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image: https://www.project-syndicate.org/default/images/avatar.png Peter Burgess
Stopping America’s Federal Debt Explosion
Most governments in the world are in dire financial straights. This is not surprising since the funding of government is opposed by all the people and organizations with the resources that could fund government, and ordinary people are faced with a world where good jobs that would result in more taxes being paid are being eliminated as fast as wealthy investors can make it happen. Having governments be more efficient is a worthy challenge ... but gutting government so that it is ineffective is not a worthy goal. Peter Burgess truevaluemetrics.org
The End of Big Banks
It has been really easy for big banks and big corporates to extract wealth from ordinary people who simply work hard for their money ... but that easy money is pretty much over with ordinary people essentially bankrupt. Now big banks have to extract wealth from big corporates, and this can be a different war and a different outcome. I argue that corporates before banks will learn that it is ordinary people that are the market ... and a bankrupt market is not in their best interest. Politics and politicians have little or no role in all of this because they have already shown that they are going to do the bidding of those that fund them. My role in all of this is the design of a system of true value accounting that will work to hold all economic actors accountable for all the impacts they are having. Peter Burgess ... TrueValueMetrics.org
The Global Economy Confronts Four Geopolitical Risks
Today’s Productivity Paradox
There was a lot of talk about the PC paradox in the late 80s, early 90s because investment in PCs had done little for productivity, but soon the technology was tweeked and all sorts of automation became possible and productivity soared, together with a boom in the international logistics industry and outsourcing to the world's lowest cost environments. There is a huge problem with how we are measuring progress and performance in the economy, because while productivity may be good for profits, it is potentially a catastrophe for people and society, and maximizing profits is usually terrible for the environment and a sustainable future. It is about time high profile economists too a hard look at the metrics they are using. You manage what you measure, but you had better measure the right things. Peter Burgess http://www.truevaluemetrics.org
When Inequality Kills
Prominent economists bemoan the relevance of GDP as a meaningful metrics for socio-enviro-economic performance, but it stays in place with little effort to replace or complement the measure with something better. In my view, as long as money is the measure of success, then we are bound to have results that have negative impact on society and the environment. You must measure in order to manage, but you had better measure the right things! Peter Burgess http://www.truevaluemetrics.org
The Tragedy of Ben Bernanke
I read economics in the late 1950s ... but before that I had read engineering, and after that I have worked in the real world of business and a real world full of poverty and economic dysfunction. The policy options and political constraints that exist today ensure sub-optimal performance of the socio-enviro-economic system which also suffers from a lack of a fully functional system of metrics about the things that really matter. Preoccupation with GDP growth may have been appropriate in the 1930s, but maximizing money profit and GDP growth in rich countries in the 21st century has to result in an existential crisis. Massive changes in the way the socio-eonviro-economic system functions are required ... and a start should be to make integrated reporting of financial performance, impact on society and impact on environment mandatory. There is the technology to have a better world. We need the metrics to give this traction.
