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They say, “See Venice—and die!” I nearly did—but that is a story for later.

Historically, Venice virtually sat at the crossroads of the trade routes from China and the rest of Asia, across to Africa, through the Mediterranean, and up into Europe. Because of late-medieval, regional, internecine violence, folks escaped into the shallow Venetian lagoon area, building houses, quays, and market spaces on pilings driven into the sandy or clay banks, hidden just below the surface. It grew to be the world’s greatest trading city.

For half a millennium, the Venetian ducat was the basis of gold currency: it was not two centuries ago that a ducat would buy a closet of fine clothes or a feast for family and friends or a night with the best courtesan. But as in so many rich societies, the laboring poor had been kept in order with a daily evening meal and tiny wages. Those who managed workers had part of their wages paid in easily dried sale (sea-salt), giving rise to their payments being known as salare, hence “salary.” That pure sea salt was a sought-after commodity, its production being controlled by the doge (Venetian ruler) and the merchants, who traded in ducats. Those with just a salare could use their salt to trade with the city’s restaurants, shopkeepers, local fisherman, and the vegetable sellers who came across the lagoon by boat.

Venice was a mercantile trading economy, where the richest could fund explorers such as Marco Polo or the captains of ships from other nations, who subsequently discovered the Americas and East Indies.1 Venice provided a prophetic microcosm of currency trading at different levels.

Learning from my past

As elementary schoolboys with a few pennies each week, we bought bubble gum whose unique selling point was the enclosed, facsimile, historic US bank notes. The phase lasted about a year as weekly, we accrued more “wealth”; occasionally, you might get a $10 or $100 bill, among the more usual early greenbacks. Boys from a neighboring housing project preferred to trade and keep Confederate (not really understanding the politics) to the Union notes my group preferred. There were more of those Confederate collectors, so our bartering power increased—we would give only three Confederate dollars away in return for five Union ones. We began trading other things, like pens and pocket knives, for these mock dollars and, in our childish ways, we were learning lessons “about the way the world worked.”

From the Norman Conquest in 1066, England developed an administrative class separate from the clergy, but increasingly a social hierarchy that rewarded those loyal to the crown with land, wealth, title, and rule over the populace. Deep in English history, we know that the peasant class had subsistence lives without money, living in hovels, scratching a living from the land with occasional handouts from the lord of the manor in return for their agricultural labor and soldiering. People were kept in check by the supply of food. Just like my contemporaries with our bubble gum bank notes, folk learned to trade, with some becoming wealthy and selling either the products of their land or their skills in local markets. What began as a barter economy grew as cities minted their own currencies, while the lords of each manor accrued gold—in similar fashion to Venetians and their ducats. No wonder folklore developed their heroes, such as Robert the Bruce in Scotland or the mythical Robin Hood2 who “robbed the rich and gave to the poor” in England.

It was traders from Italy (e.g., the Lombards) or itinerant Jewish moneylenders, such as Shakespeare’s Shylock in The Merchant of Venice, who began organizing promissory notes between differently located branches of their family. So someone could pay in gold in one country, traveling home in relative safety and redeeming their wealth later. By 1600, there was a well-established international economy. This was reflected in patterns of trade, the support of exploration and of such international “banking.”

Britain’s Industrial Revolution changed society from an agrarian and market-town economy. Workers flocked to fast-growing cities to work in mills and factories, the majority living in rapidly erected, poor-quality housing, often rented from the factory owners.3 But the UK needed successive legislation from 1725, known as the Truck Acts, outlawing the “company store” system, which effectively put company workers into debt bondage (i.e., slavery), creating company-defined “closed economies.” In similar ways, the trading post in US frontier towns, beloved of B-movie Westerns, operated similarly closed economies because they were the only local point of trade. North American economies are predicated upon the breaking out from the mix of the trading post and the barter economy of the first settlers.4

Britain was colonizing the world, as well as trading with it, leaching seemingly unending products for their domestic markets from all corners of its world.5 Quite fairly, the more organized and wealthier colonies objected to the UK’s imposition of taxation upon them, arguing “no taxation without representation.” The prime example is the iconic 1773 Boston Tea Party, when Britain’s violent reaction precipitated the American Revolution. The empire was indeed fighting back and the modern era of economics had begun.

Almost simultaneously with this, the Scots philosopher and polymath Adam Smith (1723–90) was writing The Wealth of Nations,6 which became foundational, leading to Smith being described as “the father of modern economics.” I first read Smith nearly forty years ago when I spent five years (before seminary) working for a regional unit of the UK’s national industrial relations/mediation organization, ACAS.7 There, several of the “fast-trackers” were informally tutored by a senior colleague, an Oxford economics graduate, through a reading program to understand the economic world and strategies that underpinned our daily work. Just as then, if we are now to analyze economic ills and advocate alternatives, we must do the same and learn something of the development of economic theory.

