Finance and the Real Economy

Managing the relationship between finance and the real economy is one of the greatest challenges of a class-based society where the wealthy are both the architects and primary beneficiaries of the present arrangements. What inevitably happens over time within this arrangement is that greed overtakes logic, and new financial schemes abuse laws and markets until they crash. Most of those who suffer from these crashes are those who cannot afford to invest and small-scale retail investors whose life savings are wiped out instantly. Every market crash brings significant political theater and outrage but no efforts to make meaningful systemic change. Instead, we see minor penalties for the architects of disaster and the creation of petty legislation that will be lobbied out of existence a few years after the event. Markets play a vital role in a systemically actualized society, but it’s clear that our present systems supporting them are both undesirable and inadequate to serve our efforts of systemic actualization. To imagine more, we begin with a question. How can we organize society in such a way where finance exists to serve the real economy instead of itself?

The “real economy” refers to the productive projects happening in nearly all directions at all times—people participating in work that supports the interest of collective society through the development of new tools and techniques to solve problems. This definition encompasses almost anything, including the vast majority of work performed by individuals within societies. It specifically excludes high-frequency speculative finance, like algorithmic day trading and the manipulation of order routing; the creation of laws and instruments that allow for the manipulation of markets and organizations to create capital from nothing. 

Groups of systems and people who generate enormous profits but contribute nothing to society beyond increasing their individual wealth cause havoc among the general populace when they follow their predictable trajectories toward ruin. Whether these organizations manipulate energy resources, housing mortgages, or brick-and-mortar retail chains, there is no concern for the calamity they cause when the castles of sand collapse upon themselves. Their very existence stands in conflict with the idea of market investing as a reliable path to economic freedom because at any point your individual security may be ripped from your hands so some billionaire can make hundreds of millions. Global markets are systems manipulated by the very organizations charged with their leadership. So long as the individual and societies root themselves in hierarchical values and meaning, fairly functioning markets will never exist. Note that this is not an argument against the abolition of all speculation. The private and group investment in promising ideas and people is by and large a force for good, especially when considered through the lens of supporting creative imagination in directions that conflict with the popular narratives of the moment. We can imagine a time experience of a mature humanity where the reliance on private investment has given way to public pools of capital and resources available to individuals and groups seeking to innovate. Until then, we must close the gap between finance and the real economy to drive more resources toward productive activities and eliminate the wasteful and harmful practices of a wealthy few.

Past efforts have failed to deeply connect finance to the real economy due to a lack of political will and imagination. This is unsurprising given that a significant portion of elected representatives benefit directly and indirectly from these schemes. Our presently available alternatives have typically come in the form of redistributive taxation as a way to compensate for the inequalities generated by the systems governing markets. This approach only addresses the secondary distribution of advantage, avoiding the root cause of these inequitable designs. Redistributive taxation acts as a bandage instead of addressing the source of harm, only serving to minimize the harm after the fact. Systemic actualization is a process of reinventing the market by experimenting with the foundational laws governing economic transactions. We reject the idea that class is necessary within society and challenge popular understandings about the division of labor. We establish new frameworks for stakeholdership, endowments, opportunity, and access under the umbrella of reimagining core values and understanding the relational universe as dictated by the single truth.

We reframe our division of labor around the understanding that all labor requires skills, and while all skills are not of equal complexity, they all play a vital role toward progress within the moment. There are varying degrees of difficulty involved in tasks, each of which requires a variety of training. Hierarchies of competency are established through the prolonged direction of focus and energy within the moment. Solving complex problems is necessary for both our individual and collective progress. The same may be said for rudimentary work that keeps our social systems flowing. Some will always be better suited than others to create change in specific directions. My father would struggle with some of the most basic academics, but if you needed an air conditioner fixed there were few more qualified than he. Our needs are always in relation to the moment, and each one who contributes supports collective progress. This is why all labor is valued equally in a systemically actualizing society. All productivity is an investment of focus and energy in a specific direction. No economic technology can ever accurately capture the value of moments. Therefore, any individual directing focus and energy toward supporting people or projects is deserving of fundamental material security. Through this foundational approach to labor, we break down class divisions and encourage a broader celebration of individual divinity in alignment with the single truth. 

Our embrace of all labor as a source of value doesn’t free us from the responsibility of adapting to change. For example, human-centric mass production is never coming back, and the skills developed to fit these roles will continue to decrease in their usefulness to others. Future technological disruption will continue to transform the type of individual access and agency necessary to meet the needs of the moment. Even the most forward-thinking political projects of the moment approach the economy by focusing too heavily on security and not enough on flexibility. These efforts are substitutions, not solutions. Security is a necessary component of individual actualization but is unrelated to our market order within a systemically actualized society. Instead, our market experimentation explores how alternative arrangements might provide a foundation from which all are free to experiment within the universe without fear.