Why the Greek Bailout Failed
My own experience with 'Structural Adjustment Programs' driven by the Washington Consensus has been very negative. My own work suggests that they were problematic because they were based on quite seriously flawed assumptions about how society and the economy needed to function. It seems to me that the present Greek fiasco has a political elite arguing with a financial elite, while ordinary people get to pay the price. There is a saying in Africa that when elephants fight, its the grass that gets ruined. So it is in modern society. There is a huge need for structural adjustment. The dominance of money and financial modelling in modern society may work quite brilliantly for the ownership class, but it completely fails to address the big issues that really need to be faced: massive youth unemployment, growing disillusionment by most people in institutions, whether they be political, judicial, financial or educational, not to mention a growing framework of terror that shows little signs of being contained. Meanwhile, there are significant economic activities that ought to be going on in Greece, not least of which would be work to ensure that deterioration of the ancient landmarks is rapidly remediated. The money cost of doing this would be huge, but the real cost of not doing it would be even greater (but of course this is not the subject of any metrics) and the real value of employing a lot of people would be a big plus for the economy (and that is also ignored in the conventional money cost based analysis). I am not too good at history, but I think it was Nero that fiddled while Rome burned. The high profile policy analysts and policy makers seem to be functioning a lot like Nero. Peter Burgess TrueValueMetrics.org
The End of Work as We Know It
In my view it is automation in its various guises that has resulted in a massive increase in productivity since the beginning of the agriculture revolution and the industrial revolution and it is high productivity (compared to 200 years ago) that has enables our modern high standard of living. I argue that this is a good outcome. With more than half the population of the planet still living in dire poverty in large part because of the lack of basic things like infrastructure, health services, education, etc. there is a huge need for massive investment to upgrade to a decent level. At the same time there is massive unemployment of reasonably well educated youth around the world. The challenge, therefore is to find a way so that the massive need for things to be done can be matched with the human resource that is presently unemployed but could do the work. The banking and finance sector ought to be the solution to this problem but their singular focus on the money profit metric means that they are unable to do this job. Government is underfunded to do these jobs because again the money profit metric in the investment community also means that there is no appetite at all for investing in good. I argue that the system is failing because we only use the money measure, and have no measure for the good that can be derived from best use of all available resources. Similarly, the same basic dynamic should play out with the investment needed to mitigate the risks associated with carbon energy use and climate change. Investing to achieve a better world (augmenting human capital and natural capital) rather than simply investing to increase financial capital would be a way forward that is win-win-win. Peter Burgess TrueValueMetrics.org
A New Birth for Social Democracy
800 years ago the Magna Carta was signed, and the idea that the King was subject to law was established. It should be that the modern corporation and wealthy elite are similarly not 'above society' but part of society. I very much like this article, but converting these ideas into coherent public policy and corporate practice is going to be a challenge, some might say an impossibility. We are all part of a very complex global socio-enviro-economic system, yet we attempt to manage in this system simply by using some very limited metrics ... the money profit metrics for business, the stock value capital market money metric for wealth and the GDP money metric for economic health. We have no equivalent metrics for human capital and quality of life and no equivalent metrics for the impact economic activity has on the environment. I have no idea what would be the best possible policy formulation for the optimization of the socio-enviro-economic system, but it would be a great help if there were metrics that embraced everything in this system in a coherent way. With such metrics everyone could use the data to optimize all the facts from all the perspectives that impact them. Getting the right numbering system is not easy ... but it is way easier than getting a big policy formulation right. It is a version of Adam Smith for the 21st century, with everyone's behavior having an impact on the totality of the system. It builds on the Peter Drucker idea that you manage what you measure. With a numbering system that embraces everything and not just money profit, there is a fighting chance that the money resources that exist and doing nothing of substance could be reallocated to doing the zillions of things that need doing but, using the prevailing money profit analysis, are not profitable enough to fund. The game changer, Uber is built on technology that only became possible in the 21st century. A game changing new system of metrics needs to be based on thinking for the 21st century. While I appreciate the power of conventional double entry accounting, it, like the Magna Carta, also goes back to the 1200s ... and first written about in the 1400s ... and still at the core of numbering for modern society in this century. Think what would be possible with a system of metrics that enabled the optimum allocation of resources and deployment of technology! Peter Burgess TrueValueMetrics.org
Magna Carta at 800
