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The Enduring Lessons of John Law
The 18th-century financial genius has left us a remarkable legacy of economic concepts from a time when economic conceptualization was very much at an embryonic stage, and pioneered ideas about banking and monetary policy that are important to this day
‘At the summit of his reputation in 1720, a period lasting just over one hundred days, Law was the most powerful man in France after the Regent, the Duke of Orléans. He was also the richest private citizen in Europe.
For France, brought to the brink by the wars and extravagances of the Sun King, Louis XIV, the Scotsman's financial innovations were a lifeline, but had for consequence a stock-market boom that came spectacularly to grief. The Mississippi Bubble, as it came to be known, left in France a fear of financial modernity that crippled her in her rivalry with Great Britain.
Over the centuries, John Law has been portrayed as a crook, a rake and a madman. James Buchan shows Law was none of those but a powerful mind in pursuit of a vision of public prosperity that overrode all ties to country, property or happiness. Many of his ideas are now the plainest orthodoxy.
Using Law's letters and writings, neglected family papers in Scotland and English county towns, bank ledgers in Genoa and Holland, notarial records and secret police reports in France and Venice, as well as the archive of the Jacobite court in exile, James Buchan resurrects Law's vagabond career. The result is a glimpse of one of the most astonishing lives ever lived.'-amazon.com
John Law: A Scottish Adventurer of the Eighteenth Century
By James Buchan
A Review by Jesse Norman*
‘John Law was by any standards a quite remarkable man. At the apogee of his power in 1720, he was the richest private citizen in Europe and controller-general of finance in France, responsible not merely for the country’s income and expenditure but for its commerce, navigation, agriculture and industry.
He created and presided over one of the earliest and greatest of all stock market boom-and-busts, that of the ‘Mississippi Company’, and inspired another, the South Sea Bubble. And he pioneered ideas about banking, monetary policy and financial markets that were revolutionary in his own time, and retain their importance three centuries later.
Yet Law was not French, not a noble, not an intellectual. On the contrary: he was a Scot, the largely self-educated son of an Edinburgh goldsmith, and a brilliant gambler. Oh yes, and a convicted murderer, who had escaped from jail days before his execution, fled Britain and gone on the run across Europe with his common- law wife.
The story is no less remarkable than the man himself. But both have almost been lost to view. The evidence is scant and scattered, Law himself something of an enigma, his era caught in a turn-of-the-18th-century limbo between the more familiar territories of the so-called ‘Age of Revolutions’, Glorious, American and French. And he is no one’s hero.
Until now, that is. For into this gap steps the polymathic figure of James Buchan: writer of fiction, history and reportage, and author among much else of an excellent life of Adam Smith.
Buchan tells the story and portrays the man with enormous sweep and brio. He has clearly done a vast amount of research among the primary sources, yet somehow manages to combine the historian’s sense of the wider picture with the epigrammatic wit of the novelist, and the antiquarian’s delight in curios.
Of the now forgotten Banbury Peerage case, for example, which first came to the House of Lords in 1661, was renewed in 1883 and may not quite be settled even today, he drily remarks that it was ‘a lawsuit beside which Jarndyce vs. Jarndyce… is an instance of judicial panic’.
This all makes for a heady mixture, which gives a slightly disjointed feel to a complex narrative on occasion, especially in the early chapters. There are few moments of summary and repose in which the reader can gather their thoughts and work out who everyone is, what exactly is going on and what is at stake. But once Law has settled in Paris in 1714 — having absorbed Dutch finance in the Hague and developed his ideas on banking (and made a fortune) in Genoa — then the story really takes off.
Rarely can an entry have been better timed, for the death of the Sun King Louis XIV the following year created turmoil in France. Politically, it led to a power vacuum, soon filled by the Duke of Orléans acting as regent for Louis’s five-year-old great-grandson Louis XV. It also laid bare the true extent of France’s depleted finances. The most powerful nation in Europe was broke. Decades of warfare had exhausted the public coffers and run up huge debts, while the king — and so the state — was forced to divert income to support a huge rentier class of office-holders.