Learning from economic theory

The jury remains out on Adam Smith. There are those who believe The Wealth of Nations is intentionally theological, with the social order built upon the concept of God acting within nature; others view him as skeptically deistic, because he never explicitly mentions God. Classical economists argue that Smith’s “wealth of nations” concept is supreme, promoting a “free market economy,” effectively dog-eat-dog, when only the most competitive will survive. Neoclassical economists emphasize Smith’s “invisible hand” concept, which presumes that when an individual acts in their best self-interest, it will benefit the whole society. However the faces of those spinning coins fall for you, Smith is still important because he mapped out the ground for economic discussion, while also stating:

• The existence of obvious inequalities in bargaining power between workers and masters (capital holders);

• That wages cannot be statutorily regulated because different market forces—such as supply and demand of labor—occur;

• That all “subjects” should contribute towards the upkeep of the state, thus advocating progressive personal taxation and not just taxes upon goods and services.

Alfred Marshall (1842–1924) is our next key player as his book Principles of Economics8 critiqued Smith and others, but drew together a threefold woven cord of cohering theory. First, he reaffirmed the principle of supply and demand, particularly for labor and goods (including natural resources). Second, he realized the need to pass on the “costs of production” to the consumer or buyer. Third, he recognized that the consumption or use of either a “service” or an item may increase or decrease as a second or subsequent such unit is purchased; this is known as the “marginal utility cost.” Alongside this Marshall delineated an ongoing principle of economic geography, known as “Marshall industrialization,” showing that industries become most profitable if those of the same type are geographically colocated, thus able to utilize local natural resources or the pool of skilled labor. Marshall’s Principles became the standard textbook for decades to come.

Western society was rapidly changing, from and around that First World War era. So-called laissez-faire economics, akin to Smith’s classical dog-eat-dog position, saying let the market decide who survives, was the favored model of the rich and/or politically powerful. During the 1920s boom, most Western governments agreed to link their currency rates (e.g., the US$–UK£ rate) to the price of gold, effectively tying their own currency to a particular value while also agreeing not to print more money than for which they had hard gold equivalence. This became known as “the gold standard,” creating a federalized money system without political union (akin to today’s Eurozone)—a voluntary straitjacket.

One of Marshall’s Cambridge students was John Maynard Keynes (1883–1946), who was part of London’s “Bloomsbury set.” Despite critique and counterpoint theories, Keynesian economics are still important today for their influence upon the development of twentieth-century capitalism. Basically, Keynes argued for clear, direct state intervention to moderate the effects of so-called boom-and-bust economies. Keynes challenged the neoclassical view that that in a “free market economy” there can always be full employment providing that all workers are flexible both in their wage rates and demands. I would simply question whether such neoclassical advocates can morally accept the consequent poverty of the lowest paid workers’ families.9

Keynesians needed to, and did, provide a strong working model for the West, in marked contrast to the rise of the “communist system” of economics and state control, so evident in post-Revolution Russia and other Soviet republics. What non-economists often fail to appreciate is the breadth and depth of Karl Marx’s comprehensive analysis of capitalism,10 yet how cursory is his initial advocacy of communist-style political systems. A key concept in Marx’s thinking was “value.”

• Was a worker paid a proper value for their labor, or were they just paid the minimum necessary for survival?

• Was the value of a commodity recognized? E.g., food had huge human and market value whereas money had only metallic value as gold or silver and paper money should be regarded as simply state promissory notes (with little real value!).

• How the mode of production created fresh “value,” dependent upon both the product (e.g., coal, clothes, etc) with direct benefits for people or “labor” when the productive workers may actually need far more practical skill than the overseers just shouting at them to produce more.

