Episode #120 Buccaneer Economics: Blowing away the old and inventing what works with Prof. Steve Keen
Our current economy is based on idiocy, selfishness and bizarre ideologies. What happens if we completely replace it with a different, better system? How would it work? What would the world feel like?
Professor Steve Keen, Honorary Research Associate with the Institute for Strategy, Resilience and Security at the University College London , was one of the handful of economists to realize that a serious economic crisis was imminent, and to publicly warn of it from as early as December 2005 . This, and his pioneering work on modelling debt-deflation, resulted in his winning the Revere Award from the Real World Economics Review for being the economist whose work is most likely to prevent a future financial crisis.
He is author of Debunking Economics, which explains in detail why the orthodox economic theory is not only wrong, but more of a threat to the survival of humanity and the more recent: New Economics: A Manifesto, which gives ideas of how we can shift to a new system of exchanging value.
He is co-creator of the Minsky App and of the Ecocore Universal Carbon Credits.
In this episode, we explore some of the wilder falsehoods of the currently orthodox model of economics, and dive into the ways we could structure a model that could work differently.
Manda: This week’s guest is Professor Steve Keen, who’s associate professor of economics and finance at the University of Western Sydney and who is also standing for parliament in the elections that will be coming very soon. Professor Keen was one of the very few economists to realise that an economic crisis was on the way and to warn of it way back in December 2005. This obviously the crisis that happened in 07/08. And he’s been an anti Orthodox economist since the seventies. He’s written a number of really inspiring books. I would recommend Debunking Economics, but it is very much an economists book. His new book, The New Economics; A Manifesto, which is what drew him to my attention, is well worth any of us reading, because he’s beginning to look at not only how and why does the current system really not work; why is it in fact driving us to the edge of extinction? But what could we do?
Steve: That’s right.
Manda: And so that’s what we explore in this podcast; what’s wrong, and much more importantly, how can we fix it. So people of the podcast. Please do welcome Professor Steve Keen. So Professor Steve Keen, welcome to the Accidental Gods Podcast and thank you for taking the time out of a Bangkok evening, I believe. But you’re travelling tomorrow.
Steve: Back to Amsterdam. That’s sort of getting some personal stuff fixed up and dropping into London as well to get some banking fixed up. Because of course you can’t close bank accounts when you’re not in the country where you open it.
Manda: Oh, really?
Steve: Back I come to London for banking reasons only.
Manda: Oh. As, as half the world seems to do, including the Russians. Well maybe get to that. So Kate Raworth, who is one of my other economics heroes, you I have to say have recently moved to the top of the list, considers herself to be a renegade economist. And I read both of your books, Debunking Economics and then the New Manifesto. And I loved it. But then I’m a pseudo economist; I did a master’s at Schumacher, so I’m not a real economist, but I’ve done enough to appreciate the work. And it seemed to me that you’re a pirate economist; you’re not just doing things differently, you’re actually blowing the old economy out of the water. It did feel like, oh, look, here comes another missile. Gone! That’s that entire…and you’ve got the mathematics to back it up. And I don’t want to spend the rest of the podcast confusing people with the machinations of economics, but a couple of things that I wanted to pick up on in general theory. And the first one was that it’s not an accident, that we get to a point of let’s call it orthodox economics, just to not confuse people with lots of names, where everybody in the general public genuinely believes there is no alternative. That this is the way the world is. Franklin Jamieson I think, said it’s easier to imagine the end of humanity than it is to imagine the end of capitalism. And in the general sense, if you speak to ordinary people in the street, this is the case. And I wonder for the people listening who exist in that world, can you give the very edited highlights of why there is an alternative and we’ll get to then what that alternative might be?
Steve: Well, actually, I’ll start from the philosophical point that I’m reaching, and that is that the only feasible alternative for humanity is to be the guardian of life on this planet. If we’re not the guardians of life in this planet, we will not be able to live on this planet either. Now, is capitalism the best system to guide life? No. In fact, you have to constrain that side of humanity. It’s an incredibly powerful system for innovation, and that’s important. Under the period which we call capitalism, humanity’s knowledge of how the universe functions has grown dramatically. That has largely been done by people who themselves aren’t capitalists, you know, from Newton to Einstein. So human knowledge is an incredible resource, which I would hate to see us lose. But to sustain it for the indefinite future, at least on this planet, we can’t have capitalism as the dominant social system. In outer space whenever we get there, maybe, but not on this planet. Because you cannot treat this planet as a place you plunder first, profit second, and depopulate third, which is what we’re going to end up doing, not to ourselves initially, but certainly to the other forms of life on the planet. So we have to become custodians of life and fit capitalism inside that.
Manda: Beautiful. Yay. And I think I would suggest even in outer space. Because capitalism doesn’t just destroy other species, it destroys anyone who isn’t at the top of the capitalist pyramid. So even in outer space, I would imagine that capitalism is going to be very destructive of the people not at the top. Although I had a friend once who was part of the medical team in Goldman Sachs and what I realised was that they were right at the top of the capitalist heap, but within Goldman Sachs they had a completely socialist structure, where if the lowest quant’s uncle was ill in India, they got flown to the same specialist as if the CEO was ill. Because they didn’t want anybody worrying about health care for themselves or their families. So they had created a totally socialist, utterly even system; egalitarian, within Goldman Sachs. It was just that you had to be in Goldman Sachs, which is right at the top of the pyramid, to benefit from it.
Steve: Well, a similar thing applies to… I mean, I’m not going to eulogise Elon Musk necessarily here, that it’s the same sort of thing applies inside those sorts of companies. Because you want people… You think inside a company itself, a company is not organised in a capitalist way. And this is one of the one of the ironies of capitalism that the economic theorists themselves haven’t properly got their heads around, at least the mainstream hasn’t. Corporations are command and control systems. They exist in a sort of market economy. Now you can have a command and control system like the one you’re saying, the top of that particular member of the vampire squid fraternity. They treat everybody as socialists inside, while they are rapacious towards the outside. So but inside every corporation is a command and control system and they exist in the market. So the market in effect, if you like, is like the water, the fish that swim in those are command and control systems we call corporations.
Manda: Okay. That would be a rabbit hole we could go down, but but we might get back to it later. So. Just before we head further down, I’d like to know how you became someone who is so radically opposed to the broad mainstream of economics. Most economists still believe there is no alternative. They still adhere to the models of neoclassical economics. What was the turning point for you when you realised that this is not a functional system?
