Keynes/Keynsianism
The theories of John Maynard Keynes grew out of the Great Depression of the 1930s. Previously it was believed that free markets would provide full employment (‘neoclassical economics’). During the time of high unemployment between the two world wars Keynes argued that increasing ‘demand’ (for goods and services) would lead to higher employment. In order to increase demand he suggested that governments should manipulate the financial markets by creating money to inject into the economy (banks should lend out more than they had deposits). This was made possible by the untying of currencies from the Gold Standard. In 1999 Time magazine said that Keynes’ ‘radical idea that governments should spend money they don’t have may have saved capitalism.’
Between WW2 and the 1970s most Western economies adopted ‘Keynsianism’. His ideas fell out of favour in the 1970s when the idea that governments could control the relationship between prices, employment and inflation was questioned by monetarists such as Milton Friedman. The global financial crisis of 2007-8 caused a resurgence of Keynsian thought as reflected in some of the policies of Barack Obama in the US and Gordon Brown in the UK.
Keynes’ motivation was to combat poverty with measures to create ‘full employment’. It is partly a realisation that full-employment soon may be no longer possible that has led to current questioning of capitalism itself. See ‘Gold Standard’, ‘Stagflation’, ‘Milton Friedman’.
Labour
The relationship of paid work between employer and employee.
Labour Movement
The Labour Movement in Europe began during the Industrial Revolution and led to Trade Unionism. The first attempt at international coordination, the ‘International Workingmen’s Association’ was founded in 1864. Labour movements are designed to negotiate better wages and working conditions for workers and have resulted in workers’ rights including the right to organise and reforms such as weekends, paid holidays, minimum wage, an 8-hour day, maternity rights and the abolition of child labour.In the early 19th-century forming unions was against the law of the times and politicians have tried to restrict trade unionism ever since. The conflict is about the tension between quality of life for employees and profit margins for shareholders.
Labour Party
The UK Labour Party was founded in 1900 and grew out of the trade union movement. It is currently seen as a centre-left political party, an alliance of social democratic, democratic socialist and trade union outlooks. As of 2017 the British Labour Party has become the largest party in Western Europe and is a member of the Party of European Socialists and the Progressive Alliance. See ‘Corbyn/Corbynism’
Laissez Faire
The ‘free-market’ classical economics born out of the European Enlightenment and promoting the liberty to pursue wealth as described by Adam Smith in ‘The Wealth of Nations’. Short for Laissez faire et laissez passer, le monde va de lui meme (Let do and let pass, the world goes on by itself). Laissez faire assumes that self-interest and competition will lead to prosperity, and that people will behave with social responsibility because of their ‘moral sentiments’ so should be allowed to selfishly acquire wealth without restriction. See ‘Smith, Adam’.
L.E.T.S.
Local Exchange trading Schemes (LETS), are ‘complimentary currencies’. The term was first used by Michael Linton in British Columbia in 1983. LETS schemes allow for the exchange of goods or time without money by creating an accounting system, or tokens, so local people can exchange with each other without the restrictions of ‘barter’ (you might not directly want what one individual has to swap, so want to trade with a larger group). See ‘Complimentary currencies.’
Liberalism
The 17th century philosopher John Locke is credited with founding the philosophy of Liberalism. The idea that everyone has a natural right to life, liberty and property. The term ‘Liberal’ has been attached to a wide variety of politics, economics and political parties. In the 17th and 18th centuries it opposed conservativism, hereditary privilege, state religion and the absolute power of monarchy, more recently it has opposed fascism and communism. In general terms liberals support freedom of speech, freedom of the press, freedom of religion, free markets, civil rights, democracy, secular government, gender equality and international cooperation.
Liquidity
Market liquidity is the market’s ability to buy or sell an asset easily and without causing a drop in its price. Gold for example has high liquidity, as do notes and coins. Property or goods have lower liquidity because they take time to sell and require a buyer and negotiation about price. Liquidity can therefore mean the amount of cash you have. ‘Liquidation’ happens when a less liquid asset is exchanged for cash, i.e. it is sold.
Long
As in ‘buying long’: See ‘Futures’.
Marcal, Katrine
Swedish writer and financial journalist who wrote Detendakonet (Published in English as ‘Who Cooked Adam Smith’s Dinner’), discussing the relationship between economics and gender inequality. See ‘Gender Inequality’, ‘Household’, ‘Smith, Adam’.
Marxism
In the 19th century Karl Marx, along with fellow German philosopher Friedrich Engels, analysed capitalism and found it doomed to collapse. He predicted that this would come about because of class conflict between wage labourers (the ‘proletariat’) and the ruling classes who control the ‘means of production’ (the ‘bourgeoisie’) who extract their wealth from the surplus product (profit) produced by the proletariat. He said that the proletariat would become increasingly alienated and this would lead to revolution which would lead to ‘Socialism’ (social ownership of the ‘means of production’) and ultimately to ‘Communism’, a classless, stateless, humane society where everyone would equally contribute to, and benefit from, common ownership. The principle of ‘From each according to his ability, to each according to his needs.’