To make matters worse, what taxes there were fell most heavily on the poor. Desperate attempts were made to cut costs by annulling the value of traded debt; the result was a rapid drop in trade and social uproar met by vicious repression.
France needed liquid capital, and it needed it fast. Little wonder, then, that Law’s banking scheme was taken up with enthusiasm by the Duke. In 1716 Law founded the General Bank — soon nationalised as the Banque Royale — which issued its own banknotes, paper money redeemable by coin.
But this was merely the start. Law soon turned his attention from finance. For him, the true purpose of money was not as a store of value but as a means to stimulate trade. Without new sources of revenue, France could never escape the merry-go-round of debt and devaluation. Accordingly, in 1717, he set up the Mississippi Company to build up trade in the vast new territory of Louisiana. Buoyed by favourable subscription terms, investors flocked to buy shares, which rocketed in value, fuelling a wider mania.
In due course, however, Law found himself consumed by his own creation: Company revenues were wildly overestimated and slow to grow, while supporting the Company’s shares with purchases funded by the issuance of banknotes broke the link with coin, leading to a bank run and a huge devaluation.
Yet this was no simple story of swindling, boom and bust. Unlike its South Sea counterpart, the Mississippi Company was a very serious commercial undertaking. In his brief period as controller-general, Law sought a radical simplification of the corrupt, complex and regressive French tax system.
His General Bank was an important innovation, which prefigured modern fractional reserve banking, and many of Law’s insights into money, political economy, monetary policy and banking remain profoundly important today. In effect, he sought to modernise France; to create what Adam Smith would later call a ‘commercial society’, and turn its rentiers into investors at risk. The irony is that his efforts set back France’s commercial development and ultimately compounded many of the problems he sought to solve; problems that would later set the scene for the French Revolution.
Law himself was no self-dealing Gordon Gekko: if anything, he was naive in his personal dealings to a degree. When the bank failed, he and his family were reduced to near poverty, the kindness of others and his own flickering prowess at the gaming table. It is a fascinating, poignant, almost heroic story, and we must thank James Buchan for giving us this masterly account of it.’
*This review by Jesse Norman was first published in The Spectator on 8 September 2018.
John Law
A Reflection by Eric Walberg*
Law’s law: Money = m*c2
‘The power to create money is equivalent to splitting the atom.’
And thus, The Big Question is: ‘So who should create the money?’
'John Law (1671--1729) is a forgotten prophet of economic theory, though everything we do today is based on his Money and Trade Considered: with a Proposal for Supplying the Nation with Money (1705). Schumpeter described him as “in a class by himself … in the front ranks of monetary theorists of all time.”
But it was Marx that really understood Law, “the pleasant character mixture of swindler and prophet.” Law’s misuse of his own theory exposed in embryo, spectacularly (and disastrously), how the stock market and speculation would lead to “a new mode of production”, where “enrichment through exploitation of the labour of others [becomes] the purest and most colossal form of gambling and swindling,” reducing “more and more the number of the few who exploit the social wealth.”
1893, 1929, 2008, anyone? Law was dismissed as a charlan and murderer,* the confidence man behind the Mississippi bubble in 1720. A Scottish economist who believed that money was only a means of exchange that did not constitute wealth in itself, and that national wealth depended on trade. Did I hear ‘banking is theft’ and ‘globalization’?
Gold as money: misplaced concreteness
Adam Smith took Law’s trade angle and spun it into his Invisible Hand. Smith plagiarized Law’s theory of value as based on supply and demand. He used Law’s diamond example of something that was both scarce (i.e., takes lots of labour to produce) and in high demand, which gave it ‘value’.