Steve: It’s actually quite theoretical and actually it occurred in my first year at university in 1971, actually July of 1971, if I can give a date to it. And the reason was we had a brilliant lecturer called Frank Stillwell, who was actually an immigrant from England. I don’t where Frank actually did his degree, but he did his PhD in England and came out to Australia lecturing at the University of Sydney. And Frank had become disillusioned himself with mainstream economics. He would have been 28, I imagine, at the time. He’s now 78 or close to 80 and still a radical. But Frank had become disillusioned, so he had the first year economics course and as part of that he gave a lecture on what’s called The Theory of the Second Best. Now that sounds quite esoteric, but when you when you learn neoclassical economics and you don’t even know at the time you’re learning it that it’s neo classical, you think it is just economics – there is no alternative, as you were saying beforehand. And what you learn is that the best possible world is one where there’s no concentrations of any type. So you have corporations all being small, individual competitive corporations and workers being small, obviously individual competitive workers. And that’ll give you the ideal situation.
Steve: And in that ideal situation, everybody receives what they should receive as an income. So it’s got a meritocratic and egalitarian touch to the market. But then what Frank said, Well, this thing called the theory of the Second Best says, what if you’re two steps away from that perfect situation? So you have trade unions representing the workers and you have employer organisations representing the employers and they’re currently bargaining. And that’s what’s setting the wage. Are you better off if you abolish one or the other? And according to conventional economic theory, you make welfare worse if you abolish one or the other; you’ve got to get rid of them both at the same time. Now, I remember learning this in the lecture theatre and thinking, what? Because before that, and I remember writing a first year essay about how we should abolish trade unions and monopolies, you know? But I thought, hang on a second, you can’t possibly imagine abolishing them both at the same time! This is just crazy. Now, what’s going on? Because here is a theory that I thought explained the real world really well, and I felt very much committed to this meritocratic view of how wages are determined and how profits are determined, and so on. And suddenly I got this crazy result that if you want to live in this perfect world, you’ve got to change everything that’s imperfect about the real world, at the same time.
Steve: I thought, That’s nonsense. There’s got to be something wrong with the theory that leads to this result. So I checked my textbook. Of course, there was no mention of this theory in the textbook. You only got taught this if you went on to an honours degree or a masters degree PhD qualifying, then you might learn about it. But at this stage you ended up being so committed to this vision of capitalism as a perfect, meritocratic system, that you regarded that as an interesting little curly thing to be forgotten about. Well learning it in the first year, hang on a second, my brain hadn’t been rewired to think completely like an economist. So I went down to the library and looked up the original reference. And at this stage I was studying first year mathematics, which was easily enough to cope with the mathematics of the paper. So I realised, okay, it was impeccable, it was very accurate. I think the authors were either nominated for or got the Nobel prize for this work, as a work of higher status. But it was ignored by the rest of the mainstream. And then I thought, what else am I not being taught? So I went to the economics journals and this is back in the days when journals were all physical of course. There was no such thing as an e-journal and stuff took time to be bound.
Steve: So I just grabbed the first bound copy. It happened to be, I think it was the 1966 or 69 volume of the Economic Journal. And there I found it, I think was 66 actually. The others were unbound and waiting to be bound and would come back at some point after they’d been… Because they were binding journals for thousands of journals at the library. And there’s a paper by Paul Samuelson who was the most prominent economist alive at the time, and it said; it’s called a summing up. And in this paper he admitted that the theory of meritocratic distribution that I was being taught in first year economics lectures was mathematically unsound, as a result of what’s called a debate between Cambridge, UK and Cambridge, Massachusetts, called the Cambridge Controversies. And as the representative of the American side, which was fighting for the mainstream conservative stuff, he conceded defeat. You said we’re wrong. And the final line said, if this makes you nostalgic for the old time parables of neoclassical economics, which remind ourselves that scholars are not born to live an easy existence.
Steve: Now that should have been throw out what you’re being taught and start all over again. But no, no, no. Same old crap still being taught. And today, if you ask any economists who knows about the Cambridge controversies, without knowing it carefully, of course, they all think the neoclassicals won that debate.
Manda: Oh, isn’t that interesting?
Steve: So I just realised I was being taught a mendacious theory and that’s when my change began way, way back in first year university at the age of 18.
Manda: Good man. Very good man. Because it’s seems to me reading relatively broadly, but not at great depth, because I’m not a mathematician and my brain tends to fuse quite early on; that economics is the pseudo cover for a political movement. And what they do then is that they find enough mathematics to confuse basically everyone who’s not a really hard core mathematician to be able to go, okay, this is fact now, we’ve got the maths. And it’s covering a political belief system. And that came home to me very strongly with the Larry Summers, Yanis Varoufakis conversation about in and out groups. Can you tell us, just tell us that, because then we can lead on in from there to what we’re going to do about this.
Steve: Well, that’s actually another book I should recommend to your listeners as well, which is Adults in the Room by Yanis Varoufakis. I’ve got to say, Yanis is a close friend of mine, but that book reads like a novel. It’s a fabulous read. And I recommend it to anybody to get a feeling for what actually happened to Greece and Yanis as a human being as well, and so on. But it opens with Yanis meeting up inside, I think it was in Washington, going to meet in some strange bar somewhere and waiting for somebody to come and meet him. And the person says, You made a big mistake, Yanis. And Yanis says, Well, what’s that mistake? He said, You got elected. And that was Larry Summers saying, which of course I’m now running for election myself in Australia, by the way. So Yanis and I have something in common now. I might make the same mistake he made. But the point, that was Larry Summers who made that comment. And then Larry in the conversation said, you’re now prominent enough to become part of the in-crowd.
Steve: But one of the rules of the in-crowd is in-crowd members don’t criticise other in-crowd members. So once you’re accepted, if you are accepted, you can’t criticise me, you can’t criticise Joe Stiglitz, etc. etc. And Yanis and bless his cotton socks said No, I’m going to remain an outsider. I’m much more comfortable being that. And the same thing applies to me. So we were rebels. We met together in I think in 1991 when he turned up at Sydney University as a lecturer. And I was starting to do, I’d finished my master’s and starting to do my PhD. So yeah, but the idea there’s only one way to think about the economy is first of all wrong, because if you do the mathematics properly and this has been done not just by me, by a whole range of mathematically talented economists, some from the mainstream themselves. So they’ve shot their own feet off. But others critics from the outside have disembowelled the damn thing. But if there’s no other alternative, then there’s no way to think about the economy at all, because every last supposed mathematical foundation of neoclassical economics has been falsified.
