The money project and the credit crunch

What's the relationship between the money project and the credit crunch?

It's not the building societies and the member owned mutuals that are going down.

It's the banks that maximise profit from their trade in money and shares with consumers and businesses

what's that about?

First non-profit bank in UK opened in 2002 http://www.guardian.co.uk/society/2002/oct/17/charityfinance

looks like there's no such thing as a non profit mortgage lender

what's the coop bank's ownership model?

why are there no non profit banks and mortgage lenders?

credit unions... why do they not grow and do proper services?

non profit doesn't mean not making a surplus

where do we draw the line?

http://c-resource.com/~creso2/view_article.php?aid=98

http://www.esrc.ac.uk/ESRCInfoCentre/index.aspx
Charitable donations are dwindling as recession spreads - while charities' services are becoming more in demand.

Search terms, sources, things to check out

British Library


Anthropology of money
Anthropology and Politics of Commodity Exchange (Studies in Anthropology & History) by GREGORY

A History of Money: From AD 800 by Professor Forrest Capie and John F Chown

Maidens, Meal and Money: Capitalism and the Domestic Community (Themes in the Social Sciences)

Money and the Morality of Exchange by Jonathan Parry and Maurice Bloch


Corporate governance, wealth distribution

Corporate Governance and the Distribution of Wealth: A Political-Economy Perspective

Authors: Perotti, Enrico C.; von Thadden, Ernst-Ludwig

Source: Journal of Institutional and Theoretical Economics JITE, Volume 162, Number 1, March 2006 , pp. 204-217(14)

Publisher: Mohr Siebeck

Volume 162:Number 1(2006:Mar.)

Available

Lending Collection

5007.506000

Corporate governance: what about the workers?
Prem Sikka

Accounting, Auditing & Accountability Journal, 2008 vol 21 issue 7, pp 955 - 977

The effect of privatization on wealth distribution in Russia

Michael Alexeev

¹ Department of Economics, Indiana University, Bloomington, USA

SME, wealth distribution

The Corporation

Corporation 20/20

Jen says

consider deeper questions about what wealth means, why we need wealth, what are the social values the system is built on and how do we change those?

Mark Gater - PhD in money systems with Britannia BS.. interesting topic and partnership model

Jak - swedish bank with no interest
Brazil - favellas - token system with boys given vouchers for mentoring younger boys that they could then spend as university fees
Zopa, Time Bank
Guildhall - 'best price' - concept, negotiate on the fair price, not on the highest or lowest it was possible to get.


david.boyle@neweconomics.org

Mark Gater
bang on www.bath.ac.uk/carpp/msc/alumni/gater.html

The Quakers' Made of Money project

Richard Douthwaite

James RIchardson

David Boyle
david.boyle@neweconomics.org - done

Sargon at nef

Responsible debt book author

REOS dialogue interviews

Report (Chatham house)


Layard, Happiness



MBA text book section on business models - look on MIT reading list

ESOP - employee shared ownership

google cooperative movement and political economy / philosophy / history / economics of


'Your search term 'SME, wealth distribution' matched no records' (no exact word)

SME, inequality

Your search term 'SME, inequality' matched no records

Rik Donckels and Asko Miettinen (eds), Entrepreneurship and SME Research: On its Way to the Next Millennium

Brian Snowden and Howard R. Vane, Conversations with Leading Economists: Interpreting Modern Macroeconomics

A. G. Kenwood and A. L. Lougheed, Growth of the International Economy1820–2000

Google
business ownership models distribution capital



Ownership and Governance of Enterprises: Recent Innovative Developments (Studies in Development Economics and Policy) (Hardcover)

In Search of Secret India” by Dr Paul Brunton



Look at Tim Jackson and SDC re growth

Oatley, International Political Economy (2008) and Ravenhill, Global Political Economy (2008) by the end of the first term.
(IPE course recommended reading)

International Perspectives on Household Wealth
By Edward N. Wolff, Jerome Levy – business equity, p 183



Why does market capitalism fail to deliver a sustainable environment and greater equality of incomes?

* Autores: Christine Greenhalgh
* Localización: Cambridge journal of economics, ISSN 0309-166X, Nº. 6, 2005 , pags. 1091-1109

I argue that free-market capitalist economies are biased against inventing/using green technology and against supplying the basic needs of the poor. With no mechanism for setting globally optimal prices for non-renewables, entrepreneurs choose labour-saving resource-intensive production methods. Further pressure on labour costs comes from finite individual lifetimes combined with rising access to goods. R&D creates technologies/products geared to saving worker and consumer time, instead of conserving non-renewable resources. Demand for positional luxury goods by the rich crowds out the basic needs of the poor. Technology caters for the demands of the rich, accentuating inequality, as prices fall/quality rises with innovation. I conclude with policies to redress imbalances. Copyright 2005, Oxford University Press.

The Ownership Solution: Toward a Stakeholder Capitalism for the 21st Century by Jeff Gates, 1998/9

Employee Ownership in America: the Equity Solution (Issues in Organization and Management Series]) (1985)

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=661444
Profit Maximization versus Disadvantageous Inequality: The Impact of Self-Categorization



Co-operative, inequality
• http://hsepubl.lib.hse.fi/EN/wp/?cmd=show&wpid=1021 - more about inequality as a driver of co-operatives, rather than vice versa
• Social inequality in Vietnam and the challenges to reform – book – no explicit mention in contents page

Not focusing on inequality of national incomes. Focusing on inequality of wealth held by individuals

Layard, Happiness

Capitalism, inequality

http://www.springerlink.com/content/m54165748147g455/
- extremist persective, neo-marxist and aggressively so.

“The sanctity of private property ownership would need to be drastically interfered with in order to bring about the qualitative improvement of the living conditions and experiences of the world's peoples. It seems to me that we would have to entertain the notion that private property ownership must be abolished and a social ownership and control of the commanding heights of the economy established as a first giant step towards a humane world.”

Capitalism and inequality: The negative consequences for humanity
Journal Crime, Law and Social Change
Publisher Springer Netherlands
ISSN 0925-4994 (Print) 1573-0751 (Online)
Issue Volume 6, Number 4 / October, 1982
DOI 10.1007/BF00728232
Pages 333-371
Subject Collection Humanities, Social Sciences and Law
SpringerLink Date Wednesday, December 08, 2004

So, I’ll need to strongly distinguished my approach from the socialists because that’s who I’ll get lumped in with.

Also, everyone says ‘the top 10% blah and the bottom 10% blah’ – so, briefly recognise that ineq is growing (this is contentious) and move very swiftly on to introduce my angle, which is fresh.

Perhaps the literature so far has been divided into the capitalists on one side, the socialists on the other, and there’s a middle ground regarding the distribution of wealth that has yet to be explored fully.

- ‘Fruits of capitalism; inequality matters’ – Kim Petersen. Book, again quite extreme left

The case of China – capitalism and socialism – who owns the organisations and where does the surplus go?

YouTube - Inequality and Global Capitalism
Harvard labor economist Richard Freeman explores how social inequality and globalization are threatening the foundation of democracy in the United States in ...
www.youtube.com/watch?v=UKinQbBF1Ek

CiC, inequality

Community Interest Company, wealth distribution

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html
Generally speaking, "wealth" is the value of everything a person or family owns, minus any debts. However, for purposes of studying the wealth distribution, economists define wealth in terms of marketable assets, such as real estate, stocks, and bonds, leaving aside consumer durables like cars and household items because they are not as readily converted into cash and are more valuable to their owners for use purposes than they are for resale (Wolff, 2004, p. 4, for a full discussion of these issues). Once the value of all marketable assets is determined, then all debts, such as home mortgages and credit card debts, are subtracted, which yields a person's net worth. In addition, economists use the concept of financial wealth, which is defined as net worth minus net equity in owner-occupied housing. As Wolff (2004, p. 5) explains, "Financial wealth is a more 'liquid' concept than marketable wealth, since one's home is difficult to convert into cash in the short term. It thus reflects the resources that may be immediately available for consumption or various forms of investments."

We also need to distinguish wealth from income. Income is what people earn from wages, dividends, interest, and any rents or royalties that are paid to them on properties they own. In theory, those who own a great deal of wealth may or may not have high incomes, depending on the returns they receive from their wealth, but in reality those at the very top of the wealth distribution usually have the most income.

