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Economics | ||
Original article: https://beyondmoney.files.wordpress.com/2021/11/2021-11-hertfordshire-preso.mp4 Original article: https://beyondmoney.net/ Burgess COMMENTARY A foundational analytical problem in a lot of economics is a poor understanding of the difference between correlation and causality. There is little doubt that 'money' is a component of the economic malaise that the majority of the world's population has to live with ... but a solution to the malaise of population will not be solved simply by making more money available without at the same time reforming the broader system within which money circulates. The webinar presentation by Thomas Greco via the BeyondMoney community starts to address this problem, but in the end does not describe a comprehensive and functional solution. The first section is the message sent to me about the Greco presentation. The second section is a draft response to the presentation introducing the TVM initiative. This was not sent in this form, but is the initial foundation for what was sent later. Peter Burgess | ||
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View the video: Transcending the present political money system–the urgent need and the way to do it
Thomas Greco thgreco@mindspring.com via gmail.mcsv.net Sun, Nov 28, 4:55 PM In case you missed it: Transcending the present political money system--the urgent need and the way to do it In case you missed my webinar on November 24 and would like to see the presentation, here is the recording that was made. The first part is a specially prepared slide show presentation titled, A World Without Money, Interest, and Debt: A Pathway Toward Economic Equity, Social Justice, Freedom, and Peace. The webinar concludes with a short video titled, VITA: A worldwide web of exchange, Locally controlled but globally useful, in which I describe my vision of a new decentralized, peer-to-peer, system of exchange. The question and answer portion is not include. This presentation describes the fundamental role of the global system of money, banking and finance in generating social injustice, economic inequity, environmental despoliation and violent conflict. It outlines the collusive arrangement that exists between finance and politics that has created the global central banking regime to centralize power and concentrate wealth in ever fewer hands and explains how the creation of money by banks as interest-bearing debt causes a growth imperative that is destructive to the environment, democratic government, and the social fabric. But more importantly, it describes the positive developments that are emerging to create a new “butterfly economy” and a civilization in which everyone can live a dignified life. Find this and other presentations in the sidebar at https://beyondmoney.net/. Best wishes, Thomas Our mailing address is: CIRCPO Box 42663 Tucson, AZ 85733 Message to Professor Thomas Greco stimulated by the Greco presentation of November 2021 See the slides here Dear Thomas ... that is Professor Thomas Greco Thank you for reaching out and sending me the links to your recent presentation about Money Interest and Debt and the pathway toward a better world and a path towards economic equity, social justice, freedom and peace, I have been thinking about these issues myself for a very long time as well ... and there is very little in your presentation with which I disagree ... except perhaps your optimism that a system along the lines you propose can gain buy-in at the necessary scale. My approach is somewhat different. It has been built in response to the same foundational ideas to the ones you have described. I am probably in a greater state of deep confusion about how the world works and its inherent dysfunction than you are ... but I am somewhat optimistic that my approach can be embraced by a more mainstream community of business practitioners. Back in the late 1950s I studied engineering at Cambridge. Engineering and technology still remain something of a passion. Modern productivity is incredibly high enabled by engineering. Unfortunately it has been 'gamed' by people at the top of business, banking and politics to maximize profits while ignoring the impacts on society and the environment. John Elkington, back in the 1990s talked about the Triple Bottom Line ... People, Planet, Profit ... but essentially very little happened! This was no accident. The business, financial and political establishment drowned out the message. While I was at Cambridge I also took the Economics Tripos exams and have some understanding of this 'dismal science' . Fortunately, at that time economics at Cambridge was very much in a Keynesian mode which I still embrace. Not much talked about ... but Keynes was very pragmatic and the economic policy solutions he wanted at the end of WWI was different from what he wanted during the depression of the 1930s and again what he wanted at Bretton Woods in 1944 as the world started getting ready for a Post-WWII economic environment. After a short spell working in heavy engineering (steel mill equipment and the like) with Davy0United in Sheffield, I went back to the beginning and signed up for 'Articles' with the London firm of Cooper Brothers & Co ... which has morphed over the years into the international firm of PwC (PriceWaterhouseCoopers). An early 'aha' moment was when I realized that much of the analytical work I had been doing as an engineer especially in thermodynamics was logically equivalent to what accountants do when they are using ubiquitous double entry accounting ... the foundational idea of Balance Sheet at the beginning of the period (BOP) and how the activities recording in the Profit and Loss Account result in a new Balance Sheet at the end of the period (EOP) A critical idea in the economics I learned was the difference between 'cost-push' inflation and 'demand-pull' inflation. They are very different animals. In the 1970s, the US was subjected to massive cost push inflation because the OPEC cartel got control of the crude oil supply situation and forced massive price increases onto energy traders. Everything using energy in the US was forced into a cost crisis and profits disappeared for about a decade.