Looking today at our economy, it’s difficult to see who is creating that higher level of value. Companies pump up their near-term income by accounting tricks, pump up stock prices for shareholders, without creating real value, all of which has had a hugely negative effect on our global economy.This is an extremely important distinction which should be made. Much of the growth in GDP in the finance sector is just extracting rents from others. That is not productive. When people trumpet private sector activity over government spending, you must ask what value is gained. Private profit which doesn't increase value doesn't gain society anything. Infrastructure investment isn't being maintained, and further privatization won't improve that in most cases. We need to refigure such issues.
Umair Haque, is at the forefront of pushing for a new way of looking at what, and how, we grow our economy. He says:
We have a problem — you know, what is this crisis really about? Is it a debt crisis? Is it a liquidity crisis? I think it’s deeper. It’s a crisis of real value creation and we seemed to kind of have hit the limits of our ability to create real value. And for me, real value is what I call “thick value.” And that’s a little bit analogous to what Michael Porter has recently called “shared value.” For me there are three pillars of real value. It has to be sustainable. It can’t go up in a puff of smoke next year like it happened with the banking crisis. It has to be meaningful, that is, it has to reflect real tangible benefits to people on the other side of the transaction of the relationship. And I think that it has to be authentic.It’s easier to make money in the short-term through exploitation and the extraction and much more labor intensive with a higher failure rate and a much greater degree of challenge to actually advance and create something that is new and different and differentiates in its creation of value. “So to me, this is a crisis that is about failing to create real value, but it is a crisis of our institutions. And it’s a crisis that is of things like GDP and corporate profits, and the ways in which we measure and conceive of income. And so to really get to grips with this crisis, I think we have to begin by taking a cold hard look at those things,” says Umair.
Saturday, May 14, 2011
Naked Capitalism Link of the Day
Today: Capitalists Who Make vs. Capitalists Who Take, by Dylan Ratigan:
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This notion that the most interesting class warfare is between the Producers and Predators has been around since the great agrarian uprisings of the 19th century. Veblen made a career out of drawing a distinction between Business and Industry--between the Industrial classes and the Leisure classes.
ReplyDeleteNice to see the idea get to Harvard (finally)--it's only about 140 years old, after all. A better treatment of this subject can be found at:
http://elegant-technology.com/kossack_econ_1.html
Good point. I should probably say that it would be good to have another discussion about it. I think that too often today, people think that folks are doing something important if they make a bunch of money. I would say it isn't quite that simple.
ReplyDeleteDamn straight we need that discussion! Actually, I have been trying to stir it up since the late 1980s. I had stumbled upon the literature of the Non-Partisan League, the Farmer's Alliance, and the Minnesota Farmer-Labor Party and discovered that farmers had probably the most interesting political ideas in human history. Donnelly's "constitution" for the 1892 People's Party convention in Omaha is perhaps the finest political document in the English language.
ReplyDeleteSo the first sentence in my book Elegant Technology reads, "In the beginning, there was agriculture" in honor of those incredible people who actually made progressive politics work. They figured it out while plowing behind a team of horses or huddling around a kitchen stove while blizzards raged. And they made the educated elites look like village idiots.
You really want to have this discussion?
I am definitely interested in hearing what people think constitutes productive work. I think we've allowed the FIRE sector to siphon off too much from the rest of society. There really needs to be talk about how much is enough for people to take.
ReplyDeleteI find it fascinating that the plains states which were at the heart of the Grange and Populist movements are now the most reliably conservative areas. I don't understand that, since those regions don't benefit from the prosperity which the folks on Wall Street have enjoyed.
Yes, but in places like North Dakota, the ultimate gift of the Non-Partisan League, the Bank of North Dakota, provides them with enough prosperity to actually BE conservative. And BND proves on a daily basis that you CAN run a VERY good bank with civil servants who think of themselves as public citizens.
ReplyDeleteThen also remember that the various economic calamities like the early 80s really destroyed the smaller operator. It was the folks farming 160 acres that drove the progressive movements--and those folks don't farm anymore.
Those are both good points. I only heard about the Bank of North Dakota about 3 or 4 months ago, and would like to see more people advocate for other states to emulate it. Right now it appears that the main struggle is to overturn the outlook that public servants are welfare recipients.
ReplyDeleteIt is also true that the farmer living on 160 acres is nearly extinct. In Ohio, we still have a lot of farmers who farm small farms, but also work at jobs in town. We see fewer and fewer, as many of the small manufacturers shrink operations or sell out to bigger faceless firms. Plus, it appears that older people tend to become more conservative as they age, and farmers are rapidly aging.
I'm just afraid the "government isn't the solution to the problem, government is the problem" concept took hold in rural areas more firmly in the '80's than in other areas. People in less densely populated areas don't feel the need for government that people in more densely populated areas. Even though they are probably net beneficiaries of government spending, they don't see it as such.