Money is the exception. It only represents the value by which commodities are exchanged, not having value per se. Worshipping gold as the magic substance that God gave to manage our economies is a classic case of Whitehead’s misplaced concreteness -- attributing an abstract quality to a physical substance.
Why do we think of gold** as money? As valuable? It is accepted as a reliable measure of exchange because its supply is scarce and it has demand (having a use ‘value’ in itself). But it creates trouble (deflation -> recession) because of its extreme scarcity. We can do better. That’s what Law figured out.
From gambler to economist
Law came by his interest in money naturally, as his father was Deacon of the Goldsmiths of Edinburgh. He was a lazy student and forewent university for hedonism and adventure, frittering away his inheritance.*** He applied his mathematical skills to gambling, recouped his fortune, and was appointed Controller General of Finances of France under the Duke of Orleans (regent to Louis XV).
Paper currency was Law’s bombshell. China had it from the 7th century, based on merchant receipts of deposit, though copper coins remained the basis of Chinese currency. In Europe, banknotes first appeared in 1661 in Sweden, guaranteed by the state, backed by gold. Law went a step further, establishing the Banque Générale in 1716, three-quarters of its capital consisting of French government bills and notes, effectively making it the central bank de la France, one of first in history, putting the state in charge.*** No need for gold backing.
Law realized what looks too simple to be true: that money creation will stimulate the economy, that paper money is preferable to metallic money, and that shares are the highest form of money since they pay dividends. Money producing money. Swindler? Confidence trickster? Yes, but blame capitalism, not Law.
He argued that anything could act as backing for money: gold, silver, land. But that ultimately, the backer was the sovereign. The buck/ sovereign stops here. As long as the sovereign is wise and everyone had confidence in him, there will be no bank runs; the economy will purr along.
Gold was traditionally the standard, because its scarcity acted as a strict control mechanism on an overly ambitious monarch. The king could at best debased his gold coins, but could only fool people so far, as price inflation set in with excessive spending.
Law’s policy of using state backed money to stimulate employment and regulate the economy trickled down from the 1930s on, but only when capitalism was in danger of being replaced by socialism. It took the desperation of the US economy hemorrhaging during the Vietnam war for his theory of fiat money to explode onto the world stage. On the 300th anniversary of his birth in 1971, Nixon took the US off the gold standard, making the world’s money the US dollar. Period. Nixon became our ‘wise monarch’, though in deference to the banksters, he didn't go as far as Lincoln's greenbacks and take away their money creating power.
Bubble economics
Law was working for Louis XV in the 18th century, not a reliable monarch to be the producer of money, and there were only the crudest statistics about the economy at that time.
The wars waged by Louis XIV had left the country completely wasted, both economically and financially. The resultant shortage of precious metals led to a shortage of coins in circulation, which in turn limited the production of new coins. Law proposed to stimulate industry by replacing gold with paper credit and then increasing the supply of credit.
As Controller General of Finances in 1720, Law effectively had control over external and internal commerce. His policies both dramatically increased trade and economic activity. He tried to break up large land-holdings to benefit the peasants; he abolished internal road and canal tolls; he encouraged the building of new roads, the starting of new industries (even importing artisans but mostly by offering low-interest loans), and the revival of overseas commerce—and indeed industry increased 60% in two years, and the number of French ships engaged in export went from sixteen to three hundred.
Galileo sans telescope
Law was économiste extraordinaire, the darling of Europe. But he was under Louis’ thumb. Louis took Law’s secret formula and ran with it. His wild spending created a mess, printing money that was used to build his palaces and to purchase the shares in Law’s brainchild, the Mississippi Company. That gained a crazed momentum of its own, leading to the bubble.
During the stock market bubble, the rush to convert paper money to coins led to sporadic bank hours and riots. Squatters now occupied the square of Palace Louis-le-Grand and openly attacked the financiers that lived there. It was under these circumstances and the cover of night that John Law fled Paris in disgrace, barely saving his own neck.
