Part 2 - economic democracy or corporate hegemony
Divine Right of Capital & Economic Democracy
Purpose: The section on Economic Democracy or Corporate Hegemony develops out of the first section on Money and Democracy, which clearly established that in our wealth-dominated political system, money is power. This section on economics investigates where the economic system came from, how the economic system works, and how the unseen costs of the economy are causing the biggest problems faced by humans today. This section then looks at how we can develop an economic system that accounts for the unseen costs of the current system and build a healthy and happy future for both people and planet
Paradigm: Classical economic theory says that we can be as greedy as we want and an invisible hand will manage human activities and nature to maximize the happiness and health of all. The reality, however, is that the invisible hand is a hoax and a system run on greed depletes our natural resources, destroys our natural system, and subjects people to an alienating wage and production system that has been decreasing happiness for the past half century
Class 5: crisis of economic & visions for a new economy
Failed Economic Assumptions, Inequality & Alienation
Solutions: Localization/Regionalization, Solidarity Economy, Restoration Economy
Purpose: This class reveals the origins of our current system that came from the avaricious minds of London stockbrokers at the height of the British Empire. It then shows the damage this system has wrought on people and the planet and suggests alternative economic solutions that would help build a healthy future for all.
Readings: Justice Rising, Fall 2007, Moving from Corporate Extraction to the Grassroots Restoration Economy; Fall 2010, Building an Economy for People and Nature
Handouts: Questions & Article Rankings, Talking Points
Paradigm: Classical economic theory says that we are all small producers with little power over the market, which will drive us to do the right thing for each other and the planet. The reality is that we live in a world of oligopolistic capitalism, where a tiny number of huge multi-national corporations manipulate markets, public policy, and income distribution for their own good, ignoring policies that would promote the common good.
Context: At the height of the British Empire in the early 1800s, London stockbrokers like David Ricardo and James Mills — father of renowned economist John Stuart Mills — developed classical economic theory from the biased assumptions of moneychangers. Corporations use those biased theories as the basis for their operations. For two hundred years, corporatist economists have held to those false assumptions to convince the public that the neo-liberal, corporate, free-trade agenda is in tune with human nature and the laws of the universe. They are not.
Here are three fallacious assumptions of classical and neo-classical economics that are causing our biggest problems on the earth today. They are only the beginning of the false assumptions.
• False assumption 1: Our natural resources will go on forever and are replaceable:
As Martin Luther King pointed out decades ago about societies that accept this fate: “People find themselves oppressed by increasing frustration, alienation, insecurity and so forth…When machines and computers, profit motives and property rights are considered more important than people, the giant triplets of racism, extreme materialism, and militarism are incapable of being conquered.”
As the fallaciousness of these assumptions becomes increasingly evident, more and more people are realizing that we must envision and implement a new economy that:
• Works for everyone
• Serves the common good
• Promotes a healthy planet, healthy products and healthy people
Economists like E.F. Schumacher and Herman Daly began working on these problems years ago. Schumacher wrote the seminal books Small Is Beautiful: A Study of Economics As If People Mattered and A Guide for the Perplexed in the 1970s. He came up with what he called Buddhist Economics by which everyone has meaningful work, "production from local resources for local needs is the most rational way of economic life," and technology should be appropriate to local resources as well as ecologically suitable to the size of the community.
Herman Daly served as editor of Toward a Steady-state Economy in the 1970s and as senior environmental economist at the World Bank in the ‘80s and ‘90s. In the same period he developed the Index of Sustainable Economic Welfare to replace Gross National Product accounting and co-wrote the seminal book For the Common Good: Redirecting the Economy toward Community, the Environment, and a Sustainable Future. From there he moved on to develop Ecological Economics. That system posits economics as a subset of the larger global environmental system where preservation of natural capital is the primary goal. This movement has become global through the International Society of Ecological Economics. See http://www.isecoeco.org/
Since the late 1990s there has also been a growing international movement focused on the idea of Social Solidarity Economy (SSE), “…an ethical and values-based approach to economic development that prioritizes the welfare of people and planet over profits and blind growth. In an SSE, ordinary people play an active role in shaping all of the dimensions of human life: economic, social, cultural, political, and environmental. SSE has the ability to take the best practices that exist in our present system and transform them to serve the welfare of the community, based on common good values and goals.”
