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Economic growth requires less inequality

Economic growth requires less inequality, says Mme Lagarde – Colin Cook

The story of Munnies and Wallies

The population is divided in two; 5% are Munnies, the other 95%, Wallies. The Wallies are the ones that make the ‘stuff’ and give the ‘services’ that everybody needs, the Munnies are the ones that organise it all – manage and manipulate so that things happen. To this end they have a money machine, a system to create money. The Wallies are, of course, paid for their work – not proportional to the value of their output but sufficient for them, on average, to raise a family in style.

The value of the Wallies output is well in excess of their combined incomes and even though the Munnies do help out by some very ‘conspicuous consumption’, there is still a surplus that must be consumed if the system is to keep functioning. But how? Simple. The Munnies crank up their money machine to lend the Wallies the necessary money so that they can buy more goods and services than their income allows. This is fine though there is a problem; the Munnies’ loans need to be repaid with interest so that now the Wallies not only buy the extra goods they want (the stuff the system needs to be consumed) but must pay the Munnies interest for use of money.

Thus money flows back to the Munnies away from the Wallies, reducing their purchasing power to less than it was when they first recognised the need to borrow; so to keep up their standards, the Wallies must borrow yet more.

Private Equity – Public Inequity

The Munnies also have a problem; they have more money than they can spend; there is a limit to the number of cars, yachts, cases of champagne a dynasty can use. So they have to buy other stuff – like land, toll-roads, coal fields, houses, public utilities, facilities that everyone uses; they ‘munnitise’ them. Sometimes they pool their money in to Private Equity Funds so they can buy bigger things which once belonged to the Public. Private Equity makes for Public Inequity because the Munnies expect a return on their ‘investments’ and paying to use the facilities, further eats into the spending power of the 95%. More borrowing is needed but to make this possible, the interest charged by the Munnies is lowered – nevertheless it becomes increasingly problematic to keep the 95% employed, paid and, most importantly, consuming.

Debt is building upon debt and some of the Wallies acquire so much debt they just surrender everything they have to the Munnies and in some cases promise to give a slice of all their future earnings to the Munnies as well.

The Polimedia

The above is a great simplification for there is another group, ‘The Polimedia’. Members of this are also members of the Munnies and the Wallies and whilst they are generally most friendly with the Munnies, they have some sympathies with Wallies. The Polimedia is very visible – even though on the side-lines – for they provide endless entertainment, diversions and illusions. From time to time, everyone gets to choose some members of the Polimedia and this creates the biggest illusion of them all – that who is chosen will make a significant difference to 5 versus 95 equation.

In their work, the Polimedia make it more difficult for the Wallies to consume as much as they should by taking a slice of everyone’s income and also by taxing everyone whenever they spend money – a 10% take on all spending. They keep a bit for them- selves and spend some on diversions like war and the preparations for war. (War on drugs, people smugglers, drought, crime, binge drinkers, tax havens, enemies and enemies of friends) but most of the money that the Polimedia collects goes to the Wallies to restore their purchasing power caused by taking their money in the first place! But The Polimedia does help to make the ability to consume more equal amongst the Wallies – which is kind of nice and sort of fair.

But the money continues to flow from the 95% to the 5% as the 95% take on more and more debt to keep feeling good about themselves, helping the economy and keeping a roof over their heads. It cannot keep going this way.

Debt is feeding upon itself grotesquely, exponentially. The 5% own more and more; the 95% owe more and more.

The situation is heading for disaster; it cannot be sustained.

What is to be done?

Mme C. Lagarde, who is CEO for the biggest money machine in all the world, the IMF (International Monetary Fund) has declared, ‘To be sustainable there has to be less inequality rather than more.’ SMH, GW 15/2/2014. She has since explained that this is so we can get ‘more growth’; in short, more of the money has to go to the Wallies to spend but Mme Lagarde does not explain how this will be achieved.

The solution is to move the money machine from Munnies to Wallies – so that the Wallies can generate the

money they need* and not be forced to borrow and pay interest to the Munnies. The ‘cash flow’ from Wallies to Munnies needs to be reduced – even reversed – if consumerist growth is to continue; the mathematics is conclusive.

* For the full story on such a move, read, ‘Modernising Money’ by Andrew Jackson & Ben Dyson published by Positive Money.

Colin Cook is a NSW member of ERA

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