Economics for dummies - Part 5

( - and for economist and politicians)

Part 5   So what?

The economy is not a stand-alone and boring theme only for experts. The thrive of society at large is dependent on how we understand and handle the economy. How we are able to handle climate crisis and destruction of nature is also heavily dependent on how we handle the economy.

Without proper measures of regulation, the mainstream market economy is the instrument for prioritizing private solutions over the common good.

Without proper measures of regulation, the financial sector is the instrument for speculation, short-termism and pulverization of responsibility.

Today most people will try to survive as best they can with what seems to be the harsh «laws of nature» of the economy. Economists try to align and get the most benefits for themselves, their employers or customers from the opportunities given by the established rules of the game. They don’t question the rules of the game. Politicians take the easy way out trusting the economists and economic growth.

I have tried to show that the rules of the game of the economy are not something natural and self-evident. We have more options and elbowroom to think and act alternatively if we wish to and dare to.

So, what are the obstacles for a better approach?

·        The most fundamental obstacle is the position that mainstream economy has managed to establish related to politicians and society at large globally.

·        All measures are used for influencing and manipulating people’s everyday life in the direction of increased consumption. Advertising is massive with social media adding a new dimension coupling our ecosystem of information closely to advertising. All psychological means for manipulation are being used. Advertising is basically creating new needs. Our basic needs, on the other hand, are not dependent upon massive advertising.

·        The practical challenges doing large changes in a global economy is of course enormous. Such eventual changes will have ripple effects in many fields. The toolbox needed will also have to be improved. These challenges alone are easily considered as insurmountable obstacles.

·        Economic and political power go hand in hand, and many politicians, companies and other actors benefit substantially from the present economic situation. The financial sector has achieved enormous power and is tightly interwoven with politics and government. Politicians and governments basically have the power and tools to initiate changes. They, however, have accepted a role being totally dependent on the mindset, practical mechanisms, and rhetorics of mainstream economy.

·        Today’s global governance regarding the economy is rigged to preserve the present rules of the game, mechanisms, and relations, not to change them.

·        Great power politics and cold war rhetorics make global cooperation difficult, especially between superpowers. The substantial negative effects of the present rules of the game and economic structures and relations, however, applies also for most people both in U.S., China, EU, and India, not to mention most developing countries. These negative effects, however, do not apply for holders in power and elites.

Important myths are:

·        The economy is only about money (see part 1)

·        Growth in GDP is vital – a larger cake will automatically benefit us all (see part 2)

·        All activity in the financial sector creates real value (see part 3)

·        Only private sector creates real value, which is necessary for financing public sector and society at large (see part 4)

·        Private sector is, by default, more efficient than public sector

I realize that there is no single quick fix. I, however, think that it is possible to suggest some steps and principles in a process towards a better handling of the economy. This hopefully will facilitate discussions and further work necessary on solutions and options.

·        First the speculative part of the financial sector must be regulated heavily. This will in fact not necessarily affect most people and productive business anywhere to a high degree. It will also reduce the risk of economic crisis.

·        Second, it is necessary to be clear that society at large and not individuals and small businesses must take the costs of major changes.

·        Third it must be a process with a vision giving the direction and incremental steps realizing that vision.

For a vision we must go beyond economy as an intellectual and professional discipline. We must also go beyond the more ideological background for the mainstream economy of today.

The vision should be a healthy market economy that benefits all, not the few, in rich industrial countries, without continuing to damage climate and nature for the whole globe. The rest of the world at the same time must get the options and facilitation necessary for a fair global development on their own premises.

This means questioning unlimited growth of GDP and consumption, first of all in the rich industrial countries.

Our way of life in the rich industrial countries and other elites is far more than climate and nature can handle. Climate crisis directly affects people in the rest of the world making their living conditions worse and often critical.

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For better understanding and further details, you should read the full document “What on earth are we really up to?”.