Business model, inequality

Business ownership, inequality

• Steckel, R.H., Moehling, C.M. (2001), "Rising inequality: trends in the distribution of wealth in industrializing New England", The Journal of Economic History, Vol. 61 No.1, pp.160-83.

http://www.newsfromnowhere.org.uk/books/DisplayBooklist.php?BookListID=123 - long list of anti-capitalist books



SME, inequality

He said SMEs play a vital role in the country's socio-economic development, and aid in the eradication of poverty and inequality, an SME role that the government has realised.
http://www.economist.com.na/content/view/317/53/


http://www.oecd.org/document/38/0,3343,en_2649_34321_37130854_1_1_1_1,00.html

Economic Survey of Japan 2006: Income inequality, poverty and social spending

OECD Economics Department

Monetary flows

http://www.ingentaconnect.com/content/routledg/utis/1999/00000015/00000001/art00005

The World System of International Monetary Flows: A Network Analysis

Authors: Salisbury J. G. T.; Barnett G. A.

Source: The Information Society, Volume 15, Number 1, 1 January 1999 , pp. 31-49(19)

Publisher: Routledge, part of the Taylor & Francis Group

Abstract:

The emergence of the global service economy has altered the flows of information and capital among the world's nations. Electronic international banking networks now provide the economic infrastructure for the ''global village'' as millions of financial transactions are processed daily. This article describes the world system based on the financial transactions of an international credit card network. Using transaction data from the third quarter of 1995, a network analysis produced structural findings similar to those found for the international telecommunications and trade networks. These results indicate that the world's monetary flow system is composed of a single group with the United States, United Kingdom, Germany, France, Italy, and Canada at the core and the former members of the Eastern Block and less developed countries at the periphery. Additionally, a number of nations are marginal in the network with only a single link to a core member of the network.




Inequality, business

Business, wealth distribution

Business, surplus distribution

Surplus distribution, inequality

Profit, inequality

Shareholders, inquality

Stock market, inequality

Business ownership, inequality

http://www.statcan.ca/english/freepub/75-001-XIE/10904/art-2.htm - Canadian dept of statistics
Of total wealth inequality in Canada, 98% was attributable to inequality within provinces. The factors affecting family wealth inequality within provinces include homeownership status, business equity, financial asset components, employer pension plan savings, and mortgage and consumer debt.

Business equity, inequality

International Perspectives on household wealth… Edward Wolff

nstitutional Pathways to Equity: Addressing Inequality Traps (New Frontiers of Social Policy)
by Michael Walton (Editor), Anthony J. Bebbington (Editor), Anis A. Dani (Editor), Arjan De Haan (Editor)

http://www.amazon.co.uk/Inequality-Prosperity-Liberal-Political-Hardcover/dp/0801443512/ref=sr_1_1?ie=UTF8&s=books&qid=1221652641&sr=8-1
Inequality and Prosperity: social Europe vs liberal America

Journal of Corporate Citizenship

Google – ‘stock market, inequality’ – most references focus on income inequality
Wealth in America
By Lisa A. Keister

Looks a little at wealth.

Google search – journal of coproate citizenship, inequality

http://findarticles.com/p/articles/mi_hb1445
can do a manual search through the back issues

JCC March 2007
http://findarticles.com/p/articles/mi_hb1445/is_200703?tag=content;col1

nothing on inequality from the titles

Ethical Corp – search on ‘inequality’ produces 45 results
http://www.ethicalcorp.com/content.asp?ContentID=5337
Governance:
Shareholder voting rights – Equity ownership’s endemic inequality
European investors want corporate decisions made on the basis of one share, one vote, but some companies are not listening
Despite protests from investors, more than one in four companies in Europe restrict the voting rights of shareholders.

Google

‘CSR, inequality’

World of Work Report 2008: Income inequalities in the age of financial globalization, produced by the ILO’s International Institute for Labour Studies also notes that a major share of the cost of the financial and economic crisis will be borne by hundreds of millions of people who haven’t shared in the benefits of recent growth.

http://www.opendemocracy.net/article/globalisation/philanthrocapitalism/power_inequality_democracy
The new philanthropy: power, inequality, democracy
Geoff Mulgan
The sceptical scrutiny of "philanthrocapitalism" by Michael Edwards is welcome. But markets and social enterprise could help realise the potential of a new donor economy, says Geoff Mulgan.

(how demorlaising – being a charity recipient. Is it? At the nag was it good to receive charity donations?)

Consumer driven market mechanisms to fight inequality: the case of CSR/product differentiation models with asymmetric information

The bottom up pressure of "concerned" consumers and the rise of "socially responsible" products represents a new market mechanism to fight inequality and promote social inclusion. To analyze the new phenomenon of competition in corporate social responsibility (CSR) amid doubts on consumer tastes and of the effective corporate SR stance we adopt a horizontal differentiation approach in which the Hotelling segment is reinterpreted as the space of product SR characteristics and consumer tastes are uncertain. We find equilibria of the pure location and of the price-location games and show what changes when we move from a duopoly of profit maximizing producers to a mixed duopoly. Our findings illustrate that a nonzero degree of CSR is the optimal choice of profit maximizing corporations under reasonable parametric intervals of consumers’ "costs of ethical distance", corporate cost of CSR and uncertainty about consumer tastes.

http://www.socialfunds.com/news/article.cgi/1930.html
The revised and updated edition of this text (originally published in 2000) examines how excessive executive compensation contributes to the widening gulf between rich and poor.


Premodern Trade in World History (Themes in World History) (Themes in World History) by Richard L. Smith (Paperback - 15 Dec 2007)

A Concise Economic History of the World: From Paleolithic Times to the Present by Rondo Cameron and Larry Neal (Paperback - 25 Jul 2002)

8. Existing and historical approaches to redistribution

• Perameter interventions - eg, one off payments to help pensioners deal with high fuel bills
• “Britain’s leading tax experts - the Institute for Fiscal Studies – said that despite the billions of pounds spent on tax credits, Labour had yet to meet its 2005 benchmarks for reducing child poverty by a quarter.” Guardian 11.06.०८
• different approaches to income from ownership: Denis Healey put a 98% tax on unearned income in १९७८ (History of Modern Britain)
• cost plus' - form of regulation where companies are allowed to make back cost put a specified percentage and no more. Cap on profit essentially, sometimes used with utility companies

http://moneyterms.co.uk/cost-plus/

The problem with cost-plus pricing is that it pays no attention to market prices. This means that it inevitably leads to either margins that are lower than they need be, or less sales. In the extreme case, applying cost-plus pricing to a commodity (not that anyone would — not for long anyway!), could lead to no sales at all if the cost-plus price was above the market price.

A pricing method similar to cost-plus is sometimes imposed by regulators on monopolies such as some utilities (Ofwat's methods of setting prices, for example). This is usually somewhat different as the the price setting process is modified to give sellers motivation to be efficient: for example, by basing it on what the regulator calculates costs should be, rather than on actual costs.

Banks et al 200:27

• "prior o the mid 1980s in Britain there was a tax bias away from direct holidings of equity towards wealth held in housing or occupational pensions, since equity was more heavily taxed than consumption, and housing and pensions benefitted from tax advantages relative to consumption... The introduction of personal equity plans and employee share ownership schemes meant that, from 1987 at least, equity could be held in a more favourably taxed manner by British households."
• Dividend income is taxed in both the US and UK.
• Stamp duty - 0.5% levvied on all share transactions in the UK
  

3. Evidence on Enterprise governance and wealth distribution

• 'Welsh Water gives £27m back to customers' - Guardian headline, 12th June 2008
• (http://www.guardian.co.uk/business/2008/jun/12/utilities.consumeraffairs)

• "The company... is unique among UK utility firms because it has no shareholders and reinvests all its surpluses for hte benefit of Welsh Water's customers." Each customer recieved a £21 dividend this year. totalling £27m. The remaining £14m profit will be taxed and reinvested into the company.
  

• "The interest we pay on our borrowings is much lower than if we had shareholders" says Nigel Annett, chief exec of Welsh Water. "Unlike other parts of industry, we're looking at a service. We are removed from the profit bit, which gives us a legitimacy with customers. I think it has worked better than we thought it would."

• It has 'no shareholders' but does have investors. "We are regarded as a low risk company because we have removed risks," says Annett. "Our investors want a safe home for their money. Investors charge lower interest. Lower interest means lower bills for customers." "We spent two years in the city of London arguing our case to investors. We had to raise £1.9bn, which I think is still one of the largest corporate bonds ever."