(Nixon, Ford and Carter all had to face this situation).as well as the Federal Reserve. By 1980 Paul Volcker was presiding over 20%+ interest rates!!!!!!!!!!! For the last 40 years (since around 1980) there have been impressive increases in productivity which has translated into lower business costs both from technology as well as from the business choice to outsource production to low wage (high pollution as well) countries ... mainly Asia, first Japan, and then Korea, Vietnam. China, Thailand, etc etc. For the last 40 years the biggest cost for products sold to the end-consumer have been the embedded profits all the way along the supply chain. For some reason, investors seem to think they deserve a higher and higher return on investment year over year over years which, of course, is the only way that a stock market will increase its stock valuations year over year over year. Another part of my thinking relates to taxation. Governments ... and perhaps more than any other Government, the US Government is not very efficient and cost effective AND there is a mindset in the country that less tax is good for economic performance. Current taxes should be high enough to pay for the current operating costs of the government ... to balance the recurrent budget. Investment ... improvement to infrastructure, for example ... may be funded by debt, but these bits of debt should be retired over the lifetime of the assets. The mix-up that goes on in Government accounting is a nonsense ... but probably not an accident. With good accounting corruption and other misfeasance is a whole lot more difficult. For several years around 1990 I was active with a group called the International Consortium on Government Financial Management (ICGFM) that was addressing these issues ... and around that time I did some work in the former Soviet Union around these matters as well as in several other countries. Value for money is expected from lowly paid employees ... but powerful people work to a different set of rules, and there is little or no accountability. The system is not set up for top level accountability. SO ............ I have concluded that my first step in the journey towards a world that works much better is to address the problem of management metrics. I call the initiative TrueValueMetrics I start with the existing system of conventional financial accounting and reporting. This system is coherent and has been widely used in business world-wide for a very long time. The weakness of conventional financial accounting is that it is only used in connection with money transactions and to report profit performance and balance sheet information to stockholders (owners) of the company. Conventional financial reporting only addresses transactions that are within a quite limited 'reporting envelope' with all other transactions and impacts ignored (unless they are going to impact something or anything within the basic reporting envelope). Over time the rules about how to do the reporting have been 'gamed' in order better to suit those with power and influence. Instead of thinking only in terms of money and the economy, a rather similar set of numbers is needed for everything related to people and society. In addition, another similar set of numbers is needed for everything related to the environment and nature. The concept here is that EVERYTHING should be in play, with appropriate numbering for everything. In TVM, this framing is referred to as the Socio-Enviro-Economic System. In this framing, nothing is left out. In this framing, ALL of CAPITAL is segmented into a small number of areas which are somewhat similar ... so (1) Social Capital; (2) Natural Capital and (3) Economic Capital. Using just the Financial or Economic Capital as the sole capital ... which is what we have been doing for more than a century (actually several centuries) is no longer fit-for-purpose. In conventional financial accounting there is a profit and loss account. There are costs and there are revenues. When revenues exceed costs there is a profit. With TVM there are positive and negative impacts on all the capitals. The impact on social capital may be positive or negative, the same for natural capital and the same for economic capital. For the last 200 years, in the aggregate, there has been substantial positive impact on both aggregate social capital and aggregate economic capital, but severe negative impact on natural capital. Unfortunately within social capital and economic capital, there have been winners and losers ... and it is these matters that have become flash points for a lot of discontent. Conventional financial accounting and management methods are not effective in addressing these matters. In conventional financial accounting, the profit or loss may also be computed by comparing the balance sheet at the end of the period (EOP) with the balance sheet at the beginning of the period (BOP). The difference is a profit or loss. This technique helps to understand profit and progress when there are incomplete records. The technique may also be modified for use in assessing social impact and environmental impact where the activity information is not available, but a 'state' may be ascertained. To do thisI want to see the balance sheet expanded so that there is an Economic (financial) section, a Social section and an Environmental section. Different units of measure would be used for each section. With TVM, the profit and loss account of conventional financial accounting is expanded so that ALL ACTIVITIES are accounted