Meadows, Donella
Economist Donella Meadows, co-author of 1972 Limits to Growth report, says, ‘Growth is one of the stupidest purposes ever invented by any culture, we’ve got to have an enough.’
Means of production
Marx’ term the ‘means of production’ refers to the process of wealth creation. He said that when the means of production is created by the many but owned by the few, conflict will follow. Marx saw that technological change would also change the means of production. This is something we are beginning to see materialise in the 21st century as we begin to fear that ‘robots will steal our jobs’. See ‘Marxism’, ‘Robots’.
Mercantalism/Merchant Capitalism
In the 16th to 18th centuries, this was the economic policy of maximising the wealth of a nation (and its accumulation of gold and silver) at the expense of other nations. It is still practiced by modern industrialised countries in the form of ‘neomercantilism’.
Metrics
Units of measurement. The way of measuring things in traditional economics is hopelessly inadequate. New metrics or ‘living metrics’ are being designed to monitor all wealth: human, social, ecological, cultural and physical. See ‘Oberlin Project’, ‘Systems Thinking’.
Milton Friedman
In the 1960s Friedman challenged ‘Keynsianism’, believing it ‘naïve’. He didn’t think that government could control economies. He believed there is a ‘natural’ rate of unemployment. He thought employment above this rate would cause inflation. Instead he promoted ‘monetarism’. This was the idea that a steady increase of the money supply was the priority, not full employment. Monetarism was the theory used to justify privatization of industry in the west and ‘deregulation’ of the banking system in order to allow money to grow to create a ‘free market’ economy with minimal government intervention. He advised Margaret Thatcher and Ronald Reagan and became the most influential economist of the second half of the twentieth century. The title of his 1962 book ‘Capitalism and Freedom’, encapsulates a mood of the time: that freedom and capitalism somehow go hand in hand.
Interestingly, he advocated a ‘negative income tax’, or ‘guaranteed minimum income’ to replace Social Security, an idea similar to the ‘Universal Basic Income (UBI)’ idea. Other libertarian ideas of Friedman include a ‘flat tax’ (fixed tax rate for all, aimed to combat tax evasion by the rich through ‘deductions’ etc.,) and school vouchers, to allow parents to choose the schooling of their choice.
Friedman’s ideas have led in the US to such political parties as the Libertarian and Tea Party. Many US politicians claim to support ‘free trade’, yet whilst the US imposes free trade on many other countries, Friedman’s idea to phase out ‘tariffs’ on imports to the US have never been implemented. See ‘Universal Basic Income (UBI)’.
Modern Monetary Theory (MMT)
Like Keynes’ ‘money creation’ idea, Stephanie Kelton and others in the US recommend pumping government-created money (credit, money not raised by taxes) into the economy, to give it a kick start. Modern Monetary Theory (MMT) acknowledges the two risks of this tactic: National Debt and Inflation, but says that Inflation can be controlled by moving interest rates up and down and that National Debt is not a problem. For example, Japanese National Debt in 2019 is 240 percent% of GDP and their economy is healthy. MMT recognises that money is not finite (we have no Gold Standard) and currency is a social construct, not an actual thing in and of itself. Like Keynes, MMT sees full employment as a goal. In the US the ‘Green New Deal’ and ‘Job Guarantee’ are part of the MMT philosophy. See ‘Green New Deal’, ‘Job Guarantee’, ‘Keynes/Keynsianism’.
Monbiot, George
A British writer known for his environmental and political activism. Writing a number of books and a weekly column for ‘The Guardian’, he emphasises the importance of environmental protection and social justice going hand-in-hand. He is the founder of ‘The Land Is Ours’ that campaigns for the right of access to the countryside and land in the UK.
Monetarism– See ‘Milton Friedman’
Monetary
Relating to a monetary system or standard.
Monopoly
In business, to have a monopoly is to have an unfair share of the market, to therefore have control of the market. In the UK the Monopolies Commission oversees business to make sure monopoly doesn’t lead to, for example, a telephone company being able to charge what they like because they have no competition. Monopoly happens when, for example, one company ‘owns’ control of the media, like Fox News in the US, who effectively dictate the opinion of the US public who see the same news on every channel, because the majority of the channels are owned by Fox. Or in the UK where 5 billionaires own 80% of the UK media, skewing the news to favour the Conservative Party who reward them with tax breaks. Some may argue that the Monopolies Commission is not doing a very good job.
The board-game ‘Monopoly’ has a fascinating history. The inventor, Elizabeth Magie, created two sets of rules: the ‘Prosperity’ rules, where everyone gained from each transaction, and the ‘Monopolist’ rules, that led to a sole winner. Magie designed the game for players to experience ‘a practical demonstration of the present system of land-grabbing with all its usual outcomes and consequences’. Whatever must she have felt when she sold the original ‘The Landlord’s Game’ to Parker Brothers in the 1930s and they published it as ‘Monopoly’ with only one set of rules?
