What do we need

Training as an accountant involved acquiring lots of useless information – like understanding how little wire coils stored information in big computing machines (at a time when the first desktop PCs were already available).

Maslows Hierarchy Of NeedsOne thing that has stuck with me and which does appear to be useful, even if I failed to appreciate and use it to motivate people was Maslow’s hierarchy of needs, which looks like this (with thanks to Wikipedia for the image)

Apparently Maslow never drew a pyramid, but this is the way we usually look at the hierarchy – with basic physiological needs (air, food, water, clothing and shelter) at the bottom.  Once these are satisfied we can look at other needs such as “safety” which include personal safety, financial security, health and protection from accidents and illness.

After that we want to be loved and belong and then be valued and respected for who we are and with all this is in place we can realise our full potential.

Of course not everyone agreed with Maslow – he may be wrong in placing some needs “above” others and he only reflects the people he studied and not people in different sorts of groups where, for example, society needs may be more important than individual needs.

But what interests me is that money – finance – is regarded as quite a low-level need.  We need financial security.  But what I struggle to understand is the capitalist need to measure everything in terms of money and the desire to accumulate vast amounts of monetary wealth.

Perhaps some people try to show they have realised their full potential by their wealth, but I would be surprised if that is true for everyone when you could potentially be

  • the best possible parent
  • the person who discovered…
  • the fastest man on earth
  • the best tennis player
  • a published author
  • ……

So why do we concentrate on wealth so much when we measure our economies?

The fisherman and the businessman

Paul Coelho says that this is a classic Brazilian story:

There was once a businessman who was sitting by the beach in a small Brazilian village.
As he sat, he saw a Brazilian fisherman rowing a small boat towards the shore having caught quite few big fish.

brazilian fisherman

The businessman was impressed and asked the fisherman, “How long does it take you to catch so many fish?”
The fisherman replied, “Oh, just a short while.”
The businessman was astonished. “Then why don’t you stay longer at sea and catch even more?” Continue reading

A new way of looking at economics?

I have been thinking recently.  It is a difficult and sometimes painful process I would prefer to avoid.

I have been thinking about how we measure economies and whether GDP is helpful or not.  One issue with GDP is that everything is measured in terms of finance and that does not always give reliable results.  For example I know I am well off because my house is warmer than the house I grew up in – because of improvements in insulation and heating, not because I have more finance than my parents.

And then I heard something on the news this morning.  As a result of the Ebola crisis, they (I cannot remember who was talking) think that Sierra Leone’s economy will shrink this year, whereas its GDP had been projected to rise by 11%.

Would 11% growth in GDP have been a real measure of the countries economic strength?  We know from frequent news reports that the country does not haGraph of somethingve anything like the health care that we (in an ailing economy which cannot manage 3% GDP growth) take for granted.

So do we really want to compare GDPs or are there better measures available?  Should we care about these financial measures at all, or would it be better to measure happiness (as they do in Bhutan) or what should we measure.

Perhaps we could look at some social measures – education, employment, quality of housing stock, health care – but these might be difficult to quantify.

But if we are going to look at financial measures, we need to get away from GDP.  Economic analysis says that another way of looking at GDP is that most of it comes from  bank lending and government deficits (government borrowing).  See my previous post Steve Keen visits solvent land (2) for more detail on this.

Some may say that this is fine, but recent experience of debt shows us that some, if not a lot of, debt is an illusion – it cannot be repaid and is therefore of no value.  As a result we have written off debts of countries (under the HIPC initiatives);  we have bailed out banks who lent too much to people who could not pay.  So if neither bank borrowing nor government borrowing are secure, GDP, the main economic measure we use, is overstated.

So let’s look for something which better reflects what is important – and the size of our mortgages – personally or as a country – is not the right place to start.