Manda: Blown out of the water, yes.
Steve: Either empirically or theoretically. So, you know, there has to be an alternative because everything they’ve done is wrong.
Manda: Excellent. Okay. So I don’t want to go down the rabbit hole of let’s look at all the maths because we will confuse people. But you said earlier that one of the things that struck you when you realised that the Cambridge controversy had been won by the other side, is that if we change everything that’s wrong about the real world simultaneously, then things will fall apart. Nevertheless, we’re in a situation where the real world is in a very fragile state in terms of the climate and ecological emergency. We have a global political and economic system where there are people continuing with business as usual as if the climate emergency didn’t exist. And it has always seemed to me that the only way around this is to change the economic system fundamentally and change the political system at the same time. And you’re standing for office so we can go into how we might change the political system in a moment. How would you, if you gained office, supposing you not only got elected, but you got elected and had the capacity to then pull together a cabinet and change the political and economic structure of Australia, which is a pretty major player in the world, and make of it a beacon of how we could do things. How would you begin to restructure the economy in a way that isn’t going to kill thousands of people, millions of people, as the old economy falls off a cliff?
Steve: Well, I’ll put forward the one thing I want to bring in, and that is something that I’m working on with an English activist called Adam Hardy, by the way, which is called universal carbon credits. Because the biggest threat we face in terms of the sustainability of human civilisation is what we’re doing to the obviously the ecology in general. But the most specific part is carbon dioxide, global warming. And we have, if we are to stop damaging the ecosphere in the most critical way we’re doing it, then we have to reduce the amount of carbon and as fast as possible. But all the schemes which are being put forward are about how do we change the price of carbon? As if we can work out a price which will mean Antarctica doesn’t melt. Of course we can’t. We can work out a quantity in which Antarctica won’t melt. And we may be past that point. We may have already tipped that particular catastrophic system ourselves. But we need some way to physically restrain the amount of carbon dioxide we put into the atmosphere. So the scheme that I’ve come up with and Adam came up with before me independently, was the idea of universal carbon credits. A bit like a universal basic income.
Steve: So everybody would get a universal carbon credit every day through a parallel monetary system which could be run by the central bank or could be run through the private banks as well, where the carbon credits were created by the government. And initially what I would do is set them set those carbon credit equal to the average for a particular country. So every UK resident would get the average carbon consumption of the UK that day, every Australian and so on. So let’s stick with Australia. We’d each get a carbon credit equal to the average and then every commodity you bought would have two prices: its current money price (and of course your own cash flow determines what you could pay out of that) and its carbon price. Now because of the inequality of distribution of income, 95% of the population would not exhaust their carbon credits. But the top 5% would. And so if they wanted to continue shopping, they would have to buy carbon credits off the poor.
Steve: So there’d be a direct trade; the rich would have to buy something off the poor. And the poorer you were, the more you’d have to sell because the lower your carbon consumption would be.
Steve: So what I want to do is put as much pressure on the rich to reduce their carbon consumption as possible; to initially benefit the poor. Because when you try to put a price on carbon, everybody has to pay the price. And incomes being unequal, the poor can’t afford it, whereas the rich can. Now we need something that the rich can afford, it can pay and the poor benefit. So the idea of the universal carbon credit would be to do that, and then that would both encourage the rich to dramatically reduce their carbon consumption, would encourage technological development of products which reduce carbon consumption radically, and it would give income distribution in favour of the poor out of the current system. So that’s the thing I most want to achieve.
Manda: Okay. So can we unpick how that works? So supposing I have a sack of potatoes that I want to sell you. Or no, let’s suppose there is a sack of potatoes and you’re rich and I’m poor and the sack of potatoes then let’s say it costs a US dollar and it also would cost five carbon credits?
Steve: Yeah, well I mean we know if you go shopping in any supermarket, of course I’m thinking in terms of a standard retail system; you pick up a pack and you’ll see 25 ingredients listed. Well, I’d make the 26th ingredient or the first ingredient, the carbon content. So when you went to swipe it at the checkout, as well as saying, okay, that’s going to cost you a dollar for that kilo of potatoes or a pound, then it would also say and it’s going to cost you x carbon credits with that represents the carbon content. So it’s just like a bank account that would run down the same way a bank account does.
Manda: And when your carbon credits are out, then so if you’re rich and I’m poor and you’ve run out of carbon credits and you still want the potatoes, you could presumably through an app structure, bid for my carbon credits and whoever bid the most, if we’re in a capitalist structure, I could sell – you’re offering 10p per carbon credit and a guy down the road is offering 8p per carbon credit, so I sell you my carbon credits. I then get more money, but I then have fewer carbon credits. So I’m going to run out of carbon credits quite fast also? Or is it just that I don’t need as many potatoes?
Steve: You’ll have surplus carbon credits. I mean, because income and wealth is so badly skewed in capitalism, now, if you set the universal carbon credit on a daily basis at the average carbon consumption per person in a country, then probably 90%, at least 90% more likely 95% would already be consuming less than that. They’d never exhaust their credits.
Steve: Whereas the top 5% are exhausting it. You know, as soon as they get out of their satin sheets, they’re exhausting it.
Manda: Yeah. They turn on the shower that’s their carbon gone for the day.
Steve: Did you see that Netflix show about Becoming Anna or Inventing Anna, the woman who was a con artist who ripped off American High Society in New York? There’s one stage where this poor journalist and her boyfriend or husband, rather, go and stay in a wealthy person’s house. And she comes in to find him lying on the floor and the reason he’s lying on the floor, he says, come down here, you’ve got to feel this. And the floors temperature is in Fahrenheit, 98.4 degrees Fahrenheit. The floor is heated to the level where it’s exactly the same as your skin level. So you don’t feel any cold as you walk across a tiled floor. That’s why I’m saying, as soon as they get out of their satin sheets, they’ve already more than exhausted their quota. So the rich would have to pay far more to buy what they need. And that would ‘A’ distribute income back to the poor and ‘B’ it would put enormous pressure on them to reduce their carbon footprints, both by consuming less, but also by saying, you know, I’m not going to buy that, you know, gas powered car, I’m going to buy an electric, etc., etc.. Huge pressure to change our consumption patterns. So that’s the thing I most want to achieve.
Manda: And does this extend internationally with a common carbon currency?
Steve: No, for one very simple reason. If you want to stop something happening, make it international.