• Welsh Water is owned by Glas Cymru
  

• http://news.bbc.co.uk/1/hi/wales/1433520.stm

• Glas Cymru launched what was described as a "people's bid" back in November 2000, pledging to take over Welsh Water from its present owners - Western Power Distribution - and run it on a non-profit making basis.

  Instead of paying dividends to shareholders, cash surpluses would be shared with customers.

  The company has promised to reduce water charges for Welsh Water customers, which are among the highest in the UK.

• Instead of shareholders the company will be controlled by a group of 200 or so members - led by some some prominent names from the business world.

• The purchase price - nearly £2bn - would come from selling bonds in the City of London.

  Welsh Water, which supplies water and sewage services to nearly 3m people, was part of the Hyder group which fell victim to a hostile takeover by the US company Western.

  Welsh Assembly First Minister Rhodri Morgan welcomed the news of the go-ahead.

  "I particularly welcome the prospect of Welsh Water being owned once again by a company based, managed and controlled from Wales, based on a principle originated in Wales," he said.

http://www.dwrcymru.co.uk/english/company/Glascymru/index.asp
Glas Cymru is a single purpose company formed to own, finance and manage Welsh Water. It is a ‘company limited by guarantee’ and because it has no shareholders, any financial surpluses are retained for the benefit of Welsh Water’s customers.
____

Kennedy 1995

Makes some interesting claims with no discussion of sources or methodology (and as a result I do not trust this source)

Interesting claims:

Figure 3 – p 23 – proportion of cost that is interest payments:

• Garbage collection fees: 12%
• Drinking water costs – example of a northern German water supply works, 1981 – 38%
• Use of drains / Sewage costs – example of the city of AAchedn, 1983: 47%
• Cost of rent in public housing: calculations of the German Federal Office of Statistics, 1979: 77%

“On an average we pay about 50% capital costs in the price of our goods and services. Therefore, if we could abolish interest and replace it with another mechanism to keep money in circulation, most of us could either be twice as rich or work half of the time to keep the same standard of living as we have now.” P25

- very sketchy calculations – the number is probably inaccurate but the argument is interesting.

Dieter Suhr argues that the money system is a government service (is it??) – and therefore it works against the constitutional rights of the individual in most countries, for 10% of the people continually receive more than they pay for that service at the expense of 80% of the people who receive less than they pay for.

She presents the graph shown in Lietaer but does not reference is properly. She says the figures are from Helmut Crutz. I am in email trail for full reference details.
margritkennedy@monneta.org, Helmut.Creutz@iit-online.de


Alternative argument:

• companies create employment, pay taxes, through section 106 contracts give back to the community. Building societies don't give loans to poor people.

producer surplus and consumer surplus

http://tutor2u.net/economics/content/topics/marketsinaction/producer_surplus.htm
http://en.wikipedia.org/wiki/Consumer_surplus

The producer surplus is the amount that producers benefit by selling at a market price that is higher than they would be willing to sell for.

So, it could be that:
companies are aiming to maximise producer surplus. This raises prices and the demands on the consumer, or, increases the flow of capital (financial, human, social) from the consumer to the company.

So, for the money project, we'll need to understand theories of pricing
If part of the argument is that excessive profit leads to excessive/problematic transference of human and social capital from the consumer to the shareholder via the company (money transferred below the line of producer surplus is not transferred to the shareholder because it is contributing to the costs of production, which is necessary) - then that debate will need to sit in the language of price, consumer and producer surplus.

A key question is how do you meet the need for fairness and for an organisation's need to make hay while the sun shines? That need seems fair and acceptable. How do we define when profit accumulation goes beyond acceptable haymaking?

What is the relationship between the ownership debate and the profit debate? They are separate yet related. For example, a co-operative could still make large profits and maximise capital transfer from consumer to shareholder.

In Adam Smith's capitalism, competition is what prevents producer surplus from becoming unacceptably or exploitatively large. Is that mechanism functioning adequately today?

http://www.ikeafans.com/articles/1000-ikea-corp/136-10-keys-to-ikeas-low-prices.html
IKEA's founder, Ingvar Kamprad, listed as one of the world's richest men

___

Douthwaite, Richard (1996). Short circuit: Strengthening local economies for security in an unstable world. UK: Green Books.

p125 - The Irish credit union movement began in 1958 and in 1993 had 1.3 million shareholders (out of a population of 5.14m including NI). The UK's started in 1964 and only began expanding significantly in the late 1980s, and membership in 1993 was 100,000, up 40% on the previous year. In the US, 66m people, almost 1/3 of the population, are members of a credit union.

"There are several reasons for wanting to end, or at least dramatically reduce, the involvement of outside banks in one's community. One is that using an external bank's services to do a job that can be done within the community causes a significant loss of purchasing power, which can only be restored if the community sells goods and services to the outside world and thus stays dependent on it. The farmers who lent £943 million to the Irish banks in 1993 would have been paid about £10 million in interest, while farmers borrowing the same amount would have paid perhaps £113 million for the privilege, making a net loss of £100 million to the farming community.

"Not all this different would have left rural areas become some would have gone to pya the bank staff and thus have been returned to the local flow of national currency. However, since branch operating costs are usually less than half a bank's income, using outside banks to effect a transfer from one group of farmers to another causes a substantial net drain from rural areas."

p125. I guess he did the calculations himself based on banks reported interest rates for savings and loans. The figures of amounts of savings and loans come from the Central Bank (of Ireland?) that collects figures annually for bank deposits from the farming sector, and that the figures reported are from 1993, discussed in Irish Farmers' Journal, 27 January 2004.

Beck, Thorsten et al (2005). SMEs, Growth and Poverty. World Bank / US National Bureau of Economic Research.

find no relationship between concentration of SMEs in an economy and the reduction of poverty or inequality. But they don't consider distribution of wealth.

i think firm size is important

they only consider SMEs in manufacturing

they find a statistically significant relationship between economic growth and the size of the SME sector

but cannot identify a causal relationship

they use a 'newly constructed database on the share of total manufacturing employment accounted for by SMEs (Ayyagrari, Beck and Demirguc-Kunt, 2003).

'it would be useful to have information on SME employment beyond manufacturing, but cross-country data are unavailable for the share of SMEs in other sectors."p10

___

Porritt

"Production for profit, as opposed to production for human needs, was perhaps the simplest of the old ideological divides between capitalism and communism. Some socialists and radical greens continue to argue that it is 'the profit motive' (the pursuit of profit as the single most important objective in any economic exchange) which still lies at the heart of capitalism's inherently destructive tendencies.... it is the urge to maximise profitsthat causes some companies to cut corners if they can getaway with it and to externalie as high a proportion of their costs as they are legally permitted to do. In The Corporation Joel Bakan (2004) describes the modern corporation as 'an externalizing machine.'"

argues that only governments can force companies to internalise costs.

"Profitability has quite simply become the key measure of corporate success in a capitalist system..." p73

(we value what we measure and we measure what we value)

"This process of 'creative destruction' ensures the reallocation of capital and other resources from the less productive to the more productive, however painful such reallocations might be at both the micro and the macro level. And it is those profits that provide the dividends upon which the lives of hundreds of millions of people now depend in terms of their pension and other investments." p73

issue around boardroom pay rising sharply at a time when company performance was falling, and pay at other levels was rising far, far more slowly

"Defenders of such an astonishingly powerful accumulative capacity point out that none of this necesssarilly impacts negatively upon those on low incomes in the UK, or in terms of the global economy, upon the world's poorest people. All of that money still has to go somewhere, whether it's in terms of consumption, philanthropy, investment or anything else. There is, therefore, an unavoidable trickle-down effect, regardless of the scale of accululated wealth... However, it seems impossible to argue that the world is a better place for the concentration of wealth in the hands of so few; by implication, therefore, 'sustainable capitalism' would necessarily need to find ways of limiting the concentration of wealth." p74

(I don't like this language of 'limiting' - it's very unattractive. I prefer a language of improvement)

Jeff Gates in the ownership solution reviews ways in which 'a pragmatic ownership strategy could weave a broader web of personal, economic, and civic participation.'

____

Karl Marx, Capital

p148 - time of the working day - argues there is the time to generate sufficient value to sustain yourself, your family, and we generally work more than that. (I think he doesn't include the need to accrue personal, community and state level surplus - savings, pensions, rainy day fund, new stuff fund).

For Marx, the greater the surplus value output, the greater the surplus labour input, or, in other words, the greater the theft of life time, life value, from worker by capitalist.

