Fixing the Global Jobs Crisis: time to leave assumptions behind

Mass unemployment is becoming a headache for all world leaders. At the World Economic Forums (WEF) in Davos, Bangkok and Istanbul, people were talking about how to address growing unemployment.

To find real solutions to this global jobs crisis we need to be clear on the cause of the problem. Some of the conversations I heard at the WEF revealed widely shared yet questionable assumptions about key causes of unemployment. The key myths are, as follows:

Myth 1: “Unemployment is due to falling demand.”

Are people’s needs really falling? Or just the amount of money in circulation to employ people/assets to meet those needs?

Myth 2: “Unemployment is due to technology displacing human labour.”

Could we not design systems of ownership and revenue distribution so that the income from technology frees us to work creatively and caringly for each other? How can we govern technology to release us to a world of service, not a life of redundancy?

Myth 3: “Unemployment is due to the cost of hiring and firing.”

Why then do some countries with high wages and labour standards, like Scandinavia, have less % unemployment? Where would competition between nations to lower costs of hiring and firing lead us?

Myth 4: “Unemployment is due to a lack of skills and appetite for the new types of work.”

The world has more skilled labour than ever before, and more labour mobility than ever before, and many people with Masters degrees can’t get a job.

Myth 5: “Unemployment is due to the option to claim benefits.”

Why then was the existence of benefits not keeping people out of the workforce before the recession? Why do some countries with the most supportive welfare states, like Scandinavia, have less % unemployment?

These assumptions may arise from a general lack of understanding about the first key function of a currency, which is to help connect assets, including people’s time, with needs. If a currency becomes scarce in an economy, then there is less ability for exchange. That means needs go unmet, and assets go underutilised. Its called unemployment.

I recorded a short interview for the social media corner of WEF in Istanbul to explain where we need to start looking for real solutions to the global jobs crisis.

Job Creation Without Austerity or Debt

In the face of financial crisis and mass unemployment, do you believe we have to choose between either austerity or debt-funded economic growth? Its a false choice, based on false assumptions. My video-keynote at a forthcoming conference in Denmark, explains how we can achieve job creation without austerity or more debt, by redesigning our monetary systems.

If you are near Denmark, go join the conversation at Rebuild21.

Want to learn more? Access more materials.

Dear Economists – please throw new light on money

Dear Economists

It has come to my attention that you’ve taken a battering in the last few years. Apart from a handful of you, the massive failure to predict the financial crisis, and the peddling of tried-and-failed theories of how to get out of said crisis, seems to have diminished your profession’s standing. Some politicians are even listening to sociologists, who say you have have nothing useful to offer on systems for achieving greater well-being, rather than mere economic growth. Perhaps rather unkindly, some now wonder whether your assumptions about self-interest have been a severe case of projection.

I don’t like to see anyone in such a bind. Especially when I sense there is major opportunity for a turn around in your fortunes. Although I’m one of your poor-cousins (i.e. a sociologist), for the past couple of years I’ve been reading some economics, mostly on monetary systems, and mostly by those I think you call “heterodox economists.” As an active reader, I jotted down some questions that I wanted answering. As I read on, it seemed that these questions were not yet answered! I looked everywhere (well, at least not just on wikipedia) and could not find data on them. So if you work on the following questions, not only could your answers become seminal, secure yourself tenure, you might even gain a spot in the next ‘Inside Job’ movie! I hope you read on and come back with peer-reviewed articles in the coming years.

1) How much money is there is in the world, and how much debt? If the amount of debt is much higher than actual money, what mathematical models can you offer for how this will be resolved, and with what implications for overall utility?

2) Which governments do not issue bonds to private banks, or to (semi-)privately owned central banks, but issue their own money (or issue bonds to government-owned central banks that do not then sell those bonds on to private banks – the same as issuing their own money)?

3) Which governments used to issue their own money, but no longer do, and when did these changes take place?

4) How do the non-GDP aspects of the Human Development Index correlate with the periods and places of governments issuing their own money? (Just take out the “income” component from the HDI and if you have got the information on monetary policy and central bank ownership, then bingo).

I realise some of you may have a more neo-institutional approach (dare I say sociological?!), and are interested in how economics is discussed in the media, or used in public policy. So for you, I also have a couple of research questions to suggest:

5) Of the news coverage since 2008, what % of the coverage on “financial crisis” also mentions “monetary reform”? I ask, as when searching on Google, only 3% of websites mentioning “financial crisis” also mention “monetary reform”. If you find similar statistics from trawling databases of news coverage, could you create follow up questions to reveal why there is this lack of analysis?

6) How are countries receiving advice, assistance and training on monetary issues, and what interests and evidence are involved in that advice?

7) How many economists does it take to change a light bulb?

“As many as need the light.”

Ok, so I knew the answer to that one. But could the answer instead be “as many as know the light is needed?”

I’m asking these questions as they relate to my own interests in sustainable enterprise, exchange and development, and I’m not about to retrain in your wonderful arts (sorry, “science”). If you want to know why more non-economists would like you to research these issues, you can view my TEDx talk on the “money myth.” For some output from economists already engaged in related matters, I recommend “Where does Money Come from” by Professor Werner and colleagues. Other, fairly elementary, resources Ive listed on my blog.

So, dear economists, please throw new light on money. I’m waiting for illumination. Posting links to peer-reviewed work in the comments section below would be great.

Professor Jem Bendell

Adjunct Professor at Griffith Business School
Distinguished Visiting Professor at IE Business School

Bonfire Banking

As Brits ritually remember Guy Faukes’ attempt to burn down the Houses of Parliament in 1605, it’s worth remembering when Parliament did actually burn down, why and with what implications. It was 1834, and money was involved.

The British economy had a few types of currency back then, one of which was called “tally sticks”. These were used by the Exchequer to record credits and debts and thus acted as money.

But banks didnt like these tally sticks, which meant the government could issue their own money as they pleased. They wanted to be the ones to create money, by issuing their own notes, and to charge interest on loans of notes and coins.

So they lobbied Parliament and got the tally sticks abolished in 1826. A few years later some were still being used. That wasnt good enough for the banks. They wanted them gone. A decision was taken to burn them. Where? In the stoves of the Houses of Parliament. When? In a rush. Why? Who knows, but the histories we read tell of how the chap burning them wanted to go home early, and put too many sticks in the stove.

As a systems thinker, Im always a bit suspiscious of the pilot error, lone gunman, individual madman view of historical events. But who knows? It was handy for the bankers that if a fire broke out from burning these pesky sticks and it burned down the Parliament, that the government would have to go into debt to the banks’ own forms of money to build a new one. There was no more tally stick money to go back to, to buy the materials and pay the workmen. So the government borrowed 2 million in bank money, to build a new Parliament. Its good to have your government owing you money, paying the interest, keeping you happy.

Reading this history, I wondered… would it make more sense to burn a different effigy on bonfire night?

(thx to Cairan for alerting me to the tally stick burning history. happy bonfire night!)