Marx (1818–83) became a penniless German émigré, finally arriving in England where his writing, life, and family were supported by a philanthropic Manchester factory manager, Friedrich Engels (1820–95), who had been appalled by the social conditions that he was witnessing.11 Engels believed the world needed Marxian economics to change itself, and therefore funded Marx’s analysis and writing for years. Only later did they write together The Communist Manifesto.12

Simultaneously, the dying days of the British Raj in India attempted to control occupied peoples in restricting access to food, raw materials, or naturally occurring salt. Note the challenge by Gandhi in leading the Indian “salt marches” nonviolently as but one expression of indigenous protest against the oppressive nature of such colonial economics. Gandhi’s own adoption of wearing only khadi, the Indian homespun cloth, and his encouragement to his supporters to do the same, rejecting the reimportation of Western-style clothing, emphasized the importance of newly emerging nations to support their own economic practices.13 Later historically, we see similar encouragements about economics, clothing, and land reform made by Ho Chi Minh in Vietnam as a way of rejecting French Indo-Chinese colonialism and the laissez-faire American-styled exploitative economic system imposed upon them.14

Following the crash of 1929, two things occurred. First, workers in the USA and associated nations were encouraged to believe that by absorbing a capitalist system in which “wealth was the driving factor” everyone would become “better off.” Second, Britain and Scandinavian countries dropped out of the gold (exchange) standard, thus unhitching their economic fortunes from automatic linkage with the dollar’s fluctuations.

J. K. Galbraith (1908–2006) rose to prominence during the Second World War when the US government appointed him to lead their inflation-combatting Office of Price Administration. Its work may have antagonized many, but it allowed Galbraith to test economic theory, begin a prolific writing career, and create an international platform (particularly during President Kennedy’s era) for him to advocate a “post-Keynesian economy.” In his 1952 book, American Capitalism: The Concept of Countervailing Power,15 Galbraith noted that the US economy was totally (and probably best) managed by the combination of big business, a strong labor market, and an activist government. He saw their interplay as countervailing power—in marked contrast to the virtual laissez-faire 1920s and 1930s. Galbraith wanted to call his 1958 book Why the Poor are Poor but was dissuaded by his wife and his publishers, and it came out as The Affluent Society.16 It revealed Galbraith’s central argument that a capitalist economy, such as the USA’s, had to create a demand for products (however useful or not), engendering continual acquisition through advertising, despite Galbraith being personally critical of that. He argued that taxation must be used to enable the social infrastructure (e.g., education, road networks, “safety net provision”) of the nation to grow apace. Galbraith was interventionist and described as a “post-materialist.”

The Second World War had left a huge agenda. The Communist revolution in China isolated the then second-largest nation from the rest of the world. Its Maoist (rather than Marxist) economics saw its people ruled by a pampered, self-perpetuating oligarchy, which brutally suppressed the people, using food supply, fear, and mass starvation to control them.17 Stalinist hardening of attitudes in the Soviet bloc led to the Cold War. The world was actively witnessing the rise of both Communism and individually powerful nations, with alternative economic models that did not retain simply peasant economies. The 1948 partitioning and independence of India heralded the end of the old colonialism and the beginning of a new economic world order.

The free world had its own problems; European nations had bankrupted themselves in their war efforts. President Truman’s US administration recognized the potential to take control again of the free world economic system, having no desire to restrain its own capacity to run large trade surpluses with as many other nations as possible. A new fixed exchange rate, known as the “Bretton Woods system,” was instigated, linking afresh other currencies to a known dollar rate; thus again controlling international money supply. To enable this, two organizations were set up. One was the International Monetary Fund (IMF), which became the capitalist world’s “fire brigade”—and still is—despite Bretton Woods’ 1970s demise. The second was a US-European partnership to create what subsequently became the Organization for Economic Cooperation and Development. In the USA, all this created room for Galbraith’s post-Keynesian economic models to be exported throughout the free world.

The Marshall (George, not Alfred’s!) Plan set out to dollarize Europe. It underfinanced Britain’s renewal, causing the UK to have little involvement in the future control of Middle Eastern oil reserves, progressively “developing” other European economies at the USA’s speed and expedience, while rehabilitating (western) Germany and Japan in its own capitalist modeling. In Jesus’ days, the denarius and Roman domination created a Pax Romana; by the 1950s the USA was using its dollar clout and global muscle to declare a Pax Americana.

In the second half of the twentieth century, Milton Friedman (1912–2006) was among those leading economists who argued that the central bank would always have difficulty in forecasting the nature of both national and international money supply, leading to vast fluctuations in regional economies. Friedman saw direct links between inflation and money supply, having been harshly critical of the “Bretton Woods system,” the Federal Reserve system, and Keynesian policies, then later such policies’ creation of homeland “welfare dependency.” His many writings clarifying his economic theories, called “monetarist,” and his libertarian overview of social policies (e.g., gay rights, no military conscription, and negative taxation) helped him win the 1976 Nobel prize for economics.