Steve: Okay. There’s actually a wonderful couple of renegade journalists went to interview, I’ve forgotten where they were from, but one of these renegade journalist groups. And they interviewed a bunch of consultants in Washington as if they were going to buy their services to, you know, con some policy they wanted through the government. And these consultants were bragging about how they managed to prevent action on climate change. And one way they did it was by supporting a carbon tax, because they knew there was no chance of the tax ever passing through Congress. So I have a similar attitude to international agreements. You want to make sure nothing gets done, try to make sure it happens at the international level, because some country, normally my own country, of course Australia, will block it. So let’s do it at the national level. We have a functioning policy at the national level. Let’s do it at that level and then after it’s working at the national levels, maybe then we can talk about coordinating, but let’s get it done at the national level first.
Manda: Excellent. Okay. So at the time of recording, there’s still an interesting war happening between Russia and Ukraine. As far as I understand it, no country in the world counts its military carbon output in its overall CO2 because that’s a national secret, because otherwise you could work out how many planes it’s got. I think there might be ways to do that without that. But anyway, carbon budgeting in the military doesn’t happen. I am watching a war happening which as far as I can see, is going to spike our CO2 right through the roof and probably blow any chance of us staying under two degrees. In your modelling, have you extended this to military carbon outputs in any any nation? Or is it purely at the moment domestic consumption?
Steve: It has to be domestic consumption, I think. I mean, you know, the military is something we have to address. But to try to start by reforming the military, I mean, you know, how many oxymorons do you want in one conversation? So I think, you know, the military is a clearly important issue. But if you tried to restrain, you know, the carbon output of the military, you’re likely to get the carbon output of the military directed at you.
Manda: Yeah. Yes. Okay. So in behavioural terms, positive reinforcement works better than punishment. And I’m imagining that the people who are used to being able to buy whatever they want, will get quite cross when they discover they can’t.
Steve: I hope so.
Manda: But they have a tendency to find loopholes. And I’m wondering, is there a carrot as well as a stick? Is there other than, hey, guys, you know, extinction is coming, it would be really good to do something; which is manifestly not a narrative that works because we’ve tried it for a good number of decades and it’s not made any difference. How do we persuade the super rich who just are so used to being able to get whatever they want, that at some core limbic level, they’re really going to fight if they can’t. How can we help to persuade them that this is a thing that they want to do? Is there any carrot in there?
Steve: Well, there is another group led by a guy called Denton Chan. And Denton is providing a carrot system where you get rewarded for innovations that reduce carbon overheads. So the two can work together. But equally, you can see the extent to which there’s gaming of positive incentives. Now, that makes it very hard to you know… Corporations are so good at evading tax, so good at exploiting things like carbon offsets and so on. But I think there’s very strong problems either way, they’re more likely to go for Denton’s scheme initially than mine. And to some extent I simply want to have the structure set up to enable the scheme I’m talking about. If it doesn’t get implemented before we have a crisis, I could cope with that. As long as it exists once we have a crisis. Because if you if you walk into a crisis and you don’t have a structure in place to cope with the aftermath of that crisis, then that’s when you start falling apart. So I’d set mine up initially as a parallel banking system, which could be used for any purpose that could include, for example, tax rebates. Something which is a parallel monetary system to enable the government, which would actually have to, of course, create the universal carbon credits in the first place, or create something else. They could use any means they like so long as it exists. I just want it in place.
Manda: Okay. Yes. That makes a lot of sense. Strikes me we’re actually in the crisis, so getting it in place quite fast would be a really good idea. Are you going to have the currency on the blockchain or how do you imagine the currency would function?
Steve: I’m no great fan of blockchain. I mean, I wish I’d taken the advice of some of my friends back when they told me to buy bitcoin when it was ten quid. Okay. My financial problems would be rather smaller now, but I’ve never regarded it as money, and I think that one of the first things is going to be abolished when we realise we’ve drastically overstretched our energy consumption will be cryptocurrencies that rely upon proof of work.
Manda: But I’m working with a number of guys who are using cryptocurrencies that don’t rely on proof of work. Yes, because bitcoin is an utter disaster.
Steve: The trouble is that anything like this is… The crazy thing about cryptocurrency is that it came out of the idea we want a trustless system. We want a system for money transfer, in which you don’t have to trust anybody. Okay. But if you have a new world where there’s no longer fiat currencies, in which cryptocurrency are you going to trust to be the one that will replace the fiat system? Are we all going to trust the same one? Etc., etc.. Should we trust Ethereum or should we trust bitcoin? My point being obviously that you can’t get away from having to trust in a social system. So the whole idea that there should be a trustless form of money I think is a mistake.
Manda: Okay. But we develop a carbon credit that we can trust. And as you project forward ten, 15, 20 years, assuming the climate is stable enough that long, are you assuming that the carbon credit becomes the dominant form of currency?
Steve: Well, I’m assuming we’re going to have an ecological crisis. I mean, my my position is that we’re not, you know, tapering towards two degrees over pre-industrial. We’re drastically in overshoot and the pressure we put upon the planet.
Steve: And so at some point, the planet is going to tell us, you have two choices: you can cut back or you can become extinct. Not necessarily humanity in general, but human societies could fail. So that is my overall framework. And in that world, if we do get into that world, then absolutely the first thing we have to drastically cut back is carbon consumption, and that means rationing in some sense. So yeah, I think I think it would become dominant. I want at least to have a possible that existing because you know, I hope I’m wrong. I spend most of my life hoping that I’m wrong. But on this one, if I’m wrong, then it’s just a, you know, cumbersome and tedious system, we innovate for no good reason. But if I’m right, we have a way of having both commerce of some description and control of consumption as we reduce our consumption to the scale where it’s feasible on the biosphere.
Manda: So let’s play a slightly different imaginal game. Suppose the youth of the world, everybody under 40, possibly everybody under 30. But anyway, a reasonably large mass of people got themselves together that’s capable now with the internet, and said, You know what, the boomers have really screwed us and now is the time for us as young people to instigate something completely different. If you want to carry on with your military economic industrial complex over there, then we are not going to stop you, but we’re going to do it differently. If you were going to model an economic system that would work and wouldn’t end up with us tipping over too many tipping points, let’s leave aside the ones that we’re already careening towards anyway. Let’s pretend that there is still a gap. How would your ideal economy function?
