Generally speaking - our modern economy is super effective. We produce every essential and many non-essential products in abundance.
There is nothing lacking really.
So why do we still face issues like "scarcity" or rather "unaffordability"?
Why does it seem that our economy is devolving rather than furtherly evolving?
Some people see the growing inequality as the main issue.
The few superrich 1% who own too much, they are the reason why the poorest 20% cannot afford the necessities.
Well let's think about it. Is there really a causal link?
Could it be, that we are talking about two different symptoms which originate from different sources?
I would argue for that. Inequality is a general phenomenon. Inequality occurs naturally when we are playing a long-term resource game where the winner from yesterday has an advantage in the game of today.
So I regard all discussion about the "inequality" as a source of an issue as a major distraction. Let us forget about the inequality part and look at general happenings in the economy.
I would claim: If the economy was working well then there would be no problem with starting at 0. Independent of what the richest other people have acquired.
And exactly this does not seem to be the case and even has worsened over time.
Who starts at 0 without skills today, has a very hard time. Less so in the 1950s or 1960s.
I see 3 main factors which both enabled us to increase our productivity so much as well as causing some issues.
Factors of Success causing our Failure
Namely: Finance, Globalization and Automatization.
Factors of Success
Finance is generating Liquidity for the development of the economy.
Today the availablity of resources is not our bottleneck. Our bottleneck is rather the decisions around what the most optimal use is. Finance is an important tool for solving this problem.
Finance may generate the liquidity to set up any large-scale mega-project where people see an overall benefit. Finance is the big enabler.
See the Situation: You have the resources, the tools and the people with the necessary skills. Now you want to build a house. How do you do it? Unless you are the chosen leader of those people and giving them a flat for their families as reward for helping out, you will have a hard time coordinating their efforts to make it happen.
Especially if you don't know these people then you're out of luck. Now thanks to finance you may borrow money and pay those people for their work. They can use the money in any way they like. The house belongs to you. The Bank has a profitable debt position they might even sell to stay liquid by themselves. Now if you calculate all money and assets (debt + house) the total wealth has grown.
Finance is a growth engine!
Globalization is increasing the volume of available human capital as well as the volume of available resources. Aside of that also the volume of available consumers, but let's only focus on the production and build-up part here.
With this increased pool of resources many more projects might be built simultaneously.
Whatever one part of the world is missing can be shipped from the other part of the world. This is another great enabler.
Automatization allows us to make many processes much more efficient. Especially those processes which are very difficult or too tedious for human beings.
Thus we may scale up production higher than ever.
At the same time way may also increase our precision to superhuman levels.
Everything combined gives us an economy of greater efficiency than ever.
We could be on the way to build new ecosystems on the Ocean and Space.
But as we are here to discuss - we missed some things along the way. And those things hurt us now. To me it seems we don't recognize clearly enough what it is to actually do something about it. If it was not for some stubborn and destructive mindsets, it would be really easy to do.
Failures of our Success
Finance now seems to be a hot-spot for a certain nihilistic subculture which is spreading through our society aside of this there is another spreading infection which is resentment. The general Problem is that many people people involved in the great solution of "How should we use our resources?" don't even try to solve that problem. Instead they solve a different problem "How do I get money into my pocket - now?".
On one hand the decoupling of profit from the actual economic activity does make it really hard also considering healthy profits over the long-run is more tiring and less rewarding.
On the other hand corruption and direct abuse (ranging from invisible schemes to large scale scandals) are inexcusable.
The prevalence of this corruption is turning this growth engine into a liability for society.
The non-optimal flows of the liquidity means that the money is missing where it is mostly needed - while in so many cases it is wasted on unhealthy delusions - unhealthy for society and the economy.
Globalization and Automatization have their positive effects in the more efficient use of human capital. However a problem arises when the required human capital is shrinking - because the economy is not furtherly evolvong.
As a result people are being desillusioned by what is happening. Thus escape into resentment and frustration - lacking perspective and casting blame-spells.
What can be done with people who don't evolve into new roles?
What can be done when these positions for the new roles are not created?
We arrive at the problem: we have people tools and resources - but we are incapable to continue to go ahead and develop our economy. There is tremendous lost potential.
We Need to Evolve
The responsibility is with us. Everyone of us. We live in this world where really every tool and resource is available to go where we need to go. As the human civilization.
