Summary The masters of our economy, the wealthy, don’t believe we have a dysfunctional economy. From their perspective we don’t, but the majority don’t agree. They’ve been carrying the burden of a dysfunctional economy for too long, and like it or not, they hold the power to change things. Isn’t it about time we faced reality?
Article If you do a web search on the term “dysfunctional economy,” very few articles appear; no more than perhaps two. However, if you search for “economic inequality” you will be presented with literally thousands of articles. Why the discrepancy between the two, when economic inequality is a prime indicator of a dysfunctional economy? Our economy is dysfunctional - it no longer serves the needs of the majority, so why aren’t there thousands of articles about the problem?
It’s all a matter of perspective. To the wealthy, the masters of the economy, it’s not dysfunctional. In fact, the complete opposite - it’s working well for them. Herein lies the problem - one which has been repeated throughout history. It’s the age-old story where a dominant class creates and ignores the problems of the majority. Their success blinds them to the realities of the situation. They only see things from their own narrow perspective and wish it to continue. To them, the economy is not dysfunctional, so nothing to write about. Unfortunately for them, the outcome from similar historical events of imbalance and injustice, seldom, if ever, benefit the dominant class. Therefore, it’s in their interests to consider and listen to the concerns of the majority. What’s more, there’s a huge sense of urgency for change, because of the systemic social and environmental imbalances within the economy. Many environmental issues are ticking time bombs on a short fuse, with potentially catastrophic outcomes. Therefore, they top the agenda in calling for change. However, the underlying causes are the same for both social and environmental issues. Therefore, it makes sense that we address the causes, which will solve a multitude of symptoms. Individually or collectively, governments may legislate to address urgent environmental issues, but legislation is not the preferred route as it only addresses specific problems. What we need are better systems, practices and procedures to stop these problems from occurring. We need a more balanced economy. However, as a temporary step, legislation will probably be required for urgent environmental issues.
I write about our dysfunctional economy, the causes and their solutions. I’m critical about the wealthy and vested interest and how they manipulate the economy, misleading the public into believing that their actions are in the publics best interests when they are not. That does not mean I’m against them. Far from it. I’m pro-capitalist and strongly in favour of free enterprise. However, I believe in an entirely different approach to wealth creation and prosperity, one which includes all and protects and nurtures our environment. We need extensive and fundamental reform to achieve this. Essentially our economy is set up as an adversarial system, where the interests of a few are served at the expense of the majority. The imbalances this introduces are unsustainable, and that’s the reality. No imbalanced system ever survives, it either changes or dies.
I appeal to the rational, forward-thinking business leader who realises that ignoring the writing on the wall is not an option. The leader who wishes to future-proof their interests. For those who ignore, or only pay lip service to radical change while continuing their old ways, are our modern day dinosaurs. Change brings risk, but it also brings opportunity. However, opportunity will only be realised by those expecting and anticipating its direction, the rest will perish.
As I’ve already turned to history to provide clues to our future, I do so again in referring to the writings of Viscount Alexis de Tocqueville (1805 - 1859) a French diplomat and political scientist who lived in America for a time. He researched American democracy and wrote a book called “Democracy in America” (1835.) He noted that Americans had a different approach to self-interest. They appreciated that to serve their own needs, they had to place common good first; to ensure others needs were being served as well as their own. This is the solid foundation upon which modern America was built. Unfortunately, we have lost our way, becoming too self-centred, only concerned with our own needs not those of the common good. “Democracy in America” was published forty-six years after the French Revolution, from which his parents narrowly escaped the guillotine. Therefore, he had a good understanding of pre and post-revolution France, and he admired American Democracy. That speaks volumes about the merits of looking after the “common good”, of which early America is the proof of its effectiveness.
The problems in adopting a self-interest approach, as preached by Milton Friedman, and in practice today, is that it not only leads to a dysfunctional economy, but it breaks down the most essential component which binds us as a society - trust. Trust is a thing we have very little of today. In the past, the wealthy earned our trust and respect as they worked hard and sacrificed to achieve success. Today they earn our anger and displeasure, as most make their money through manipulative and predatory practices only intended to benefit themselves. They show little concern for the welfare of their fellow humans or the environment. People have lost trust in our democratic system, which has failed the majority, as it no longer looks after their needs, only those of the wealthy. As a result, society has become fractured as the populace is left behind. We now have deeply divided societies in most developed economies such as US, UK, France, Italy, Spain, Australia and others. This is all because we lost sight of serving the common good. To rectify this, we now have to make fundamental changes to our economy. We need a balanced approach, which serves the needs of all, without killing the spirit of free enterprise.
I can hear the rumblings of disagreement now, “Of course we are aware of the issues of economic inequality and environmental concerns, and are addressing them.” That’s just lip service, because there are no major programmes involving any fundamental economic change. It’s business as usual with a few minor initiatives tinkering around the periphery doing nothing; rearranging the deck chairs on the Titanic.
A short article won’t permit any in-depth explanation of what’s needed, but there are four key areas we should be looking at:-
Introducing new business measurement standards, together with improved macroeconomic measures. Measure dictate outcomes. Wrong measures - wrong outcomes.
Replacing our laissez-faire or neoliberal economic strategy of free markets by strengthening and protecting national economies. Strong national economies are the foundation stone of a functional economy.
Limit the growth of the rentier economy, keeping as much funding within the real economy as possible.
Overhaul the investment market, returning it to the principles of investing and not trading, to provide greater stability and growth.
There are many other causes, but these four areas will make the biggest difference.