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Date: 2017-09-25 Page is: DBtxt001.php L0700-PP-ECONOMY

KEY SOCIO-ENVIRO-ECONOMIC TRENDS
These trends have been in place for many years ... but now dominate the system
The takeaway from these graphs is that decision makers have been able to make decisions that delivered benefit to owners (investors) while the population that works in the USA has been put to further disadvantage compared to prior decades. This is the result that one must expect as long as the dominent measure of economic success is money profit and money wealth accumulation. It confirms my belief that in order for the economy to be optimized for ALL the population there must be measures to reflect quality of life for everyone, and not merely a single simple measure that really only works for those with affluence.

LONG WAVE ECONOMIC CYCLES - 1800 TO 2010
Long Wave Economic Cycles
Rolling 10-year yield on the S&P 500 from 1814 to March 2009 (%PA)


Source: Volans: Breakthrough Business Models Report, September 2016

The central argument of the Volans concepts can be summarized as follows:
1 Think Sustainably Leaders know that the rules of the game are about to change faster than at any time in their working lives. Simply parroting the latest sustainability jargon won’t make the cut—indeed the entire Sustainability Industry must undergo a radical reinvention, involving defragmentation and re-capitalization, if it is to tackle its current weaknesses, including intense siloing, internal competition and a Babel-like confusion of terminologies.
2 Think Exponential As leaders learn to Think Sustainably, they will also need to learn to Think X, shorthand for Think Exponential. In the same way they once looked to activists and social entrepreneurs for evidence of where markets were headed, they must now engage a very different set of players. These new players are not happy with 1% or even 10% year-onyear improvements, instead pushing towards 10X—or 10-fold—improvements over time. And in Thinking X, business leaders need to think of four key domains where the X agenda is already playing out.
3 Think Social The first imperative is to Think Social. This is not simply about embracing social media and networks, but positioning business for a world pushing from 7 billion to 10 billion people within a few short decades. This builds on the work of social entrepreneurs and intrapreneurs, and impact investors, moving us all into areas like behavioral and cultural change.
4 Think Lean The second imperative is to Think Lean. The triple bottom line agenda—now also embraced by the burgeoning global B-Corp movement—expanded the focus from eco-efficiency to new forms of value creation—and destruction. Now there is a need to pull together movements working on lean production, lean startups and frugal innovation, and those aiming to create new forms of efficiency across all major capitals (e.g. physical, financial, human, intellectual, social and natural capital).
5 Think Integrated The third imperative is to Think Integrated. There is growing interest in Integrated Reporting, with sustainability accounting and disclosures converging with financial accounting and disclosures. But integrated accounting and reporting across multiple forms of capital is only part of the challenge. To break through, we need to evolve solutions that are integrated across—and impact—every level of the system. In tomorrow’s capitalism, this will mean seamless data flows from farms, fisheries and factories right out to the biosphere, oceans and atmosphere. The result: new forms of market intelligence that most business leaders do not yet know that they will soon find indispensable.
6 Think Circular The fourth imperative is to Think Circular. Going—or thinking—in circles used to be seen as a bad thing, but now concepts like the Circular Economy and Cradle-to-Cradle Design are gaining real traction. This aspect of the Sustainability X agenda runs directly counter to the linear take-make-waste model of capitalism, but the accelerating push towards a low carbon economy—with the new emphasis on carbon productivity—will catalyze closed-loop value webs and business models

'http://truevaluemetrics.org/DBpdfs/Initiatives/Volans/Volans-Breakthrough-Business-Models-Report-September-2016-updated-4-Oct-2016.pdf'
'http://s3.amazonaws.com/aws-bsdc/Volans_Breakthrough_Business_Models_Report_September-2016-updated-4-Oct-2016.pdf'
Open external link PDF ...

Open PDF ... Volans-Breakthrough-Business-Models-Report-September-2016-updated-4-Oct-2016
TPB observation:
The difference between the Volans approach and TVIA is that TVIA starts with what actually exists and looks to measuring progress and performance of what exists from every perspective. Based on measurement and reporting, it then becomes more efficient to implement initiatives to improve progress and performance. It should also be noted that measurement using the TVIA approach does not in any way depend on the way initiatives have been designed and are being implemented. Good measurments of progress and performance are agnostic with respect to the design of the initiatives.

WHAT'S WRONG WITH GDP ... Robert Kennedy 1968
ECONOMIC PERFORMANCE / GDP
GDP is a measure that sends all the wrong signals about economic performance in any mature economy ... though there is a strong correlation between GDP and quality of life in poor developing economies. After the 1970s GDP has proved to be a bad proxy for quality of life in rich mature economies like the United States and Canada, many countries in Europe and Japan.