Perhaps surprisingly, it was the monetarist Alan Greenspan, later chair of the Federal Reserve, who enabled both Thatcher and Reagan to utilize Friedman’s monetarist thinking to determine transatlantic laissez-faire economic policies for the 1980s. From his earliest days, following the 1987 stock market crash, Greenspan’s lengthy Federal Reserve tenure saw him rightly criticized as a “loose monetarist,” allowing currencies and systems to fail before offering to clear them up, only then using US liquidity with hindsight. Despite criticism, Greenspan was a smart cookie, becoming a chief adviser to Deutsche Bank after his Fed days, and in early 2007 rightly predicting a 2008 global recession, which would profoundly affect the USA.

This brief, historically subjective essay is now almost too close to the present sufficiently to analyze changing theory in this generation. We look at some of the main issues and problems in the next chapter. But there are new voices and expressions about how things could be done and economies managed. Like Friedman, Friedrich Hayek (1899–1992) was a penetrative analyst and Nobel laureate, who recognized that economic theory had to be advocated within a broader social and philosophical framework.

That broader approach is essential to this book’s trajectory, finding support in the writings of E. F. Schumacher and the “Ecological Economics” school. As we discover in chapter 3, the well-argued commitment of Jeffrey Sachs, Joseph Stiglitz, and Herman Daly, all renowned World Bank economists, are also within it. However, in Europe, the writings of economists such as Molly Scott Cato and Thomas Piketty, alongside those of popular commentators (e.g., Naomi Klein), build upon Schumacher’s beginnings, establishing an alternative, if not an eco-, economic school. In chapter 10, I offer conclusions about how important all these writers are in forcing economic theory to turn another corner.

Key economic practices

We can choose to advocate a society like the Wild West frontier or the Scottish Border Reivers’ territory, when what you have and can keep, normally by force, allows you to be “king of the castle,” creating your own wealth to provide literally everything you and your dependents need.

The world is not like that. In various configurations we live in society with each other, with varying levels of interdependence. In that mutual reliance, there have to be some rules (e.g., looting or taking by force is wrong), and once we step beyond subsistence agrarian societies, something will become currency, be it furs, slaves, food, salt, or gold. Economic principles and practices develop.

Until recent decades, the Westernized nations of North America, the UK, and Eurozone as well as Australasia have effectively acted together as a control and a brake on the global economy. They have had the ability to control both the growth of nations such as Japan, and also the restrictions upon the prices of products from the developing nations, such as those from Southeast Asia or Africa. They have done this by extending their own principles of taxation, by commodifying almost everything, yet inadvertently creating an uncontrollable global monetary system and not truly recognizing the power of “the new kids on the block.”

Taxation

Was it not Benjamin Franklin who said, “In this world nothing can be said to be certain, except death and taxes”? The previous part of this chapter affirms how taxation is a necessary part of society. If we want roads (and road repairers), education for our children or a judicial system, these have to be paid for and some system of federal or city taxation is required to do so. The key principle is how such taxation should be applied: should it be progressively applied to income or to the amount of one’s possessions? Should we have a “purchase tax” upon some (or all?) goods and services? All civilizations have had taxation of some sort. Remember, even Jesus had to ask his followers for a coin, bearing the mark of their Galilean oppressors, and tell them to pay their due taxes with “render to Caesar . . .” (Mark 12:17). We return to the question of “just taxation” in chapter 2.

“Commodification”

In his life-enhancing novel The Alchemist Paulo Coelho said, “Everything in life has its price,” which is daily misquoted by nearly everyone. In today’s labor markets, there is a salary to catch every worker whereas people-traffickers know that even their sisters and brothers have a market value! Whether it’s a new fridge or the latest SUV, we understand that everything even natural resources have their ultimate price—whatever their scarcity. This is the frightening contemporary construct/practice which is known as “commodification.” Part of Marx’s helpful analysis was to remind us that society becomes a danger to itself when it commodifies labor, people or those goods which traditionally did (and even should) not have a price put upon them.

The “global monetocracy”

The mind-blowing 2003 book Gaian Democracies first coined and thus popularized the phrase “the global monetocracy,” which has easily slipped into mass-media usage. The “global monetocracy” concept is the worldwide phenomenon that now money talked and commercially was acting transnationally. Just like General Motors, Coca-Cola, and—how many more would you like to name?

Later we shall return to why this book proved helpful in “redefining globalization and people power.”18 As the noughties evolved, so did the role of transnational companies. For many years, we had watched as the über-rich moved to tax havens, such as Monaco, Panama, or the Cayman Islands. Now companies began emulating individuals, moving their taxable bases to the jurisdiction where they could pay least tax. Nowhere was this more apparent to Europeans than with the global internet-based companies such as Amazon or Google, or those representing the city lifestyle, such as Starbucks or the international banks. Individuals and consumer groups increasingly questioned the injustice that such companies with huge incomes paid little or no tax in the territories generating that wealth.

