Economics for Ecology International Scientific Conference in Sumy, Ukraine was started by students of Sumy State University in 1992.P-CED became involved in 2009 during the 15th annual conference. Our approach was to begin to provide students with a comprehensive understanding of economics for ecology in an overall context of economics in transition. The world economy, including Ukraine’s, had been hit hard by the economic meltdown in autumn of 2008.
For the remainder of 2009, study notes were added to the end of the online copy of the 2009 paper. This section explains those various study notes. The 2010 paper was an introduction to people-centered economics, including P-CED’s treatise. The 2010 presentation was based on feedback and discussions with students during the 2009 conference.
Study notes subsequent to the 2010 conference are here.
Commanding Heights: The Battle for the World Economy covers world economic history for the past hundred years in three episodes. From the website link:
A global economy, energized by technological change and unprecedented flows of people and money, collapses in the wake of a terrorist attack …. The year is 1914.
Worldwide war results, exhausting the resources of the great powers and convincing many that the economic system itself is to blame. From the ashes of the catastrophe, an intellectual and political struggle ignites between the powers of government and the forces of the marketplace, each determined to reinvent the world’s economic order.
As the 1980s begin and the Cold War grinds on, the existing world order appears firmly in place. Yet beneath the surface powerful currents are carving away at the economic foundations.
Western democracies still struggle with deficits and inflation, while communism hides the failure of its command economy behind a facade of military might. In Latin America populist dictators strive to thwart foreign economic exploitation, piling up debt and igniting hyperinflation in the process. In India and Africa bureaucracies established to end poverty through scientific planning spawn black markets and corruption and stifle enterprise.
With communism discredited, more and more nations harness their fortunes to the global free-market. China, Southeast Asia, India, Eastern Europe, and Latin America all compete to attract the developed world’s investment capital, and tariff barriers fall. In the United States Republican and Democratic administrations both embrace unfettered globalization over the objections of organized labor.
But as new technology and ideas drive profound economic change, unforeseen events unfold. A Mexican economic meltdown sends the Clinton administration scrambling. Internet-linked financial markets, unrestricted capital flows, and floating currencies drive levels of speculative investment that dwarf trade in actual goods and services. Fueled by electronic capital and a global workforce ready to adapt, entrepreneurs create multinational corporations with valuations greater than entire national economies.
Among the 40 interview subjects are CEOs and top-level executives from a range of industries: oil, pharmaceutical, computer, tire, manufacturing, public relations, branding, advertising and undercover marketing; in addition, a Nobel-prize winning economist, the first management guru, a corporate spy, and a range of academics, critics, historians and thinkers are also interviewed.
A LEGAL “PERSON”
In the mid-1800s the corporation emerged as a legal “person.” Imbued with a “personality” of pure self-interest, the next 100 years saw the corporation’s rise to dominance. The corporation created unprecedented wealth but at what cost? The remorseless rationale of “externalities” (as Milton Friedman explains, the unintended consequences of a transaction between two parties on a third) is responsible for countless cases of illness, death, poverty, pollution, exploitation and lies.
THE PATHOLOGY OF COMMERCE: CASE HISTORIES
To assess the “personality” of the corporate “person,” a checklist is employed, using diagnostic criteria of the World Health Organization and the standard diagnostic tool of psychiatrists and psychologists. The operational principles of the corporation give it a highly anti-social “personality”: it is self-interested, inherently amoral, callous and deceitful; it breaches social and legal standards to get its way; it does not suffer from guilt, yet it can mimic the human qualities of empathy, caring and altruism. Four case studies, drawn from a universe of corporate activity, clearly demonstrate harm to workers, human health, animals and the biosphere. Concluding this point-by-point analysis, a disturbing diagnosis is delivered: the institutional embodiment of laissez-faire capitalism fully meets the diagnostic criteria of a “psychopath.”
