Gareth Vaughan on what the purpose of an economy is, another Taylor special, Brexit & icebergs, embracing socialism & probing Trump

Gareth Vaughan on what the purpose of an economy is, another Taylor special, Brexit & icebergs, embracing socialism & probing Trump

This Top 5, comes from interest.co.nz's own Gareth Vaughan. Note, Top 5 has replaced our previous Top 10 column.

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.

We are always keen to find new Top 5 contributors so if you're interested in contributing, contact gareth.vaughan@interest.co.nz.

1) What the purpose of an economy is & 21st-century economic questions.

English economist Kate Raworth, author of Doughnut Economics, Seven Ways to Think Like a 21st-century Economist, spoke to RNZ's Kathryn Ryan on Thursday. It was a lenthy interview with the self proclaimed renegade economist having some interesting things to say.

Here's a flavour.

I want to go back to the fundamental question in economics that I was never actually invited to ask, which is what is the purpose of the economy? Because students don't even discuss that. And if we don't know what the purpose of the economy is we don't know what progress looks like. We don't know what metrics to be using. And so I framed the purpose of the economy, I drew it as a picture. Crazy as it sounds it comes out looking a bit like a donut. The purpose is to meet the needs of all people within the means of this incredible, delicately balanced living planet. 

And if we start from there and say the economy aims to do that, what kind of revisit do we need to do with today's economy? We need to make a lot of change because we have inherited economies from the 20th-century that are degenerative by design. Our economies are structured industrially in a linear way. Take earth materials. We make them into stuff we want, use it for a while, often only once, think of a single use plastic cup, and then we throw it away.

And that take, make, use, lose cuts against the cycles of the living world. It has externalities all over it and the costs of this throw away industrial process are spewed out onto the living world and externalised from the business model. So we need to transform that from a linear, degenerative model to a circular regenerative model where there is no such thing as throwing things away. There is no away. There is no such thing as waste. Waste from one process becomes food for another.

We need an economy that regenerates with and within the cycles of the living world. So I'm not even talking about economic instruments at this point. I'm talking about the fundamental re-conception of the production systems that we use to  meet our wants and needs so that we do so within the means of the planet and then come to the question what kind of policies would you introduce to bring that about, what kind of regulation, what kind of market incentives, what kind of structures and ecosystems for markets would you want? And for me these are the 21st-century economic questions. 

2) Where did the US$493.79 million come from and what was it used for?

The Austrian magazine Profil has shed light on yet another NZ company incorporated by the infamous Taylor family. This one is Impala Trans Ltd. The following is translated from German.

Between 2007 and 2010, this Impala Trans transferred from her Lithuanian Ukio account $493.79 million to five Austrian bank accounts, all of which were set up at the then Raiffeisen Zentralbank. The holders of these Austrian accounts were companies with addresses in Rotterdam, Limassol (Cyprus), and Hong Kong. Where the money came from and what it was used for is unclear.

Impala Trans was established by the Taylors' GT Group in 2005. As reported by interest.co.nz in December, NZ Police have received more than 350 criminal investigation enquiries from overseas relating to companies established by the Taylors.

3) The Titanic voting for the iceberg to move.

As the slow moving train crash known as Brexit continues to shuffle down the line, David Hargreaves sent me the headline below from The Guardian on Thursday.

Brussels has said a vote by UK MPs to block a no-deal Brexit in any circumstances is a meaningless move, with one senior EU negotiator describing it as “the Titanic voting for the iceberg to get out of the way”.

And remember David Cameron? He's the (now former) British Prime Minister who called the 2016 referendum on whether Britain should stay in the European Union. Cameron, who led the remain campaign, told the BBC he doesn't regret calling the referendum. But he does regret losing the referendum, and "the difficulties and the problems" in trying to implement the result of the referendum. 

Log this in the file of tweets that haven't aged well...

4) Why ardent US capitalists should embrace socialism.

In a thought provoking article in the Financial Times, Janan Ganesh argues hardened US capitalists should vote for a Democratic presidential candidate in 2020, even a fairly left-wing one. He notes recent debate in the US over socialism.

Whether in the mouths of Democrats, who are warming to the word, or of Republicans, who still spit it out, it has come to mean something more familiar to a European as social (or Christian) democracy. Fiscal transfers, universal healthcare, powerful trade unions: not only do these things not add up to socialism — Denmark is no command economy — a true stickler for that creed would actively oppose them as efforts to buy off the revolution. They are not designed to replace the market so much as to stop the masses turning against it.

All of which provokes a counter-intuitive thought. Hardened capitalists should vote for a Democratic president in 2020 — even a fairly leftwing one — rather than a Republican. The market system is under greater popular stress, after all, than at any time since the 1930s. One answer to the resentment is to give no quarter at all. A wiser one is to contain the anger by making pragmatic concessions to it.