Nationalism
People need to identify with a group. Some studies show that 150 people is the perfect size for a community. Any bigger and communication breaks down, people feel unsafe. Complex government and financial structures allow us to live in much bigger societies, a global society even. As part of a need to feel ‘connected’, people tend to identify others who are in their group, and who’s out. Making other people ‘out’ can reinforce a feeling that we’re ‘in’. Many sociologists and psychologists have investigated the role of ‘the other’ and it is fascinating. In the absence of any other tangible groups many people resort to national boundaries, to their country of origin, to identify themselves. In the distant past this loyalty may have been to a village, a valley or a river trading route. Nationalism can lead to aggression towards ‘the other’ and can be used as a justification for colonialism, exploitation and war, so-called ‘National Interest’. When the poor people of a nation get restless, nationalism can be used by the ruling class to distract them, demanding that they be ‘patriotic’, instead of focusing on inequality at home. We would be foolish to ignore this need of people to feel safe in an identifiable group.
National Interest – see ‘Nationalism’
Natural Capital – see ‘Capital’
Negative Growth – See ‘Divestment’
Neoliberalism
The 20th-century resurgence of 19th-century ideas about economic liberalism and ‘free trade’, leading to privatisation, austerity and deregulation of the financial markets. A rejection of ‘Keynsianism’. See‘Liberalism’, ‘Milton Freidman’.
New Economy
Since an article in ‘Time’ Magazine in 1983, the new economy has been used to describe the transition from manufacturing industry to a technology-, or ‘service-based’- economy.
New Economics, or New Economy Movement
An umbrella-term for the theory that human well-being and the planet should be prioritised over economic growth.
New Economics Foundation
The UK’s New Economics Foundation proposes a shortening of the working week in high income countries from 35 hours to 21 hours, with alterations to tax and insurance to make this attractive to employers. It identifies – from psychological research – that five acts create human wellbeing: connecting to people around us, being active in our bodies, taking notice of the world, learning new skills, and giving to others.
Newlight Technologies
In California, Newlight Technologies uses methane gas produced by dairy cows and turns it into bioplastics, to make bottles and office chairs. In this way greenhouse gases are captured so that the products they make are ‘carbon-positive’ (lock-up more pollution than they produce, utilising ‘generous’ design. See ‘Generous Cities’.
Oberlin Project
In 2009 the town of Oberlin became one of America’s first ‘climate positive’ cities, currently absorbing more carbon dioxide than it produces, growing 70% of its food locally, preserving 20,000 acres of urban green space and reviving jobs, culture and community in what was previously a ‘rust-belt’ area of industrial decline. The project set up ‘Oberlin’s Environmental Dashboard’, a website which displays all of Oberlin’s vital statistics, from water consumption, oxygen levels in nearby Plum Creek, to carbon emissions per person, per hour, in real time. See ‘Generous Cities’.
Occupy Wall Street
The Occupy movement started with the ‘Occupy Wall Street’ protest in New York’s financial district in 2011. Its rallying cry of ‘We are the 99%’ referred to the calculation that 1% of the world’s population owns as much as all the remaining 99% put together. A protest against worldwide economic inequality, it led to similar protests around the world, calling for a reduction in corporate influence in democracy, controls on speculative trading by banks, cancellation of student loan debt (‘Strike Debt’) and a general rethink of economics and the democratic process overall. The organisation received large contributions from supporters, building a ‘People’s Library’, utilising a non-hierarchical consensus decision-making organisational structure and its influence continues with the ‘Alternative Banking’ group that proposes a new financial framework based on ‘popular regulation’. Of almost equal significance to the size and enthusiasm of the protest, was the almost complete lack of coverage by mainstream media, leading to a new appreciation of the importance of the social media that made it visible to the world, and an understanding that so-called ‘news’ agencies are not independent and seem unwilling to report challenges to the current financial and political structure.See ‘Alternative Banking’, ‘Strike Debt’.
Okun’s Law
In the 1950s Arthur Okun said that 2% growth in US national output corresponded to 1% fall in unemployment. Like many economic theories it wasn’t true, but was part of the belief that ‘growth’ was the panacea for all social, economic and political ills.
One Percent – See Picketty, Thomas
Open Source Circular Economy (OSCE)
The OSCE movement is a worldwide network of activists and designers who aim to knowledge-share to increase the potential of ‘circular manufacturing ’, creating the ‘knowledge commons’. The Open Building Institute aims to make open-source (free and available to all) designs for off-grid, ecological, affordable housing, using the Creative (or Collaborative) Commons idea. See ‘Collaborative Commons’ and ‘Circular Economy’.
Options
Or ‘Stock Options’ are similar to ‘futures’. They are the right, or option, to buy stock in the future at a fixed price agreed in advance, and the right to sell stock in the future at a fixed pre-agreed price. This is different from ‘futures’ which are a contractual obligation, not just a right. See ‘Futures’.
Park 20/20
A business park in the Netherlands constructed with recyclable materials, an integrated energy system, water treatment plant, roofs that harvest solar energy, store and filter water, block heat and provide wildlife habitats. See ‘Generous Cities’.
