Never Again? Or Just A Matter of Time?

People are remembering the 15th anniversary of the collapse of the collapse of Lehman Brothers, which many regard as the event that sparked the Great Resignation. Unsurprisingly many are asking if we learned the lessons, or could it happen again.

Some things were certainly learned, but no two crises tend to be the same. However, the view seems to be, "we didn’t learn enough", and more crises are very likely. ?

Marjorie Kelly , Distinguished Senior Fellow at The Democracy Collaborative, and author of “Wealth Supremacy: How the Extractive Economy and the Biased Rules of Capitalism Drive Today’s Crises,” is certainly of the view we didn’t learn enough. She argues a paradigm change is still needed. Why? (Article )

Well, she argues.....

“Where at one time our economy was designed to make "stuff," today it is designed to extract wealth for the already wealthy, leading to one crisis after another.”

This is an interesting statement for a number of reasons. First, let me say that I think she is absolutely correct. Several years ago, I made the same point when talking about the term Valueism which I coined. I was arguing that our economy is value extraction focused, rather than value creation focused. And, as Marjorie points out, that value is being captured by the already wealthy.

It is achieved by using money to generate more money, which has become the alchemy-like ‘art’ of banking, with only around 7% of money issued by banks being invested in the real economy, and 93% being played with in the banking 'casino' economy. That much has certainly not changed much. Valueism was arguing that the balance needs to be shifted and the 'casino' closed.

The other point Marjorie makes, that I want to focus on now, is the remark, “one time our economy was designed to make “stuff.”” She is right. That was seen as the way to create value for customers, and it led to material and financial wealth.

Today in most developed economies, more than enough stuff gets produced, even though only a small percentage of finance reaches the real economy. If the 'casino' is closed, and more money goes into the real economy, the risk would be an even greater amount of "stuff" gets produced, depleting our natural resources and destroying our environment far faster in the process. The climate crises and the other problems we are already seeing would worsen far more quickly.

Marjorie is correct, we need a paradigm shift. The economy cannot be based on making “stuff”, nor can it be based on the 'casino', which is akin to a giant Ponzie Scheme.

In short, we need to reconsider the purpose of the economy and what drives it. Yes, it is about wealth creation, achieved by creating value. But have we properly considered what these terms “value” and “wealth” mean? No!

Adam Smith wrote his famous “Inquiry into the Nature and the Causes of the Wealth of Nations.” A major contribution to the first Enlightenment which later produced the first Industrial Revolution. In his day “wealth” had a very different meaning. It meant something more akin to wellbeing, not financial and material wealth as it does today.

The paradigm shift we need requires is to go “back to the future” and recognise that the purpose of the economy is to deliver wellbeing, and to ensure we can flourish sustainably. Then, what do “flourishing” and “wellbeing” mean in the twenty first century? How is it achieved? And are we achieving it?

Few people, even in developed nations, are likely to say that they live in flourishing societies. Indeed, many openly say, “the system isn’t working.” Early in the COVID pandemic people also expressed the hoped that we might “build back better” and achieve a “better new normal.”

Detailed descriptions of these terms were not expressed to my knowledge. But some thinkers started to consider the need for new theories of value. Such a call was made to other economists by the economist Mariana Muzzucato in The Value of Everything. But I have seen no new theories of value as a result of that, and she did not offer one herself.

Her call led me to develop the idea of the “Dignity Theory of Value ,” so that we consider the inherent worth of those people, other beings, and things (including our environment, planet and future generations), when making our choices and decisions. We would then stop seeing everything in only “value for money” terms. As we increasingly recognise that money is a very poor proxy for real value, this idea is gaining interest, but we are a long way off achieving large scale adoption of it.

In sharing this idea now, I want to suggest the new paradigm to drive our economy, assuming it cannot be driven by making stuff or the 'casino', ought to be driven by the creation of value seen as contributions to sustainable widely shared prosperity, measured in terms of flourishing and wellbeing. So that all may live a dignified life, respectful of their own inherent worth and that of other people, all other life, and other things such as our environment.

This thinking is at the heart of my call for a New Enlightenment and an economy driven by Enlightened Enterprise. Let’s hope it does not take another banking or economic crisis for us to learn the lessons and make the paradigm shift that is needed. Start by being the change you want to see in the world, be driven by the Dignity Theory of Value to create real value in sustainable ways. I also call this Equitable Capitalism . ??????????????