The System

As many of us are aware, western societies under capitalism are having problems. We outline some of these problems, offer links for in-depth reading and and give a very brief history of Capitalism in New Zealand since the 1980s.

Capitalism

Our current version of capitalism came out of the Chicago School of Economics in the 1980s. From this time, a majority of western governments adopted “Neo-Liberal” economic principles which boil down, essentially, to the concept that a free market is the best way to optimise distribution of resources and wealth.

Called variously “Reaganomics”, “Thatchernomics” and here in NZ “Rogernomics”, neo-liberalism called for the privatisation of state-owned infrastructural assets, deregulation of markets, union and welfare dismantling, and globalised “free trade”, allowing capital to flow where labour was cheapest. It was then believed that every country would have necessary protections in place to protect the environment and its people. As we know this is not the case.

Cheaper consumer goods have come at the cost of gutting first world manufacturing and rampant third world environmental and labour exploitation. The race to put profit before the planet has led us to the verge of eco-catastrophe.

The principle of user-pays

User-pays has often increased inequality in society as less affluent people lose opportunities and basic cover for health and housing. For example, user pays education at the tertiary level has saddled people with debt and led to less social mobility.

Where money trickles

Sometimes characterised as “trickle-down” economics, the key theory is that business is more efficient than the state, and if allowed to operate without restriction, the business community will generate employment, and lower the cost of consumer goods, which is good for everyone.

However, as the IMF has concluded in a series of recent reports, trickle-down economics has been proven not to work. Causes and Consequences of Income Inequality: A Global Perspective

Scarcity-based economics

Since long before neo-liberalism entered the picture, our economic system – Capitalism – has been run on a “scarcity-based” model. Price is dictated by supply and demand. A limited supply of goods is required to create a profit, and if there is no shortage of resources, artificial scarcity is created by controlling the flow of goods.

Dysfunctional results

We overview some of the dysfunctional patterns arising from our system. The true cost of goods on the environment and people is hidden in factories, landfills, far off quarries and toxic dumping sites so that the products can be kept artificially cheap.

Debt based monetary supply

Our current system of money is complex and is far more than a way of exchanging goods and services. Many experts believe core societal problems result from our monetary system.

The vast majority of money is created when banks “loan” money to governments, businesses and individuals, and this credit is then spent into existence (and into circulation within the economy). The term “loan” is a misleading one though, because banks do not lend money they actually have, but create new money through a piece of financial wizardry called “fractional reserve lending”.

Today approximately 97% of money in the NZ economy is digital entries into a computer, which has been created by banks rather than by the government. The days when the Mint printed the money are well and truly gone! Most of this takes the form of debt, rather than earnings, which distorts areas of the economy, creating inflation and “bubbles” such as the housing market bubble. In addition, creating money out of interest bearing debt leads to the inevitable requirement for constant growth. Our finite world is crushed as both people and the environment buckle under this impossible expectation.

Links

The good folks at positivemoney.org.nz explains in simple terms how things work in NZ.  Their website is the best NZ resource we have found.

Competition as the dominant human paradigm

Deregulated capitalism has competition at its heart. Businesses compete to survive, to get the best resources at the best price and offer consumers the best deals. So coffee shops are full of people gleefully discussing recent bargains, sales and winning stories.

This mindset permeates society. Reality TV turns everything into a competition, we become show ponies for our successes, talk about ourselves before asking about others, and “self interest” becomes the driver of our politics, our commerce and our culture.

While some competition is healthy, when we compete for basic human needs, others miss out, leading to an “us and them” or “haves and have nots” mentality and an elevated sense of entitlement for those who are benefiting. Our increasingly unequal society means some people survive and thrive and others are left behind.
This in turn leads to corruption and crime as a way to keep up or level the playing field. The extremes of competition makes us a far more narcissistic, less compassionate society. Things such as cooking and singing, which were once shared cultural activities, have become contests for entertainment.

Again, the concept of competition leading to optimised results and healthy markets is based upon some highly flawed reasoning. Increasingly, it is now becoming apparent that workplaces based around collaborative, rather than competitive models, are showing significant increases in productivity, creative solutions, and employee retention. Have a look at this interesting infographic-rich summary of these issues.

Intellectual property

One of the key ways the competitive paradigm manifests itself in our system is through the concept that ideas can be owned and used exclusively to gain an advantage over competitors – ie, patent laws. The rationale behind protecting intellectual property is straightforward: we want to encourage creativity, innovation, research and development. We do so by giving the person who comes up with a new idea, product or work “exclusive rights” to its use, distribution and development, so that they have an opportunity to profit from it. The theory is that unless you protect innovators, they will stop innovating, because their work will constantly be “stolen” before they can personally enjoy the benefits of it.

Unfortunately, as with many aspects of our system, intellectual property laws are now achieving the opposite of what they intend. Innovation is being actively stifled, through:

  • Patent “trolls”, who buy generalised patents and then bring hugely expensive and time consuming law suits to prevent new development occurring in that field unless the licensing “toll” is paid.
  • The purchase of patents for the express purpose of burying innovation that threatens an existing market.

