wealth


Here’s an innovative idea for tackling world debt – since 90% of debt is imaginary money, spirited out of thin air by the banks, why don’t we ‘move the zero‘ on our debts and write off the made up bit?

As you will know if you’ve been paying attention to the financial crisis, most of the money in the world banking systems does not exist. A mere 10% of the figures tossed around actually exists anywhere as real wealth. All the rest is written in as debt, downpayments on future earnings.

Since it doesn’t exist, there’s no reason why that 90% couldn’t be written off at a stroke, saving the world’s tax payers from a burden of debt that our children’s children are currently destined to carry. Moving the zero would reset the banking system, bring money back down to earth and give us a fresh start.

As a proposal, I like it. It has the ring of the Old Testament’s jubilee principle, where all the debts were cancelled every 50 years so that poverty wasn’t passed on to the next generation. In practice, politicians are too craven to ever consider such bold ideas, but that doesn’t mean we shouldn’t ask. Let’s shame them with a more just, more generous, and more common sense solution than anything they’ve proposed so far – click here to sign the petition.

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HT – Breathe

In 1649, Gerrard Winstanley led one of the UK’s most notable political protests, when his group of forty ‘diggers’ took up residence on St George’s Hill, near Weybridge. They planted vegetables, erected their own homes, and invited anyone to come to join them, promising to ‘work in righteousness and lay the foundation of making the earth a common treasury for all.’

Winstanley believed that oppressive social structures kept people in poverty. If access to land was restored, people would form communes and look after themselves in a happy and democratic anarchy. Nobody would work for the oppressive upper classes if they had their own land to farm, and social hierarchies would crumble.

Needless to say, the local authorities were scandalised and called the army. When the army decided not to move them on, they resorted to intimidation. There were beatings and arson attacks, crops were trampled, and eventually Winstanley was hauled into the courts and the camp disbanded. The occupation lasted from April to August, and after similarly unsuccesful projects in other parts of the country, the diggers finally abandoned their efforts in 1651.

Despite their lack of success, the diggers movement was profoundly influential. It inspired the American revolutionaries, pioneered many of the principles of communism, and is often cited as the birth of ‘direct action’ protest in Britain.

350 years on, the diggers’ cause is still unresolved. Land ownership in the UK is a subject we rarely talk about, but it remains a deeply rooted inequality, stretching right back to old class structures. 70% of the UK is owned by just 1% of the population, with big landowners including the queen, the military, and many duchies and inherited estates. The Duke of Westminster owns my office in London, part of estates that total 140,000 acres. Two thirds of Britain is owned by just 6,000 landowners. Houses and land remain hugely expensive and beyond the grasp of many people, while vast estates remain unused and in private hands. Because the monarchy and the government are among those landowners, and many more of them sit in the House of Lords, reform is not on the cards any time soon.

Fortunately, the legacy of the diggers lives on. Today the radical protest collective The Land is Ours are due to move onto some disused land near Hammersmith. They will pitch tents and dig composting toilets, and start building themselves an eco-village. Raised beds will be assembled and the former industrial land turned into a productive growing space. Volunteers will head out to meet local residents and tell them what is happening, bringing the community into the project.

The last occupation of this type was in 1996, when 500 activists occupied a site on the banks of the Thames and made themselves homes and permaculture gardens. They lived there for five months until the landowners, Guiness, evicted them with the help of the riot police.

Who knows how long this particular protest will last, perhaps the summer. Whether or not it survives, it’s a bold and subversive statement, and may highlight the neglected issue of land reform once again.

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With a title like that, you’d expect ‘How the rich are destroying the earth’ to be a marxist polemic. It’s not. At least, not entirely. Simply put, the rich are destroying the earth because in the face of environmental catastrophe, “this class opposes the radical changes that we would have to conduct to prevent the aggravation of the situation.”

Herve Kempf is a expert journalist committed to fighting France’s ‘environmental illiteracy’ through the clear presentation of cold hard facts, and his book is to a plea to get people thinking about the environment in a social context.

