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Anthropologist David Graeber’s new book, Bullshit Jobs: A Theory, raises some excellent questions about jobs, value (economic), values (cultural/societal) and the future of work. I thoroughly recommend the book to anyone who cares about those matters. But the book explores these issues through Graeber’s anarchist-leaning lens and is self-confessedly short on answers that align with Graeber’s own intense scepticism about achieving desirable change through conventional political institutions.

In this pamphlet, I shall attempt to look at the same issues through a Long Finance lens. I won’t pretend that I am long on answers myself – I think the future of work is one of the thorniest long-term problems with which our society needs to grabble at the moment – but I do have some ideas and at least hope to frame some darned good follow up questions.

In the summer of 2015, I was asked to write a futurology piece for SAMI Consulting – the result was Machine Learning and Professional Work – A Lookahead To 2040. Coincidentally, that summer, I first met David Graeber and realised that his seminal 2013 Strike Magazine article, On The Phenomenon Of Bullshit Jobs, was very relevant to my piece. If the world is awash with “bullshit jobs” now, what will it be like in the coming decades when a large proportion of today’s meaningful jobs are either automated away or become bullshit-protected jobs?

So when I chatted with David Graeber again on these matters in April 2018 and he kindly gave me a draft of Bullshit Jobs: A Theory, I decided it was time for me to revisit these crucial issues; this time from a Long Finance – specifically an Eternal Coin - perspective.

Bullshit Jobs: Some Inconvenient Truths

A great many jobs are utterly pointless or even societally harmful – not only from an external, independent perspective, but from the subjective assessment of the people performing those jobs. Graeber reminds us of John Maynard Keynes prediction that, by the year 2000, the standard working week would have been reduced to 10 to 15 hours through automation and productivity gains. Instead, suggests Graeber, we have created swathes of meaningless jobs and protected swathes of obsolescent ones. 

According to Graeber, his article, On The Phenomenon Of Bullshit Jobs, led to a flood of e-mails from people with tales of their bullshit jobs. It also led to YouGov polls in the UK and elsewhere in Western Europe, in which 38% to 40% of respondents declared their jobs to be pointless. Most of those people also stated that they were rendered miserable by their jobs.

We can question the rigour of elements of the research method.  Self-selecting individuals with tales - sometimes monstrous behaviours, sometimes hilarious scenarios of pointless activity, often a combination of tragedy and comedy at the hands of hapless managers – are surely not a representative sample. Nor to some extent are responses to a YouGov survey, however careful the survey method and choice of wording, when the question is a leading one, along the lines of “do you think your job is pointless?”

Yet, almost everyone who reads the book is likely to agree that Graeber is onto something. Bullshit jobs is “a thing”, as the young folks say. Moreover, it is a thing that is likely to become increasingly prevalent as automation’s relentless expansion potentially gobbles up more and more jobs.

Most of us can think of examples we have encountered in the world of work – be it ludicrous bureaucracy or visible employees who can be seen doing little or nothing at all by way of meaningful work.

Those of us familiar with Parkinson’s Law - the original article is still a highly recommended, cracking good read - will recognise the notion that work expands to fill the time available in which to get it done. While Graeber doesn’t reference Parkinson’s Law (surprisingly perhaps), the ideas are quite closly related. Parkinson doesn’t just focus on individuals filling their time, he also quotes, for example, Admiralty statistics that show, laughably, that staffing in the Admiralty continued to grow substantially, even after the British Navy had shrunk markedly.  Many of those Admiralty jobs must have been bullshit jobs; C Nothcote Parkinson was simply too polite to use that term.

Bullshit Jobs: Some Really Good Questions

Graeber sets out three really good questions on page 154, looking at the problem on three levels:

  • Individual: why do people tolerate bullshit jobs?
  • Economic/social: what has led to the proliferation of bullshit jobs?
  • Political/cultural: why isn’t the proliferation of bullshit jobs seen as a societal problem and dealt with?

In his rigorous yet chatty style, Graeber takes the reader on a whistle-stop tour of the history of work, pointing out that the idea of treating time as a monetary currency is a relatively recent social construct, founded at the time of the industrial revolution and steeped in the labour theory of value that, resultantly, emerged in that era. The notion of work being an inherently virtuous way to pass time is not much older, originating during the mediaeval, feudal period, in England and some other parts of Northern Europe, subsequently becoming known as “the work ethic”. Graeber suggests that managerialism is the agent of modern feudalism.

Although this historic analysis doesn’t directly address the above questions, Graeber suggests that this history leads to most people’s sense of dignity and worth being intrinsically linked to work and specifically their job. The irony that so many people largely define themselves by, yet simultaneously hate their jobs is not wasted on David Graeber, nor on me.