Steve: Well, it has to have limits on the degree of inequality. I mean, the first thing that the logical failing of neoclassical economics is arguing that the income depends on merit, which it doesn’t. So you have in any human society, will have inequality. It’s virtually any structure has inequality built into it. But human society tends to have an inequality from, you know, from the days of agrarian societies forward. So that inequality has to be restrained. And like in Japanese corporations at one stage, think back in the 1980s, had either a rule or a practise that the chief executive earned no more than 100 times the lowest pay level of the company. Now you look at the ratio must be over 1000 to 1. And there’s an enormous layer of people in finance who earn just gigantic salaries, which are, you know, nobody ever called somebody in finance an essential worker. When you have a breakdown, the essential worker is the garbageman, the nurses, the doctors, the people that maintain the Internet these days, those are your essential workers. And yet they get paid terrible wages because they can’t afford to organise, they can’t afford to strike. We can’t have them strike. And they’re at the bottom of the hierarchy, the social hierarchy. So you need to restrain how high that inequality gets. So that would be the first thing.
Manda: What would your ratio be?
Steve: Something like 100 to 1 is feasible.
Manda: Yeah. Plato said 20 to 1.
Steve: That sort of thing is fantastic. You would hope to have the person at the bottom of the hierarchy having a living wage. So if you’re earning 100 times a living wage.
Manda: It’s still a good amount.
Steve: Yeah, that’s pretty good. Now, what you’re getting these days is 10,000 times the living wage. And that’s ridiculous.
Manda: Yeah. I gather just before the economic crash that you predicted, it was 350000 to 1.
Steve: Oh, my God.
Manda: Some of the bankers in the US, compared to the people in the U.S., on what was then their baseline wage, which is is functionally insane. Okay. So we have limits to inequality which are legislated. Having got that, I’m very interested in your views on taxation and without us getting too geeky about it… You’ve already spoken about universal basic income. I’m guessing universal basic services would also be a thing and that then there would be
Manda: A redistribution. We have already spoken to Richard Murphy on this podcast, so there is a basic understanding of modern monetary theory. But if you could, for people who haven’t gone back that far. Could you explain how money actually works as opposed to how the Orthodox economists want us to think it works?
Steve: Yeah OK, well, the simplest thing is, let’s say what is money in the first place? How do you define it? And fundamentally, in modern society, money is what’s in your bank account. So if you’re going to create money, you’ve got to add to bank accounts. If you’re going to destroy money, you’ve got to take money out of bank accounts. That’s the first principle. Then when you look at the banking sector, because we put our money in bank accounts and bank accounts are called liabilities of the bank because of the money shown in your bank account, the bank is liable to give that to you if you ask for it. So the banking sector has assets which include our the money we’ve deposited with them. It includes loans they’ve created and so on. And then it has liabilities which are our bank accounts and it has short term equity as well. The bank’s own money for its own daily day to day operations. So if you want to create money, you’ve got to add to liabilities or the short term equity of the banking sector. Okay. Now, to do that, you’ve got to also add to the assets.
Steve: And that’s why people don’t get their heads around unless they’ve done sort of study that I’ve done or they’ve done an accounting degree. But if you imagine you go to the bank and you want you deposit £100, £100 note if there’s such a thing. Okay. Well, the bank goes to the teller. The teller puts it in a shoot, it goes to the downstairs and gets put in the vault. So that’s the asset of the banking sector. And then they record on your deposit account. Now those are done electronically, an extra £100. So that increases the bank’s liabilities and increases the bank’s assets. So that’s the basic mechanism. To create money you have to have both increase the assets and increase the liabilities of the banking sector. And there’s two fundamental ways you can do that. The bank can lend out more than it gets back in repayments. That means it’s loans rise, which are its assets, and its liabilities rise, which are the deposits. Because when you borrow money from a bank, it says, that’s a great idea. Here’s £1,000,000 to buy that property in Putney and you owe us £1,000,000 at the same time. So the assets rise and the liabilities rise.
Manda: Can we just stop there? Because this is the thing that I think people don’t understand is that the bank just made £1,000,000 out of thin air. They typed it into a spreadsheet.
Steve: That’s right, yeah
Manda: And it existed. And then they sold it to you or to me at whatever is the current interest rate. And they therefore not only created money out of thin air, which technically is theirs, they then sell it to us. And we have to create the, let’s say, 6% to give them back on a cumulative basis because it’s not just interest one time unless we happen to be able to pay off our mortgage all in one go. And I think this is the thing. I think it was Ben Bernanke who said if people ever actually understood how the banking system made money, there would be a revolution.
Steve: It was actually John Kenneth Galbraith who said that. Yeah. And also Henry Ford. But let’s not go too far back. Henry was actually a fascist…people aren’t actually conscious of that.
Manda: Yeah. The Positive Money Foundation over in the UK once did a survey, it was 2014, of all the MPs in Parliament and discovered that fewer than 10% actually understood where money came from. And I’m guessing that since everything’s moved to the right and we have a bunch of ideologues there now that even fewer now understand where money comes from.
Steve: Yeah, but it is incredibly simple. And that’s why you’ve got to go back to first principles to understand it. Banks are accounting machines. And the accounting is based on assets and liabilities and equity and your assets minus liability equals your equity. That’s the rule applies to all. So what we’ve given them is the right to create their own assets if they create liabilities at the same time, where those liabilities are our deposit accounts. So banks create money by lending more than they get back in deposits, in repayments pardon me. And the government creates money by putting money, entries, in the reserves of the banks which are on the asset side and in our deposit accounts as well. So governments create money by spending more than they take back in taxation. Banks create money by lending more than they get back and repayments.
Manda: And so therefore the total amount of money circulating in the economy, if we assume it’s an island like Britain or the UK. And we forget for a moment that there’s international trade in money, but you’ve got a closed system. The amount of money circulating in the economy is the amount created by the government and the amount created by the banks as, generally speaking, private debt. And I think this is one of the other things that people don’t realise when the government says, oh, we have to cut down on government debt because otherwise we’re burdening future generations, which is the worst bollocks possible. Then the only way that money continues to circulate in the economy at the same flow rate is if people take out more debt and get the banks therefore to create more money and then they create more pressure on their own shoulders. And the alternative would be for the government to create more money and allow it to circulate in the economy. And my right wing friends are always absolutely terrified of the creation of inflation. If governments create money, then it creates inflation. And the fact that they created 638 billion during the last crash and it created no inflation at all, doesn’t ever seem to actually impinge on them. So can you explain to people who are not economists or accountants and don’t really get the maths, why governments creating money is not a bad thing?