The Intercontinental Network for the Promotion of Social Solidarity Economy operates across five continents and has working chapters in dozens of countries. It presents a very successful model of what the global economy could look like in the future using institutions that exist today. More information is available at http://www.ripess.org/ or https://ussen.org,
There are also many other groups that are working to create a new economy. They include the Next System Project (http://thenextsystem.org/), The New Economy Coalition (http://neweconomy.net/), and Evonomics: The Next Evolution of Economics (http://evonomics.com).
Activities: Start the class with an overview as presented above and then move into the PowerPoint Economics: Dismal Science or Prescription for Happiness which examines the origins of our insidious economic system from the thinking of London stockbroker David Ricardo, and discusses solutions that can save the planet. You can download the PowerPoint here and notes for the PowerPoint here. When you open the PowerPoint, it should show a file of the slides and notes for each slide. Print this out as a script for the PowerPoint. Then go to the “slide show” pull down menu and go to “view slide show” to show the PowerPoint. You can also modify the PowerPoint to better reflect your local economy and circumstances. Let us know if you want any help with this or have any questions about the PowerPoint. At the end of the PowerPoint you should have a question and answer period so people can talk about what they have just seen.
If you have time, you can also show the class a video from the list of videos. They include:
• Richard Heinberg on the limits to growth;
• One that explains the new designation of B Corporations, whereby corporate managers include environmental impacts and social responsibility in the corporation's bottom line;
• Four videos on the Solidarity Economy. Those featuring Nancy Neamtan and Daniel Tygel and the UN meeting on the Solidarity Economy are particularly good.
It is important that you help everyone understand all the economic alternatives being talked about. You can highlight the Social Solidarity Economy and show the developing map of the US Solidarity economy at http://solidarityeconomy.us/. We are working on mapping all the solidarity economy enterprises in our county. But that is a different course. Let us know if you want more information about this mapping project.
After the break, move on to the questions. Notes on the answers for the questions are here. Remember to mention the fine collection of books that deal with classical economics and creating an economy for the future. You will find them listed here.
Before class is over, remember to hand out the questions and rankings and talking points for the next class, Banking Failure of 2008 & Public Control of the Money Supply.
The day after the class, email the talking points, questions and rankings for the next class to everyone and include a current article on our failing economic policies.
The day before the next class, send a reminder email that the class is coming up and attach the talking points, questions and reading priority, and maybe a piece on the power of Wall Street.
Class 6: monetary system failure of 2008 & public control of the money supply
MONETARY SYSTEM FAILURE OF 2008 & PUBLIC CONTROL OF THE MONEY SUPPLY
History of Money, Private vs. Public Control of Our Money Suppl
Purpose: This class takes a serious look at money, what it is, where it comes from, and how we can get it to work for the betterment of all of us rather than just the 1%.
Readings: Justice Rising,Winter 2009, Money for People Not Corporate Plunder; Spring 2009, Deglobalization/Relocalization
Handouts: Questions & Article Rankings, Talking Points
Paradigm: We are told that the only way to get money is to work hard for it and that certain people have a lot of money because they produced something of value for the rest of us. The reality, however, is that the banks and the Federal Reserve, a private/public undertaking driven by the big banks, create money out of thin air and distribute it to their supporters and friends.
Context: Our monetary system is a public common. We depend upon our monetary system to enable a stable and secure economic future with meaningful jobs, livable wages and secure housing. Policy makers have understood the importance of public control of the monetary system since the dawn of civilization.
Money’s origin comes from our concept of value. Policy makers initially created monetary value to provide compensation for horrific human events. They used cows as currency to mitigate human tragedy, e.g., two cows from one clan for the grief and loss they caused around the death of a member of another clan. Public authorities administered these exchanges to maintain peace within communities.