About a year ago I thought it would be fun to publish a Magna Carta version 2.0 to celebrate the 800th anniversary of the signing of the original. I decided against the project when I realized how little I really knew of the details of the history ... and indeed the details of the content of the whole document. The theme of Magna Carta 2.0 would have been to sort out the relative power of the bankers, corporate titans and oligarchs relative to legitimate and democratic government institutions ... a situation today not much different from the issues being negotiated at Runnymede 800 years ago. Many of the actors in modern times have shown a contempt for the rules that boggles the mind. It would not surprise me one little bit if someone more capable than me decides that it is high time that the chronic dysfunction that has emerged in our modern socio-enviro-economic system should be addressed in a Runnymede like confrontation, which, I argue would be better than massive uncontrolled violence that might well be the alternative. Peter Burgess TrueValueMetrics.org
The Education Myth
I ended my formal education more than 50 years ago, but did not stop learning. And thank goodness! The world has changed in so many ways and rather few educated people have been taught that this change impacts everything. Education is vital for this generation of young people, but in order for them to have a great future all sorts of other things have to be done as well. With current thinking in the leadership class, young people are getting pumped into an economic setting where a high percentage are unemployed or underemployed. This is crazy. We have all the money in the world to develop a new 'app' that makes money wasting time and doing little else, but we cannot fund the multitude of important things that need to be done to make the world a better place now, not to mention a world that has a better chance of surviving in the future. This sort of investment will make more jobs possible ... but everything gets to be problematic when there is hyper profit inflation on top of near zero interest rates and a deflating labor economy. There is systemic dysfunction. Better education is a good idea ... but in combination with way better decision making in almost every aspect of the socio-enviro-economic system that is just not working very well any more. Peter Burgess ... truevaluemetrics.org
New-Model Development Finance
In my experience, development finance is a critical piece of sustainable progress for developing countries. The old established institutions (World Bank, IMF, regional development banks, bilateral agencies) have a poor record of delivering value for money. China has a different approach, and maybe not very much better. I argue that too much of development thinking is about money, and far too little to do with people. When you look at 'development' through the eyes of the multi-billion people who are at the bottom of the pyramid (BOP), development performance has been poor and progress inconsequential. Peter Burgess truevaluemetrics.org
The Economic Consequences of Mr. Osborne
I read economics at Cambridge almost 60 years ago, and have been a Keynesian ever since. Keynes did his work on top of reality. Modern economists try to fit economic ideology on top of reality, and surprise surprise, its does not work. The potential for productivity to deliver huge benefit to people and society is being held hostage to out-of-date ideas about almost everything. Technology has progressed in an amazing way over the past 50 years. Economics, politics and indeed media are stuck in the past ... and the metric of money to measure socio-enviro-economic performance is bizarre and counterproductive.
Peter Burgess TrueValueMetrics.org
An Even More Dismal Science
I like reading this stuff. I studied economics a long time ago after an engineering degree and before training in accountancy. I am struck by the apparent lack of appreciation by the high profile big name economists of the enormous role of technical change in the functioning of the system. Any modelling about the future based on data about the past is almost certain to be wrong unless the model takes into consideration not only the fact of technical change, but also the way technical change is itself changing. When I was a corporate CFO, the strength of our company was how fast we were changing ... the weakness of economics is that it is being so slow to appreciate the fact of technical change Peter Burgess TreuValueMetrics.org
Making Do With More
In many ways the world is a better place than it was a hundred years ago, but relative to what is possible, the progress and performance of our enviro-socio-economic system is rather pathetic. From my view point the systemic dysfunction is caused in some considerable part by the very poor metrics we use in out modern system. Profit and stock value are far too dominant, together with GDP and GDP growth ... while most of the things that have true value are ignored, like for example, parenting ... and elder care only when it is the money paid to the caregiving industry. There are metrics for the cost and the profit being made on every product that flows through the economy, but there is nothing about the goodness (or not) of the products and the impact their life cycle is having on the environment ... and when productivity goes up, and payroll goes down, and profits go up, and society goes down we only take notice of the profit. No wonder most of the big decisions are wrong and the world is ... compared to where it should be ... a serious disaster!
Emerging Economies’ Demographic Challenge
I recently watched a panel talking about the role of managers in maximizing shareholder value under corporate law. The question was where had this absolutely wrong idea come from, and it was concluded that it was economists with a lack of training in law who were the culprits. So now the question why demographics should be a challenge, and I have to conclude it is because economists have little idea about how productivity comes about and how it can be used to make the world a better place. Given the really sad state of economic data now and for most of the past, and economists fixation on the analysis of these awful data, not to mention that the biggest constant we have is change, it is no wonder that economists are having such a difficult time figuring out what is going on and how to fix it. And, please, when are we going to stop using GDP and GDP growth as a measure of economic health?