Steve: Okay, it comes back to then that whole framework I was talking about assets and liabilities and equity and I’m focussing here just on financial assets and the financial asset is your claim on somebody else. Financial liability is somebody else’s claim on you. Now, that doesn’t include houses, by the way, if you own a house, then it’s your asset and it’s not a liability for anybody else. So I’m looking…
Manda: As long as you own it. Most people, the bank own their house until they’ve paid off the mortgage.
Steve: No, even if you owe the bank, if you own a house then it’s your asset, nobody’s liability. They’re called non-financial assets. But financial assets are your claim on somebody else. Okay? So if you add up all assets, all financial assets and all financial liabilities, you get zero. Now, if you then look at the banking sector, how the banks operate, looking at banks as part of the economy. Well, bank, by definition, has to have assets greater than its liabilities. You can only become a bank if you raise equity. And then you get a banking licence and you’re allowed to establish yourself. And if you start with let’s say £100 million in equity, let’s say, as a very small bank. Then your assets are £100 million and your liabilities are zero. Then you make your first set of loans and your loans increase your assets. They also increase your liabilities. And the question of just how far you go is how big a ratio do you end up having between your loans, between your liabilities and your equity? But a bank has to be in positive equity. Now, that means the banking sector has to be in positive equity. So if you look at the banking sector versus the rest of the economy, the rest of the economy is necessarily a negative equity to the banking sector.
Steve: Now, who enjoys being in negative equity? The answer is no one. Because if you actually sit down and say, what do people owe me and what do I owe people? Oh, dear, I owe people more than they owe me. That’s terrible. I might go and borrow some money and go gamble on the stock market, or I might go buy some cryptocurrency and speculate on that. So a huge part of irrational behaviour by us is driven by the fact, the necessity, that because the banking sector is in positive equity, the rest of the economy is in identical negative equity to the banking sector and that creates troppo behaviour, frankly. So you have to look at the overall system and say, well, who in a society can actually cope with being in negative equity all the time? And individuals? Well you can if you service the net claims you have but that’s difficult for a lot of people. The banking sector can’t. Nobody likes having, you know, liabilities exceeding their assets. But the government can, because ultimately the government, you know, is the entire country. So we actually use its liabilities. That’s the way to maintain trade amongst ourselves. And if you go back in history and say, well, what preceded the days of relying upon government created money?
Steve: One thing I do cover in that second book, The New Economics; The Manifesto is the work of Harvard Law professor Christine de Sam, who looked at the establishment of the Kingdom of King Offa in the period between the Roman rule and then the final development of the, you know, the the Norman conquests and so on. And back in those days when you had a breakdown of a monetary system, the way that power was maintained within a kingdom was at the front of a sword. You are required to give us 100 chickens. I’ll come out and take 100 chickens. And if you don’t like that, then I’ll slit your throat. That was Commerce. That was the state of public relations between the Romans with their own credit system and then finally, the U.K. developing its credit system based around tally sticks predominantly. So Offa invented a coin. And then what you do is say, we’ll buy those hundred chickens off you. And then what you get is coins which you can then use for trade with the rest of the people in your culture or your kingdom. And in that case, the state created a monetary economy. And that led to, grew out of the subsistence period that England fell into after the Roman Romans left.
Steve: And so the coin, as well as being a way for the state to appropriate what it wants from the rest of the economy was also a means of growing the rest of the economy. And so the coins were a far, far nicer way for the state to appropriate what it wants. And it had the double effect that you can then use that as the basis of commerce because you are going to pay taxation. So you needed the coins to pay the tax. And that’s the essence of modern monetary theory today. To say that the state creates more liabilities for itself than it creates assets. That has the reverse effect on the public, creating more assets for them than liabilities. So the government debt is the record of how much money the governments created. And that money, when it circulates, is debt free for the recipients. So if you borrow money from a bank, you owe a debt precisely that same amount of debt to the bank. But if the government spends more on you than it takes back on taxation, you’ve got additional money in your bank account above and beyond what you’d have without the government existing.
Manda: Exactly. And this is the thing that I think certainly was a paradigm shift for me, is the understanding if I decide to make some money in my back garden, we live ten miles from Offa’s Dyke.
Steve: Oh do you!
Manda: So if I decide to be Offa and make coins, I get arrested because that’s not you know, you’re not allowed to do that.
Steve: That’s forgery.
Manda: Yeah, but if the government makes money and then spends it, that’s what governments are for. And then the government takes the money back in tax to even things out. So they tax the rich people more than they tax the poor people in an ideal world. And they help to create more equity. And the poor people have the money to spend in the economy or everybody has the money to spend in the ecconomy. But it drives me crazy when people say we can’t afford the NHS. I’m going, well which bit of the spending on the NHS does not come back in tax ultimately?
Steve: Well some of it doesn’t come back, but it shouldn’t come back in tax; the government should run a deficit.
Manda: In the end, it should all come back. Unless it’s gone to foreign, you know, unless we’ve sold our NHS to American… It circulates in the end and then eventually it all comes back. It’s not going anywhere unless we’ve sold off the NHS and then it all goes to American multinationals. So, in our ideal, I’m trying to get to how do we create – We’re very nearly finished- How do we create a better economy that would function in a way that isn’t predicated on the annihilation of everything that we value? So we’ve got a government that’s creating… Let’s assume the government is creating the money. I think letting banks create the money always strikes me… Do we really need banks?
Steve: Well, what banks should be doing and they don’t do now, is providing working capital for companies that they personally assess are going concerns. There used to be things called lines of credit that existed 50 or 60 years ago, or overdrafts for small firms. Funding for entrepreneurs and money for large scale purchases that individuals can’t make on their own savings, such as buying a house or a car, but not in such a way that causes bubbles in those assets. So I would want private banks to be doing that rather than relying upon a government system to be creating those loans.
Manda: Could they not be community owned banks? Do they have to be…
Steve: Yeah! Well, the building societies were like that. If you look at the, it’s actually quite fascinating, if you look at the history of British private debt, you find between 1880 and 1982 or three, the level of private debt in the UK never exceeded 73% of GDP. And then in 1982 that’s when Maggie Thatcher deregulated the banking sector and let the banks muscle in on what building societies used to do. Now the building society, you deposit your money in a building society account and the building society deposits that in a bank and there’s no money creation. So when when Maggie did that, you went from 73% to 220% under her and Blair.
Manda: And House prices rocketed.
