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In the AEMS summer school 2022, we discussed a lot of problems so far, such as the climate crisis, the current economic system that focuses on profits and social inequality, and innovative solutions to these problems. The lecture `Money & banking system´ on Thursday the 28th of July by Christian Kreiss provided an insight that there is no limit on how different and controversial the perspectives on solutions to the current problems might be.
At the beginning of the Lecture, Christian Kreiss pointed out that there is a humongous gap between GDP growth and wages that leads to social inequality. He outlined the correlation between productivity and worker’s compensation indicating that as wages increase, so does productivity. He used a line graph for the years of 1948-2014 to support this. The graph also indicated that if wages continued to match productivity 1:1, the minimum wage would be $26 per hour in the US. It was alarming to see the numbers Christian Kreiss used. The fact that CEOs make 351 times workers’ pay and that the richest 10% worldwide own roughly 84% of total net financial assets is truly eye opening. Additionally, Christian Kreiss severely criticized the so-called rent-seeking capitalism, which gives “functionless” investors, as Keynes already called them, an unfair share of the profits a firm makes. Furthermore, Christian Kreiss included interesting questions such as ‘who owns America?’ with outstanding facts of billionaires such as Bill Gates who is the biggest owner of farmland, owning 242,000 acres of land. This allowed us to really realize the severity of the issue of inequality and how power as well as money is unevenly distributed. He also followed up on looking at how rent could be reduced without dividends to international shareholders and how, if they are paid to employees, wages can increase significantly. Using the example of Mercedes, Christian Kreiss outlined how workers who provide high productivity only get around half the wealth they produce.
While we can agree with Christian Kreiss on the abovementioned problems in our current economic system and that it's about time they were addressed, some of the suggested solutions need further discussion.
The lecturer stated that there is a prevailing mismatch between supply and demand that needs to be solved. He argued that right now, to avoid a depression and deflation process, we should increase consumption in the short run while we should bring down consumption in the long run. Relating to this, it should be stated that increasing consumption further, even in the short run, puts immense pressure on our environment, which we can not afford anymore at this point from a scientific point of view. Also, Christian Kreiss didn't explain the transitory phase of how we would then move from a higher consumption level back to an even lower level than the current one.
Another part of the suggested solutions was about free science and free press. In this part, there weren't as many empirical facts to prove the point that the press, especially in Germany, isn't free at the moment. The claim was missing some scientific foundation.
Christian Kreiss’ ideas on how to abolish the hidden wealth fee by giving back the money to the low-income households, namely by implementing a progressive property tax on real estate, rent taxes, that are used to reduce taxes for low-income people and by implementing a stamped currency, were very interesting. It is however uncertain if these are as easy a solution as stated on the slides. It would have been of interest to hear more details about how these solutions might work in reality and how they would help to solve the problem.
Another important solution Christian Kreiss mentioned was the system of vouchers being used in schools to implement and encourage free education as well as free choice for those who cannot afford it. Kreiss used the example of Germany for this solution as he argued that free education can eradicate the problem of inequality in the economic system. This proposal of using a voucher provided, can be criticized. The wealthier population may still have the utmost power of choosing private schools as well as investing in them, having control. This also means the possibility of limited spaces in private schools, which may force those who rely on the vouchers to have limited choice and possibly be forced to attend public schools. In addition, it can be criticized whether the government will be willing to or be able to (in less developed countries) afford implementing this solution as Christian used Germany as an example which may not be applicable to other countries. An example of where else this is implemented is in Sweden, which introduced a nationwide universal voucher program in 1992. Using taxpayer money, the vouchers provided parents a freedom of choice in taking their child to a private or public school. This has been very effective, however it is key to note that Sweden has a financial advantage and is not very densely populated compared to some countries. Additionally, using taxpayer money can create tension amongst people.
Perhaps the focus on improving these public schools (the root of the problem) may be a better solution. Overall, this solution has some faults that could possibly be improved in the future but still provides a good insight on possible solutions that can be helpful to the system in the future.
Christian Kreiss concluded his lecture by stating the importance of inner peace. He further emphasized on the idea of ‘meditation’ which aligns with the idea of ‘inner peace’ that we should find within ourselves, emphasizing how this would allow unity and being able to work together. Following up on this, it has to be argued that without `outer peace´ and with existing looming threats to our planet, sole inner balance might not solve the problems. It is worth mentioning that this conclusion created a small debate after the lecture.
Based on the lecture "Money & banking system" by Christian Kreiss during the AEMS 2022.
Written by: Marlena Schöttl and Njomza Bashkurti