Columnist Evan Davis on BBC News posed the dilemma "Plan A vs Plan B" to economists Jonathan Portes and Roger Bootle. Is austerity or spending stimulus likely to pull us through the financial mess we are in?
Economics explained: Plan A vs Plan B
There is a joke that goes: If you took all the economists in the world and laid them on the ground head to foot they would still not come to an agreement. It is not a question of Plan A vs Plan B but a matter of understanding the creation and purpose of fiat money.
There are many others who are spreading the word that our current economic system is simply not sustainable. It his high time that we consider steady-state economics. Herman Daly, Paul Ekins, Thomas H. Greco, Michael Hudson, Tim Jackson, David Korten, Mike Nickerson, Jonathon Porritt, James Gustave Speth, Peter Victor, are some of these writers, to name just a few.
We know that people can and do trade without the need for money. We also acknowledge that barter is an inconvenient and inefficient mode of exchange. Money has become the life-blood of our modern economic world. Along with money comes the desire and need to save for retirement, to see us through the final years of our lives when we are no longer fit to labour. Personal saving is no different from business profit. The essential objective of every business enterprise is to return a profit. But saving or profit is real and tangible only if it represents surplus. This is one of the essential roles of money that every student of economics is told. Money is a store of value. In our modern world, fiat money is not backed by any underlying surplus. Instead, money is an entitlement to those who hold it. It is a debt obligation on the future worker. The quest for savings, profit, return on investment, or interest is a gigantic pyramid scheme that is dependent on a growing labour force, consumers, population, liquidation and exploitation of the natural resources.
In reality, neither austerity programs nor quantitative easing will solve the financial crisis. Austerity programs destroy the very productivity of the workforce that is required to create any resemblance of surplus. Monetary expansion only continues to build the pyramid scheme that maintains the status quo for the ruling moneyed elite.
Money, like laws and guns are all instruments of social organization and control. And with all three, those who wield the power will corrupt and distort it for their own self interests.
In conclusion, it is not a choice between Plan A and Plan B, but a matter of understanding money, growth and profit. Money is a human fabrication and a false god. Growth is not sustainable on a finite planet. Profit without surplus is all an illusion.