It may seem anti-climactic, even preposterous, to turn all eyes to the financial literacy of young people. The work of the Prince’s Trust says not, however. As do the restaurant academies of celebrity chefs. The Bank of England also thinks not. Together with The Times, it has for several years run a monetary policy committee competition for school- leavers. Likewise, financial literacy has increasing presence in secondary education.
Business studies enjoy growing popularity. But also many young people sideline their
•
•
•
education in order, first, to have an income of their own. Admittedly, much of the ethos of such education is of the go-getting entrepreneurial kind, suggesting as virtuous making your fortune by the time you are 40 so you need not work for the rest of your life; but the technique (and therefore the deeper, more wholesome aspects) of finance can well survive such a bias.
But there is one further, subtler point. Young people are an instance of youth.
Youthfulness can also arise in any person when he can fulfil his aspirations. So much tiredness in our times has surely to do with people not leading fulfilling lives. It is one example of the deep alchemy of finance, deeper perhaps than George Soros has in mind, that it can give encouragement to the young; but another is that it can awaken youthfulness in older people also. If the emphasis here has been in favour of young people it is simply because the chances are that they are less hide-bound by habits of economic thought from pre-global times and because one sees a generation becoming more and more wasted because of an economic paradigm in which they see little merit and which sees little merit in them. After all, fulfilling an aspiration entails ‘having a job’, but the reverse is not also true.
chapter
13 From Threshold to Bridge
What is one to conclude from this discussion?
One may think that the global financial crisis should not have been allowed to happen, or that it will be prevented from continuing or repeating itself in the future. Or, like the respected London economist, Andrew Hilton, and others, one may suspect that the really serious recession has yet to come, though much depends on how one defines and measures such things. But once the soundbite has passed, the ‘official’ funding has become yesterday’s news and the balance sheet manipulations have bedded down, it may be that people will wonder if there ever was a crisis.
The thought underlying this book does not operate on this level, however. The modern economy, precisely because it is so value-creative, has much room for manoeuvre, for absorbing ‘shocks’, as the mechanical image has it, or accustoming itself to ‘surprises’.
Most economists trust that serendipity will come to their aid when their explanations are found to be wanting. Life can indeed go on as before.
Whether to does or not depends in part on where one is standing when making the conclusion. Behind a computer screen in an air-conditioned office in a ‘Third World’
country things look very different than if one steps outside the building. IMF officials rarely leave their five-star environments, except perhaps to tell a farmer the problem is that his cows are a cost too many. Politicians always have the get-out that they can resign or be voted out and that in any event no policy can be binding on a successor. Such is the nature of politics, but it is a bad fit for economic life, for financial continuity. How different things would be, could be, if every major finance house partnered with a slum project or a Rwandan coffee farmer in order to provide both financial literacy (of the kind meant here) and uncollateralised capital. How different if a coffee shop in the City of London would simply contract to buy all the coffee from such a farmer at the price he needed in order to stay viable, feed his family and educate his children. Any extra cost would be unnoticed in the foam, that great source of coffee shop profits. But the ethos would have to be a matching of the development of which the producer and his farm and circumstances were capable; not abstract balance sheet growth.
How different if peasant farmers in the southern Philippines could be taught balance sheet management, not just how to keep expenses below income. Then they would escape their dependency on external capital, and realise they are their own source of capital. The loans come as a reflection of their ability.
Everyone of these instances, which could be multiplied a thousand-fold, every time an individual seeks to take responsibility for his own economic life, is an opportunity for aspirational capital to come into being, for the financial markets to be given a fresh focus.
Access to markets or credit is never so free and self-directed as when based on financial literacy; finance is never so stable as when it provides the wherewithal for an initiative rather than trying to exist unto itself.
There would be casualties along the way. Extortionate local lending would have to stop. World prices in food would become a thing of the past, for they are economically
nonsensical. Local ‘mafia’ would have to stop exploiting their fellow citizens as they begin to wake up. Well-meaning westerners would have to ease back on their intent to westernise the economics of everyone they come into contact with. Fijian islanders will have to learn not to put a real-estate value on their exotic villages as collateral for ‘inward investment’ from thrusting foreign tourism entrepreneurs.
The list is extensive and becomes dirge-like. Many would rather leave things as they are than take on the world. But there are those who know that the forces needed to bring about real change arise when one undertakes the change, not when one contemplates it. There are many examples of people acting out of a new understanding, a wider understanding of finance. Grameen Bank, microfinance generally (though why the money has to be lent rather than invested or given is a moot point), Fair Trade, Transition Towns, online investment schemes for ‘poor’ people, and much more. There is much good news. And the examples are everywhere, not just in the so-called Third World or with a Third World focus. And not just in connection with food, important though that is.
Other books in this series, as indeed beyond it, detail and chronicle these developments. What is missing, perhaps, is a match for such developments at the level of ‘official thinking’ and in the business schools of the world. But this may be a matter of time only. One thing is certain, however, that the interface, the threshold between the real and financial economies, between the past and the future, has another form of expression, namely, the continuing disregard for finance on the part of many social changers and the ‘outlier’ status, at best, of the existence of such people in the mind of the financial community.