Growth, not Grexit
Building on what Anna Diamantopoulou has written I would like to suggest that one of the best ways to enable Greece for a wonderful future is to make a huge investment in the restoration of its past. It is a crime against humanity … a cultural crime … to allow the disintegration of the ancient historic sites, but also important, it would rejuvenate the tourism sector which is arguably one of the most valuable parts of the Greek economy. Greece is one of the most beautiful parts of the planet and this should be driving its future. Sadly the metrics used by decision makers are fatally flawed … crude GDP growth is not the answer while initiatives that improve quality of life are, and European tourism / Greek history is one opportunity to pursue. SHOW REPLIES
Reforming Greek Reform
The single biggest reason why there is economic dysfunction in modern times is the behavior of rich and powerful people. This applies everywhere in the world, including Greece. Very few governments are financially sound in large part because there is an imbalance between taxes and essential expenditures. Greece is notorious for its weak tax collection system which benefits the rich and powerful disproportionately. At the same time Greece has a social benefit system that is more generous than it should be and is unaffordable while rewarding quite youthful, healthy laziness. Correcting these structural issues is not austerity, it is simply good common sense. This can be done sensibly or it can be done stupidly. To start with please don't talk about increasing Greek exports of manufactured goods against German manufactured goods … no matter what exchange rate advantage there is in a post Grexit world, this is a non-starter. On the other hand tourism should be a real winner, but only possible if Greece is again a happy place. Media, politicians and pundits don't help especially when the underlying analysis is based of fatally flawed metrics. SHOW REPLIES
The Global Economy’s Chinese Headwinds
Bankers, economists and others are going to continue to misunderstand the progress and performance of the economy as long as they comingle state and flow and will advocate for wrong policies as long as they believe that growth is the answer to all problems. From the perspective of the environment (planet) growth has a terrible downside whioh we ignore at our peril. From the perspective of people growth (of profit) has a terrible downside for employees (people). Growth that represents more and better goods and services (product) for people at the bottom of the pyramid would be good, but it must be offset by substantial negative growth of quantity in rich economies and a positive move towards quality. As long as GDP growth as now measured is the goal of policy makers there will be poor performance in financial terms, but even worse, poor performance in human social terms and environment (planet) terms. I am an advocate for better metrics in order to have better decicions ... this essay explains: http://www.truevaluemetrics.org/DBpdfs/MDIA/TVM-Short-Introduction-to-7D-Capitalism-and-MDIA-141212a.pdf. Much more on the website http://www.truevaluemetrics.org/
Inequality Disaster Prevention
I am frustrated by most of the socio-economic analysis that originates with high profile economists in large part because the analysis is quite simple on top of extremely complex systems. The mathematics of complex system analysis is inherently problematic and in the end inconclusive. But there are ways to get the right answers. Rather than to seek a really big policy solution, there should be a myriad of little initiatives all of which result in a step in the right direction. So then the question arises, how to get behavior change for everyone so that in aggregate we get a better socio-economic trajectory. The advertising industry has worked for its whole existence to do this ... but arguably only for the benefit of the corporation (and owners) rather than for the benefit of society as a whole. The advertising industry specializes in behavior change. I argue for some radical reform of the way we do accounting and reporting of corporate performance. There are initiatives that are heading in this direction so that there is reporting of impact on people and planet as well as just the profit performance ... but the techniques still need strengthening. I also argue that the purpose of economic activity is not simply to make a profit for corporate owners, but to sustain and improve quality of life and standard of living of people while doing the least possible damage to the natural environment. The corporate organization is subsidiary to people, not the other way round. The amazing progress of technology in the last 50 years is impressive. The mixed results for people progress is a disaster. In the developed economies the backsliding of the middle class is disappointing, and in the developing world progress out of poverty should be universal. Shortages and violence are endemic in too many places. It should not be a surprise that for profit economics is failing. On the other hand a system that thinks in terms of for good could get very different results. Peter Burgess - TreuValueMetris Multi Dimension Impact Accounting |
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MAR 6, 2016 |
| The text being discussed is available at https://www.project-syndicate.org/profile/5374df044a42310eecfc5609 and |