Think it's not that simple. Social and physical technologies can increase productiity without a correponding increase in labour, I reckon. Surplus is also created by inputs from consumers, (investors?) social and natural capital, etc.

p120 - like Porrit says - he distinguishes between making boots to make good boots so that your fellows may wear good boots and your family may be comfortable - one on hand - and making boots in order to produce capital on the other.

(margin notes - being should not suffer in the process of creating value for others. But if i am boss, shared ownership feels better. (If I can choose who I'm working with :)

5. Evidence on enterprise governance and sustainability

Tomorrow's Owners: Stewardship of tomorrow's company.

_____

Hall, Peter and Soskice, David (2001). Varieties of Capitalism. New York: Oxford University Press.

VOC is very interested in corporate governance, with a particular focus on shareholder vs stakeholder approaches to governance.

p338
"A widespread view is that, since international capital markets are increasingly dominated by diversified portfolio investors (such as mutual funds and pension funds) seeking higher returns, companies must adopt the shareholder model or be starved of the external capital needed to invest and survive."

p.350 - chapter titled 'impact of corporate governance on product market and innovation strategies'

p359
"The British company is dominated by a CEO with strong performance incentives linked to share price, owned by dispersed portfolio shareholders interested mainly in shareprice..."

p339 - argue that primary corporate goal of UK companies is profitability, whereas in Germany, which takes a more stakeholder model, it is multiple goals, including profitability, market share, and employment security.

Still, nothing to say on governance and the distribution of wealth.

______

http://money.ninemsn.com.au/article.aspx?id=647198
Fund managers meet executive directors twice a year for an hour and expect to understand what is going on.

By Luke Johnson , Financial Times, 14 Oct 2008

There is another victim of the credit crunch: the publicly traded model of ownership. The near-collapse of many of the large banks in perhaps a dozen countries shows that such corporate structures do not work.

I have served on the boards of various public companies for more than 20 years and most such constructs were dysfunctional.

Professional investors have stakes in 100 companies or more and expect to have real insight into all of them: a fantasy. Meanwhile, the top directors of a large public company can spend a fifth of their time visiting hundreds of actual or would-be shareholders.

On stock markets the mad gyrations of a share price during a few days can determine the destiny of an institution that has been going for 200 years. If their shares had not imploded, would the government have stepped in to save RBS and the others?

How can anyone run a business when hedge funds trade big chunks of their equity every day?

I believe private ownership allows a more stable, long-term approach to wealth creation. Highly geared leveraged buy-outs may suffer in the coming downturn, but family or employee ownership offers advantages over the volatility of quoted companies. There is less minute-by-minute exposure to external scrutiny, and less obsession with immediate valuation. Organising such ownership structures for banks would not be easy, but it might lead to a healthy state of affairs.

lukej@riskcapitalpartners.co.uk The writer is chairman of Channel 4 and runs Risk Capital Partners, a private equity firm

http://www.ft.com/cms/s/0/73110d3c-4185-11dd-9661-0000779fd2ac.html

Tomorrow's Owners, by Tomorrow's Company

public ownership

Definition 1
see public company.

Definition 2
Government ownership and operation of an enterprise for the public good.

Public Company:

A company which has issued securities through an offering, and which are now traded on the open market. also called publicly held or publicly traded. opposite of private company.

Private company
A company whose shares are not traded on the open market. opposite of public company.

This content can be found on the following page:

http://www.investorwords.com/3932/public_company.html

• Research from John Oliver found that 'radical organisations have a tendency to evolve into post-democratic organisations over time. They transcend and include democracy, reintegratng hierarchies and structures.'
  

Co-ops - the cons

Is The Rise and fall of St Luke's ad agency related to its ownership structure?

St Lukes (all bullets from John Oliver's presentation of his own research)

• Spin-Off of Chiat/Day LA, already a radical company (Agency of the Decade).
• New Start-Up, 1995 – 30 people, 5 core founders.
• Co-operative
• Experimented with 2 Business Units
• Internal Market Hybrid
• Now 50 people, original founders have left.
• Progressive allocation of shares + ownership model

• Total creative freedom, from spontaneous structure.
• Co-operative, democracy.
• Shareholder value and responsibility – 90’s Zeitgeist.
• Boundry-less workplace. Hot desks.
• Latest collaborative technology tools.
• Structure turned outwards, based around clients.
• Peer and 360º team assessment.

• Growth: From 30 to 100+ in 4 years
• Awards: UK Agency of the Year in 1997, £75m turnover.
• Satellite offices: Sweden, India, France
• Achievments: Top Tier Clients, IKEA, BT.
• Media Profile: Articles (HBR), documentaries (BBC), Books.

• Consensus culture, 1 person / 1 vote.
• AGM attended by all employees.
• No single central power figure.
• Unconventionality, rituals.
• Open expression of emotions.
• Personal development – sabbaticals, ‘make yourself interesting fund’.
• Ecology values, role in society.

• Increased risk aversion.
• Consensus inertia, risk aversion.
• “I can say no to this task, because I am an owner”.
• Empowerment distorted - Experience [fn.] Influence.
• Hanging on to previous success attribution.
• Progressive HR policies taken outside of original spirit: Sabbatical time equivalent paid in cash.

• International expansion held back.
• From
  
• £5m turnover in ‘95 to
• £85m in ‘98 to
  
• £7.5m in ’05
• Founder Andy Law left to create sole ownership company.

• Scale of success boosted by buzz around its image.
• “A ship is safe in a harbor. But that’s not what ships were made for”. Mutual-fund mindset, rejecting risk, edginess, daring, difference.
• Consensus structure couldn’t manage the downturn.
• St Lukes still today represents a different working culture, and strong values.

http://www.thersa.org/projects/tomorrows-business/tomorrows-investors

Most people in the UK own shares. We own them not only in our own names, but also through our investments in pension companies and investment funds, a capital stake amounting to more than £500 billion in UK markets alone.

This democratisation of share ownership has changed the way public companies are owned. As recently as the 1970s, corporations were controlled by handfuls of wealthy individuals. Now, taken together, ordinary investors own large stakes in many of the biggest companies in the world.Yet despite high profile scandals, increased criticism of the behaviour of some hedge funds, and widespread public dissatisfaction with boardroom pay raises, we largely remain passive and uninformed owners. As a result, people often find themselves with shareholdings that conflict with their interests. And the corporate system has a vacuum of power at its very centre.

If you have any queries, or if you would like to participate in any part of the Tomorrow's Investor project, email Rowland Manthorpe.

The Tomorrow's Investor survey was completed by 225 fellows.

66 per cent of respondents felt that they did not want to be more involved in the financial management of their indirect shareholdings.

49 per cent felt they did not want to be more involved in ethical management.

However, the vast majority of respondents felt that public companies would benefit from greater investor involvement. 59 per cent felt that ethical management needed investor input; 47 per cent felt that this was the case with financial affairs.

http://en.wikipedia.org/wiki/Participatory_economics

Participatory economics, often abbreviated parecon, is a proposed economic system that uses participatory decision making as an economic mechanism to guide the production, consumption and allocation of resources in a given society. Proposed as an alternative to contemporary capitalist market economies and also an alternative to centrally planned socialism or coordinatorism, it is described as "an anarchistic economic vision",^[1] although it could be considered a form of socialism as under parecon, the means of production are owned by the workers. It emerged from the work of activist and political theorist Michael Albert and of radical economist Robin Hahnel, beginning in the 1980s and 1990s.

The underlying values that parecon seeks to implement are equity, solidarity, diversity, workers' self-management and efficiency. (Efficiency here means accomplishing goals without wasting valued assets.) It proposes to attain these ends mainly through the following principles and institutions:

• workers' and consumers' councils utilizing self-managerial methods for decision making,
• balanced job complexes,
• remuneration according to effort and sacrifice, and
• participatory planning.

Albert and Hahnel stress that parecon is only meant to address an alternative economic theory and must be accompanied by equally important alternative visions in the fields of politics, culture and kinship.

(this sounds very messy to manage)

7. Misc

• National income from wages / labour is decreasing in developed nations. So, what is the rest of national income made up of? Income from ownership - recorded how and by whom? the tax man?; Income from trade - manifested where? Company sales of domestically produced goods and services; company profits from foreign production under its leadership - traced to where?

(Source: TUAC John Evans presentation (2008) / OECD orig - expand image for details)

Cost of mortgage repayments in the UK have risen 78% in the last 8 years (source?)

what do the ecological and green economists say?
http://www.elsevier.com/wps/find/journaldescription.cws_home/503305/description#description

• what are the issues around how frequently stocks are traded?