Steve: House prices went through the roof. You’ve got the most expensive housing compared to any country on the.. that I don’t have data for… That’s 43 countries. So yeah the way was set up before that deregulation by Maggie was such that you didn’t create money when you made a loan for buying a house and therefore you didn’t create a housing bubble either. So you could just have cooperatives doing that. That would be feasible. But I’m conscious of the need to get finance to entrepreneurs, and it’s incredibly hard as a person who’s innovated some new idea to get funding for it. So I would want that to be provided in a private way. Positive money has a scheme like that where the banks still exist and they have to lend out of a fund created by the government. I’m still not sure they’re being functional because there’s such a degree of overheads in banking and there’s so many things where you’ll lend to somebody who folds, and you’ve got to make your money out of those who don’t fold. You may need the capacity for money creation by banks, but for example, I’d like to have that through everybody being given money to give to crowdfunding.
Steve: Use the intelligence of the crowd, something that could replace the banking, but only at a small scale. Like for the sort of thing I do, where I’m crowd funded, that’s obviously one potential avenue for it. But if you want to start a microchip, a microprocessor plan, that’s a bit too big to imagine crowdfunding the next microprocessor plant. They tend to be two or £3 billion each.
Manda: But we have to break the vulture capital. I mean, it seems to me that Facebook and Google are the the new vampire squids on the face of humanity that they are, because the vulture capitalists were there demanding that they get massive returns because they’ve taken massive risks. Somehow, I would say we have to break that if we’re going to have a holistic economy that functions and doesn’t create massive inequalities.
Steve: And one of those would be enhancing crowdfunding and saying everybody gets X pounds X dollars per year that they have to allocate to crowdfunding. So you could do something of that nature and then harvest the intelligence of crowds as to what gets funded.
Manda: Right. Beautiful. Okay. So I’m aware that time is moving on. So let’s just as a last thing, move to you’re standing for parliament now in Australia. When is the next election? Because there was a point when it might have been now.
Steve: Yeah, it can be called on an arbitrary date by the Prime Minister, but the final date has to be no more than three years after the last election and that’s May 21. So we think it will be either May 14 or May 21.
Manda: Okay. Wow. And he doesn’t have to call it…. How how far in advance is it? Six, eight weeks?
Steve: Six weeks. So, yeah, it’s better than the American where they centre the election permanently.
Manda: Of course.
Steve: Yeah. But you know, our prime minister only knows how to campaign. He makes Boris Johnson look skilful.
Manda: Oh, really? Wo.
Steve: Yeah, he’s dreadful. So we think he’s delaying the election for as long as he can. So we’re guessing May 14, because it’s embarrassing to have to go the entire three years.
Manda: Okay. Just to give himself a week’s notice. So if you were to recreate a political system that had a political economic basis of the economic system that we’ve been suggesting, I’m guessing that first past the post, even with compulsary voting, which you have in Australia, which always strikes me as a really interesting option, would probably not be the way that you would choose to structure it to to use the wisdom of crowds in the way that we could. Have you an idea of how you would in our new superstate that we’re going to create, that’s going to save the world, create a democratic structure that would be more functional than the one that we have at the moment?
Steve: Oh, there’s already one. We call it the Hare-Clark system, after its inventors and it’s used in Tasmania, the Australian Capital Territory and I think New Zealand, and that is a proportional representation at the regional level. So rather than having one person per electorate being elected, I think you have four and therefore anybody gets 20% plus one vote, then they get elected in the Hare-Clark system.
Manda: So 25%.
Steve: No, it’s actually the number of people being
Manda: Being elected plus one
Steve: So once you get… If you exhaust the vote, like the top 19.99 8% of the vote is already covered.
Steve: Okay. That’s the rule. So if you look at the the Senate being elected for example, there were six candidates elected in the Senate in New South Wales, which is an electorate of 5 million people. And if you get one seventh of the vote plus one, you get what they call a quota and therefore get elected.
Manda: And so that exists in the area that you are standing in.
Steve: That’s right. The Australian Senate, we have ten senators, 12 senators per state, all of them, half of them are elected every election. So there’s six positions and therefore anybody who gets one seventh of the vote plus one gets elected. And it’s preferential voting. So people have to vote for up to minimum six parties. One, two, three, four, five, six. And then they can ignore the other parties or they vote for individuals 1 to 12. They can do either way. And then in the votes, it’s a very exhaustive system to decide who’s actually one far, far better than the Monty Python esque farce that you guys have in the UK.
Manda: Yes. Okay. And you also have compulsory voting. Whenever that’s suggested over here, people suggest that this is some kind of weird form of fascism and that you shouldn’t compel people to vote. And instead we end up with Boris Johnson and his friend in Russia running the country. So how did compulsory voting arise in Australia and was it considered to be kind of anti libertarian at the point when it was imposed?
Steve: No, I think the the attitude I’ve always had towards compulsory voting and I think that was the attitude of the founders as well, is that you make sure everybody who’s got the right has to exercise that right, because that way the politicians can’t spend their time just pressuring minorities that they don’t want to have vote to not bother voting.
Steve: And so if you look at what it goes on in America, it’s all about how can you exclude people or discourage people from voting and make it harder and harder for them to do it. And finally, they don’t even bother. And therefore, only the people who you want to vote for you vote for you and you get it. So to me, compulsory voting doesn’t control the voters, it controls the politicians.
Manda: You still end up with quite a right wing set at the top, though. So it’s not…
Steve: We have unfortunately. So it’s not perfect by any means. But really people haven’t understood how the preferential system works. So when you look at it and like when I’ve ever voted, I voted for the Greens, the marijuana party, the Sex Party, the Labour Party, and then very last vote I’ve given to the Liberal Party or to you know, arch reactionaries over here. So I’ve been quite conscious of how the preferential system works and if people think about it properly, then you do have the capacity to have a very wide representation. And when you look at the Senate level in Australia, the Senate has a large number of people who are minorities, individuals or the Greens and even the representative level where you still only have one person being elected per electorate. We have a substantial number of independents and Greens there, so certainly more than you’ve got in the UK. And like America, the reason that we got Bush was because some Americans voted for the Green Party. That gave us Bush. Well in Australia can vote for the Greens and still get Labour.
Manda: That’s interesting. I’m trying to design for my book a political system that would work and I’m really interested in how that functions. Oh, okay. So very last question. In your book, in The New Manifesto, you detail the way in which certain of the Orthodox economists decided that even at six degrees of global warming, that it wasn’t really going to affect GDP very much. And we know on this podcast that GDP is not a useful measure. But I just want to know, want you to talk us through how they did that. And then I want your opinion of do they actually believe this? Are they actually functionally insane and stupid? Or is this a political cover for people who don’t want action on global warming?
Steve: They’re stupid.