Reshaping finance also requires a reimagination of money and what constitutes value. Consider our present arrangements dictating monetary supply. In the United States and other financialized nations, credit is created at the point of contract.1 When you go into a bank to take a loan, the money you receive in the form of credit did not exist prior to you signing that contract. Banks create money to give you at that moment, increasing the total supply of money within a specific currency. These arrangements empower private organizations, whose primary motive is profit generation, to control the money supplies of nations. History also teaches that they are ripe for exploitation. Banks are some of the most active perpetrators of structural racism because they have repeatedly been caught discriminating based on race in the forms of higher interest rates,2 predatory lending,3 and denial of services.4 

Having money supplies and credit issuance beholden to private interests directly contributes to accelerating the crisis. That our money has nothing backing it beyond entries on a spreadsheet is what makes it a fiat currency, necessary to rapidly expand growth but imaginary in its nature and legitimacy. Cryptocurrencies offer new asset classes, which are necessary to solve some of the world’s biggest problems. Currencies designed to fund and govern new experimentation ecosystems focus on imagining decentralized solutions and experiences. For example, it is predicted that global economies would need to increase about five-fold to address global poverty.5 With that said, some of the most popular cryptocurrencies are heavily influenced by institutional investors and serve no productive purpose. 

Consider Bitcoin, which is intended to serve as a blockchain-based fixed supply currency free of government influence and interference. The theory behind Bitcoin is sound; inter-community mediums of exchange are prevalent in a systemically actualized society. In reality, Bitcoin ownership is heavily skewed in the hands of a few. Global adoption would create a more extreme wealth concentration than we already struggle with.6 At this point, new entries into Bitcoin primarily benefit the relatively few top holders. Sound familiar? The decentralization of finance—removing the bank middlemen from our transactions—is a vital component of systemic actualization. Modern banking is highly extractive in relation to its value and penalizes the poor through additional fees and ever-rising minimums. The private control of public monies will always be at odds with the best interest of the collective stakeholders. 

Enacting our vision of reformation to support systemic actualization also requires a revised approach to collective investment through governments. To do that, we must dispel the confusion surrounding government spending and debt. The standard propaganda used to drive fear and uncertainty around public spending roots itself in a philosophy of money not applicable to currency-issuing governments. For the majority of individuals, household spending consists of balancing our expenses against our income so that we’re generating surpluses. Much of the fear, uncertainty, and doubt so common in political discourse is rooted in the idea that government spending operates identically to household spending—that we are somehow at risk of insolvency if we leverage debt beyond revenues from taxation. 

Modern monetary theory teaches us that this is not accurate to the extent it is implied. Currency-issuing governments like the United States do not rely on taxation to support spending on subsidies or programs. Like banks, governments create capital to spend with the stroke of a pen. Taxation exists as a way to create demand for capital by reducing the overall supply but lacks effectiveness because elected representatives lack the political will to appropriately manage and experiment with them. Consider that unemployment results from fiscal policy, not a byproduct of market prices or demand. Modern monetary theory suggests organizing ourselves around a full employment fiscal policy, where governments can scale public jobs in accordance with private sector demands, thus creating an inverse relationship between the demand for labor in private enterprise and opportunities for employment in public programs.7 This flexible approach is vital to supporting a high-energy democracy and a sense of stakeholdership for each individual. 

To ensure that finance supports the real economy, we should also reconsider our approach to governmental involvement with productive verticals of society. Today we struggle to overcome dogmas relating to the degree of freedom of markets in relation to state regulation. These philosophies position our pathways to progress in binary terms, supporting a pendulum-like approach to managing our economic laws over time. Instead, we embrace deeper strategic coordination between governments and organizations. Decentralized and experimental, we empower local, state, and national governments to tinker with policies and laws impacting specific productive verticals. For example, we might introduce new sets of legal bindings and classifications into existing organizations through corporate modules that “plug in” to existing corporations in order to alter their legal operational structures and obligations. This type of micro-transformation empowers a deeper level of cooperative competition and experimentalism while empowering communities to combat financial abuses. Corporate modules also support the development of public works DAOs, which exist separate from governments while remaining in close partnership with them. 

Here we identify how deeply misaligned our policies and systems are with the core values of self-actualization. There are alternative economic arrangements to our present strategy of allowing people to remain jobless for years while receiving the bare minimum of material support from the government. Elected leadership chooses not to implement them, instead continuing to promote systems that deny productivity and participation so that a small minority might continue their economic dominion through the present arrangements. Modern monetary theory also helps stabilize inflation through price and wage stability but does not eliminate it entirely.8 What is most relevant to understand and embrace in our journey toward systemic actualization is that all of the institutions so dogmatically defended by the ruling class are in fact just economic technologies that favor their power maintenance. There is nothing natural or necessary about them, and like any artifact humanity designs, there comes a moment when they are inadequate to support the necessary progress. The relationship between finance and the real economy helps shed light on how deeply defective our present arrangements are while also providing insight into how alternatives might take shape. - Finance and the Real Economy
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