This book hopes to have helped overcome this phenomenon by wandering, as it were, in and out of those worlds, indeed by wandering in and out of various dimensions. To that extent it is autobiographical and may therefore be idiosyncratic. But the experience of going from a slum in an old car in the morning, dressed in slacks and no tie, then switching cars and clothes to have lunch in a golf club ‘where the money is’ or to interview a central bank president leaves its mark. As does spending a weekend in a field in Kent at a Green Party monetary policy conference then the next day heading for a meeting at the Bank of England. The main impression is that, while many people experience the threshold between modern finance and the real economy, most choose to be on one side or other of it.
Few walk along it, thereby bridging it.
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Index
Bold page numbers are used for illustrations.
20th century. see twentieth century 1930s depression 155, 158
A
abstraction 52–3, 58–61, 85, 136–7 accounting
banking as 195 ethics and 209–10
for/not for-profit divide 214–15, 21�
IASB role 210–11
international standards 140 as link between economics and real
world 203–4, 204 link to economics 81–2
link with associative economics 205 macro economic considerations 214 practicalities of 211–18, 212 price 218
and profit 148
profit and surplus value 216, 216–17, 217
as science 207
as synonymous with money 140 universal consciousness of 139 use in global financial crisis 213 agencies
dangers of reliance on 62 use of 60
Alchemy of Finance, The (Soros) 106–8 Altmann, Ross 37
American Insurance Group (AIG) 35, 38–41 Andrews, Edmund 35, 37–8
angels 109–10 Anglo-Saxon
bias 10 defined 21
Appeal to the German People and the Civilised World (Steiner) 157
aptness in finance 74 Aquinas, Thomas 29–30 Aristotelian taxonomy 27–9, 29 aspiration 84, 94, 144–5, 147 assets
price buoyancy 146 as source of income 145 trading of 207
associative economics
accounting and profit 148 asset price buoyancy 146 capitalising of real estate 146–7
from competition to cooperation 136–7 and cycles 95
differentiation 147
epistemological considerations 12 exploitation 98
as formal discipline 13 inclusive of all 83 interface with crisis 219
key precepts of 13, 146–50, 149, 1�0 knowledge, nature of 102–4
link with accounting 205
and output gap monetarism 167–75 and Rudolf Steiner 7, 12–17, 12n7 threefold society 122–6
wearing out of money 147 atavism 99
Atlas Shrugged (Rand) 97
Austrian school, Steiner and 16–17
B
Bank of England 46–7 banking
as accounting 195
changes in through history 60–1 citizenised 191–3, 207–8
crises 4
delinking of cash and credit 188–90, 1�9
demise of 190–3 disintegrity of 76–7 going beyond 135–6 links with trade 135 modern central 200–1, 201 banks, states’ bailing out of 93–4 Barfield, Owen 14–15, 112–14 Bean, Charlie 4
Begg, D. 201
Bezemer, Dirk 35, 49 biases
in the book 10 in data 9–10
blame for financial crisis 25, 88 Blinder, A.S. 124
‘blue sky’ thinking 104
Bobbitt, Philip 16, 126, 127–30 boundaries and liberalisation 70 Bourlet, Jim 110
Bowsher, Charles 40–1 brains, two-sidedness of 115 Bronk, Richard 111–12 Brunner, K. 202 Buckle, M. 64 Buiter, Wilhem 36
C
Capie, F. 124n2, 201, 201n3 capital
Aristotelian taxonomy 27–9, 29 excess liquidity as too much of 85 as independent of labour 26–7 relationship to labour 156–7 removal of excess 86–8, 89 as source of income 145 use of for power 126 vs. labour 154–5
capitalising of real estate 146–7 capitalism
as in adolescent phase 52, 54 metamorphosis of 125–6 transformation, need for in 88 cash, delinking from credit 188–90,
1�9
causation
and propensity to divide 99 reflexive 59
understanding of 77 central banks
as auditorial 148, 149–50
independence of 63, 87, 123–4, 143–4, 178
and international cooperation 70–1 in modern banking 200–1, 201 Cheffers, Mark 209
Chicago Business School, economics of 79–80
Chick, V. 196 choir of cultures
concept introduced 6
and defining a ‘people’ 19–20
as governing single world economy 16, 82
market state view compared to 129–30 need for in single global economy 82 new financial instruments for 82–3 power of as image 130
chronology of global financial crisis Aristotelian taxonomy 27–9, 29 goods-market to money market, move
to 26–7
liberalisation in England 30–1 Thomas Aquinas 29–30 trade/mercantilism, rise of 30 Church opposition to rise of trade 30 Churchill, Winston 124, 143
citizenised banking 191–3, 207–8 Clash of Civilisations (Huntington) 125–6 closed/open-system thinking 195–8, 196,
197
Cochrane, John 49, 50–2 cognition, left-right 115–16 Cohen, B. 202
Coleridge, S.T. 112, 113
collaboration in single world economy 70–1 collateral debt obligations (CDOs) 37, 61 commentary on global financial crisis
Adair Turner 45–6, 46–7, 48–9 Alistair Milne 44
alternative perspectives 52–5
American Insurance Group (AIG) 38–41