5) Trump's being probed from many directions.

This Al Jazeera story provides a useful wrap of all the investigations US President Donald Trump is currently facing. Whilst special counsel Robert Mueller's probe into alleged Russian interference in the US presidential election and whether Trump campaign members were complicit, gets most of the attention, there are plenty of other Trump probes. Of course there's Congress too, which now has a Democrat majority and is serious about probing Trump.

But as Al Jazeera details, Trump is also being probed by investigators from New York City, New York State, Washington DC, Maryland and New Jersey. The subjects of these investigations include everything from whether the Trump Country Club broke the law by hiring undocumented migrants, to issues around his inauguration, whether he has breached the emoluments clause of the US Constitution, to his business interests and, of course, his taxes - or lack thereof.

The cartoon below from Politico's Matt Wuerker seems a good companion to the Al Jazeera report.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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And so I framed the purpose of the economy, I drew it as a picture. Crazy as it sounds it comes out looking a bit like a donut. The purpose is to meet the needs of all people within the means of this incredible, delicately balanced living planet.

That is a really interesting question . I don't think it can be answered from within the discipline of economics.
I think one needs to incorporate ideas of human Nature, History, philosophy, sociology, nature and even spirituality....etc
To say that it is to meet the needs of all people comes up short , ..in my view. AND yet ..the doughnut you drew is pretty amazing, and I'm thinking that maybe we could come up with a more realistic purpose..??
eg. "An economy is an environment that allows people to attempt to meet individual needs ,within a framework of rules, while supporting those who are unable to meet their own needs"...?? (This implies that there are winners and losers, in regards to capable individuals....ie. competition )
( I shall print out that doughnut and ponder..)

eg. It is difficult to get ones needs met if one is not prepared to work. AND...if one works hard , what portion of his work should be gifted to others thru tax...etc..etc..

eg.. What is our responsibility to the planet and future generations, and does it mean we limit our needs .??

etc...etc

Economics was originally a branch of philosophy, so perhaps it's an acknowledgement that as a practice the field has become too divorced from wider thought and devolved into maths and models disconnected from reality.

What is the purpose of an economy? Nothing, it is the sum total of transactions in a given area. Let's be clear, what we are talking about is - In what direction should we encourage or force individuals actions and choices.
To get a productive discussion and better outcomes, it's easier to start with a correct or more clear question.

Disagree Withay. Human beings have always laboured to survive. This labour had to include the hard months, so putting stuff aside to make survival easier has always been apart of the equation. This simple picture has evolved to today where that labour has morphed into much, much more. Trade obviously became a part of the picture, as did a basis of that trade which evolved into currency. The sum of all that activity is called economics. However in today's world unregulated economics works against total survival, or even progress. As we understand more, the more we can see where we have failed as a species to properly regulate economic activity to the point where we have placed our very survival at risk. Thus the question is entirely relevant and pertinant to many other discussion we have on this site such as what are we trying to achieve throught the TWG, how do we control climate change, should we worry about what China is doing, does our government genuinely represent and is acting on the interests of the people and so on.

Hi Murray. How is anything you said disagreeing with what I said? By the sound of your comment you would advocate for more regulation and as I said, the question is "In what direction should we encourage or force individuals actions and choices." Same same.

I'm not a fan of euphemistic or obfuscatory language. The "purpose" of the economy is either an incorrect sentence as a sum can't have a purpose or it's essentially a linguistic trojan horse for controlling individual actions. I'm not against regulation and controls but let's call it what it is if that's the case.

Great article Gareth on donut economics. And the comments. Can't wait until I can get it up on my big s reen and go through it properly.

I started her donut ecomics book a year ago and still can't finish it. She has some clear objections to traditional economics and its diagrams but try remembering her diagram - have good look at it and then try to reproduce with its nine ecological features outside the ring and the dozen society features inside. Without a photographic memory you can't. Then consider some of those features - ocean acidification makes it in but decline in oceans oxygen doesn't but Scientific American argued it was more important. I agree with her that a 'political voice' is good for me but is it an essential for an economy? Same with gender equality but hypothetically an economy would work just as well with all men being subservient to women (arguably it might be stronger).

'Without a photographic memory you can't'

We could say the same about a systems-analysis of the whole planet. It's a complex thing. What she's done is to simplify it and give it a shape. It was a worthy effot.

Agreed worthy. But replacing simplicity with complexity. Maybe that is warranted but why do I have accept her 12 human values or her 9 most serious ecological concerns.
The gender rights means no Saudi will accept her economic diagram and the political voice means China will not accept it. Why create a new economic theory that will be rejected out of hand by half the world?
If she left the human rights to religious leaders and philosophers and the ecological limitations to relevant scientists it would be better. And simpler.