Swell Money and Sustainability
Unriddle our Destiny
The aftermath of the financial crisis of 2007-08 changed for many people the understanding of how the economy works. For many years, the Global Marshall Plan Initiative, the Club of Rome, the Eco-Social Forum Europe and other well-respected organisations have advocated for adequate global governance and more regulation of markets, specifically financial markets.
On the contrary, market fundamentalists have argued that no policymaker can outsmart markets, with their alleged self-healing powers. The eruption of the financial crisis was no surprise to us, whereas the market fundamentalists were dumbfounded by what had happened and shocked that their models did not hold.
After the fall of the Berlin Wall in 1989, market fundamentalism, driven by huge ambitions of power, became the leading paradigm: free-flow of capital, minimal state control and deregulated business and -trade were positioned as the framework conditions needed to solve all societal problems. This dogma is based on the idea that totally free markets inherently guarantee the best allocation of resources, hence securing the path for growth, in terms of GDP, jobs, income, and even sustainability. The financial sector and its “spin doctors” were successful in terms of manoeuvring the political debate in their favour, positioning themselves as relatively neutral economic catalysts; similar to a casino, where net gains and net losses compensate each other. Such seemingly harmless economic players, they argued, should not be burdened by taxation and regulations for transparency, but instead should be granted unlimited freedom in order to maximize net wealth.
This was indeed a compelling “narrative” and many even believed it to be fact. Hence, it is all the more astonishing that a major player in the global financial market like George Soros claimed since a long time that it was a fairy tale. He generated huge market gains using his superior knowledge of the financial system. Soros’s work focuses mainly on the concept of reflexivity: investors’ understanding of the dominant- or the supposedly dominant economic paradigm and participation in the capital markets may at times affect economic performance.
Once an insight is out of the box, it changes the situation and might then not be true anymore. This is a complicated form of feedback and adds to the fact that actors in the economy generally lack foresight. Situations in financial markets therefore often may change heavily and unexpectedly. Insiders use and feed this volatility to their advantage. Their “special” know-how enables them to tweak the system in ways that generate profit. Due to the lack of transparency, these dubious activities go largely unnoticed. As long as they can get away with the “casino metaphor”, they can even avoid paying taxes.
Before 2007, there were hardly any publications available that provided in-depth insights into the workings of the economy. Only few people knew what was going on and were able to predict the crisis ahead. One of these economic forecasters was Dirk Solte from the FAW/n in Ulm, Germany. Using the institute’s expertise on globalization and deregulation, as well as his own research results, Solte forecasted the financial crisis; his scientific argumentation was in line with that of the Eco-Social Forum Europe, the Global Marshall Plan Initiative, the Senate of the Economy, the Club of Rome, to name a few.
Another expert on market regulation is Wolfgang Eichhorn. For decades, Eichhorn has analysed market controls, macro-economic scenarios and impossibility results to devise adequate market regulations. Some years ago, Eichhorn came up with the idea that the so-called “magical quadruple” of German economic policy (adequate- and constant economic growth – price level stability – high rate of employment – balance in foreign trade) needs to be extended to nine economic parameters, including two that focus on the environment and the nature of the income distributions. Since the last financial crisis, the theories of Solte and Eichhorn have been broadly debated. Nevertheless, it is
noteworthy, that the theories described in this book are anything, but mainstream. More importantly, their theories are scientifically reliable. Prior to the fall of Lehman Brothers, Dirk Solte published a book in which he drew up a prognosis for the economic turmoil that lay ahead. Together with Franz Josef Radermacher, he worked on several projects related to the economic crisis, including teaching material for the general public.
The book “Swellmoney and Sustainability” was originally part of a series published by the Foundation “Forum für Verantwortung“ under the guidance of Klaus Wiegandt. It gives a comprehensive overview of the authors’ analysis work as well as those of other esteemed economists. We hope that it finds many readers and that those readers will benefit from the insights on a highly important issue for our common future. Especially the young generation should learn that today money is quite different from what it was a decade ago. Unfortunately it is still taught the old way at many places.
Franz Josef Radermacher
Club of Rome
Global Marshall Plan Foundation