The popular narrative is that before humans used money they utilized a barter-based economy. The reality appears to be that barter was rarely used. People simply took care of each other. It was essentially a gifting economy.
Public authorities developed the first money to finance public undertakings that distributed money to the general populace who needed some of that money to pay the taxes that the public authorities collected. Greece, the Middle East, and China created some of the first successful monetary systems to promote trade in their domains and along the Silk Road trade route.
Throughout history public authorities kept a tight rein over their monetary systems to guard against counterfeiters and chiselers who constantly attempted to make monetary systems work for their own private good rather than the common public good. Government administrators also guarded the money supply because they knew that money was power. Owning a lot of money is like owing a lot of robotic slaves. Money can build infrastructure and provide services for the public good or can be used to rape, pillage and rob the vulnerable and unsuspecting. Without a public guardian of the money supply, there is no protection of the common good or the vulnerable and unsuspecting.
Private bankers took control of the money supply in the late 1600s when wealthy financiers of the British Empire forced the king to give their private Bank of England control over the public monetary system. After 250 years of rancorous political discord over private control of the English monetary system, British public authorities brought the monetary system back under public control in 1946.
The battle for control over the monetary system of the United States has been equally rancorous. When the first Treasurer of the United States, banker Alexander Hamilton, enriched his Wall Street brethren with insider information, America’s farmers and soldiers were so enraged that only a few bankers served as the Secretary of the Treasury over the next century.
Hamilton followed that up by proposing the first Bank of the United States, largely funded by his British clients. This bank took control of US monetary policy and so enraged it critics that congress did not renew its charter in 1811. By 1816 however, a Second Bank of the United States was chartered by Congress and fierce fights raged again over the authority of the privately run bank to control monetary system. President Andrew Jackson ended that practice, declaring to the private bankers, “You are a den of vipers and thieves. I intend to rout you out.” And he did.
Private bankers again took over the US monetary system after corporate wealth began financing our elections in 1896. They installed their own policy makers in the early 20th century who depended on big bankers to bail the government out. Creation of the Federal Reserve System (the Fed) in 1913 marked the institutional beginning of private bankers regaining official control over our monetary system. Congress established the Fed as a system of twelve regional banks run by the private national banks in their regions and the Central Federal Reserve Bank in Washington DC, which is administered by both the regional banks and presidential appointees. Due to the power of the big banks to dominate the actions of the regional Fed banks, Fed decision-making is heavily influenced by the biggest private banks.
The power of the big banks over the Fed has been amplified in recent years by a trend of appointing Wall Street bankers to be presidents of the regional Fed banks. William C. Dudley, a former managing director of Goldman Sachs and president of the New York Federal Reserve Bank, is the vice chairman of the Federal Reserve Board and a permanent member of the influential Open Markets Committee, which is in charge of US Monetary Policy.
Augmenting corporate control of monetary policy by the Fed has been the take over of the Treasury Department by bankers, investors, corporate executives and investment bankers. The chart below shows the evolution of Treasury Secretaries from non-bankers to bankers and corporate executives, and then to investors and investment bankers, who are essentially speculative gamblers. Investment bankers regulating the monetary system resemble foxes guarding the hen house. Even after the 2008 financial crisis both Presidents Obama and Trump continued to appoint investment bankers to be the Secretary of the Treasury, our chief monetary system policy maker.
The salient events in monetary policymaking of the past century were taking the dollar off the gold standard and having the Fed issue Reserve Notes backed only by the faith of the American people. It is a faith supported by the subliminal message in our consumer-based economy that money is God. Unfortunately, it is a god without a soul or values, allowing private banks and financial institutions to print unlimited quantities of money. As long as the faith of Americans in the dollar holds strong and private bankers control the money supply, wealthy investors will gain power over the making of public policy, which impacts all of our lives. Amazingly, when Wall Street greed and lax regulatory enforcement by their Wall Street brethren in the government caused the monetary system to blow up in 2008, the faith of Americans in their monetary system held firm even though, jobs evaporated, wages sank, businesses went broke, and millions lost their homes. The investment bankers running the monetary system bailed out their banks and wealthy friends, leaving everyone else to struggle. Besides the bailouts, their stimulus policy of quantitative easing produced $80 billion dollars a month and sent it to the banks to further enrich their executives. They should have sent checks to all American citizens, which would have had a much stronger stimulus effect on the economy.
