The Global Economy

By August that year, all my projects were completed, and I was repatriated back to Australia in September. Professionally it was a very successful four and a half years assignment for me. I managed to nearly double our few million dollars project margins, and the company awarded me a generous completion bonus. I came home to Australia to two paid off properties and a 6 figure cash in the bank. I am not in a hurry to look for another job or assignment and utilised my time to learn about the Global Economy trying to understand why a catastrophic crisis like we experienced in Asia especially in Indonesia could ever happen.

As a non-economist but a process engineer, I can clearly see straight away that our economic process is flawed. This system is simply unsustainable.

In the primary economic process, the producers produce goods and services to be consumed by the consumers who paid some money for them. At the same time, the consumers are participating in the production process and earning their money as wages or salary. So we have a circulation of goods and services going in one direction and the circulation of money going in the opposite direction.

In the production process, we take some money out of circulation called profit. As long as this profit is injected back into the primary money circulation, the process will be stable. However, what happens is that the profit is injected back to enhance or improve the production process to make more profit. As this process is going on, the accumulation of profit is growing fast and faster while the amount of money in circulation is diminishing fast and faster as well.

As a process engineer, I see this profit as a leak in the system, and the more profit is made, the more significant is the leak. To keep the economic wheel turning, injection of money is done through the credit system. But payment for interest is added to the profit that worsened the leak. The consumers are earning less and less money (in the value of purchasing power) while the accumulated profit built up the capital market, the secondary economic cycle, which is currently the most essential thing in our capitalistic system.

In this system through the stock/capital market we let our money make money and the more money we have, the more money we can make. As a consequence, the rich are getting richer, and the poor are getting poorer. It is as simple as that.

In the year 2000, there were around 360 odd multi-billionaires worth half of the world’s wealth. As my model predicted, within 15 years that 300 odd number has dwindled down to 62 and within two more years it dwindled down further to only 3 (three). Yes, at the time of this writing, only three people have so much combined wealth as much as half of the world’s total wealth.

Thomas Piketty of the Paris School of Economics, and Emmanuel Saez and Gabriel Zucman of the University of California, at Berkeley combined tax survey and national-accounts data to create distributional accounts that they say captures 100% of US income since 1913. The data set reveals that since 1980 there has been a “sharp divergence in the growth experienced by the bottom 50% versus the rest of the economy.” The average pretax income of the bottom 50% of US adults has stagnated since 1980, while the share of income of US adults in the bottom half of the distribution collapsed from 20% in 1980 to 12% in 2014. In a mirror-image move, the top 1% commanded 12% of income in 1980 but 20% in 2014. The top 1% of US adults now earn on average 81 times more than the bottom 50% of adults; in 1981, they earned 27 times what the lower half earned.

The average pretax income of the top 10% of Americans has doubled since 1980, that of the top 1% has more than tripled, and that of the top 0.001% has risen more than sevenfold – even as the average pretax income of the bottom half of Americans has stayed the same.

On the other hand, as the wealthy continue sucking the country, children are getting sick from living by open pools of raw sewage. This was one of many shocking findings by the United Nations late last year (2018), following a two-week investigation into extreme poverty in the US. The UN report was issued by a team of investigators who visited California, Alabama, Georgia, Puerto Rico, West Virginia and Washington DC.

“The United States is one of the world’s richest, most powerful and technologically innovative countries; but neither its wealth, nor its power, nor its technology is being harnessed to address the situation in which 40 million people continue to live in poverty,” wrote Philip Alston, the UN special rapporteur on extreme poverty and human rights.”                                   

Source: blogfactory.co.uk

Here is a link to a recent video Direct From’s most watched video of 2018 about homelessness in the world’s richest country – “The Other Side of L.A.: Skid Row”[1] with Dena Takruri.

Back in May 2000, I participated in an online discussion at The World Bank Development Forum about Globalisation, Development and Poverty. I created a PowerPoint Presentation[2] purporting my thoughts above and suggested an alternative system what I call a “surplus sharing” system. At the same time, I also proposed to create a new “scoreboard” that benefits the community.[3]

But, Geeewish! That discussion must have woken me up from my innocence. It made me realise that either I am too far ahead of my time, or only too naïve to think that our economic system is supposed to be designed to serve humanity. It is, in fact, the other way around. Our economic system is created to enslave humanity for the benefit of some ‘capitalists’. This might sound pretty harsh, but once we really understand how our economic system works, it will look so obvious. We just need to think out of the box of our beliefs on what the economy is.

The World Bank has been talking about alleviating poverty as long as I could remember. In my early career in building the Electricity Network in Java, all my projects were financed by Development Funds, and some of them were funded by IBRD (International Bank for Reconstruction and Development) under The World Bank Group. They are mostly in the form of soft loans with 2% interest for 20 to 30 years.

I can see the benefit of this kind of development funds to finance infrastructure projects as within 10 years of my career in Indonesia, we have built the Electricity Network in Central Java and brought light/electricity to more than 10 million households or over 40 million people. (Average number of people per household in 1980 – 1985 was 4.2 – 5.1)

The Power Station project in East Java that I was involved in my last assignment was financed by the World Bank, while the Power Line project in South Kalimantan that I have just completed was funded by an Australian Loan under a bilateral agreement between Indonesia and Australia.

However, with the economic crisis that brought the nominal value of the rupiah down to 25%, all the loans that the Indonesian Government had taken to lift up the standard of living for the Indonesian people suddenly blew up by a factor of four. It seems to me that all the effort to help people turned into a bigger problem with the economic crisis.

Was it wrong that the Indonesian Government or any Government of a developing country took a loan to build their infrastructure and uplift their people’s living standard and thereby become heavily indebted? As the old saying says; “We should live within our means”. But is it wise to keep the people poor if you can’t afford to uplift their livelihood without taking a loan?

What is wrong is our World Banking & Finance system. They are not created to help people, but to control and dominate nations with debts. Our economic system is not only designed to accumulate profit/capital in fewer and fewer hands but at the same time, wealth in a few hands will give the leverage to control and dominate the rest of humanity – slavery.

I think we need to totally overhaul the whole system.

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[1] URL: https://www.facebook.com/1569761423138547/posts/2006060722841946/

[2] The original PowerPoint slide show is downloadable at
https://mysticreflection.home.blog/wp-content/uploads/2019/01/economy.pps
Please keep in mind that the show was made in the year 2000. The economic conditions were different than now.

[3] Recently China is planning to launch the Social Credit System in 2020. Currently, it creates negative responses outside of China. However, if we start thinking out of the box and develop the criteria carefully, it could be used as the new scoreboard based on ‘integrity’ replacing the current scoreboard based on wealth.

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Post Publication Note:

Here is the 2012 updated version of the abovementioned PowerPoint slideshow on youtube “Redesigning the Global Economy”

In 2013 Chinese President Xi Jinping launched the One Belt One Road (OBOR) Initiative also known as the Belt and Road Initiative (BRI). The initiative aims to enhance global trade and stimulate economic growth across Asia and beyond by developing infrastructure and broadening connectivity through land and maritime routes. It’s the first step in initiating the “Surplus Sharing Economic System” where China uses their Trade Surplus to help build Infrastructure in poorer countries.

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