We are all seeing rather less of the Sun. Scientists looking at five decades of sunlight measurements have reached the disturbing conclusion that the amount of solar energy reaching the Earth’s surface has been gradually falling. Paradoxically, the decline in sunlight may mean that global warming is a far greater threat to society than previously thought.
Dimming appears to be caused by air pollution. Burning coal, oil and wood, whether in cars, power stations or cooking fires, produces not only invisible carbon dioxide (the principal greenhouse gas responsible for global warming) but also tiny airborne particles of soot, ash, sulphur compounds and other pollutants.
This visible air pollution reflects sunlight back into space, preventing it reaching the surface. But the pollution also changes the optical properties of clouds. Because the particles seed the formation of water droplets, polluted clouds contain a larger number of droplets than unpolluted clouds. Recent research shows that this makes them more reflective than they would otherwise be, again reflecting the Sun’s rays back into space.
Scientists are now worried that dimming, by shielding the oceans from the full power of the Sun, may be disrupting the pattern of the world’s rainfall. There are suggestions that dimming was behind the droughts in sub-Saharan Africa which claimed hundreds of thousands of lives in the 1970s and 1980s. There are disturbing hints the same thing may be happening today in Asia, home to half the world’s population. “My main concern is global dimming is also having a detrimental impact on the Asian monsoon,” says Prof Veerhabhadran Ramanathan, one of the world’s leading climate scientists. “We are talking about billions of people.”
Frontline: Inside the Meltdown
The first part of this story is events leading to economic meltdown that began on September 15, 2008.
FRONTLINE then chronicles the disaster that followed. Within 24 hours, the stock market crashed, and credit markets around the world froze. “We’re no longer talking about mortgages,” says economist Gertler. “We’re talking about car loans, loans to small businesses, commercial paper borrowing by large banks. This is like a disease spreading.”
“I think that the secretary of the Treasury could not fully comprehend what that linkage was and the extent to which this would materialize into problems,” says former Lehman board member Henry Kaufman.
Paulson was thunderstruck. “This is the utter nightmare of an economic policy-maker,” Nobel Prize-winning economist Paul Krugman tells FRONTLINE. “You may have just made the decision that destroyed the world. Absolutely terrifying moment.”
In response, Paulson and Bernanke would propose — and Congress would eventually pass — a $700 billion bailout plan. FRONTLINE goes inside the deliberations surrounding the passage of the legislation and examines its unsuccessful implementation.
“Many Americans still don’t understand what has happened to the economy,” FRONTLINE producer/director Michael Kirk says. “How did it all go so bad so quickly? Who is responsible? How effective has the response from Washington and Wall Street been? Those are the questions at the heart of Inside the Meltdown.”
Video: at top of page
Frontline: Ten Trillion and Counting
All of the federal government’s efforts to stem the tide of the financial meltdown have added hundreds of billions of dollars to an already staggering national debt, a sum that is expected to double over the next 10 years to more than $23 trillion. In Ten Trillion and Counting, FRONTLINE traces the politics behind this mounting debt and investigates what some say is a looming crisis that makes the current financial situation pale in comparison
Video: at top of page
Frontline: Breaking the Bank
In Breaking the Bank, FRONTLINE producer Michael Kirk (Inside the Meltdown, Bush’s War) draws on a rare combination of high-profile interviews with key players Ken Lewis and former Merrill Lynch CEO John Thain to reveal the story of two banks at the heart of the financial crisis, the rocky merger, and the government’s new role in taking over — some call it “nationalizing” — the American banking system.
It all began on that fateful weekend in September 2008 when the American economy was on the verge of melting down. Then-Secretary of the Treasury Henry Paulson, his former protégé John Thain, and Ken Lewis, one of the most powerful bankers in the country, secretly cut a deal to merge Bank of America and Merrill Lynch.
The merger of the nation’s largest bank and Merrill Lynch was supposed to help save the American financial system by preventing the imminent Lehman Brothers bankruptcy from setting off a destructive chain reaction. But it became immediately clear that it had not worked. Within days, the entire global financial system was collapsing.