Philosophy
Richard Seaford (Exeter University) sees a significant link between the invention of coinage and the philosophical thinking that began around 600 BC. Philosophers of the time were beginning to look into the cosmos for one single powerful thing. Some thought the one primary substance was Air, some Fire, others thought that it was Water. Previously it was thought that the world was governed by the whims of many different gods, goddesses and demons, and there was a statue of some deity or other on every corner. Now everyone was looking for the one truth. Was it coincidence that the idea of money as a universal, impersonal, single powerful substance emerged at the same time? Richard Seaford sees the new way of looking at the universe around 600 BC as a ‘cosmic projection of money’.
Picketty, Thomas
After extensive research using data stretching across most of the 20th-Century, French economist Tom Picketty demonstrated that wealth does not trickle down. Money begets more money, because there is more profit to be made from speculating in money itself than investing in business, so wealthy people are able to get richer and don’t share it. Using loopholes in the global tax system they avoid paying tax on their capital, so also avoid contributing to social infrastructure, whilst benefiting from it (they don’t pay for the roads yet still get to drive on them). So wealth, in fact, trickles up, staying in rich families, through inheritance, so that even if wage inequality improves, the inequality in the amount of capital possessed by individuals – and a handful of families in the world – has increased enormously over the last 250 years, but drastically since the end of the Second World War. So, between 1988 and 2008, more than 50% of the total increase in global income was acquired by the richest 5%, the poorest received only 11%. This has led to what we now call the One Percent, which roughly means that we have reached a crisis where 1% of the populations ‘owns’ the same amount of capital as the whole of the other 99% put together. Picketty says a redistribution is needed and recommends a global (and enforceable) tax on wealth (capital). See ‘Trickle Down’, ‘Trickle Up’.
Ponzi schemes
A Ponzi scheme is a fraudulent investment scheme, where new investors’ money is used to pay money to old investors, giving the illusion that there is an actual profit-making business behind it. Ponzi schemes need a constant supply of new investors who are motivated by greed and want to be part of what looks like a get-rich-quick opportunity, to provide the money to the longer-standing investors. When the supply of new money runs out the whole thing collapses, revealing the fraud. Charles Ponzi was such a fraudster in the 1920s, but the idea features in novels (e.g. Dickens) before that. Nick Gleeson, the rogue-trader who shifted money between different accounts to make each one look wealthy, effectively used a Ponzi scheme to bring about global financial crisis in 2008.
Premium Bonds
See also ‘Bonds’. Premium Bonds are UK Government bonds that don’t pay interest but instead enter you into a monthly prize draw for the chance to win tax-free prizes.
Positive Money
A UK not-for-profit organisation that campaigns for a ‘sovereign money’ system. See ‘Sovereign Money’.
Productivity
‘Productivity’ refers to the efficiency of production. There is great debate about how to measure it. Traditional economics looks at a very simple equation: output minus input equals productivity (how much you’ve made out of what you put in). Increasing national productivity was seen as important because raising living standards raised incomes, therefore raised people’s ability to buy stuff and pay for better housing/environment etc. In reality we know that the maths of productivity was faulty because it didn’t include ‘externalities’.Also because wealth doesn’t ‘trickle down’ and increasingly only benefits some people. Productivity can be measured in different ways. For example, in terms of ecology the word means: the fertility of an area or habitat.
Quantitative Easing (QE)
When a central bank buys ‘financial assets’ from commercial banks. In effect this is really government giving money to the banks. Recent quantitative easing (QE) in the UK was seen as a way of keeping the economy healthy in a recession by making sure there was plenty of money for the banks to lend to business and to individuals. In reality the banks didn’t lend money to small businesses and individuals but simply used it to make the 1% richer. (The 1% are, after all, the bankers). It has been argued that the money could have been given directly to citizens (this happened in Iceland), and that ‘bailing the banks out’ only leads them to behave more irresponsibly in the future because they can take excessive risk without consequences to themselves. In reality QE was a ‘bailout’ of the banks with Government (tax-payers) money which could only be paid for by cutting services and reducing welfare spending, leading to ‘austerity’, which is a fancy word for ‘poverty’.
Quantity Theory
The Quantity Theory of Money (QMT) is the theory that the amount of money in circulation (the ‘money supply’) has a direct relationship tothe price of goods and services. More money means higher prices. How or whether this works has been debated by economists since the 16th-century. It has been the argument for a central government-controlled bank that could restrict money supply to prevent inflation and inject money to prevent deflation. See ‘Sovereign Money’.
Raworth, Kate – See ‘Doughnut Economics’
Representative Money
Money that ‘represents’ or has a claim on, a commodity. E.g. gold certificates or silver certificates. In this sense it is not ‘commodity money’ so much as commodity-backed money. World currencies in previous years that were linked to the gold-standard could arguably be called ‘representative money’, but have since been replaced by ‘Fiat money’. See ‘Fiat money’, ‘Commodity money’.