The peaceful atom
To get it right means having: *a stable ruler (NOT an absolute monarch or a populist demagogue), and *sophisticated statistical instruments to estimate the amount of money needed in production/ consumption, and its velocity of turnover.****
The power to create money is equivalent to splitting the atom. Money mobilizes society’s Energy, and economics' Einstein realized it equals the social equivalent of Mass times the Speed of light squared, something like labour power (supply) times desires (demand). As Meyer Rothschild said: Give me control of the nation’s money supply, and I control the nation. Unleashing Law’s theories in the 18th century could only lead to disaster.
It’s fine for Louis to create the money, but not for his own luxuries/ wars; rather, for the good of his people, and according to the needs of the economy.
So who should create the money?
In the first place, it is essential to take the money creating role away from banks. Their interest is ‘interest’, profit. Period. Not social well being. Secondly, the 2008 financial crisis demonstrated once again that bankers are always tempted to gamble, that they should be limited to issuing loans based on 100% of their reserves, i.e., full reserve banking).
Sovereign money should be issued by a central bank under the direct authority of the ‘sovereign’, society's embodiment. Why leave the real economic decisions up to bankers? Let the state determine how the economy should develop, using as its secret weapon the creation of money (with proper oversight and the help of well-intentioned investment bankers). Atomic power used rationally.
Ultimately Law failed as policy-maker, in part because of the profligate king and the entrenched interests of the day, in part because of the lack of statistical instruments. It’s time to ‘take up the torch’.
*He killed an opponent in a duel and was sentenced to death, later commuted to a fine. The victim’s brother appealed and Law had to escape to Amsterdam. After his spectacular career as French finance minister, he pined away abroad, and died in poverty, forgotten to all.
**Silver or copper are too plentiful, making storage a problem
***His mother rescued the family home, buying it from him to pay off his debts
***There were six such banks that issued paper money, along with Sweden, England, Holland, Venice, and Genoa.
^Velocity of money = Nominal GDP/ money in circulation'
*This article was first published at EricWalberg.com on Saturday, 03 November 2018
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What is EDUCATION if it is not about VALUES?
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A few months back, I posted a Blog, highlighting the major shortcomings and failures of Business Schools and their ‘fancy’ and most-often, useless MBAs. Whilst, a few years earlier in another Blog Values, Ethics, and the Common Good in MBA rankings: Where are they? I had shed light on the tragedy and consequences of the values-less business education.
Today, I wish to continue with the same theme, by sharing an article by an authoritative observer and practitioner of this very important subject.
Rana Foroohar is a Global Business Columnist and an Associate Editor at the Financial Times, based in New York. She is also CNN’s global economic analyst. In a recent book, Foroohar discusses, amongst other topics, the reasons behind the failure of business education to provide informed and capable business leaders, able to lead good businesses.
I very much believe that the article that I am about to share with you, sums it all up pretty succinctly, debunking the myth of the so-called business education and the MBAs.
However, before sharing Foroohar’s reflection with you, I believe it will be helpful, if I can shed some light on the following pertinent question first:
What is EDUCATION if it is not about VALUES?
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Lest we forget
'In the absence of the sacred, nothing is sacred. Everything is for sale.'
Before the rise of the inhumane, values and moral-free, money-obsessed neoliberalism, nobody tried to monetise learning on an individual basis; higher education was accepted as a public good. But, today, the value of learning will always be a puzzle unless you can count it in cash, the more the better. Then, you have made it, you are a success now, worthy of all praise!
‘Education is a process of inviting truth and possibility. It is the wise, hopeful and respectful cultivation of learning undertaken in the belief that all should have the chance to share in life.’
"Education to Build a Better Future for All"
Some say that my teaching is nonsense.
Others call it lofty but impractical.
But to those who have looked inside themselves,
this nonsense makes perfect sense.
And to those who put it into practice,
this loftiness has roots that go deep.
I have just three things to teach:
simplicity, patience, compassion.