The key factor in this, for Kempf,  is a wealthy elite: “this predatory oligarchy is the main agent of the global crisis.” That’s obviously a highly provocative statement, but it is well backed up. We know there is a wealthy elite – we encounter it only very occasionally. (See Peter Mandelson and his dealings with Oleg Deripaska last year) They live lives of opulence, disconnected from reality and operating almost in an alternative world populated only by people like them, and their servants. There are a number of problems with this.

Firstly, the rich set the agenda for everyone else. Drawing from the economic philosophy of Thorstein Veblen, Kempf argues that the primary driver of the consumer culture is emulation. We have a tendency to compare ourselves upwards, which creates a constant need to do better, to have more. What the rich have inevitably becomes the ambition of those just below them on the income ladder. The mega-rich pitch our whole culture into a self-destructive pursuit of wealth.

Secondly, the wealthy have all the economic and political power, and they’re very happy with things that way. Democracy does not suit them, and the erosion of civil liberties that has occurred in almost every western country in the past decade shows a growing paranoia and desperation to maintain the status quo. Kempf hesitates in suggesting the rich are actively conspiring against us, but they are unaware of the realities of the world, and hold all the power.

As long as the rich continue to run things, nothing will be done about injustice, says Kempf. The 500 richest people in the world have as much wealth as the 416 million poorest. But, “if nothing happens even as we enter an economic crisis of historic seriousness, it’s because the powerful of the world want it that way.” Why would the rich not care about injustice? Because poverty is relative. If you fix inequality you fix poverty, but the rich will be less rich.

Instead of equality, Kempf argues, we are given growth. Rather than dividing the pie more fairly, we are told we must make a bigger pie. “The pursuit of material growth is the oligarchy’s only means of getting societies to accept inequalities without questioning them.”

Kempf’s is a great little book, angry and passionate, and matching a concern for the earth with a concern for the poor. He has some wonderful turns of phrase, and is not afraid of a blunt statement: “naive comrades, there are evil men on earth” or “If one wants to be an ecologist, one must stop being a halfwit.” It is also refreshing to read a French view for a change, and his is a welcome voice among the British and American writers that dominate the politics and ecology debate.

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“Dubai is not just a city living beyond its financial means; it is living beyond its ecological means. You stand on a manicured Dubai lawn and watch the sprinklers spray water all around you. You see tourists flocking to swim with dolphins. You wander into a mountain-sized freezer where they have built a ski slope with real snow. And a voice at the back of your head squeaks: this is the desert. This is the most water-stressed place on the planet. How can this be happening? How is it possible?”

A great article on Dubai in the Independent today, dealing with slavery, debt, and a paradise half-built.

prosperity-without-growth“Questioning growth is deemed to be the act of lunatics, idealists and revolutionaries. But question it we must. The myth of growth has failed us. It has failed the two billion people who still live on less than $2 a day. It has failed the fragile ecological systems on which we depend for survival. It has failed, spectacularly, in its own terms, to provide economic stability and secure people’s livelihoods.”

Strong words from Tim Jackson, Economics Commissioner of the Sustainable Development Commission, an independent advisory body to the UK government. It comes from a report entitled ‘Prosperity without growth’, and it sounds a warning to the G20 as they convene.

“A return to business as usual is not an option. Prosperity for the few founded on ecological destruction and persistent social injustice is no foundation for a civilised society. “

That’s our philosophy on a plate. All that’s missing is a broader definition of wealth and the point that we’d be better off with a little less affluence. Oh wait…

“Prosperity goes beyond material pleasures. It transcends material concerns. It resides in the quality of our lives and the health and happiness of our families. It is present in the strength of our relationships and our trust in the community. It is evidenced by our satisfaction at work and our sense of shared meaning and purpose.”

In short, the government’s advisors are telling them to make wealth history. Let’s hope they’re listening.

Read the full report here.