Manda: Okay! But talk us through what they said, what they did, because it’s mind bendingly crazy.
Steve: What they did. And this goes right back to the limits to growth. When the limits to growth was first published, the economist who attacked them most vigorously was a little bloke called William Nordhaus. Whom you might know got the Nobel Prise for economics in 2018 for his work on climate change. And when I went to look at that work and I only started looking at it in detail in 2018, frankly, I expected to find that they took what scientists said was going to happen and then applied a discount rate and said, well, we’re going to discount the future at 5% per annum. And if you discount the future at 5% per annum for a hundred years, what happens in a hundred years is trivial. And I thought that’s what they did. Then I found out that was wrong. He assumed, he simply assumed that anything that was done undercover would be unaffected by climate change. This is a 1991 paper. He says that there are some activities which are exposed to the climate. So agriculture, forestry and fishing. Other activities take place in, quote unquote ‘carefully controlled environments which are negligibly affected by climate change’. He gave examples of microprocessor production and surgery. Fair enough. And then he said 87% of industry is done in carefully controlled environments. All of manufacturing; even included mining; all of services, wholesale and retail services, all of the finance sector, all of government. What do they have in common? The only thing they have in common is they happened under a bloody roof. So he’s pretty much like, if you have a roof, you’re safe from climate change!
Manda: But he also did the thing where they looked at, I think, Michigan and Florida and decided that the temperature difference between Michigan and Florida was was a certain number of degrees. Therefore, if the whole planet goes up by that set number of degrees, we’re only going to see that amount of difference. Talk us through that, because that just that just blew all the fuses in my head.
Steve: That was the first part I’d read of their work, which just left me in just shock at how stupid they were. That’s why I say stupid, because what they said was that they assume that the effective temperature on income across space, which therefore is comparing one part of America temperature and a gross state product to another part of America temperature and gross state product. The pattern that applies across space will apply across time. That sounds clever. It’s actually effing stupid.
Manda: It’s. It’s functionally insane. Yes.
Steve: Functionally insane because when you look at what they’re doing, if you actually say, well, let’s say a statistician tries to work out what’s the relationship between temperature and income. And say, well, there are three things which determine temperature. One is how far we are from the sun and that’s the sun cycles and irrelevant to global warming. The second is how much of the sun’s heat do we retain on the planet? That’s what global warming is about. And the third is how far you are from the equator and how far you are inland from seas and how far above, etc., etc.. The data they’re looking at is the third factor. That is irrelevant to global warming. But they’ve got data on that, they can actually look at what’s the temperature in Michigan and what’s the temperature in Florida, and then what’s the income in Michigan and what’s the income in Florida? So they’ve got data on that. So they can derive numbers for that from actual data. And then let’s use those same parameters for the second issue. It’s insanely stupid.
Manda: Just the fact that anyone published that. That’s the kind of thing that a five year old might do. And you’d think, well, that was quite a clever thing to do when you’re five. But these are, as you said, Nobel prise winning economists. And then they’re providing. Quotes. ‘Scientific cover’ for politicians who want to go well, Gdp will only fall by 5% over a hundred years. That’s nothing. We don’t care.
Steve: And then you’ve got to come back to say, well, where did all of that come from. And the answer is these are the people who’ve swallowed the neoclassical Kool-Aid, which I’ve rejected. And when I was 18, they’ve swallowed that Kool-Aid. And that Kool-Aid tells you capitalism as the world’s best system. So therefore, because it’s the world’s best system, it must be able to cope with anything. And therefore, climate change can’t be a challenge. And that’s really what’s going on inside their minds. They’ve been addled by this vision of a perfect system, and it took me a long time to really finally accept this. But they have no idea what climate change actually means. If distorted in such a way that the market system can cope with it. And therefore they say, well, the four degree increase in temperature will cause 3% damage to GDP. And to quote Norhaus 2018, in a paper published in the American Economic Review after he was given the Nobel prise, he said six degrees of temperature increase will cause I think an 8.9 or 7.9% fall in GDP. Now six degrees of temperature increase and you should interview Mark Lynas one of these days about that, will probably drive extinct most multicellular life on the planet. Six degrees takes us back to the temperature levels that don’t quite pre-date multicellular life, but they certainly predate the dinosaurs. And so if we put that much extra heat into the planet, then the whole structure of the climate becomes something which is hostile to large scale organisms.
Manda: And we are a large scale organism. So along with everything else.
Steve: Unfortunately we are. And depend upon lots of other things that are large scale organisms. So they are completely wrong about what climate change actually is and they’ll dress up all those fancy statistics about numbers that they can actually generate out of current data, which are irrelevant to what we’re doing to the planet.
Manda: Oh, you know, I thought I was going to end up on some kind of a happy note. OK. So have you got a plan in place if you get elected to get your carbon credits into the Australian Government system? And do you think it’s likely.
Steve: The thing that I’m going to push for is a digital currency run by the central bank. Because at the moment Australia does have, when you when you pay tax in Australia, you have to give your bank account to the tax office. Number, the number of course. And therefore the tax is paid through your bank account. The UK doesn’t have that system as I found when I was there. They’re quite crazy. But you could then use this system as a surrogate bank account so the money goes to your digital account, then you can transfer it to your actual account. So it would just be another system which would sit there for immediate contact with the public from the government if it was required. And so I’m going to push for a central bank, digital currency.
Manda: Brilliant. And then the carbon currencies can be paid into the central bank digital currency. And then we’re good to go.
Manda: Okay. That’s a good place to stop. Professor Steve Keen, it’s been a pleasure and an education. Thank you so much for coming on to the Accidental Gods podcast.
Steve: Thank you for the invite.
Manda: And that’s it for another week. Enormous thanks to Professor Steve Keen for standing up for so long and so lucidly against the manifest insanity of our current economic belief system. The fact that there is an in-group and the first rule of the in-group is that we don’t criticise the in-group, is why we are where we are. It’s why our journalists on television and in newspapers continue to peddle the concept that the government takes our tax and then spends it, rather than the government makes the money out of nothing and then gives it to us and takes back taxation as an effort to even things out. And I think this is in and of itself a revolutionary concept. And then if we add Steve’s ideas for carbon credits and a government system of banking and universal basic income and universal basic services, and a fixed ratio between top and bottom level pay, all of these could be done now. They could be done within our current system without breaking it apart and causing the havoc that that would wreak. So if you do nothing else after this podcast, go out and talk to people about how money actually works. Call out the lies that we are told about austerity and about the need to suddenly clamp down.
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