The increased money supply from quantitative easing also raised the value of stocks and bonds, allowing wealthy investors to grow richer as asset prices rose. As central actors in most major financial transactions, bankers grow rich by siphoning off a tiny percentage of the money from each transaction. Meanwhile, wage earners suffer from a stagnant pay scale, creating an income inequality not seen since the feudal ages.
The bailouts were based on the fact that the bank-friendly public policy makers claimed our biggest financial institutions were too-big-to-fail. If they were too big to fail then, will the taxpayers have to bail them out again in a future financial crisis?
One devious scenario is that the banks will perform a bail-in where they take depositor money and convert it into stock of the failing bank. This first happened in Cyprus in 2013 and has been contemplated as public policy by Canada, Cyprus, New Zealand, the US, the UK, and Germany. This could devastate a lot of people’s bank accounts.
The best way to solve the too-big-to-fail dilemma is to get investment bankers out of our regulatory agencies and for everyone in America to put their money into small local banks or credit unions. Some regulators are confident that they could break up the big banks smoothly, but their Wall-Street friendly bosses are not about to give them a chance.
The big banks could also be converted to public banks. This makes sense once banks have so much control over the monetary system that they present a systemic risk to all of society. Big banks should then become part of the commons and no longer belong in the private sphere. Our democracy is about people as power, not money as power.
Activities: There are several movies that provide a comprehensive picture of what happened during the financial crisis, including The Big Short and Inside Job. Some of the best analysis came from Matt Taibbi, investigative journalist for Rolling Stone Magazine. You can see videos with him here. The best is probably the one with Bernie Sanders. It is over an hour long, but I have identified several excerpts that you could play for the class. Another clear voice on the causes of the crisis is Sheila Bair, the past head of the Federal Deposit Insurance Corporation, who proved to be one of the few public policymakers looking out for the public good during the financial crisis. Here are several links to her presentations.
One of the most important points to understand is how banks create money under the fractional reserve banking system. Here is a list of videos on the hocus pocus way that banks create money. The video How Banks Create Money and the Money Multiplier is probably the best. There is also a video of Glenn Beck giving a forthright analysis of the Federal Reserve System
As a result of the 2008 crisis, the largest banks have increased in size, particularly the biggest four. Here is a chart you can print and hand out showing how much they have grown. JP Morgan Chase has grown by 57%, while Wells Fargo grew by almost 270%. Much of their growth came from the 35 banks they have swallowed up since 1990. JP Morgan’s growth is mainly due to its purchase of Washington Mutual and Bear Stearns at bargain prices during the 2008 crisis, while Wells Fargo bought the much larger Wachovia, and Bank of America bought Countrywide and Merrill Lynch. Wells Fargo also became infamous for trying to stimulate growth by creating thousands of fraudulent accounts without account holder permission.
At this point, take a break and then come back to deal with all of the questions for the class. You can use the notes on the answers to guide the discussion. It would also be good to talk about some of the best books on money. In the last few minutes of the class pass out the questions and article rankings as well as the talking points for the next class on Public Banking and Other Solutions.
The day after the class, email the questions and rankings for the next class to everyone and include a current article on the power of Wall Street.
The day before the next class, send a reminder email that the class is coming up and again attach the questions and article rankings for the next class, Public Banking and Other Solutions. Include a piece on public banking or the health of your local economy
class 7: solutions to economic crisis: public banking and others
SOLUTIONS TO ECONOMIC CRISIS: PUBLIC BANKING & COMMUNITY ORGANIZING
Solutions: Public Banking, Solidarity Economy, Other Local Models
Purpose: To look at local initiatives creating new economic models and systems.