Reciprocity
In social anthropology ‘reciprocity’ is the idea of the exchange of goods either through barter or ‘gift exchange’ where a favour is done with the expectation of receiving a return in the future. Like a birthday present. An immediate exchange (barter) does not create a social relationship, but when the exchange is delayed it creates an obligation, a relationship of mutual need. In the case of religious ‘jubilee’ it can also allow for redistribution of wealth. Homo sapiens, it turns out, are actually the most cooperative species in the world. We outperform ants, hyenas and the naked mole rate when it comes to getting along with people outside of our family. E.g: Ebay’s trader rating system. See ‘Jubilee’, ‘Religion’.
Regenerative Design
One step further than zero-impact or climate-neutral is climate-positive, regenerative design that uses design features to make projects that absorb more carbon dioxide than they create. See ‘Oberlin, Project’, ‘Generous Cities’.
Religion
David Graeber (History of Debt) notices that the language of religion is rooted in ancient financial systems that were based on debt. The Lord’s Prayer in English, before the version that talks about ‘trespasses’, was translated as ‘forgive us our debts, as we forgive our debtors’. The idea of sin, forgiveness, reckoning and redemption are present in Judaism, Christianity, Hinduism, Buddhism, Taoism and Islam. In religion, of course, our debt is to God and the cosmos and the forgiveness of debt by us and by God is the important thing, not the debt itself. The annihilation of debt is Enlightenment. Judaism today still holds with the idea of writing off debt every seven years, and a complete clean slate every 50 years, on the ‘Jubilee’ years, which is why the movement to clear third-world debt at the turn of the century was called ‘Jubilee 2000’. As ancient financial systems influenced religion, so also see the influence in the other direction, in the way that banks were built to look like temples. See ‘Jubilee’.
Rentier
A property owner who gets income from renting, or interest on investments. The term, used often in the works of Karl Marx, is increasingly being used in the context of ‘rentier capitalism’. That is, to gain profit by monopolising access to property. Like Commons and Enclosure, the word has grown from English terms for physical things into a broader description of the process of the transfer of capital that some believe should be commonly held, into property. See ‘Marx, Karl’, ‘Enclosure’, ‘Commons’.
Resource-based economy
Traditionally a resourced-based, or ‘natural-resource-based’ economy refers to economies where the wealth of an economy, or nation, is based on natural resources, for example Russian (more than 80% exports are oil, gas, metals and timber), Norway (45% of exports from oil and gas) and some gulf states whose income is dependent on oil and gas. More recently it has become used to mean an economy that bypasses money, where resources become the common right of all inhabitants like the aspirations of the Zeitgeist Movement. See: ‘Zeitgeist Movement’.
Rethinking Economics
In 2000 economics students in Paris wrote to their professors, rejecting the dogmatic teaching of traditional economic theory, telling them: ‘We wish to escape from imaginary worlds’. Following the financial crash of 2008, some students at the London School of Economics – including Yuan Yang -rebelled against their lecturers, calling them ‘old goats’ and insisting that ‘the teaching of economics is in crisis’, with profound implications ‘for the multi-dimensional challenges of the 21st century – from financial stability to food security and climate change’. Student dissent spread to 80 student groups from India to the US, Germany and Peru. The Kick It Over movement hijacked the American Economic Association’s annual meeting in 2015, declaring ‘The revolution of economics has begun’. Yuan Yung has since been Beijing correspondent for the Financial Times and is co-chair of ‘Rethinking Economics’, the international student network for change that she co-founded.
Robots
If robots will be doing our work for us, who owns the robots? Some economists suggest a ‘robot dividend’, where all citizens would own a share in the robotics industries, as the only way to avoid extreme inequality in the future. This is an idea inspired by the Alaska Permanent Fund. See ‘Alaska Permanent Fund’.
Sanergy
In Kenya, projects such as ‘Sanergy’ build hygienic toilets to turn human waste into biogas and organic fertiliser, improving public health, creating jobs, cutting nitrogen pollution and increasing soil fertility. See ‘Regenerative Design’.
Shareholder – See ‘Shares’ and ‘Stock Market’
Shares
Having ‘shares’ in a business allows the joint ownership of a company by many different people. The value of a private company or a ‘corporation’ (or ‘joint-stock company) is its ‘stock’. When an individual wants to sell shares in her company, or a private company wants to go ‘public’, the value of the stock is agreed in advance and then the owners agree how many shares to divide that value into and the shares are sold to investors. The number of shares is fixed unless the ‘shareholders’ agree to create more at a future date. The strength of the system is that investors cannot suddenly withdraw their money in a way that would damage the business, as they have to find someone to buy their shares, which keeps the money in the business. Shares are traded at a value that fluctuates depending on the profitability of the business. A percentage of the company’s profits is paid to the shareholders every year as ‘dividends.’ The innovation of joint ownership made possible the economic growth of Europe in the Middle Ages. See ‘Stock Exchange’, ‘Stock’.