In January 2016, the UK’s former right-wing Chancellor of the Exchequer19 advocated, in a much-publicized interview, that old-style / “Galbraithian” graduated “corporation tax” (levied on profits) should be scrapped in favour of taxation upon sales in the country concerned. “It is also grossly unfair on smaller businesses, who are unable to shift profits between tax jurisdictions and have to pay the full amount due under UK law . . . . While multinationals can artificially shift profits to whatever tax jurisdictions they choose, sales are where they are, and can’t be shifted . . . the UK should take the lead in implementing this much-needed reform.”20 No wonder his comments were globally reported across those nations where the US$, £-sterling or euros are traded. Time for change.

Recognizing the new players

UK economics professor Jim O’Neill began inventing acronyms for the recently developing circles of countries as serious economic players. His first was BRIC, referring to Brazil, Russia, India, and China. Consider all the media furor about social and economic conditions surrounding the high spending for the 2016 Rio Olympics or the challenges created by Russia’s GazProm in the Arctic (1) or the increasing economic influence of the world’s one billion-plus nations of India and China. O’Neill’s second acronymic circle, MINT, meaning Mexico, Indonesia, Nigeria, and Turkey, are just entering the global stage. O’Neill’s circles of shared economic development are now challenging the supremacy of former key players, such as the USA or Germany, in determining global economic policy.

The bottom line

Capitalist China’s 2015/16 unilateral devaluation of its own currency, the yuan, was the clarion declaring a new global economic order. No longer did a major economy need to heed the USA and indeed it could significantly wound the dollar system. The old days of Venetian ducats, the gold standard, Bretton Woods, or the IMF having any real semblance of control of world economics is probably dying. “China’s reforms are re-shaping the global economy and global politics. Soviet reforms beginning in the 1980s and changes in India in the early 1990s were no doubt inspired in part by China’s successes.”21 No longer will the US dollar be able to ride over the world’s hill, like the US Cavalry, to sort out the mess, as successively Keynes, Galbraith, Friedman, and Greenspan once believed. “In future years, the rising power of China and India could further wound US pride and self-confidence, and further ratchet-up global tensions.”22

It is the transnational corporations and the mega-sized (both in population size and financial clout or growth) nations who now “rule the roost.” As Keith Hebden, the director of the UK’s Urban Theology Unit has prophetically written:

So we reward genetically-modifying, patent-hungry monsters like Monsanto [a food production transnational], even though they create starvation, slavery and environmental disaster, because they dazzle us with the promise of technological and economic salvation. We shop till we drop because Marks and Spencer tell us that there is a lifestyle attached to the sweater we buy. We sacrifice the lives of our military because the oil- and gas-guzzling monsters—which isn’t only the oil industry but all systems dependent upon fossil fuels—demand that we feed them ever more of the earth’s natural resources. We are told that they live to serve us but deep down we all know that we live to serve them. The monsters are our masters.23

In terms of the global oikos, the USA, UK, Eurozone, and Australasia no longer “call the shots.” Many of the new players do not believe as we Westerners believe, nor value human lives as we do. Some have better worldviews about their natural resources or native animals and plants than Westernized nations do. The world that Western economists have created for us will not be the one which our grandchildren inherit—if we still have a planet by then. We have to look afresh at what happens when that (meaning “our”) kind of economic system goes awry. Then what we can do is to start building a better world for those yet unborn—as well as ourselves.

1. da Mosto, Francesco’s Venice.

2. Robin Hood: Prince of Thieves, 1991 film/DVD, dir. Kevin Reynolds.

3. Thomson, Making of the English Working Class, 352.

4. Hart, Trading Nation.

5. Keay, Honourable Company.

6. Smith, Wealth of Nations.

7. www.acas.org.uk

8. Marshall, Principles of Economics.

9. Keynes, Essential Keynes.

10. Marx, Capital.

11. Engels and McLellan, Condition of the Working Class in England.

12. Marx and Engels, Communist Manifesto.

13. Gandhi, Story of My Experiments with Truth, 407–9.

14. Duiker, Ho Chi Minh, 475–88.

15. Galbraith, American Capitalism.

16. Galbraith, Affluent Society.

17. Fenby, Penguin History of Modern China.

18. Madron and Jopling, Gaian Democracies.

19. Lawson, View from Number 1.

20. Interview with Lord Nigel Lawson, in The Daily Telegraph, January 30, 2016.

21. Sachs, End of Poverty, 169.

22. Sachs, Commonwealth, 8.

23. Hebden, Seeking Justice, 30–31.