income inequality might have complicated links to financial crises. For instance, inequality, by putting too much power in the hands of Wall Street titans, enables them to promote policies that benefit them — like deregulation — that could put the system in jeopardy.
Inequality may also push people at the bottom of the ladder toward choices that put the financial system at risk, he said. And low-income homeowners could have better afforded their mortgages if not for the earnings gap.
Simply stated, the happiness-income paradox is this: at a point in time both among and within countries, happiness and income are positively correlated. But, over time, happiness does not increase when a country’s income increases,
economic thought has gone through five periods in the early 18th century. The first, which included Quesnay and Smith, still saw the economic system as part of society. Only with Townsend, Ricardo and Malthus do economists begin to think of the economic sphere as autonomous.
At present there are several enormous detriments to the existing banking system. One is that the banks create money out of thin air by repeatedly on-lending to different customers the same money secured by a small capital base, with the risk attached that any breakdown will be covered by taxpayers either through deposit insurance or through massive bailouts. Another is that under current rules the money supply can only be increased by additional bank lending which further exacerbates an already over-extended credit bubble. A third is that there is nothing to stop the banks using therir proceeds from lending to gamble on speculation in commercial property, overseas markets, tax avoidance/evasion scams, or any other money-spinning scheme rather than lending to UK business to create jobs.
Significantly, when the Government has engaged in £200bn quantitative easing over the last 3 years to extend the money supply, this money creation was intermediated through the banks which used it overwhelmingly to shore up their own rickety balance sheets rather than lend to business or householders. Nationalising control over the money supply is a key reform long overdue.
Michael Meacher MP
Labour MP for Oldham West and Royton
close to 1 billion men, women and children – one in seven of us – are hungry today. But there is no good reason why anyone should go hungry. The world can feed every single one of us. The problem is the way we grow and share food.
- The medium of beauty in a business world is the workers that make the businesses run. It’s not the stock options or profit. They comprise far more capacity, and far deeper longing and invigorated promise for future generations than the system gives them credit for. So the question is not whether they are paid enough, or given enough work: the question is, does the workplace enlarge humanity, or endanger humanity.
- Thus, we need to see the market not just as a tool to make money, but a complex labyrinth with a generative creative order. In such an ecosystem, we need to consider investments as a form of stewardship. Conversely, we may redefine investments as a way to create and sustain beauty, rather than gain power for ourselves. And true beauty, at her truest aim, is a humble stream that flows through the heart of a city, re-humanizing its inhabitants, and allowing them to breath in what would otherwise be unbearable air.
We could have created a public rating agency (a UN agency funded by member states?) that does not charge for its service and thus can be more objective, thereby providing an effective competition to the current oligopoly of Standard & Poor’s, Moody’s, and Fitch. If the regulators had decided to become less reliant on their ratings in assessing the soundness of financial institutions, we would have weakened their undue influence. For the prevention of future financial crises we should have demanded greater transparency from the rating agencies – while changing their fee structure, in which they are paid by those firms that want to have their financial products rated. But these options weren’t seriously contemplated.
Another example of financial reforms whose neglect comes back to haunt us is the introduction of internationally agreed rules on sovereign bankruptcy. In resolving the European sovereign debt crises, one of the greatest obstacles has been the refusal by bondholders to bear any burden of adjustments, talking as if such a proposal goes against the basic rules of capitalism. However, the principle that the creditor, as well as the debtor, pays for the consequences of an unsuccessful loan is already in full operation at another level in all capitalist economies.
People have to understand that there’s no such thing as “free,” that when they buy into a system in which they upload their videos to YouTube without expecting to make anything (unless they’re very lucky to become a token Horatio Alger story) at the end of the day, or when they contribute to services like Google+, or Facebook, or other social networks, what’s happening is they’re working for the benefit of someone else’s fortune by creating data that can be used to grant or deny access based on pay to these third parties,
What you have now is a system in which the Internet user becomes the product that is being sold to others, and what the product is, is the ability to be manipulated. It’s an anti-liberty system, and I know that the rhetoric around it is very contrary to that. “Oh, no, there are useful ads, and it’s increasing your choice space”, and all that, but if you look at the kinds of ads that make the most money, they are tawdry, and if you look at what’s happening to wealth distribution, the middle is going away, and just empirically, these ideals haven’t delivered in actuality. I think the darker interpretation is the one that has more empirical evidence behind it at this point.
Wal-Mart impoverished its own customer base. Google is facing exactly the same issue long-term, although not yet. The finance industry kept on thinking they could eject waste out into the general system, but they became the system. You become global instead of local so that the system breaks. Insurance companies in America, by trying to only insure people who didn’t need insurance, ejected risk into the general system away from themselves, but they became so big that they were no longer local players, and there wasn’t some giant vastness to absorb this risk that they’d ejected, and so therefore the system breaks. You see this again and again and again. It’s not sustainable.
Pay levels in the private sector have impacts which go beyond the company itself. Excessive incentives at the top can produce perverse behaviours. Excessively low pay externalises costs to the taxpayer (e.g. through the benefits system) estimated in the billions of pounds and is likely to reduce the ability of the economy to recover. Excessive gaps between incomes are associated with costly health and social problems as well as with higher levels of debt and economic volatility.
This is nobody’s idea of a good system: that all our tax, which we pledge to alleviate the hardship of the most disadvantaged, should go into the top pockets of a handful of companies, who will then underpay their employees (for “efficiency”) and squeeze their suppliers.
findings suggest that public sector workers tend to be more intrinsically motivated across a wide range of different countries but this is not a universal characteristic. Our research shows that there are certain features of the public sector, such as the level of corruption, that can make it more attractive to pro-socially motivated workers
[T]he demand isn’t simply to make a public bank, but is to treat the banks generally as a public utility, just as you treat electric companies as a public utility…. Just as there was pressure for a public option in health care, there should be a public option in banking. There should be a government bank that offers credit card rates without punitive 30% interest rates, without penalties, without raising the rate if you don’t pay your electric bill. This is how America got strong in the 19th and early 20th century, by essentially having public infrastructure, just like you’d have roads and bridges…. The idea of public infrastructure was to lower the cost of living and to lower the cost of doing business.