Short
As in ‘selling short’: See ‘Futures’
Smith, Adam
Adam smith was a Scottish economist, a moral philosopher, and a pioneer of political economics. His book ‘The Wealth of Nations’ (1776) paved the way for ‘free market’ economic theory, and stated that self-interest and competition would lead to economic prosperity. Since then the idea grew that selfish wealth creation would somehow lead people naturally to do-the-right-thing and share their wealth, and they therefore should be allowed to make money without restriction, leading to ‘laissez-faire’ classical economic theory. (Laissez faire et laissez passer, le monde va de lui meme = Let do and let pass, the world goes on by itself). His statement that people bartered before they used money has led to a belief that this is the truth, an idea only recently challenged. His ideas were reflective of the mood of the time, the European ‘Enlightenment’, and certainly contained no concept of social economy, the unaccounted for contribution of unpaid female labour or ‘inclusivity’, as pointed out by Katrine Marcal in the title of her book ‘Who Cooked Adam Smith’s Dinner’. At the time of writing his great work, Smith was living at home with his mum.
Socialism
The idea of social ownership, in all its forms and interpretations, usually of the ‘means of production’ of goods and services. See ‘Labour Movements’ and ‘Labour Party’.
Sovereign Money
Money controlled by the state rather than by commercial interests. Legal tender issued by a monetary authority, usually a nation-state’s national bank, or the ECB (European Central Bank). In reality, most money in circulation is bank-money, or debt. The Sovereign money movement wants to remove the ability to create money from commercial banks. Instead, it would transfer the role of new money creation exclusively to the state. This would end boom-and-bust cycles and create stability. Switzerland is considering the introduction of a Sovereign Money System. Ben Dyson, the founder of ‘Positive Money’, points out that before the introduction of electronic money, the Bank of England issued paper money (at the minimal cost of printing it, i.e. a few pence) and when it allocated it to commercial banks, received credit equivalent to the face value of the notes, credit which we could use to invest in public funds. When electronic money came into being we missed a trick, if we had taxed the commercial banks a percentage of every pound they created, we could now be sloshing in funds for welfare programmes.
Speculation
This is the purchase of something (goods or assets) in the hope that it will be more valuable at a later date. In the financial world people speculate on stocks, bonds, commodity futures, currencies, fine art, collectables, derivatives and land. See ‘Bonds’, ‘Derivatives, ‘Shares’.
Stagflation
A term coined by Milton Friedman. Stagflation is the combination of stagnation and inflation, i.e. when inflation is high, ‘growth’ is slow and unemployment is high. See ‘Milton Friedman’.
Stock
Derived from the Old English word for stump or tree trunk, ‘stock’ has been used to refer to all the movable property of a farm since at least 1510. This is ‘physical capital’ or ‘capital stock’. Stock is also the value of a business, and ‘shares’ are the way the stock is divided between investors who are ‘stockholders’ or ‘shareholders’, all the shares together add up to the total stock. See ‘Shares’ and ‘Futures’.
Stock Exchange
See ‘Shares.’ The trading of ‘stock’ or ‘shares’ in a business allows companies to attract investors, or shareholders, to raise money to create profits, without the risk of that money being withdrawn suddenly in a way that would damage that business, as shareholders can only take their money out of the business by finding someone else to buy their shares. Shares were traded in mills, mining, copper and forestry as early at the 13th-century. The Dutch East India Company issued the first shares tradable on the Amsterdam Stock Exchange in 1602 and became the first multinational mega corporation, able to finance hugely costly fleets of ships to trade millions of tonnes of cargo with Asia, with investors easily able to invest their money by buying shares through the Stock Exchange. England had its own East India Company set up in 1600 – trading on the London Stock Exchange – that transformed from a commercial venture into one that ruled India. The invention of the Stock Exchange allowed Europe to dominate the world as it did.
Stock Market – See ‘Stock Exchange’
Strike Debt
‘Strike Debt’ grew out of the Occupy movement. Banks sell ‘bad debt’ (loans that have defaulted) at a reduced price to the original loan, to whoever wants to buy the debt along with the legal right to recover some or all of it. In 2014, Strike Debt used donations to the ‘Rolling Jubilee Fund’ to buy up student debt and then ‘forgive’ the debts, i.e. cancel them. See ‘Occupy movement’, ‘Religion’.
Sundrop Farms
In Australia, Sundrop Farms is using hi-tech greenhouses to use solar energy to desalinate saltwater, create heat and generate electricity to grow vegetables, through climate-positive, ‘generous’ design. See ‘Generous Cities’, ‘Regenerative Design.’
Supply and Demand
This is the model – in conventional economics – that says that the price of something will ‘settle’ when the quantity of the thing supplied is equal to the quantity that people want. I.e. in a ‘free market’ prices will fluctuate until a natural equilibrium is reached. In reality, there never has been such a thing as a ‘free market’, and in ecological terms, we are a long way from a natural equilibrium. Also, advertising, marketing, education and many other social factors contribute to the quantity (and the nature) of stuff that people want. And many people can’t afford to buy what they need.