View a humorous and informative look at this issue by John Oliver below:

These issues and the wider history of patent law development are explored in detail in a paper entitled “The Case Against Patents”, which can be found here: The Case Against Patents

Secretiveness and Envy

There is often a lack of openness when financial matters such as salaries and house sales price. Businesses often encourage employees to be private about salaries, as this can reveal the unfair discrepancies between incomes of similarly performing employees. The problem is that the injustice still exists concealed behind a lack of transparency.

The invisible destruction of values

The masters of our world deflect our attention away from the reality of the damage to people and the environment. Our busy lives keep us from asking questions. Marketing, and the dictates of fashion, seduce us to open our wallets and spend money we are yet to earn. We are programmed very early to accept these drivers, and to see them as “the way the world is”, by ingrained education and media-driven fear tactics – fear of change, fear of losing what we have, fear of the threat of the “other”.

We are manipulated to see over-consumption, waste, exploitation and inequality as natural aspects of human existence. To see, as the new normal, our increasingly selfie-obsessed culture, in which traditional community structures and values seem less and less meaningful. Where the virtual world of pre-manufactured imagination trumps the real world in both importance and meaning.

We are also fed on a mainstream media diet of ‘if it bleeds, it leads’, encouraging fearfulness and a sense of isolation in a world that seems increasingly dangerous and mad. We buy gossip magazines offering helpings of content-empty celebrity stories for us to dine on. Provided with lashings of the modern “circus maximus” distractions of sport, soap and reality TV.

Caught in a system where “economic growth” is the only measure of success, we are taught that “abundance” means filling our houses, wardrobes and kitchens with all our heart desires, while somewhere far away and out of sight and mind, the earth’s resources are depleted and destroyed and people are working slave lives that are too hard for too little.

Mixed reactions to our system

Many of us excuse the system failing, saying things like “there is no such thing as a perfect system”. However, our ambivalence also relies on us trusting “the powers that be” to correct things through regulations and for our own interests to be taken care of. People are waking up to the fact that the system serves a few only, and that we have been sold bogus promises. Many are pushing back the injustices that have resulted.

The New Zealand Story of Neo-liberal Exonomics

Bryan is a journalist and documentary maker who cares enough to make it his mission to show the true impacts of deregulation in New Zealand. Below is one of his documentaries.

A new values system: We here in the abundance network believe fundamentally that the pathways to human evolution do not lie in competing harder and harder with each other for fewer and fewer resources and opportunities. The shrinking pie is all about manufactured scarcity, and being part of a “zero sum game”. We believe that we need to adopt measures for success that are not based on winners and losers, but upon the quality of the whole, measured from the perspective of those who have the least. Abundance comes from maximising human potential. That comes from supporting and enabling each other, not cutting off our fellow humans at the knees to get a better view for ourselves.

The diamond myth

An illustration of some of the things we are talking about can be found in the diamond industry. There is a perception in this world that diamonds are rare and hence valuable. It may surprise many to learn in fact that there are actually vast stockpiles of diamonds in the world, far more than any market could ever require. This oversupply is augmented by the fact that we now have relatively cheap ways of manufacturing diamonds artificially.

Rough Diamonds

So, if price is a function of supply and demand, why are diamonds expensive? The answer is that the stockpile of diamonds is tightly controlled by a small cartel of producers (mainly one, the De Beers conglomerate), who restrict the amount of diamonds on the market, and so control supply. Anyone who has ever tried to sell a diamond would tell you that it loses 80% of its value the moment you pay for it. Yet, diamonds have this strange mystique as being a store of value. Why? Because the same cartel markets them as such. A market is then created out of, essentially, nothing but empty assertion and manipulation.

I’m Jewish. I don’t work out.If god had wanted us to bend over he would have put diamonds on the floor.
Joan Rivers

Interesting fact

The “tradition” of a diamond engagement ring goes back only as far as the 1930’s, when De Beers introduced a staggeringly successful marketing campaign essentially equating the “quantity” of a man’s love with the size of the diamond that he buys for his intended.

Further Reading

  • An article in The Atlantic : Bernie Saunders is a Social Democrat not a socialist as he referred to himself throughout the election.
  • What is Capitalism and a bit about why the world is the way it is. People see the disfunctional the world and often don’t realise it was predicted by many and is playing out like a textbook for these people. Not easy to change but easy to understand here.
  • The Energy Skeptic is a well organised website with in-depth information about problems and dependency due to fossil fuels. It isn’t focused on solutions and makes for some disheartening reading.

Systemic failure

The “powers that be” seem unwilling to take the helm and address these issues, so together we need to raise consciousness and manifest a better way to live harmoniously and with a true understanding of abundance.

Regardless of the dysfunctional nature of the system, there are better ways to operate which create improved living. Some of the principles needed to manifest better outcomes for people and the environment are exactly the opposite of how society directs us to behave.

Many of these alternatives are not “top down” changes, but are grassroots “bottom up” in nature. Changes that we can each start implementing in our lives now. Movements that begin with people and ideas that are accessible to everyone.