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/10/how_to_solve_the_crisis.html
57. At 7:45pm on 04 Oct 2008, NorrieC wrote:

(interesting claims to investigate but beware of trusting NorrieC directly)

The purpose of a money system is to provide a means for exchange of materials and labour between one person and another. Since the labour and materials are indivisible then 'money' in small denominations allows labour and materials to be traded between two people in fractional amounts.

In that sense it is much more flexible than a simple barter system.
Unfortunately that relatively simple requirement has been hijacked by the current, fraudulent system called Fractional Reserve Banking.

(Wikipedia says:
Fractional-reserve banking is the banking practice in which banks are required by governments to keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) with the choice of lending out the remainder, while maintaining the simultaneous obligation to redeem all deposits immediately upon demand. This practice is universal in modern banking. http://en.wikipedia.org/wiki/Fractional-reserve_banking.

(So, if you're a bank, you can't hold onto it, but you've got to be able to give it back at a moment's notice. This is probably why they lend to each other all the time.)

from another blog of hers/his:
the Federal Reserve. And where did they learn their tricks from....you've guessed it...the good old Bank of England. In fact nearly every country in the world operates this deathly system on the BofE's model



In a debt-based, fiat,
fiat?
The terms fiat currency and fiat money relate to types of currency or money whose usefulness results not from any intrinsic value or guarantee that it can be converted into gold or another currency, but instead from a government's order (fiat) that it must be accepted as a means of payment.<sup>[1] [2]

also interesting is...</sup>

Fiat (Latin for "let it be done") is a theoretical construct in policy debate—derived from the word should in the resolution—whereby the desirability rather than the probability of enactment and enforcement of a given plan is debated, allowing an affirmative team to "imagine" a plan into being.


In a debt-based, fiat, Fractional Reserve Banking system the majority of the 'money' in the system is fictional. It is an illusion of immense proportions. The 'money' is printed on a printing machine on a whim and bears no resemblance to any tangible asset or labour of any worth or value.

To work[sic], the mathematical model behind the system requires a geometric growth in debt, population, energy consumption, raw material consumption, waste production and pollution (and a complementary geometric decrease in our co-inhabitants of this planet !).

(so, what is this mathematical model and how can i find out more about it?)

The word geometric means non-linear. i.e the previously mentioned list doesn't just grow linearly, it grows exponentially, 1, 2, 4, 8, 16, 32, 64, 128, 256, 512, 1024 etc etc. The earth CANNOT sustain geometric growth of any of the above list INDEFINITELY. That is NOT an opinion. That is NOT a political statement. That is NOT the viewpoint of a religious crank. That is NOT pathetic wish of a tree-hugger. It is a physical, mathematical, practical, undeniable FACT.

The model behind the current system is utterly flawed. Any talk of patching it up so that it can continue is unbelievably futile. The only reason it has managed to work at all until now is that a source of (almost) free energy has fuelled the previously described exponential expansion. That free source of energy (oil) is peaking out. Note: I did not say running out. I said PEAKING out. That means that since June 2006 the world's daily oil output has been in decline. i.e every day since June 2006 the worlds daily output has never been higher than in June 2006 and has been falling consistently since. It doesn't matter whether you believe in the Peak Oil theory or if you think anyone who believes in it is a nutter. The figures speak for themselves. The worlds daily oil output since June '06 has been decreasing. It is an absolute fact.

In order to satisfy the base requirements of a debt-based, fiat, Fractional Reserve monetary system the consumption of energy must increase to fuel the increase in manufacture of goods and general industrial activity which in turn increases the consumption of those goods by ever increasing numbers of people taking out more and more loans to buy those goods which in turn results in more and more fiat money being printed. If the increase in energy consumption is strangled because of a decrease in the supply (which it has been) then the bedrock of that geometric system is undermined and the financial system collapses with it.

Without the creation of new loans/debt/credit (call it whatever you will) the rate at which the money pot is being filled with new money is lower than the rate at which the loans are being repaid or written off, which destroys the quantity of money in the money pot (when its repaid or written off as a bad debt the original loan amount is destroyed but so is the leveraged amount - 40x in the case of Northern Rock). Therefore, if the rate of money destruction is greater than the rate of new money creation then the money pot shrinks. When the money pot shrinks it is called a DEPRESSION.

The cretins in Number 10/11 may understand the explanation thus far ( but I have my doubts) and therefore they look around for 'solutions' to the problem. The 'solution' they seek, however, is to find ways of printing even more new money to keep the money pot topped up. That's the limit of the 'fix'. But new money can only be printed as a result of new debt. New debt begins as government debt which is then spent into the economy through the commercial banks or the corrupt PFI schemes or their cronies in the Defense Contractors camp. All of the proposals outlined by Robert above are ways to print more new money in an effort to prop up the exisiting, failing system. e.g.

"public sector would inject new capital into our battered banks" That means printing new pound notes. Don't be fooled by the deliberately obfuscating vocabulary.

"[to] provide them with the muscle to start lending in a sensible way again." So the 'public' lend the banks 10 newly printed pound notes for them to use Fractional Reserve Banking to lend �100 (�90 of which is fictional) back out to the 'public' (at a 10:1 lending ratio, most banks are much higher). Well that seems like a plan, not.

"decided to inject billions of our cash into banks. " printing more new money again.

"savers would receive an automatic and instant uplift in the value of what they put in." They may receive an increase in the numerical amount of pounds but not the 'value'. The purchasing power (value) of those pounds will be diluted in exactly the same proportion to number of new pounds printed. It is a pyramid selling (Ponzi) scheme.

(A Ponzi scheme is a fraudulent investment operation that involves promising or paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business. It is named after Charles Ponzi.^[1] A Ponzi scheme has similarities with a pyramid scheme though the two types of fraud are different. - http://en.wikipedia.org/wiki/Ponzi_scheme )

"but the risk of capital losses would, I think, be quite small." thats an incredulous statement to make given the example offered by the current circumstances. In a Fractional Reserve System with, say, a 10:1 lending ratio the loss of �10 from the system results in the destruction of (10x10) �100. Destructive losses are magnified by the Fractional Reserve Banking system. Thats why it is so destructive.

"This will be a semi-compulsory, contributory pensions scheme" You must be joking. The last place I want my retirement nest egg is in the hands of financial incompetents who want to make me better off by printing new, valueless pound notes. And then prevent access to it until you are forced to buy an annuity worth nothing in real terms. I'll invest mine in real, tangible assets accessible at all times thank you very much.

(ELC pension scheme...)

"there should perhaps be a dividend for those in low paid jobs and insecure employment, who are hurt most by the economic slowdown precipitated by this crisis." It is pathetic and devious to use the low paid as a crutch to support this repugnant viewpoint. The low paid (and those on fixed incomes ie pensioners) are hurt far more by the destruction of the spending power of the little money they do have by your beloved inflation (wholesale printing of new money), a cornerstone of your proposal.

"Personal Accounts Delivery Authority (PADA), which is setting up a new national pensions savings scheme for launch in 2012." Another quango to swell the ranks of the civil servants who represent 50% of the working population and 20% of the entire population.

"only governments, through the deployment of taxpayers' money" Don't lose sight of the fact that the government has no money of its own, it is not a revenue generator. Every pound spent by the government must first be forcefully taken from someone else.

If the problem could be solved and everyone made rich by the wholesale printing and distribution of new money then Zimbabwe would be the richest country in the world right now.

Inflation is the printing of new pound notes which has the effect of increasing prices because of the reduction in spending power of the pound notes already in existence resulting in the rise in prices.

The government pension system is a scam. You are led to believe that pension contributions are somehow invested in some trust fund and ring fenced for future payout to the people who paid them in. In reality the government takes your pension payments and squanders them immediately upon receipt and your future pension payments, if you get one, are paid out of the taxes of the people who are still working throughout the period of your retirement. The system is completely insolvent because the forecasted future withdrawals are greater than the future predictions for contributions.


_____

I think there's a whole other area of questions and discussion around the financial system - I think the question is around sustainable models of business ownership and finance.

___
http://en.wikipedia.org/wiki/Sovereign_wealth_fund

A sovereign wealth fund (SWF) is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. Sovereign wealth funds have gained world-wide exposure by investing in several Wall Street financial firms including Citigroup, Morgan Stanley, and Merrill Lynch. These firms needed a cash infusion due to losses resulting from the subprime mortgage crisis.

