY. They were two of the most respected authorities on the Uk’s financial system, who had been at the centre of the crisis in the UK. While their books made sense, they didn’t identify any fundamental faults in the system and the proffered solutions seemed to be palliative rather than curative. In other words they proposed regulations to prevent the symptoms of overheating reappearing in the ways that they now recognised, but they did not identify or address any root cause of the overheating before the crash.
I thus engaged in the further reading listed at the back of my book when somewhere along the way it hit me. We misuse the concept of money, and always have done! When you think about it, money was really intended to facilitate the FAIR exchange of goods and labour. This meant that you could be paid in monetary units for your labour and then use those units to buy the goods you actually wanted. A much better idea than barter, but money was a concept not a commodity. It was simply a token that represented something that was real and of exactly equal value. It wasn’t intended to grow by the process we now call investing.
After much more research, I realised that private financial investment is in fact a misnomer, as its sole purpose is financial extraction. Nobody invests without the prospect of a positive financial return. It’s carried out by people with more money than they need and those with the most money expect, and get, the biggest returns. We even call those returns Unearned Income. I thus came to the conclusion that we have two distinct economies. A real one in which people work and exchange goods and services and a financial one which extracts large amounts of money from the real one. Mervyn King acknowledges this in his book and refers to the second one as the financial sector, whereas I call it The Money Breeder Economy. Would that have been a better title for my book?
So my next question was “Why would a democratic society let this happen?”, when I came to another startling simple answer. We are not a democratic society and never have been! The rhetoric from Gettysberg was hollow. We are not governed for the people by candidates chosen by the people. We are governed by people chosen by factions that represent much less than 10% of the people. We call them political parties who, in order to gain power, find that they have to do a deal with the financial sector. Yes they have to agree that private investment (i.e. private extraction) and an economy based on growth of the much discredited statistic known as GDP are essential. Well the truth is that both are more harmful than essential. More importantly neither have not been determined by anything close to a democratic process. Since Magna Carta we have transitioned from Monarchy through Aristocracy to Plutocracy, but we have yet to reach Democracy. We desperately need to find that final transition to a position where our MPs commit themselves to their constituents (i.e. the people) rather than to any party or even a coalition of parties.
That is the essence of my thinking, so the question I want to ask everyone, and Compass members in particular, is What if I’m right? How can we make that final transition?
To date no one I have spoken to who has read my book has explained why I am wrong. Yes some want to retain their right to get interest on their bank deposits on the flawed argument that they are taking a risk. The problem is trying to get enough people to think about it and voice their opinions and most of all those in a position to do something about it. The trouble is that the latter are busy people with full agendas of their own. For example I have spoken with Andy Haldane (CEO of the RSA and former chief economist at the Bank of England) and challenged him to a debate, but he hasn’t yet had time to read the book. He told me it sounds rather radical, but not that it sounds wrong!
So, I am delighted that Compass has invited me to write this blog about my thinking and to share my book with everyone in Compass. I didn’t write it to make a profit, but to point our society in a new direction. It’s not a difficult read and should be readily understandable to you all. So I hope you will read it, and share your opinions as widely as possible, including here and on Amazon. If you believe my ideas make sense, let’s make it go viral together. Sadly at my age social media is another world that I don’t inhabit!
No one person can possibly know all the answers, so I hope you will join in and share your own views on how to make a fairer society.