Surplus
In financial terms ‘surplus’ is loosely equivalent to the idea of profit. If you can charge more than you need, that’s ‘producer surplus’. If you can buy something for less than the top price you can afford, that’s ‘consumer surplus’. Since the mid 19th century economists have been creating algorithms around ‘supply and demand’ and calculating ‘surplus’, to predict and manipulate prices.
Surveillance Capitalism
Getting money from data collection. The commodification of personal information. Or, in other words, spying on our social media and internet habits in order to sell us stuff. The marketing of information about customers and subscribers to advertisers. The reason why certain things pop up in your facebook feed. Surveillance Capitalism radically changes the way corporations make money and is another way that money trickles ‘up’ to organisations like Google, who benefit every time we ‘click’.
There are obvious concerns about ‘consent’ (you give it every time you agree to those ‘terms and conditions’ and to ‘cookies’) and privacy. On a more positive note, data collection can be used for ‘social optimisation’, such as in ‘smart cities’ (where energy flows can be run by computer) or fitness tracking devices such as ‘Fitbit’, or the ‘Apple Watch’.
The internet was invented by academics, with public money. Now it is Google who get all the profits from that invention and we have very little control of that unless we want to boycott the internet. There have been proposals that residents of this planet should all have ‘tech shares’ so that we are still able to have an income when robots are doing our jobs, and that information technology should be publicly owned. See ‘Job Guarantee’, ‘Universal Basic Income’.
SEEA (System of Environmental Accounting)
This is the UN-approved standard for calculating natural capital, although Columbia is the only country in the world to have a dedicated statistics department to calculate the value of forest, water and minerals. All calculations of the world’s natural capital are at the moment estimates.
Systems Thinking
Like Complexity Theory, Systems Thinking looks at the interconnectivity of all aspects of a complex issue and how the relationships between the different elements affect the behaviour of the whole. For example, by considering economics in terms of all its component parts including biology, sociology, politics and ecology. Systems Theory regards the relationships over time, factoring in stocks and flows, feedback loops, and delay, and the mind-boggling process of what happens when all these things interact. Systems can be unpredictable, but also adaptive as they evolve over time. Looked at using Systems Thinking, economics looks less like simple maths, and more like biology. Systems-dynamic computer programs are increasingly being used to understand and predict economics. See ‘Complexity Theory’.
Tax
Most countries have a tax system to pay for public work for the common good. Tax is compulsory and imposed by law. Failure to pay tax (tax avoidance) is punishable by law. Tax may be direct (payable as a percentage of income, wealth or property), or indirect (a tax on sales, goods and services). Public works paid for by taxes may include roads, public transport, public hygiene, healthcare, education, legal systems, military, research, culture and the arts.
The idea that public works expenditure must all be raised by taxes is challenged by supporters of the chartalist theory of money creation and its modern reincarnation Modern Monetary Theory (MMT). See ‘Chartalist theory’, ‘Modern Monetary Theory (MMT)’.
Thatcherism
Margaret Thatcher, Prime Minister of the UK between 1979 and 1990, believed in less government, lower taxes and more freedom for business and consumers. Becoming leader at a time of recession under a Labour government, she was influenced by the Mont Pelerin Society, the Institute of Economic Affairs (IEA) – a think-tank that opposed the British Welfare State – and the ‘monetarist’ opinions of Milton Friedman, amongst others. Her government cut spending on social services, education and housing, and reduced the power of trade unions. She privatised nationalised industries including gas, water, electricity and steel (which raised £29 billion) and sold off council houses (£18 billion) in what was criticised as ‘asset-stripping’ of the nation’s infrastructure and ‘selling the family silver’. Her government deregulated the banking industry, which began the uncontrolled behaviour of financiers leading to the 2008 economic crisis. She aligned herself with Ronald Raegan in the US against the Soviet Union. Her legacy, often called ‘Thatcherism’, was the continuing movement away from Socialism that has continued into the 21st-century, and in 2018 is trending towards the privatisation of the National Health Service. She famously said ‘The problem with socialism is you eventually run out of other people’s money’, and ‘There is no such thing as society’. See ‘Deregulation’, ‘Milton Friedman’.
Treasuries – see ‘Bonds’
Trickle Down Economics
This is the long-held belief that rich people are better at looking after money than poor people and should therefore be allowed to make money without interference. In this way they would generate profitable businesses and create work for others, so everyone would benefit, the so-called trickle-down effect. I was thought that the richer the rich became, everyone below them would also get richer, like people climbing up behind each other on rungs on a ladder. In fact, when rich people are rewarded with tax breaks they are not likely to increase investment in their businesses, but are more likely to invest any extra money in financial ‘speculation’ for personal gain and ‘streamline’ their businesses (lay-off workers). Any doubt about the truth of the Trickle Down effect was laid to rest by the work of Thomas Picketty who demonstrated why wealth, in fact, trickles up. See ‘Picketty, Thomas’.