Some sovereign wealth funds are held solely by central banks, who accumulate the funds in the course of their management of a nation's banking system; this type of fund is usually of major economic and fiscal importance. Other sovereign wealth funds are simply the state savings which are invested by various entities for the purposes of investment return, and which may not have significant role in fiscal management.

The accumulated funds may have their origin in, or may represent foreign currency deposits, gold, SDRs and IMF reserve positions held by central banks and monetary authorities, along with other national assets such as pension investments, oil funds, or other industrial and financial holdings. These are assets of the sovereign nations which are typically held in domestic and different reserve currencies such as the dollar, euro and yen. Such investment management entities may be set up as official investment companies, state pension funds, or sovereign oil funds, among others.

There have been attempts to distinguish funds held by sovereign entities from foreign exchange reserves held by central banks. The former can be characterized as maximizing long term return, with the latter serving short term currency stabilization and liquidity management. Many central banks in recent years possess reserves massively in excess of needs for liquidity or foreign exchange management. Moreover it is widely believed most have diversified hugely into assets other than short term, highly liquid monetary ones, though almost no data is available to back up this assertion. Some central banks have even begun buying equities, or derivatives of differing ilk (even if fairly safe ones, like Overnight Interest rate swaps

____
http://en.wikipedia.org/wiki/Market_capitalization

Market capitalization/capitalisation (aka market cap, mkt cap or capitalized/capitalised value) is a measurement of corporate or economic size equal to the share price times the number of shares outstanding of a public company. As owning stock represents owning the company, including all its assets, capitalization could represent the public opinion of a company's net worth and is a determining factor in stock valuation. Likewise, the capitalization of stock markets or economic regions may be compared to other economic indicators. The total market capitalization of all publicly traded companies in the world was US$51.2 trillion in January 2007^[1] and rose as high as US$57.5 trillion in May 2008^[2] before dropping below US$50 trillion in August 2008 and slightly above US$40 trillion in September 2008.^[3]

____

I think there's another macroeconomic discussion about the balance of size and types of company within an economy

___

From The Times

October 28, 2008

After financial meltdown, now it's smeltdown

Bjork

(Icelandic economy was predominantly fishing): Now we have three aluminium smelters, which are the biggest in Europe. (there are plans to build 2 more).
A lot of Icelanders are against the building of these smelters. They would rather continue to develop smaller companies that they own themselves and keep the money they earn.

The six biggest venture capitalists in Iceland are being booed in public places and on TV and radio shows; furious voices insist that they sell all their belongings and give the proceeds to the nation.

Iceland is a small country. We missed out on an industrial revolution and my hope was that we would skip it completely and go straight to sustainable hi-tech options.

There is a wonderful characteristic in the Icelandic mentality - fearlessness, with an addiction to risk-taking to the point of being foolhardy. In music-making, storytelling and creative thought, this risk-taking is a great thing. And after my introduction to a lot of Iceland's small, growing companies, I realise how many of them have shown this fearless approach either in biotechnology or high technology.

In the past, having all our eggs in the same basket has proven far too risky, as we discovered in the days when we got 70 per cent of our income from fish. Now we are facing a disaster from betting everything on finance.

Iceland can be more self-sufficient and more creative - and still have an approach that is more 21st than 19th century.

(really inspiring to see / hear the yin voice in politics, poetics in politics)

http://www.guardian.co.uk/business/2008/oct/16/europe-economy
European leaders are to go to Camp David on Saturday to press the US president, George Bush, to cap his eight years in power with a major international conference devoted to redesigning global capitalism.

___

fiduciary duty
http://en.wikipedia.org/wiki/Fiduciary_duty
The word itself comes originally from the Latin fides, meaning faith, and fiducia, trust.
duty is a legal relationship of confidence or trust between two or more parties, most commonly a fiduciary or trustee and a principal or beneficiary. One party, for example a corporate trust company or the trust department of a bank, holds a fiduciary relation or acts in a fiduciary capacity to another, such as one whose funds are entrusted to it for investment.

A fiduciary duty ^[1] is the highest standard of care at either equity or law. A fiduciary (abbreviation fid) is expected to be extremely loyal to the person to whom he owes the duty (the "principal"): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents.

(so it sounds like this legal relationship to one stakeholder makes that stakeholder's interests out of balance with those of other stakeholders; the CEO does not have a formal fiduciary relationship to people and planet, so clearly that interest is out of balance. So what would an ideal structure for managing a set of stakeholder relationships look like? Bet there's lots of work on that. But need to discuss in relation to bigger systemic design questions about wealth creation and distribution.)



____

John Bunzi claims that 97% of all money in circulation was created by banks as loans

Quotes from Email from John Bunzi – 6th November 2008
But here’s the rub: if virtually all money is created out of nothing as debt, where does the extra money needed to pay all the interest on that debt come from? Either someone somewhere has to go bust to pay it or the banks must lend even more money to keep the pyramid growing (or both).

Why is there government borrowing and government debt? And why should we have to pay high taxes to cover the interest the government has to pay?

Well, because governments only create about 3% of our money leaving the banks to create the rest.

If governments created all new money they wouldn’t need to borrow or pay interest and we could all have lower taxes.

our governments are caught in the pyramid scheme having historically allowed the private banks to take over the vital right of money creation – a right which should always have been the government’s alone, on behalf of the people.

debt-based growth becomes an imperative because if the pyramid doesn’t keep growing, it collapses

The simple solution, as I’ve suggested, would be for the government to create all of our money – the whole 100% - instead of allowing the banks to create 97% of it. That, after all, is only what most people think the government does anyway! If the 97% were created by the government too, on behalf of the people, interest could be eliminated, public works paid for without incurring debt, and taxes dramatically reduced. And the banks would be put back in their proper place as handlers – and not as creators - of money.

if the UK government were the only nation to forbid the banks from creating money and instead created it itself, the banks, like the hedge-funds, non-doms and many corporations, would retaliate by threatening to move their operations elsewhere.

As Michael Portillo, then Conservative Shadow Chancellor, said in a letter to a constituent, “Legislating against the credit multiplier would lead to the migration from the City of London of the largest collection of banks in the world. It would be a disaster for the British economy".[i]

I - Letters to Margaret Harvey and Barbara Panvel dated 28 September 2000 and 13 February 2001 respectively.

the then Labour Treasury Minister, Ruth Kelly, in a letter of 20 August 2001 to Robert Jackson MP.[ii] She said, "It is evident that this proposal would cause a dramatic loss in profits to the banks… . In this case it is highly likely that banks will attempt to maintain their profitability by re-locating to avoid the restriction on their operations that the proposed reform involves. Given the desirability of an internationally competitive market in financial (and other) services, it would not be in the UK's interests to insulate itself from such a market".

[ii] Monetary Reform – Making it Happen!, by James Robertson and John Bunzl, ISPO, 2003.

The transition “would quite possibly cause untold economic harm to any nation trying to move first.”

Unless we had a viable, local, sustainable alternative system in place beforehand.

But what if all or sufficient nations acted together, simultaneously, “all together, now!” That way, the banks would have nowhere else to run and the simple solution could be implemented without fear or risk.

(totally unpheasable politically without a global government)

http://www.islamic-world.net/economics/prohibition_of_interest.htm

the prohibition of interest and its affect on the distribution of wealth

one of the basic differences between the Islâmic system and the Capitalist system with regard to the distribution of wealth is that Capitalism allows interest, while Islâm forbids it.

A very simple consequence of the prohibition of interest is that it produces a balance and uniformity in the distribution of wealth.

since Islâm prohibits interest, it would in practice allow only two forms of investing capital in the modern world- "Partnership" and "Cooperation". Both these forms are completely free from this injustice and imbalance in the distribution of wealth. Under these two forms of investment, if there is a loss, it has to be borne by both the parties, and if there is a profit, both have a proportionate share in it.

Under the Islâmic system, every one who invests his money has a share in the enterprise and its policy, bears the responsibility of profit and loss both, and thus he is no longer allowed to have his own way in business.

“…Allâh has permitted trade, and forbidden interest." (2:275)

where is the economic theory, the evidence, the methodology, the counter arguments, the other possibilities, and so on? I would like to read more about this.

Margrit advocates charging a fee instead of interest – after silvio gesell. That money is a ‘government service’ – but this is really problematic, money is like language. Money is as much a government service as language is: as a system it dwarfs national government in both space and time.

Money Flows

... in search of the meaning...

Money flows are calculated as the dollar value of composite uptick trades minus the dollar value of downtick trades
http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html

the Chaikin Money Flow oscillator is calculated from the daily readings of the Accumulation/Distribution Line.