We need to actually solve problems. We need an optimistic vision and goal to work towards - one we are willing to invest into.
Therefore we need to turn our ideas of what is the problem away from dead-end ideas towards the things which actually cause the problems and which can be improved by anyone of us.
Money is not the Problem
Money might be the carrot for leading people to work.
However we need to get rid of our hatred towards money.
Money is not evil.
The Idea that money and finance is a the evil thing which corrupts people prevents us to deal with it appropriately.
Money is essential to keep the economic engine going. The financialization is enabling arbitrary growth - arbitrary: limited only by our capabilities how to use it.
The money flows allow us to coordinate teams where the people put their individual differences aside for the sake of a collaborative success.
To properly deal with money, we need a proper idea what it is. Unfortunately our idea about money is often one of the most stubborn ones in our mind.
Anyways I would dare to define money in one word: "Promise".
Money is a promise that you get something.
For our regular Fiat currencies this is enforced by law. A promise from our society.
It is purely virtual and the value is relative to the market conditions.
So there is no issue in creating arbitrary amounts of money from borrowing. This is like taking the distributable promise from our society against an equivalent promise from your side. (Leaving questions about implementation details aside - for now.) This makes sense and is great.
You see that this "arbitrary" here is directly limited by how one can be trusted generally by the reputation about our capabilities to use the money productively.
For optimizing our perception here: We should not feel bad about debts, debts simply create duties (for money) similar how picking a job creates duties (for money). In our lifes we often find ourselves working on these duties the furfillment of promises, the work on duties is what makes the "normal and boring" things happen. (These boring things are often the most essential parts! E.G. Brushing your teeth.)
Certainly we should always be careful what we promise and negotiate well.
Certainly our money flows need to be managed responsibly.
For the Picture: The game around money is the trade game between us and the society - trading freedom, possibilities and duties.
Everybody wants to have money available. Not directly for the sake of the riches and the high-end lifestyle, rather for the sake of safety.
So people hoard money mainly for safety, but hoarding an inflationary asset is not optimal. So basically everybody is interested in investing the money well. And well invested money keeps the economy going well.
If the investments generate a profit and the economy is going well - double safety.
Now if the investments generate profit but the economy is going down - isn't this single "safety" quite fragile?
Everything about our money flows is our personal responsibility - our biggest impact on the course of things. This is how we decide where the economy is heading.
Where do you earn your money from?
Where do you spend your money?
Where do you invest your money?
Where do you get your money? (Like loans and investments)
Back to how much money is available in the system. If there is too little trust available because there is too much rampant corruption then the barriers for loans and investments to be made will be high.
The investments will be skewed to be conservative - old companies with a large marketshares, less new companies which drive innovation and further build-up.
It feels a bit as if we are in this situation.
If there was more justified trust in the system - e.g. people are less nihilistic and corrupt rather capable leaders with a positive vision and integrity. Then the picture would look very different.
Generally it is our capability to do something productive with the money. Our capability to coordinate projects and not overrun costs.
This is the required skill for the future. If we add more people who take this leadership with honesty we may dillute out the corruption and negative mindsets and cause a positive culture shift.
The Importance of Human Capital
Now looking at the people from a different side. A owner of a factory knows that people are needed to make it run. Now costs might be optimized by moving to a different country with cheaper labor-costs. Okay - also we could automatize some processes to furtherly increase efficiency.
So this is great - cheaper products - and/or greater profit.
But: What about the working people?
As a neutral observation we may say that for the same output one such factory produces the number of positions decrease and the new positions increase in complexity - e.g. machine maintenance.
So the one worker who happily quit school to put metal sheets in a machine for some good money will unlikely be able to do the maintenance of the robot arm which is now doing this job.
A good capitalist knows the value of human capital. Maybe the abundance of human capital in the globalized world has lead to some amnesia in this regard.
The interesting situation that the governments try to take on the responsibilities to fully educate their people also does not help in this regard.
In general a big part of the people learn better if what they learn is directly relevant to them. Often we learn by necessity when doing.
The thing is that every human being who is motivated to evolve and push forward the development of our civilization is lost potential when being left hanging in this situation. This lost potential should be sees as projects which are not being done and economic growth which is not being made.
There are so many problems we need to solve - why are we leaving so much untapped potential aside?
People improving themselves will naturally specialize in skills. Now without active investment into People we have more specialists than leaders.
