[Book] The Wealth of Nature: Economics as If Survival Mattered

[jprussell]

I outlined this post back in December 2021, apparently, but I never got around to handling it. "Luckily" this week I was struck with no idea what to write, so I went looking in my drafts folder in desperation and decided this would work. It's my thoughts on JMG's The Wealth of Nature, which packs an exceptional amount of helpful, smart thinking into a pretty neat package. As always, I'd love to hear what you think.

Comments

[thinking_turtle]

Thanks for sharing your thoughts on Wealth of Nature. When a cow dies, its corpse is eaten by predators like humans or crows. What's left becomes compost and is used by plant growth. I wonder how those dinosaurs sunk all the way into the crust of the earth!

One interesting aspect of stocks is that stocks are not really money. The pool of money is distinct from the pool of stocks. So I can buy a share for $100 and then all other shares get valued at $100. But there may not be enough money to buy them all!

I learned from Varoufakis and John Titus that money is created by commercial bank loans. Given that there is not enough money to repay both the loan and the interest, repayment of loans depends on the issuance of new loans. This keeps the economy moving!

[scotlyn]

Hi Jeff.
This is a good post and a good topic, and I have been reflecting on the matter of money (which as you point out is not the same as wealth). It was an archdruid report post a long time ago that started me thinking about the three economies you mention, but the revelation that I've had lately is the realisation that if I wish to increase the "weal" of myself and others, it is important for me to aspire to have and to use LESS money, not more.

The reason for this is that money is debt. For anyone to HAVE a dollar to spend (whether it is cash, or a pixel denoting a balance in a bank account), that farmer has to have borrowed it from a bank and put it into circulation. The bank created the loan from nothing, as two opposite ledger entries (one being dollars into the farmer's account, the other being the value of the bank's "asset" - which consists of the farmer's work to pay off the loan+interest and/or the value of the land the farmer used as collateral). But the bank is also entitled in legally enforceable ways, to look for the repayment of the principle - equivalent to the money it created with the loan - AND the agreed interest - which it did not create, and which does not, in fact, exist. It is a game of musical chairs which only continues through the endless addition of new chairs and occupants, even as some of the old ones are taken away, and some of the old participants *must* lose and fall out of the game.

There are two important points to notice here. The first is that when you multiply this out you realise that *by definition* there can NEVER be as much money currently in circulation as is currently owed. A money supply based on the creation of debt+interest must - eventually - eat itself. Because every dollar in circulation *by definition* represents (say) a dollar and 10 cents owed. Where can that extra 10 cents come from? Only from ongoing exploitation - by turning every living being, and its wealth-making activity, into a "resource" to extract. And this makes me think that debt-based money, specifically, IS the engine by means of which the third economy co-opts the energies and best intentions of the second economy, into the never-ending "extraction of value" from the first economy which is eroding the basis of our life on this earth.

And two, this specifically means that every dollar in circulation represents a legally enforceable creditor's claim upon the work and/or the possessions of a debtor. It is this that makes me realise that if I personally want to see LESS coerced labour, and LESS repossession, it follows that I must strive to need to use LESS money. And look to enhancing "weal" in other ways.

[k_a_nitz]

It might be worth pointing out that there is an existing slightly different 3 sector model (I was taught it in Economics classes way back decades ago) where the secondary sector is manufacturing and the tertiary sector is services (which includes financial services). This classification grew out of the three sector model of growth (see here for more info).
The separation of manufacturing/services from financial services reminds me of Thorstein Veblen's concepts of 'business' and 'industry' from his Theory of Business Enterprise. Essentially, he saw the financial owners ('business') as constraining the ability of 'industry' (manufacturing and services) to serve society's needs because of the former's focus on extracting profits (even limiting production or closing plants if it were profitable). But unlike Marx, Veblen saw the engineers and not the workers as the ones who should be in control.
The discussion of banking above is interesting as I've just been editing a translation of the chapters on money for volume 2 of Werner Sombart's Modern Capitalism (hoping to get it out in November - I started work on this volume in 2019 so I've made good progress, the first volume took 8 years!). It is quite a complex area even in terms of the history of money and monetary policy prior to the 19th century. Suffice to say that it can't be addressed in isolation from the history of extraction of natural resources.