These three are your greatest treasures.
Simple in actions and in thoughts,
you return to the source of being.
Patient with both friends and enemies,
you accord with the way things are.
Compassionate toward yourself,
you reconcile all beings in the world.-Lao Tzu
‘Education of the mind without education of the heart is no education at all.’-Aristotle
“Try not to become a man of success, but a man of value.”- Albert Einstein
“The plain fact is that the planet does not need more "successful" people. But it does desperately need more peacemakers, healers, restorers, storytellers, and lovers of every shape and form. It needs people who live well in their places. It needs people of moral courage willing to join the fight to make the world habitable and humane. And these needs have little to do with success as our culture has defined it.”-David Orr
'We live in a world with many complex problems, at all levels, local, regional and global. It is said that education is the key that opens the door to a more harmonious world.
The pertinent question is: What kind of education and learning would help us address these challenges and create a sustainable world and a better life for all?
T.S. Eliot posed the question: "Where is the Life we have lost in living? Where is the wisdom we have lost in knowledge? Where is the knowledge we have lost in information?"
Reflecting on the questions above, we are going to need an education system that respects planetary boundaries, that recognises the dependence of human well-being on social relations and fairness, and that the ultimate goal is human well-being and ecological sustainability, not merely growth of material consumption.
The new education model recognises that the economy is embedded in a society and culture that are themselves embedded in an ecological life-support system, and that the economy can't grow forever on this finite planet.
In short, we need to listen to our hearts, re-learn what we think we know, and encourage our children to think and behave differently, to live more in synch with Nature.
If we do this successfully we can become wiser as a species, more “eco-logical.” We and the planet that gave birth to us can be happier and healthier, healed and transformed.'...
Brexit, Trump and the failure of our universities to pursue wisdom
The Journey to Sophia: Education for Wisdom
Our Emotional Inheritance and the need for Emotional Education
Make 2017 the Year of Values-led Education to Make the World Truly Great Again
And now, reverting to Foroohar’s article:
Her words and sentiments are music to my ears, as noted and acknowledged in My Economics and Business Educators’ Oath: My Promise to My Students, which I sincerely hope one day business schools will adopt, guiding them on how they may form their new moral and spiritual compass and find the path to values-led business and economics education in the interest of the common good.
Thus, here, I am joining with Rana Foroohar, by endorsing her call for values-led business education.
‘Want to Kill Your Economy? Have MBA Programs Churn out Takers Not Makers.’
Why has business education failed business?
By Rana Foroohar*
A very confused and dejected business leader with MBA, most likely!
Too much information but not much wisdom and knowledge!
What a sad state of affairs, you might say, these people running the world today! Photo:evonomics.com
After the financial crisis of 2008, many people predicted that there would be a crisis of capitalism. The best and the brightest would forgo careers filled with financial ledgers and become teachers or engineers, or start small businesses. Needless to say, that didn’t happen. In fact, getting an MBA has never been a more popular career path. The number of MBAs graduating from America’s business schools has skyrocketed since the 1980s. But over that time, the health of American business has decreased by many metrics: corporate R&D spending, new business creation, productivity, and the level of public trust in business in general.
There are many reasons for this, but one key factor is that the basic training that future business leaders in this country receive is dictated not by the needs of Main Street but by those of Wall Street. With very few exceptions, MBA education today is basically an education in finance, not business—a major distinction. So it’s no wonder that business leaders make many of the finance-friendly decisions. MBA programs don’t churn out innovators well prepared to cope with a fast-changing world, or leaders who can stand up to the Street and put the long-term health of their company (not to mention their customers) first; they churn out followers who learn how to run firms by the numbers. Despite the financial crisis of 2008, most top MBA programs in the United States still teach standard “markets know best” efficiency theory and preach that share price is the best representation of a firm’s underlying value, glossing over the fact that the markets tend to brutalize firms for long-term investment and reward them for short-term paybacks to investors. (Consider that the year Apple debuted the iPod, its stock price fell roughly 25 percent, yet it rises every time the company hands cash back to shareholders.)