Money Flows/Methodology

Philosophically, money flow analysis takes its lead from the market. Instead of relying on fundamental ratios to assess value, money flow analysis looks to what the market itself is signaling about a stock, sector or market. This signal may be about interest rates, commodity prices, earnings expectations, future sales or takeover activity. Money flow analysis rests on the classic economic principles of how supply and demand imbalances affect prices. The complication is that the stock market is a market in which there is not normally an outside supply of stock (company issuance of new stock or repurchase of stock for cancellation are the exceptions to this). Therefore, the stock market operates as a closed system with all investors playing a zero-sum game: one group of investors supply the stock to fulfill demand from another group of investors.

Constructing and interpreting money flows is done by monitoring every single trade in a stock. Although for every trade there is always a buyer and a seller, it is very important which comes first - the buy order or the sell order. For example, many buy orders cumulating up one after the other will eventually lead to upwards share-price performance as sellers of the stock require higher and higher price to sell their positions. Birinyi Associates monitors every trade for the major stocks not only in the US, but also in 36 markets worldwide to determine money flow.

http://www.birinyi.com/tour.1.php

Our approach is to understand the psychology and history of the market, and most importantly the actions of investors. Much of our effort involves money flows, or what has traditionally been called ticker tape analysis. We follow the ideology of Charles Dow in our methods. As he stated years ago, start with the market's input:

"The market reflects all that the jobber knows about the condition of the textile trade; all that the banker knows about the money market; all that the best-informed president knows of his own business, together with his knowledge of all other businesses; it sees the general condition of transportation in a way that the president of no single railroad can ever see; it is better informed on crops than the farmer or even the Department of Agriculture. In fact, the market reduces to a bloodless verdict all knowledge bearing on finance, both domestic and foreign.

http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:chaikin_money_flow

Hoogvelt

FDI
"'Direct' flows were made up of foreign direct investment... companies investing in wholly- (or majority-) owned subsidiaries abroad, making profits that were returned in the form of dividends. The defining criterion here was 'equity' ownership, which carried managerial control over the foreign operations. Indirect investments were, by contrast, interest-bearing debt intstruments, as in bank lending, whether to governments or private firms. At the time of writing, that distinction is becoming meaningless, as the development of stock markets in many so-called 'emerging' markets, as well as the general opening up of all the world's stock markets, means that non-residents can buy shares in any domestic markets. " p80-1

Totally embedded in the system:
"it has become common for governments... and indeed private companies, to issue bonds and 'treasury' bills (in the case of governments), certificates of deposit, or other forms of of 'commercial paper' in the world's credit markets, instead of borrowing from banks. (...) Public finances are raised from international private credit markets." p81

"the trade in currencies has become the fastest growing market ever, now reaching sixty times the value of international trade in goods and services." p82

"The Economist summed it up: 'The truth is that there is no longer any such thing as money. At least not in the sense required by monetarism and its siblings." The Economist 19 Steptember 1992 p30

"the 'core' today uses 70 per cent of the world's energy, 75 per cent of its metals, 85 per cent of its wood, and consumes 60 per cent of its food." UN Human Development Report 1992 p35

3 richest people have more wealth than the 48 poorest countries - from UNDP human development report 1999 p3. Same ref, p38: distance between income of 'richest' and 'poorest' countries: 3:1 in 1820, 11:1 in 1913, 35:1 in 1950, 44:1 in 1973, and 72:1 in 1992.

___

John Kay

p26

Table 3.4 What the United Kingdom Earns (£bn)
29m workers earn on average £19,200 559
Profits of business 302
Taxes (less subsidies) on business 132

GDP 993
(Annual national accounts; OECD)


Table 3.5 Redistribution of United Kingdom income among households, 2001 (£bn)

Earnings o workers 573
investment income (net) 80
benefits and pensions 246
Total resources 899

Taxes -131
Other social contributions (?) -101

Left for households to spend 668

(UK National Statistics)

p27
What the United Kingdom produces: 2001 (£billion) - Total output column only. Two other columns I've not recorded here - 'sold to other businesses' and 'sold directly'

Agriculture 18
Mining 32
Manufacturing 376
Electricity, gas and water sply 46
Construction 127
Trade (?) 294
Transport & Communication 153
Finance intermediation 485
PUblic administration 85
Education, health & social wk 219
Other 80

GDP 993

(UK National Statistics)

2. Evidence and theories on the drivers of inequality

http://www.guardian.co.uk/business/2008/jan/17/economics.economy
Stock markets have more impact on the inequality in Britain than the government's tax and benefits policies, a thinktank report says today.

http://www.ifs.org.uk/publications.php?publication_id=4107

focuses on income inequality and the incomes of the super rich, boosted by the stock market.

Bernard (2008)

"The VOC [Varieties of Capitalism] literature suggests that the institutional arrangements that make up natinal production regimes - financial arrangements and corporate governance, industrial relations, education and training systems, and welfare state - and the institutional complementarities that these institutions generate when operating together produce important micro- and macro-economic effects (Hall and Soskice 2001)." -

But though " financial arrangements and corporate governance" are first on the list, this is the last time in the whole paper that they're mentioned!

"The limitation of the VOC perspective in accounting for cross-national variance in inequality is that its explanatory leverage is observable primary on income (i.e., wage) distribution prior to tax and transfers." - p1. So it doesn't tell us much about wealth inequality, income through ownership and redistribution through tax and benefits.

"Figure 1 uses data from Statistics Canada to track the evolution of income inequality and redistributive profile of taxes and benefits in Canada between 1976 and 2004." p4 - find sim data for UK money flows analysis.

p6 - LMEs are characterised by arms length, short term, flexible relationships.
"SMEs are characterized by longer term, trust and obligation-based relationships. Such arrangements bring parties (employers and employees, banks and firms, management and shareholders, government, and producer groups) closer together, creating an environment where such parties have a stake in each others' activities... and maintain a long-term horizon."

Large body of VOC thinkers suggest that "divergent patterns of distributional equality among advanced industrial countries are owed in large part to the.. wage bargaining system, educational and training system, and the social protection." p6

"Earnings dispersion, by far the most important determinant of the overall distribution of income, is closely related to particular skill systems as well as the wag ebargaining institutions that tend to go with these systmes. By themselves this part of dichotomous variables account for nearly 70 per cent of the cross-national variance in income inequality." (Esteves-Abe et al (2001: 177, 181 and 182)

basic summary of the observation / arg:

"In SMEs, where htere is high quality and redistribution, wage setting institutions are centralised and coordinated, acquisition of asset-specific skills in the workforce is prevalent, and the welfare state provides generous social protection. In the low equality, low redistribution LMEs, wage-setting institutions are decentralised and uncoordinated, general skills constitute the core sklls of the workforce, and the welfare state provides limited protection against economic risk." p6

(how much of an issue is wealth inequality from ownership? How do we place it among the issues / drivers?)

Union density has dramatically decreased in LMEs and only slightly decreased in SMEs between 1980 and 2000.
















SMEs have more vocational training than LMEs. This raises the marketable skills and earning potential of lower earning population segments. There is a "strong negative association between wage inequality and vocational training intensity." Scattergraph on page 9.

"Whereas a large proportion of early school leavers in [specific skills systems] acquire valuable skills through the vocational training system, in [general skill systems] most early school leavers end up as low-paid unskilled workers for most or all of their working lives." p9 (author notes that the logic of this argument has been criticised)

p10 - data suggests that higher public spending on education is associated with lower levels of income inequality.

Research by Burkhart (2005) concludes that "Capitalism has a positive effect on the income distribution variable, meaning that increasing levels of capitalism leads to more income controlled by the top 20 per cent of the population." P16 HOwever, he suggests further research to "discern what exactly it is about capitalism that makes it influential in models of democratic performance and income distribution." p19

Beinhocker (2007)

Epstein and Axtell (1996) "model that included nothing more than people with a few basic abilities, and an environment with some natural resources.

Virtual island with only one resource - sugar. Fifty by fifty grid. each square on the grid has different amounts of sugar on it, from 0 to 4. Two sugar mountains, with 'badlands' in between.

The Sugarscape agents could make decisions and take actions. Simple version: look for sugar, move, eat sugar. + a metabolism for digesting sugar. The agent is credited by the amount of sugar eaten and debited by the amount of sugar burned - so can build surplus. If sugar goes below zero, they've starved to death.

Agents are heterogenous - they differ by vision length and fast (bad) or slow (good) metabolisms.