GPI IS A BETTER MEASURE

GDP versus GPI
Until the late 1960s there was some correletaion between per capita Gross Domestic Product (GDP) and the Genuine Progress Indicator (GPI), but this ended with the economic downturn of the ealry 1970s, the subsequent oil shock of 1973 and subsequent stagflation and cost push inflation. After 1980, there was a new political imperative where deregulation and profit became the dominant policy rather than a more balanced set of socio-economic goals.
The cost push inflation of the 1970s was ended in large part by the expansion of offshore manufacturing espcecially in China and reduction of high wage US manufacturing.

PROFITS HAVE BEEN INCREASING BUT WAGES HAVE NOT
For almost 40 years since 1980 years there have been corporate profit increases, but almost no increases in wages!

534 400
September 2012 ... This graph shows that corporate profits rose to new heights while wages decline!
Open external link ...

1200 874
September 2012 ... Corporate Profits -v - Wages as a percent (%) of GDP!
Open external link ...

WAGES, PROFITS AND PRODUCTIVITY
50 years of increase in productivity and profits, little or no increase in wages!

750 531
Productivity up ... Wages down!
A plot of productivity versus wage growth shows that NONE of the benefit of increased productivity has gone to improving wages ... ALL of it has gone to profits and to the benefit of owners.

Productivity up ... Wages down!
This graphic prepared by Secretary Reich shows the same basic information.
For more than 30 years all the benefits of improved productivity has gone to owners, with none going to those that work.
In the period 1945 to 1980 the growth of productivity was share more equitably between investors and workers.

576 434
Corporate profits, GDP and labor wages
For the period 1970 to 1985 corporate profits were relatively stagnant, but from 1985 to the present profits have increased significantly though with substantial volativity.
GDP has increased modestly year over year while labor income has increase rather less.

INVESTMENT INCREASES PROFIT
Investment does little for GDP growth because it does little for people and aggregate demand / consumption

This set of data (from Andrew McAfee) shows a modest growth in GDP for the USA from 1995 to 2011. In this period corporate investment increased but dropped as the economy went into a short recession after the post Y2K tech boom and again in the so called 'great recession' of the period 2007/8/9.
Non financial profits after tax has grown stongly from 1995 to 205 but with signficiant fluctuations with big drops in the 2000 recession and again in the great recession a few years later. Total profits after tax did not fluctuate as much as the financial sector fluctuated less even though it had a huge role in the financial crisis that was responsible for the great recession.
None of these economic indicators suggests an economy and a society in trouble ... rather it looks like a set of trends that are really quite good.

The problem is that when the productivity / worker trends are added in (the red line) then it shows that the achievements of the economy are being obtained with less and less participation of workers. It comes as no surprise that a political candidate such as Donald Trump is able to attract votes based on a promise of change, when a very large proportion of the country's worklers are 'losing' relative to the more advantaged in the society.
This is very basic economic analysis that seems to have been ignorded by politicians, policy makers and the media for a very long time.

FINANCIAL SECTOR TRENDS

Financial Sector Assets
A big part of the wealth of the United States has been created not so much by the ownership of physical assets, but by the ownership of financial assets.

MONEY ... THE DECLINING DOLLAR

The declining value of the dollar
Some economists attribute the decline in value of the dollar to the creation of the Federal Reserve Bank.
It is possible to ascribe correlation to this, but not causation.

The declining value of the dollar
More likely is that the decline in the value of the dollar is attrributable to the changes that have ossurred in the underlying economy of the United States and the World.
There have been substantial drops in the value of the dollar during the First World War and the Second World War. In both cases there was massive 'inflation' caused by excessive demand for war materials ... demand pull inflation and production profits.
Global production profits have continued to fuel demand pull inflation since the 1980s. During the 1970s following the global 'oil shock', there was cost push inflation.

CLIMATE CHANGE

800 750
Globally Temperature is Increasing

579 255
Carbon Dioxide Emissions are Increasing

Carbon Dioxide Concentrations are Increasing and so is Global Temperature
Highest temperatures ever going back 10,000 years

INTERNATIONAL DEVELOPMENT

650 431
Funding Development Assistance
The changes in the structure of development financial flows over the past 40 years mean that developing countries are going to be less and less able to achieve independent sustainability. This outht to be a matter of great concern, but the discussion is muted.
Official Development Assistance (ODA) has remained at about the same level of several decades.
However, various forms of debt financing and foreign direct investment have increased substantially. The expectation with these modes of financing is that there will be a 'return' from these investments that is a risk adjusted market rate. In most cases this will be substantially more than the underlying increase in the productivity and performance of the economy ... and the basic arithmetic is that the country gets pooer rather than richer as a result of the financial interevention.
The good news is that international remittances have grown substantially. These fund flows have a very positive impact on the quality of life of the beneficiaries. Sadly remittances are also the target of politicians who have an interest in taxing these fund flows.

US GDP
All profits after tax
Non-financial profits after tax
Corporate Investments







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