Readings: Justice Rising, Spring 2014, Public Banking: Creating Jobs, Building Communities, & Reclaiming the Commons
Handouts: Questions & Article Ranking, Talking Points
Paradigm: The narrative from Wall Street and academia is that our privately run economy works for the betterment of everyone and that public control of our money supply will ruin it. The reality is that public control of the money supply and other economic models would provide a happier and more sustainable future.
Context: The current movement to create public banks to recapture the monetary system for the common good began with the publication of Ellen Brown’s book Web of Debt in 1994. Following the financial crisis in 2008, interest in public banking exploded as people sought an alternative to our private banking system.
In the 2008 crisis, private banking ruined our monetary system, leaving millions of people both homeless and unemployed. Interest in public banking as an alternative led to the establishment of the Public Banking Institute in 2010. In the spring of 2014, Justice Rising collaborated with the Public Banking Institute to produce Public Banking: Creating Jobs, Building Communities and Reclaiming the Commons, the reading material for this class. Now there are 21 states with initiatives to start a public bank in their state or community.
There is also a movement to create US Postal Banks using the US Postal Service. In the past the Postal Service has offered a variety of banking services including savings accounts to underserved Americans. There is a movement to re-establish those services supported by a wide variety of groups. For more information go to http://www.campaignforpostalbanking.org/
There are many other groups working to set up alternative economic models. One of them is Transition Town, a global movement that is looking at ways to reinvent local economies by organizing locally. It “is a vibrant, grassroots movement that seeks to build community resilience in the face of such challenges as peak oil, climate change, and the economic crisis. It represents one of the most promising ways to engage people in strengthening their communities against the effects of these challenges, resulting in a life that is more abundant, fulfilling, equitable, and socially connected.” Started in England by Rob Hopkins, it now has over 160 official affiliates in the US and numerous unofficial affiliates.
Economic localization is another global movement to create an economy for the common good. The Business Alliance for Local Living Economies (BALLE) https://bealocalist.org/ has been on the forefront of the localization movement for the past two decades. The localization movement often focuses on building a local food movement and is responsible for the proliferation of farmers markets around the world, many farm-to-school and farm-to-table programs, and community-supported agriculture. A slow money movement has developed to help finance this change. Class 8 on Food and Health will concentrate on local food.
Activities: Start by looking at local initiatives for establishing a public bank. If there is an initiative in your state, invite a speaker to your class. If there is no local chapter, you could invite someone from the Public Banking Institute (See page 16 of the JR on Public Banking for a list of local initiatives) or Marc Armstrong from Commonomics to address your class. Or show one of the many videos from the Public Banking Institute website. A list of three of the best is here.
One interesting rationale for starting a public bank is to service an industry that is now underserved. This could range from the marijuana industry to the local homeless population. Discuss if there is an underserved population in your community and how either a public bank or perhaps a postal bank could change that.
You should also present at least one other presentation. One of our favorites is a presentation by a panel of people involved in the local food network. This can include local farmers, farmers’ market representatives, or local storeowners who sell local food. There are many passionate and articulate people involved in this phenomenon. If you cannot find anyone to speak on this topic, click here for a short list of relevant videos.
If there is a Transition Town group near you, there would probably be a representative happy to talk to the class. You can see a map and list at http://www.transitionus.org/transition-towns. You could also show some videos. Here are several good ones, including one from Houston where petrochemical engineers are moving into the new era.
These presentations and discussions may take up the entire class. Hopefully you will have time to go over the questions. You should also talk about this list of books on public control of the monetary system. Finally, remember to pass out the questions, article rankings and talking points for the next class, Climate Change, Resource Depletion, and Global Pollution, the first in Part 3: Saving The Environment From Corporate Destruction. The day after the class, email the talking point, questions and rankings for the next class to everyone and include a current article on corporate impacts on the environment.
The day before the next class, send a reminder email that the class is coming up and again, attach the talking points, questions and reading priorities and maybe another piece on corporate impact on the environment.