for and reported coherently and comprehensively. Conventional financial accounting has the logical framework to consolidate the accounts of multiple business enterprises into single coherent whole. In TVM a similar approach enables social, environmental and economic activities to be aggregated in a meaningful manner. A conventional profit and loss account has credits and debits reflecting revenues and expenses. The sum of revenues less the sum of expenses is the profit. It is commonplace (and a reporting requirment) that there is also a cash flow statement as well as a profit and loss account in published financial reporting. This is because of the vast difference in character between an investment and an operating expense. An investment has value for many accounting periods while an operating expense relates to an immediate operatong activity. Most business decision makers understand this important distinction, but it is rarely reflected in the process of government financial management and its associated reporting. In the USA, legislation with a financial impact that lasts for 10 years gets mixed up with legislation that lasts a single year, but the reporting rarely breaks down the year by year financial impact. Government financial analysis is also very sloppy about what is investment and what is expense, and, of course, there is no concept of 'balance sheet' in government accounting though there is a lot of political talk about government debt and its impact on the economy. One of the issues that arises in understanding the state of a nation is (1) the value of the society ... or people ... (2) the value of the place ... the environment and (3) the value of the economy. The finances of government are important, but they are only a part of the bigger idea of the state of the nation. Government accounts are not national accounts. The same sort of thinking should also be applied to the places within a country. The government of the State, or County, or City / Municipality is not the totality of a place, but just a part of the place. In the 1960s when I was a very young corporate controller I worked with a Harvard Business School based consulting firm (Management Analysis Center) to implement a Responsibility Accounting System. The basic principle was that all the key people responsible for decisions that would impact performance would get some sort of numerical feedback monthly from the accounting department. This was immensely unpopular, but very effective. Supervisors were very responsive when their name was attached to relevant performance numbers. My accounting department also had to be responsive to both the accuracy and the relevance of the numbers, and out company management had to address the question of how the company as a whole was organized. I used some variant of this idea most everywhere I worked. It was never popular, but it always improved performance. Many years ago, around 1990 I think, I pitched the idea of Responsibility Accounting within the UN system in New York. Afterwards one of the UN participants in the meeting gave me the feedback that the UN was not interested in taking responsibility nor being accountable, which of course, a system of responsibility accounting would have been addressing. Top management deirection and guidance makes a big difference in the functioning of the organization. Though I made little progress on this matter within the US system as a whole, all the work for the UN where I had any project responsibility did its work with some form of meaningful management metrics. Of course, conventional financial accounting is not fit-for-purpose in most of the work where the UN is involved. However rigorous financial accounting does have a role in ensuring that money is used for the intended purpose and is not diverted to some corrupt purpose. Conventional financial accounting does little, however, to ensure that money is used in an effective way to further the social, environmental or economic purposes of the project. In the 1980s and 90s it was not easy to put numbers around the social, environmental and general economic benefits arising from the disbursement of money ... and it remains a challenge decades later. Back in 1999, in the run up to the Millennium Year 2000, the UN promulgated the Millennium Develoopemt Goals (MDGs). This was an effort to stimulate interest in development worldwide and to mobilize reosurces for development finance. Together with the MDGs there were a huge number of related social and economic performance metrics. The expectation was that these goals would help to improve development management within the donor community and beneficiary governments and organizations. The MDGs covered a period of 15 years to 2015. There were 8 goals. It is noteworthy that there has been very little reporting about the performance of development against these goals in this period in spite the quntity and sophistication of the development performance reporting that was described. Link to more about the MDGs within TVM And then in 2014, in the run up to 2015 and the end of the MDGs a new initiative was launched. This was the Sustainable Development Goals (SDGs) that significantly expanded on the MDGs. In many ways the SDGs were a fresh start. At the top level there was no continuity from the MDGs to the SDGs which I consider to be a major weakness. Many of the detail metrics remained the same, but there were many new metrics added. Instead of just 8 goals within the MDGs, there are 17 goals for the SDGs. As a foundation for effective management metrics this is a nightmare, and it is no surprise that the SDGs are being used for corporate PR and reputation building more than for anything else. Link to more about the SDGs within TVM
| The text being discussed is available at | https://beyondmoney.files.wordpress.com/2021/11/2021-11-hertfordshire-preso.mp4 and https://beyondmoney.net/ |