This dysfunction is reflected at both a philosophical and a practical level. Business schools by and large teach an extremely limited notion of “value,” and of who corporate stakeholders are. Many courses offer a pretense of data-driven knowledge without a rigorous understanding and analysis of on-the-ground facts. Students are given little practical experience but lots of high-altitude postulating. They learn complex mathematical models and ratios, but these are in many cases skills that are becoming somewhat devalued. As Nitin Nohria, dean of the Harvard Business School, admits, “anyone can teach you how to read a P&L [profit-and-loss statement] or value a derivative; those kinds of things have become commoditized.” The bigger challenge is to teach America’s future business leaders how to be curious, humane, and moral; how to think outside the box about problems like funding the research for a new blockbuster drug. And how to be strong enough to stand up to Wall Street when it demands the opposite.
Sadly, most business schools in America aren’t doing that. What’s more, unlike those in many other countries, they aren’t so much teaching the specifics of the industries students want to enter, or even broader ideas about growth and innovation, as they are training future executives to manage P&Ls. It is very telling that Finance 101 is always a mandatory MBA course, while most others are not. But finance isn’t taught in a way that is rigorous, or truly representative of the real world. Financial risk modeling, one of the basic concepts taught in business schools, is an inexact science at best; many people feel it’s more like rune reading. After all, it involves throwing thousands of variables about all the bad things that could happen into a black box, shaking them up with the millions of positions taken daily by banks, and extrapolating it all into a simple, easy-to-understand number about how much is likely to be lost if things go belly-up. What could possibly go wrong, especially when you’re relying on past assumptions (“the sovereign debts of the United States and Europe will never be downgraded!”) and don’t account for the fact that market-moving events often create their own momentum? Yet the notion that financial models can reveal truth is still taken as fact in most business schools—that was, of course, one of the key factors that fueled the great financial crisis of 2008. “The premise of financial theory [taught in MBA programs] is bogus,” says Robert Johnson, an economist and former quantitative trader for George Soros’s Quantum fund who now heads the Institute for New Economic Thinking, an influential group that, among other things, is trying to broaden the nature of economics and business education. “That’s why we end up living with very thin margins of safety—because of the pretense of knowledge and precision about the future which does not exist.”
Meanwhile, the social, moral, and even larger macroeconomic consequences of corporate actions are largely ignored in the case studies students pore over. Even after the financial crisis, a survey of the world’s one hundred top business schools (most of them in the United States) found that only half of all MBA programs make ethics a required course, and only 6 percent deal with issues of sustainability in their core curriculum, despite the fact that a large body of research shows that firms that focus on these issues actually have higher longer-term performance. Instead, students are taught that what matters most is maximizing profits and bolstering a company’s share price. It’s something they carry straight with them to corporate America.
People do keep heading to business school, though—in large part because business, and in particular the business of finance, is where the money is. A full quarter of American graduate students earn a master’s degree in business, more than the combined share of master’s degrees sought in the legal, health, and computer science fields (business is also far and away the most popular undergraduate degree). The greatest percentage of those who receive an MBA degree end up not in industry, but in some area of finance. Although figures have dropped somewhat since the financial crisis of 2008, the financial conglomerate—banking, insurance, hedge funds, investment management, and consulting firms—is still the largest single block of MBA employers, along with the accounting and finance departments of Fortune 500 companies. Given that the quickest path to being a CEO these days is through a finance track, many of the top decision makers in the largest and most powerful firms not only have an MBA, but come from one of a handful of elite programs, like Harvard, Chicago, Columbia, and Wharton. “[Within] the first three months of your MBA program, you’re surrounded by people in suits,” says one 2015 graduate of Columbia Business School. “It’s not peer pressure, but there’s definitely a social element to feeling like you want to revert back to mainstream [areas of employment] with job security.” She, like most of her peers, is planning to work for a consulting firm, an investment bank, or a private equity shop upon graduation. Given the six-figure cost of an MBA education, that’s not so much a choice for many students as it is a financial necessity.