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Bernard Madoff will wake up in jail tomorrow morning instead of his Manhattan penthouse. At 70 years of age, he is likely to serve a mere fraction of what could be a 150 year prison sentence, for what has been described as the biggest fraud in history. Over the past decade, Madoff scammed investors, funds, and charities out of $65 billion if an elaborate ‘Ponzi’, or pyramid sheme.

A pyramid scheme is a fraudulent investment plan that delivers high short-term gains by paying back investors with other investor’s money, rather than profits. As long people keep joining the scheme, their contributions pay the people before them. Since no profits are actually being generated, it crashes as soon as investor recruitment slows down, and the perpetrators disappear with the capital.

While it is easy to see Madoff as a rogue and dismiss such schemes as a criminal interest, climate writer Joe Romm suggests that our whole way of life has all the characteristics of a pyramid scheme.

“We created a way of raising standards of living that we can’t possibly pass on to our children” he told Thomas L Friedman in the New York Times. “We have been getting rich by depleting all our natural stocks – water, hydrocarbons, forests, rivers, fish and arable land – and not by generating renewable flows.”

Our consumer lifestyle relies on unsustainable use of resources and cannot continue indefinitely. Just like a pyramid scheme, those arriving last will find there is nothing there. In this case, those will be our children, who may inherit a world devastated by climate change and plundered of its resources. ” Every generation that comes after the Baby Boomers are poised to experience the dramatic changes in lifestyle that inevitably follow the collapse of any Ponzi scheme.”

Read Romm’s insightful article here at Climate Progress.

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The Fortune Forum will be meeting on tuesday night at the Dorchester hotel to discuss innovative ways to relieve global poverty. In attendance will be 100 billionaires, captains of industry, celebrities and philanthropists, gathered to hear Ted Turner speak and Joss Stone sing.

The Fortune Forum, according to their website,  “is dedicated to assist and showcase some of the finest humanitarian organisations alongside a number of exemplary grassroots initiatives in the world today. Thoughtful dignitaries, music legends and donors; philanthopists, private individuals and entrepreneurs converge to perpetuate life-changing and durable results.”

The forum is, basically, a club to encourage very rich people to give a little more away. Disgracefully, the mega-rich give away considerably less of their incomes than the poor. The richest 20% of us in the UK give an average of 0.8% of our incomes away, the bottom 20% gives away 3%.

While that might sound laudable, the Forum has hatched an interesting plan to encourage the rich to give more – through tax breaks. Under their proposed scheme, 50% of every donation would be deducted from the donor’s tax bill. The government would then pay that 50% from its aid budget. In theory, this would mean £5 billion extra donations for the poor. In reality, it would suck up the whole of the UK’s aid budget – it would still end up going to the poor, but it would do so through the donations of the rich instead of the Department for International Development. Aid would be privatised, our taxpayer’s contribution to the UK’s aid rolled up into billionaire playboys’ pet projects.

The forum insists their idea is an ‘incentive’ to encourage the rich to give more. I say it’s a complete injustice, and the average billionaire could give away 100 times what they do already and still be stupendously wealthy. Why should the tight-fisted rich be given sweeteners to part with their wealth, when the poor have proved to be more generous than they are with no help at all?

Unfortunately the forum’s scheme has the backing of the UN secretary general, Ban Ki Moon. They have also met with the treasury. This week’s dinner will raise the profile of their idea even more. But no matter who supports it, and no matter how much the poor are mentioned, or even how much money is released through it, the Fortune Forum speaks louder about greed than it does charity.

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One of the recurring questions of the credit crisis is ‘why didn’t we see it coming?’ It’s become known as ‘the Queen’s question’ here, as it’s the one she asked the experts herself. The fact is, thousands of people knew what was going on, that our economy was running on unsustainable levels of credit, but they were ignored. One of those people was James Scurlock, whose documentary and book were released months before the collapse of Northern Rock.

‘Maxed Out – hard times in the age of easy credit’ is the book of the documentary. It is essentially an expose of debt culture, told through a series of human stories with people who lend, borrow, or collect debt.