Video: at top of page
Frontline: The Warning
“We didn’t truly know the dangers of the market, because it was a dark market,” says Brooksley Born, the head of an obscure federal regulatory agency — the Commodity Futures Trading Commission [CFTC] — who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country’s key economic powerbrokers to take actions that could have helped avert the crisis. “They were totally opposed to it,” Born says. “That puzzled me. What was it that was in this market that had to be hidden?”
In The Warning, veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation’s worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008.
“I didn’t know Brooksley Born,” says former SEC Chairman Arthur Levitt, a member of President Clinton’s powerful Working Group on Financial Markets. “I was told that she was irascible, difficult, stubborn, unreasonable.” Levitt explains how the other principals of the Working Group — former Fed Chairman Alan Greenspan and former Treasury Secretary Robert Rubin — convinced him that Born’s attempt to regulate the risky derivatives market could lead to financial turmoil, a conclusion he now believes was “clearly a mistake.”
Born’s battle behind closed doors was epic, Kirk finds. The members of the President’s Working Group vehemently opposed regulation — especially when proposed by a Washington outsider like Born.
“I walk into Brooksley’s office one day; the blood has drained from her face,” says Michael Greenberger, a former top official at the CFTC who worked closely with Born. “She’s hanging up the telephone; she says to me: ‘That was [former Assistant Treasury Secretary] Larry Summers. He says, “You’re going to cause the worst financial crisis since the end of World War II.”… [He says he has] 13 bankers in his office who informed him of this. Stop, right away. No more.'”
Greenspan, Rubin and Summers ultimately prevailed on Congress to stop Born and limit future regulation of derivatives. “Born faced a formidable struggle pushing for regulation at a time when the stock market was booming,” Kirk says. “Alan Greenspan was the maestro, and both parties in Washington were united in a belief that the markets would take care of themselves.”
Now, with many of the same men who shut down Born in key positions in the Obama administration, The Warning reveals the complicated politics that led to this crisis and what it may say about current attempts to prevent the next one.
“It’ll happen again if we don’t take the appropriate steps,” Born warns. “There will be significant financial downturns and disasters attributed to this regulatory gap over and over until we learn from experience.”
Video: at top of page
This section is for information subsequent to the 2010 conference.
During the plenary session, I briefly expanded on the written comments in my paper regarding financial economics costing far more than what it produces. That was a few statements on “trading at the speed of light”, also known as high-frequency trading, in the stocks and commodities markets. That was 5 May. The following day, the US stock market plunged 1000 points in five minutes, the largest drop ever. Why? Exactly what I warned students and faculty about only one day earlier. I closed my plenary speech with the comment “They are stealing our money and it’s out of control.” That isn’t capitalism. It is more akin to Frankenstein’s monster.
I can explain in detail exactly what happened and exactly how it was done. Since this is intended to be a study guide and learning experience for students, it makes more sense to first present the basis scenario of high-frequency trading, or trading at the speed of light. Note that in the following video, they are talking about trades — buying and selling — measured in milliseconds for one buy/sell transaction. That is thousandths of a second. Since the time the video was made in 2009, state-of-the-art technology has reduced that amount of time to microseconds: millionths of a second – 13 microseconds to be exact. Once the microsecond barrier is broken, next is nanoseconds, billionths of a second. This video should help in beginning to understand those implications.
Quants: The Alchemists of Wall Street
Quants are the math wizards and computer programmers in the engine room of our global financial system who designed the financial products that almost crashed Wall st. The credit crunch has shown how the global financial system has become increasingly dependent on mathematical models trying to quantify human (economic) behaviour. Now the quants are at the heart of yet another technological revolution in finance: trading at the speed of light.
What are the risks of treating the economy and its markets as a complex machine? Will we be able to keep control of this model-based financial system, or have we created a monster?
A story about greed, fear and randomness from the insides of Wall Street.
Director: Marije Meerman
Research: Gerko Wessel