Yet ironically, many business leaders, even those who have MBAs themselves, have begun to question the value of these programs. “I went to business school before I knew any better, kind of like sailors get tattoos,” jokes former GM vice chairman Bob Lutz, whose book Car Guys vs. Bean Counters decries the rise of the MBAs. The problem with business education, according to him, is that students are taught not what happens in real business—which tends to be unpredictable and messy—but a series of techniques and questions that should take them to the right answers, no matter what the problem is. “The techniques, if you read the Harvard Business School cases, they are all about finding efficiencies, cost optimization, reducing your [product] assortment, buying out competitors, improving logistics, getting rid of too many warehouses, or putting in more warehouses. It’s all words, and then there’s a sea of numbers, and you read it all and analyze your way through this batch of charts and numbers, and then you figure out the silver bullet: the problem is X. And you’re then considered brilliant.” The real problem, says Lutz, is that the case studies are static—they don’t reflect the messy, emotional, dynamic world of business as it is. “In these studies, annual sales are never in question. I’ve never seen a Harvard Business School case study that says, ‘Hey, our sales are going down and we don’t know why. Now what?’
Lutz believes this kind of approach was one of the things that tanked the American automobile industry and manufacturing in general from the 1970s onward. He’s not alone. Many of America’s iconic business leaders believe an MBA degree makes you less equipped to run a business well for the long term, particularly in high-growth, innovation-driven industries like pharmaceuticals or technology, which depend on leaders who are willing to invest in the future.
MBAs are everywhere, yet the industries where you find fewer of them tend to be the most successful. America’s shining technology and innovation hub—Silicon Valley—is relatively light on MBAs and heavy on engineers. MBAs had almost nothing to do with the two major developments in the American business landscape over the last forty years: the Japanese-style quality revolution in manufacturing and the digital revolution. Indeed, the top-down, hierarchical, financially driven management style typically taught in business schools is useless in flat, nimble start-up companies that create the majority of jobs in the country. Moreover, when that style is imposed on Silicon Valley firms, they typically falter (think of John Sculley, the Wharton MBA who made the ill-fated decision to oust Steve Jobs after his first tenure at Apple, or the reign of Carly Fiorina at HP, during which that company’s stock lost half its value). One of the scariest trends in business these days is the increased movement of MBAs and finance types into the technology industry. They now are bringing their focus on financial engineering and balance sheet manipulation to firms such as Google, Apple, Facebook, Yahoo, and Snapchat—a shift that, if history is any indicator, doesn’t bode well for the future of such firms.
Why has business education failed business? Why has it fallen so much in love with finance and the ideas it espouses? It’s a problem with deep roots, which have been spreading for decades. It encompasses issues like the rise of neoliberal economic views as a challenge to the postwar threat of socialism. It’s about an academic inferiority complex that propelled business educators to try to emulate hard sciences like physics rather than take lessons from biology or the humanities. It dovetails with the growth of computing power that enabled complex financial modeling. The bottom line, though, is that far from empowering business, MBA education has fostered the sort of short-term, balance-sheet-oriented thinking that is threatening the economic competitiveness of the country as a whole. If you wonder why most businesses still think of shareholders as their main priority or treat skilled labor as a cost rather than an asset—or why 80 percent of CEOs surveyed in one study said they’d pass up making an investment that would fuel a decade’s worth of innovation if it meant they’d miss a quarter of earnings results— it’s because that’s exactly what they are being educated to do.
*This article by Rana Foroohar, adapted from her recent book, Makers & Takers: The Rise of Finance and the Fall of American Business was first published in the Evonomics
See below for more inspirational and related readings:
What is this life all about?