The distribution of sugar among the agents began as a bell curve and ended in a Pareto curve, a long tail. the rich get richer effect. "The skewed distribution is an emergent property of the system." p86


Evidence on global wealth transfers from poor to rich countries:

• In 2001, according to nef's research, developing countries paid rich countries:
• $122bn in interest payments on loans
• $55bn in profits sent back home by multinationals
• (interest and profits alone represent about 3% of their GDP...)
  
• $260bn loan principle
• $110bn through the forced holding of foreign currency reserves, usually US dollars (such transfers 'constitute an immends and expanding transfer of wealth out of these economices' to the United States" - p36)
• $122.4bn "illegal and thus unrecorded capital flight from poor countries"...? nef (2003:37)

• "Trickle down is a discredited idea. Let us think instead of globalisation as a 'hoover' effect, sucking resources away from poor people in both poor and rich countries, and concentrating them in the pockets of the rich." nef (2003:37)

• This suggests that debt is a bigger drain of capital from poor to rich countries than trade. But debt is historically specific. It can be cancelled. It is not - need to double check this thinking but - it's not part of the system design. The wealth drain from trade is part of system design and will continue until the system design is improved.

Interest

From The Future of Money, Lietaer 2001 p53

• A German study investigated the transfer of wealth between income groups through interest payments. They grouped the population into ten groups of about 2.5m households each. As you can see from the graph, the bottom 80% had a net 'loss' of interest, and the top 20% had a net gain, which was huge for the top 10% and slight for the 9th decile.

• The top 10% of households recieved a net transfer of DM 34.2 billion in interest from the rest of the society during 1982. The greatest transfers occurred from the middle classes (deciles 3 - 8) which each transferred about DM 5 billion to the top 10%. Even the lowest interest households transferred DM 1.8 billion. (orig. source: Kennedy, Margrit: Interest and Inflation Free Money. Sava International 1995, p26)

• I would like to do something similar with mapping out the resource flows around the case study companies and their stakeholders

• Leitaer: "This graph clearly shows the systematic transfer of welath from the bottom 80% of the population to the top 10%. This transfer was due exclusively to the monetary system in use, and is completely independent of the degree of cleverness or industriousness of the participants - the classic argument to justify large differences in income." (p54)

Banks et al (IFS, 2000)

• Aim to understand differences in financial wealth between the US and the UK, and conclude thus: "potential candidates for investigation arising from this paper have been the stock market, annuity markets and the housing market, all of which could be important explanatory factors in generating measured wealth differences between the two countries." They explore and discount the major importance of income,
  
• strong evidence that stock ownership is a primary way for people to accrue wealth - eg Tables 5 and 7 in the annex, powerful data at individual but not aggregate level. "Throughout, increments in total financial net assets are almost one to one with teh magnitude of the capital gains achieved in the stock market." p24
  
• "there is little doubt the stock market surge was largely responsible for increasing wealth inequaltiy in the United States during the 1980s and 1990s." p24
  
• large inequalities in wealth in both countries, greater in US.
  
• In seeking explanation: consider income inequalities, which explain some but by no means all of the wealth inequality. They also explore and discount inheritance and measurement issues.
  
• "Only recently (post 1988) has the UK had substantial levels of direct share ownership in comparison to the US, and even then the direct holdings of equity of many stockholders are small." p6
• The data does not provide any measure of private pension or government pension wealth. Data sourced primarily from British Household Panel Study (BHPS) and hte Panel Study of Income Dynamics in the US, supplemented by others inc Financial Research Survey and Family Expenditure Survey in the UK and the Survey of Consumer Expenditures in the US. Externally to this study, the PSID contains data on business equity while the BHPS does not- observe implication that "both surveys understate the concentration of wealth among the extremely wealthy." p9 "Both surveys exclude the super-rich." "To the extent that omitted components vary across countries, and particularly for groups converting business wealth to personal wealth, these may be important issues which deserve further investigation." p9
• "We begin with two concepts of household wealth - total household wealth (excluding business equity) - and total financial assets." p11 Point of confusion: they do include wealth in shares and bonds in the total financial assets. Equity the same as shares, no? equity considered in financial assets then? details p10
  
• "Simple summary statistics such as means and medians can be quite misleading when the subject is wealth" because wealth can be distributed so unevenly among any given grouping
• "Total household wealth is about a third higher in the US" p11. "On average, in the mid 1990s American households owned about $20,000 more in corporate equity." p12
• wealth distribution, US and UK, figures in the annex. In USD rather than % of total, but could calculate. Organised by deciles and age groups - for 1995, 1984-2005. Lots of data on the distribution of share wealth, particularly in table 5, (1994 BHPS - shareholders in the 50th percentile had an average (what kind of average?) of US$10,100 held. Overall average in 50th percentile was US$0.0. Shareholders in the 95th percentile: US$156,800,000. 98th percentile - US$326,000,000 - excluding pensions wealth. p59. Could graph this data but only starts at 50th percentile, with average wealth in stock and shares at 0. Table 7 - 'changes in financial assets and capital gains in stocks' - period? - shows strong relationship - strong evidence that stock ownership is a primary way for people to accrue wealth. Shows how much wealth ends up there at the individual level, but not at the national level (if had data on how many people each percentile represents could calculate the latter from the former, but is aggregate data available elsewhere?)
• 'The UK index is the FInancial Times All Share index
• Figure 8 shows percentage of UK population owning shares, - from 9% in 1978 to 23% in 1996.
  
• (What was British gas's distributive pattern prior to privatisation?)
• p28 - considering reasons for differences in share ownership patterns US-UK. One explanation involves "differences in attitudes toward capitalist financial institutions. Especially during the 1970s and early 1980s, it is probably a fair characterisation that there was more distrust of the fairness of capitalism as an economic system at least among significant segments of the European population. The stock market is one of hte most vivid capitalist symbols..."p28
• Table 10 - could make a graph of it - share ownership and political differences in the UK. p64. Conservative voters hold a great deal more share wealth than labour voters.

where this leaves us:
- fairly strong evidence here that share ownership is a signficant driver of inequalities in wealth. Methodology- doesn't relate it to change, solution or policy options. So what do we do with that? Depends on political objectives - are we ok with inequality or not? Not related to company ownership model so scope to research that aspect. Data provided in terms of average wealth per household in specific categories, rather than stock and flows of wealth at the national or even global levels.

So, yet to seek data on:
the average income of different wealth percentiles
stocks and flows of wealth at the national level
relationship between the wealth distribution trends reported here and company ownership models

____

If models of business ownership had an impact on inequality then we might expect to see a correlation between a country's patterns of business ownership and it's wealth distribution.

I plotted the data for the capitalisation of listed companies as a % of GDP against data about the % of a nation's wealth held by the top 10% of the population, and from a visual look there doesn't seem to be a correlation. There are many other variables that may have an influence, including, for example, the extent to which investment tends to be global or national in scope.

http://www.guardian.co.uk/commentisfree/2007/dec/05/theweathofthenation

"Rising inequality can only be addressed by a major change in the political system and the way companies are governed"

The median annual pre-tax wage for a full-time adult worker is estimated (pdf) to be £23,764, a rise of 2.9 per cent since 2006. The bottom 10 per cent of the employees receives around £13,000 a year. At the same time, the remuneration of executives at major companies has doubled in the last five years. Though the Labour government has sought to manage poverty and inequality through tax, pension credits and a variety of mean-tested benefits, no political party has put forward any programme to tackle the root causes.

(which are, he says, our majority vote political system rather than the scandanavian consensus model which incentivises politicians to respond to minority demands)

In contrast to Scandinavia and even Germany and France, the UK corporate structures lack two-tier boards, works councils and effective trade unions. UK employees are not allowed to elect directors and have no say in how the wealth generated with their own blood and sweat should be distributed.

A study (pdf) by the Organisation for Economic Co-operation and Development stated: "a stronger bargaining power of trade unions is associated with lower relative poverty and income inequality."

(But his emphasis on inequality is still on wage inequality:)

In 1975, at the dawn of Thatcherism, 65.1 per cent of the gross domestic product (GDP) went to workers in the shape of salaries and wages. By 1996, it declined to 52.6 per cent though with the introduction of minimum wage and investment in public sector it rose to 55.6 per cent in 2006, still nearly 10 per cent less than in 1975. The shrinking share of the cake has been sliced unevenly with the fat cats taking the biggest share. The result is an inevitable increase in inequality.

Prem Sikka is Professor of Accounting at the University of Essex