This section explains some of the key concepts about how our current economic system works, and some of the problems with it. If we are to lead economic change in our communities, we will be talking to lots of people about many different issues. It is important to have a grasp of the key concepts so that we can talk with clarity, integrity and credibility.
An economic system is composed of people, institutions, rules and relationships. It is the means by which goods and services are produced, exchanged, distributed, consumed and disposed/recovered in a local, regional, national or international community. It includes inputs of labour, capital and natural resources, and ‘agents’ such as buyers and sellers. The type of economic system determines what’s produced, how, and who gets it.
Our industrial growth society is characterised by high consumption rates due to short product lifetimes, built-in obsolescence (so you need to buy new versions/models), fast-changing fashions and throw-away culture. It assumes the earth has unlimited resources as inputs, and an unlimited ‘sink’ for receiving waste outputs.
Here’s a series of three radio programmes from BBC Radio 4 which help provide an understanding of the fundamentals. Click below to go to the page where you can listen online or download for later:
Understanding economics can help us explain how the crisis in our global financial system, the Deepwater Horizon incident in the Gulf of Mexico and the riots in Greece and Spain are linked. Here’s the first 5-minute chapter of the UK version of the Crash Course in Economics by Chris Martenson which gives a brief outline of how the global economy works and what is going on with it:
About money and debt
You can find out more about money – where it comes from, the problems with money today and how we might fix them – at Positive Money. You can also download a few chapters of the new economics foundation’s book “Where does money come from” for free – find out more in the video below (it’s promoting the book but also explaining some of the key concepts). There’s more great videos on the site at Positive Money.
The problem of economic growth
The economy is part of our society, which is itself a subset of the natural environment that provides the raw materials and services we depend upon for survival. But the Earth’s resources are finite and economic growth cannot therefore go on forever. This is explained by Richard Heinberg in the post carbon institute’s short video below:
The current economic model has also failed to distribute wealth through trickle-down. Between 1960 and 2005, income inequality in the UK increased by 32%. In the USA it increased by 23%. In contrast, Sweden decreased income inequality in the same period by 16% (The Equality Trust, Research Digest #2 2011).
The very rich are becoming richer and the very poor poorer (Institute of Fiscal Studies, 2011) . In 2005, the top 5% of earners owned 40% of total UK wealth (HMRC Personal Wealth Report).
Problems of rent increase, classic economics and Land Value Tax
We’ve been kindly allowed to reproduce a chapter from Mark Braund’s book “The Possibility of Progress”, which covers classic economic thinking, that underpins our current economy, from Adam Smith, Henry George and David Ricardo and others. He introduces economic factors such as the accumulation of rent, market speculation, international economic inequalities, patents, migration and more. See here.
Are we measuring the right things?
The new economics foundation have been leading the research work in this field, and questioning whether GDP is really the most useful measure of success of our economies – since 1970, the UK’s GDP has doubled, but people’s satisfaction with life has hardly changed.They say “a successful society is one where economic activity delivers high levels of sustainable well-being for all its citizens. Our work seeks to understand, measure and positively influence well-being, develop ways of integrating it into policy, and promoting it as an alternative measure of progress”.
See the video below for an introduction to their Happy Planet Index which can be downloaded, along with other resources, from their website.
One way of putting this together – communicating the financial crisis in 7 steps
Here’s a write-up of the Financial Instability session from the Transition Network Conference 2011 in Liverpool.
It outlines 7 steps to help clearly communicate the key issues behind the present economic downturn, as well as other resources that might be useful. By Naresh Giangrande and Peter Lipman.
Credits : Image Source : Business Graph with Earth by jscreationzs