Why am I here? What’s my Life’s purpose? How can I make the most of my Life?
The Wisdom Corner
The links noted below are amongst my Blog postings which are there to provide ideas for inspirational stories for everyone, encouraging contemplation, soul searching and spiritual enrichment.
Whenever you get a chance, please take a few minutes to watch, listen and read some of the amazing narratives below: They are some examples of the many gems I have discovered in my life journey from the wisdom of others. They have opened new horizons in my life. For that I cannot be grateful enough.
Here, by sharing their wisdom with you, I hope they will do the same for you:
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'Slavery was abolished by most countries 150 years ago, but bonded and forced labour, trafficking and exploitation persist'
Yes. It is true: There are more slaves in the world today (2018) than at any time in history!
Photo: Modern-day slavery: The numbers
Many years ago, when I was at high school, in our history classes, we studied many historical events. One of them, was about ‘Slavery’. I recall that our teacher told us that ‘Slavery’ was abolished for good in 18th century!
When was slavery abolished?
Slavery was abolished in the U.S. in 1865 with the 13th Amendment. Slavery was abolished throughout the British Empire with the Slavery Abolition Act 1833. In 1848, France colonies abolished slavery...Continue to read more
It appears that my high school history teacher was very optimistic! There are more slaves in the world today (2018) than at any time in history! Wow! So much for the abolition of slavery!
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What is modern-day slavery?
'About 150 years after most countries banned slavery – Brazil was the last to abolish its participation in the transatlantic slave trade, in 1888 – millions of men, women and children are still enslaved. Contemporary slavery takes many forms, from women forced into prostitution, to child slavery in agriculture supply chains or whole families working for nothing to pay off generational debts. Slavery thrives on every continent and in almost every country. Forced labour, people trafficking, debt bondage and child marriage are all forms of modern-day slavery that affect the world's most vulnerable people.’...Continue to read
Why are millions of people trapped in slavery?
Photo: Rotarians Combating Modern Slavery
Slavery is illegal in throughout the world, yet an estimated 21 million people are enslaved globally. To put that number in perspective on Anti-Slavery Day, there are more slaves in contemporary society than at the height of the transatlantic slave trade. But would you recognise a modern slave if you saw one in the street? Watch the video
Global forced labour generates $150bn a year in illegal profits
'Forced labour in the global private economy generates illegal profits of $150bn (£89bn) a year – three times more than previously thought – according to a report that lays bare the lucrative scale of the exploitation faced by millions of people trapped in modern-day slavery, coerced employment and trafficking.
The study, by the UN's International Labour Organisation (ILO), found that almost two-thirds of the total profits ($99bn) came from commercial sexual exploitation; the rest was derived from forced economic labour, such as domestic work, construction and mining.
According to ILO estimates, more than half of the 21 million people believed to be experiencing forced labour, trafficking and modern-day slavery are women and girls in commercial sexual exploitation and domestic work. Men, meanwhile, are most commonly exploited in agriculture, construction, manufacturing, utilities and mining – sectors that together account for $43bn of the annual illegal profits. The remaining $8bn comes from the savings private households make by either not paying or underpaying domestic workers held in forced labour.
Annual profits per victim are highest in developed economies and the EU ($34,800 per capita), followed by countries in the Middle East ($15,000 per capita), and lowest in the Asia-Pacific region ($5,000 per capita) and in Africa ($3,900 per capita).'...Continue to read
What a shameful and corrupt world we have created.
Thus, let us come together, once again, and campaign for the abolishment of slavery.
How? What can we do? ...Watch these pages
- A Sure Path to build a Better World: How nature helps us feel good and do good
- Economic Growth: The Index of Misery
- Sears: The Shameful Failure of Edward S. Lampert and Ayn Rand’s ‘Virtue of Selfishness’ Business Model
- People's Manifesto for Wildlife
- It’s time for a showdown: Economic Man vs. Humanity