From my point of few we are lacking good leaders more than we are lacking the specialists. Specialists without leadership will not help us to make the big mega-projects happen.
We need to invest in people to become the skilled leaders for our future.
Also it needs to be generally understood here that the value of the leader is not that he is in control. Rather it is that he knows what to do.
Our capability to coordinate great projects is of utmost importance.
If the leadership is scarce and corrupt we are not capable enough to continue to develop our economy.
Now maybe not every company is ready to invest in building up the leaders they need. It seems every management layer is a bit reluctant to foster a competition to themselves.
However somebody needs to take on the responsibility and courage to strategically invest in the further development of our economy.
And here it means specifically investing in new people trying themselves out as leaders whilst also receiving guidance from a senior leader who cares.
The Responsibilities Need to be Taken
Looking at Europe - here the amount of Venture capital is relatively small compared to the Investments which are done by governments or EU funds.
What this means is that the governments and the EU are taking the responsibility for the further development of the economy to a big part.
Just: How well is this done?
To me it seems: Not particularly well.
I see that the intention is there. The necessity is being recognized. But the strategic depth is missing.
It seems that nobody actually knows what should be financed and how this should be executed.
The process to receive subsidies via application appears to be far from optimal.
The bureaucratic process of applying for a given set of accepted causes makes it easy to be abused by people who are good in filing such applications and understanding what picture they need to portray. On the other hand people who are really focusing on building something relevant often don't choose to go through the process for an application.
Honest people in general don't want to ask for free money.
Dishonest people have less issues to pretend things to get this free money.
Then the important other question:
Who takes on the responsibility when the money is disappearing without effect?
Generally everyone. Because this is just another case of future taxpayers having to pay back the debt. So this may seem as a very bad deal to many people - they are not directly involved in the decision-making, they don't feel any positive impact - they hear cases of corruption, but in any case they and their children need to pay part of the debt.
Positive to mention is the Fund of the European Innovation Council as here the capital is invested and not given out as subsidies. This is the right direction.
Personally I think it is a good idea when the government or the EU may borrow unlimited amounts of money. If there is a will as a society to make something happen - the borrowing at the top level is basically a promise of society to the society.
Then we just need to go ahead with a clean spirit and keep corruption at bay.
If the money flow in real productive investments then potential dividends may pay for the loans and all we did is getting the growth engine running again.
The decision-making around where to invest is the crucial point.
To increase the quality of this decision-making is so important we need to invest into this as well. Also we need to democratize this process a bit more. As in this case the whole society is hanging with the debts - they need to be able to ensure that the money is used well. The more undemocratic the more unfair it feels.
We don't need the picture of: The elite is distributing the money among themselves while the poor taxpayer pays.
Instead we need:
- Vision and Focus - The target should be a sound economic structure with all necessary capabilities locally available (Math - Physics - Chemistry - Biotech - Materials - Machines - Chips - Software - Cars - Ships - Airplanes - Rockets - Satellites ...)
- Courage to make the really big investments to build out the complete supply-chains
- Think Tanks where people professionally ponder ideas on what is needed and how it should be done - combined with the research and transparency to the broader public.
- Interface to the broader public to capture all relevant ideas.
- Interface to all Universities for easier information exchange and targeted research.
- A board of strategists who work on evolving the grand plan on which we may act. Probably a yearly report about the current state of the grand plan is adequate.
This will have the positive effect of:
- People are less reluctant about government debt - they are in control and benefit from it.
- People take on more responsibility and find their way into roles as strategic thinkers.
- More positions available as leaders and strategic thinkers - and this are the positions where people ultimately need to evolve towards.
- More optimal decision-making thus the money flows where it actually is needed.
- Growth of a solid economy of capable people.
We could go more into depth about how to do it exactly - however the point here is not to create the exact solution but to communicate in which way or form we can and should take the responsibility.
With increasing automatization there is a natural progression from hard work towards responsibility.
The less hard work there is left to be done, the more we need to take on responsibility. Now when the idea spreads too much that we can also outsource the responsibility to an AI, then our economy will not go well.
We need to take on our responsibility and act accordingly - fix our mindset, start the reasonable processes. Interpersonal skills are important - our next generation is important. Then we can use all the tools available to appropriately build the great economy of the future - one which is not blind and one which carries a great load of justified trust.
