Download Transition Economics

Economics for Transition:
building an equitable and resilient local
economy
<Your Name here!>
Transition Initiative
Ambitious agenda

The BIG picture (system view)

The current economic crisis and its
historical context

Response to the crisis then and now

Understanding the structure of the
economic system

Understanding money and the banking
system

Understanding the financial system
The Big System View
The Main System
Biosphere / Ecosystem
The Main System
Biosphere / Ecosystem
Homo “sapiens”
Hierarchy of Systems
Biosphere / Ecosystem
Social System
Biosp
Social system
Law
Education
Art
Religion
Culture
Politics
Science
[…]
Public
Health
Economy
Hierarchy of Systems
Biosphere / Ecosystem
Social System
Economic
System
Biosp
Economic System
Manufacturing
Labor
Distribution
Means of
Production
Financial System
Food
Production
[…]
Hierarchy of Systems
Biosphere / Ecosystem
Social System
Economic
System
Biosp
Financial System
System Hierarchy Violations
Industrial growth model
Corporate “personhood”
Global GDP $60 T vs. derivatives $600 T
Job outsourcing
Biosp
System Hierarchy Compliance
(attempts)
Triple bottom line
Biosp
Biosp
UN principles for responsible investment
Mondragon Cooperative
Slow Money
B
The Big Systemic Problem
Financial System
Economic System
Social System
Biosphere / Ecosystem
The Current Economic Crisis and its
Historical Context

Long term trends in real wages and
productivity

Trauma in the 70s

How the middle class responds

How employers respond

How we dealt with the crisis last time
around
American Exceptionalism
US Economic History
Source: analysis of U.S. Census Bureau data in Economic Policy Institute, The State of
Working America 1994-95 (M.E. Sharpe: 1994), 37
US Economic History
Source: Congressional Budget Office, “Average Household After-Tax Income,” Data on the
Distribution of Federal Taxes and Household Income, April, 2009.
How did the middle class cope with the
trauma of stagnating real wages?
Coping Strategy #1
Coping Strategy #2
Coping Strategy # 3
Coping Strategy # 3
What was the effect of the shift on
employers and the top 1% ?
CEO Pay
Impact on Income Distribution
Impact on Wealth Distribution
How did we deal with the economic
crisis last time?
◦ FDR elected as a moderate democrat on a
balance budget platform (11/1932)
◦ Social Security (1935) including
unemployment insurance
◦ Work Progress Administration - Federal
Government hired 12.5M people
◦ Paying for all the program through tax on
the rich (94% marginal tax rate)
How did we deal with the economic
crisis last time?
◦ Banking Act (1933) including Glass
Steagall Act
◦ Securities Act (1933) including securities
registration requirements
◦ Securities Exchange Act (1934) including
creation of the SEC
◦ Investment Company Act (1940)
◦ Investment Advisers Act (1940)
How are we dealing with the
economic crisis now?
◦
◦
◦
◦
◦
◦
Cutting government services
Cutting education
Cutting Social Security
Cutting Medicare and Medicaid
Reducing pension benefits
Cutting taxes on the wealthy (proposed
capital gains tax of zero!)
Why we will be in this one for a
while…
◦ When is the economy in recession and
how do we know when it’s over?
◦ GDP
◦ What are the components of GDP?
◦ GDP = C + B + G + (X – I)
How are we going to get GDP
growing again?
◦ GDP = C + B + G + (X – I)
Homework
◦ What accounts for the difference between
the response to the economic crisis in the
30s and now?