What he discovers is that “Americans’ incomes have not kept pace with expenses” – people want to consume more goods than they can afford. Rather than deny themselves, those unaffordable luxuries are bought on credit. When the payments get too burdensome, new loans are taken on to cover the old ones in what is known as debt ’surfing’.

Scurlock explores how this came to be with a series of mini-biographies of the men involved, the bankers who first realized that it was more profitable to encourage borrowing than saving. Dee Hock, the inventor of Visa, or Sanford Weill of Citigroup, who declared that his preferred customers were ‘people who eat at McDonalds.’

If that sounds a little odd, it should. Banks used to court the rich, as they would have more money to play with and be more dependable. More recently banks have begun to target the poor, because they have less money and are less dependable. That means they will borrow more, and then not be able to repay it, which means more fees, punitive interest rates, or even repossessions.

Clever business perhaps, if rather short-term, but at a terrible human cost. Scurlock meets a family who’s daughter committed suicide because of her credit card debts. He meets a woman who was persuaded to remortgage her house to help care for her disabled son, and now faces repossession. One obvious lesson of Maxed Out is just how shamelessly the banks have preyed upon the poor.

Another important message is how credit disconnects us from the true cost of things. There’s the former marine, now in jail, who bought a Cadillac on the US Army credit card and got away with it, at least for a little while. There’s a woman who has ordered an 11,000 square foot house because “if you look like you make money, eventually you will, you know.” As Scurlock observes, the basic problem is that people didn’t grasp that “credit was not the same as wealth.”

There’s a lot of interesting material here, like the financial sector’s lobbying powers (MBNA was the biggest contributor to George W Bush’s campaigns) or why the government failed to regulate – mainly because they were using credit too. The chapters on debt collection are eye opening, both from the point of view of the harassed borrower, and what really goes on in a debt collection agency. I’m going to do a separate post on sub-prime lending, but here are some more:

  • An estimated 90% of credit reports contain errors.
  • Many American manufacturers, including General Motors, make more money from financing their products than they do on the products themselves.
  • There are between twenty and forty million Americans without a bank account.
  • “Close to half” of all Americans plan on winning the lottery before they retire.

Scurlock surveys the levels of debt and concludes “you have to wonder if society itself is not already bankrupt.” “Many of the regulations we’ve seen disappear were instigated to protect the financial system from a Depression-style meltdown” he warns, and “sometime, maybe sometime soon, this house of cards is going to collapse.” I’m guessing this book was probably researched in about 2005 for a 2007 publication debt. Perhaps Scurlock was already too late, but I really wish it had got more attention.

In summary, this is a very useful book in explaining how our debt culture developed, how it affects our view of money, how it preys on the poor, and how it ultimately pushed our economies over the edge. I highly recommend it. There’s also the Maxed Out documentary of course. If anyone’s seen it, let us know your views.

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When you think of the most indebted countries, who do you think of? You probably think of African countries such as Ethiopia, Malawi or Chad.

Those countries are all on the IMF’s list of heavily indebted countries, all places that are struggling under a heavy burden of public debt.

If you add personal and public debt together, both government loans and private loans, credit card debts and mortgages, the results are a little different. The total amount owed to parties outside the country is called ‘external debt’. The top ten most indebted countries in the world by external debt looks like this:

  1. United States – $13,703,567 million
  2. United Kingdom – $10,450,ooo
  3. Germany – $4,489,000
  4. France – $4,396,000
  5. Netherlands – $2,277,000
  6. Ireland – $1,841,000
  7. Japan – $1,492,000
  8. Switzerland – $1,340,000
  9. Belgium – $1,313,ooo
  10. Spain – $1,313,000

As the government regularly tells us, it’s not the amount of debt that’s important, but the ability to pay. It does tell us something about our wealth however – it is created out of debt.  For that wealth to continue or to grow, we will need to take on more debt, as we’ve seen repeatedly over the last few months. (the figures above are October 08 and out of date already)

Does that sound like a sustainable way to run an economy?

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