Trickle Up effect
This is the recent realisation that – without enforceable, fair, global taxation – the rich get richer while the poor get poorer because of inheritance and tax avoidance. So called because it exposes the lie of Trickle Down economic theory. The Trickle Up effect has led to the rise of what we now call the One Percent: one percent of the global population ‘owning’ the same amount of the world’s resources as all the remaining 99% put together. Trickle Down, as an idea, was thoroughly disproved by the work of Thomas Picketty. See ‘Picketty, Thomas, ‘Trickle Down Economics’.
United Nation’s Sustainable Development Goals
These goals, agreed by 193 member countries in 2015 – to be achieved by 2030 – are to ensure the right of every person on the planet to basic food, clean water, education, healthcare, housing, work, access to information, gender and social equality, political voice, peace and justice.
Universal Basic Income (UBI)
The idea of granting a guaranteed basic income to all people regardless of their existing salary or status. Resistance to this idea comes from our historical concepts of ‘work ethic’ and a belief that no-one should get money for nothing as it will make them lazy. Contrary to this argument, where UBI schemes have been piloted, people tend to work harder, seize more opportunities, plan better and feel more relaxed and able to cope, when they know they have a secure fallback. As ‘work’ becomes harder to define and wealth is less and less created by production (which is increasing done by robots and automation) some see UBI as the only way to ensure the well-being of the earth’s citizens in the future.
Ecologist Peter Barnes says ‘The great task of the twenty-first century is to build a new and vital commons sector that can resist enclosure and externalisation by the market, and share the fruits of our common inheritances more equitably than is now the case’. See ‘Enclosure’.
Virtual Money
This is the idea that, like ‘virtual reality’, electronic money exists only in cyberspace and isn’t real. In reality all national currencies currently in use are virtual in the sense that they are fiat money (See ‘Fiat Money’) and not real ( as in, connected or corresponding to, the actual worth of stuff). See – ‘Commodity Money’ and ‘Representative Money’.
Ward, Barbara
An economist and pioneer of sustainable development, who in the 1970s called for global action to tackle the ‘inner limits’ of human needs and the ‘outer limits’ of environmental stress on the planet, much like Kate Raworth’s ‘doughnut’. See ‘Doughnut Economics.’
Wealth
In its simplest definition, wealth is a ‘plentiful supply’, an abundance of valuable resources.
WEIRD
W.E.I.R.D (Western, Educated, Industrialised, Rich & Democratic) people represent 12% of the world’s population. Most economic studies into human behaviour have used students in the US and Europe as their subjects. These studies have therefore not been representative of the behaviour of the majority of the planet’s people.
Workers’ Cooperatives – See ‘Cooperatives’
World Bank
The World Bank – a group of 5 international organisations – was set up in 1944 after WW2 with the aim of ending extreme poverty and promoting income growth for the bottom 40% of every country. It provides temporary loans to countries who can’t get loans from the bank, technical assistance and knowledge-sharing to developing countries and published the ‘Changing Wealth of Nations 2018’, which included improved estimates of the world’s natural capital, and estimates for the first time of the world’s human capital. The report aims to use these different measures of ‘wealth accounting’, other than GDP.
Critics of the World Bank point out that it imposes policy reforms on recipient countries, like political or social change and that the interest on ‘leveraged’ loan repayments has added to third world debt, which in the 1970s and 80s rose on average by 20% every year. UNICEF reported in the 1980s that World Bank programmes had been responsible for ‘reduced health, nutritional and educational levels for tens of millions of children in Asia, Latin America and Africa’.
The World Bank Group is based in Washington and the 193 member countries have unequal shares. For example, the biggest shareholder is the US and the bank president is nominated by the US President.
Yang, Yuan – See ‘Rethinking Economics’
Zeitgeist Movement
The Zeitgeist Movement advocates a resource-based economic model that aims to manage society with technology instead of money or politics. It suggests the need for technological solutions to provide people with food and shelter, without war, poverty, crime, profit or financial corporations. It argues that 1 billion people in poverty can be fixed with science and our failure to fix the problem is a lack of science, not a lack of money.
Zeitvorsorge
Zeitvorsorge (time-provision), is a scheme introduced in St Gallen, Switzerland, to help provide care for the elderly. Every citizen over 60 can earn credits by helping an elderly neighbour with their cooking or shopping etc., whilst providing them with company. They then build up a ‘time-pension’ which they can cash in when they’re older and themselves need help. Since the scheme’s inception in 2012 it has been growing in popularity. Designed to reinforce rather than replace the human instinct to care for others, the Zeitvorsorge is an example of a Complementary Currency, like the Bangla Pesa. See ‘Bangla Pesa’, ‘Complementary Currency’.
Zero Impact/Mission Zero
An environmental ambition to do-no-harm, i.e. have no environmental impact. For example zero-energy buildings like the Bullitt Center in Seattle which uses solar panels to generate its total annual energy needs. In her book ‘Doughnut Economics’, Kate Raworth points out we can go one step further, with ‘Regenerative Design’, and become not just climate-neutral but climate-positive, as seen in projects that absorb more carbon dioxide than they produce, like the city of Oberlin, Ohio. See ‘Generous Cities’, ‘Oberlin Project’, ‘Regenerative Design’.