Another paradox, which touches on all three questions, is the notion that our society has a (religious or mythological) cosmology imagining that work is an appropriate place for human beings.

Actually, Graeber raises a further darned good question (omitted from the above list) when he suggests that there seems to be an inverse relationship between social values and pay, wondering why this might be the case. He suggests that the answer might, in part, sit with the mediaeval work ethic idea that social value work is done for love whereas paid work is done for diligence and need. In service sector jobs, much of the value emerges from the care element of the work, which is, paradoxically, the least quantifiable element.

Graeber wonders whether the information revolution might be in part the cause of the proliferation of bullshit jobs, simply because information sector jobs and roles tend to be intangible, with benefits hard to measure and value difficult to quantify. He also wonders whether the distinction – perhaps even opposition – between value and values, might eventually lead to a revolt by the caring classes.

An Eternal Coin Perspective On Issues Raised In Bullshit Jobs

The Long Finance concept of the Eternal Coin is a thought experiment about  virtual coin that might represent value, wealth and exchange, sustained over a very long time – see Dr Malcolm Cooper’s paper, In Search of the Eternal Coin: A Long Finance View of History.

In that 2010 paper, Malcom Cooper set out the history of value, starting some 4,000 to 5,000 years ago. David Graeber, coincidentally, covered a similar period in his excellent 2011 book, Debt: The First 5000 Years.

The history element of both of those works is fascinating, but the stored value element, which is the Eternal Coin’s focus, is intrinsically linked with what such a coin might exchange for in the future.  When Cooper starts to discuss what the current and future Eternal Coin might comprise, there is some even more intriguing foreshadowing of Graeber’s ideas in Bullshit Jobs. For example:

“Time and information have always been important contributors to wealth creation, but in the past both impacted on a scale which was measurable. It is no longer clear if this is the case...”  In Search of the Eternal Coin p25

From an eternal coin perspective, it is understandable that many people tolerate their jobs (bullshit or no) simply in order to contribute income towards their individual or family’s existence, while avoiding being a drain on the family’s stored wealth or indeed that of the state.

Further, most people consider aspiration to be a mostly virtuous characteristic in people and in societies.  Cooper again:

“All of our Eternal Coins were driven by aspirations, and for much of the last couple of centuries these have been underpinned by a general belief in human progress towards a wealthier, more comfortable, more secure future. What happens to Long Finance if this belief falters? One of the more compelling historical truisms is that revolutions are often caused by decelerations in the rate of progress and frustrated ambition (thus the place of the middle class in the vanguard of most modern revolutionary movements).” p28

On a potentially more positive note, I have long been intrigued by thinking around information as a model or societal syndrome. I referenced Pat Gratton, Chris Phoenix and Tom McKendree in my 2008 Gresham Lecture, Commercial Ethics: Process or Outcome? Those thinkers, like Graeber, struggled to place idealists - such as inventors, authors of Wikipedia entries and designers of public domain source code - into the conventional, binary divide of societal syndromes, commercial or guardian. They settled on the notion of information syndrome to describe this type of activity. One interesting observation is the economic or value characteristics of such activities. Guardian syndrome activities (which would include bullshit jobs) tend to be negative or zero sum in terms of value, commercial syndrome activities tend to be positive sum. But information syndrome activities are not only positive but potentially unlimited sum activities, as information assets can be widely shared and enjoyed. That is potentially a hugely positive thing for society, but only if we are able to harness for good the rapidly changing characteristics of the things we might do to add value to society.

So, in my view, we don’t inevitably face a dystopian future, or at best a dystopian transition to a better future. It is surely possible to envisage a progressive, positive, evolutionary course through these changes.

Ideas And Aspects Worthy Of Further Exploration

David Graeber only makes one firm policy proposal in Bullshit Jobs: A Theory; a universal basic income (UBI) for all citizens. This is not a new idea, indeed the Permanent Fund Of Alaska is to all intents and purposes a UBI. Further, UBI has recently been trialled in Finland – although personally, I wonder how “universal” such a trial is when merely piloted with 2,000 citizens in a Finnish town.

Of course, most developed nations have something akin to a UBI in the form of benefits systems – they are in theory a safety net to ensure that all citizens have their basic needs covered.

But I am attracted to a similar but subtly different type of system, also not new but barely tested, which I call a universal benefits and income tax system. One of my great bugbears in developed nations such as the UK is the extreme complexity of the benefits and taxation systems. Add to that the lack of integration between those two systems and the result, almost everywhere, is excessive bureaucracy, many instances of unintended consequences, perverse incentives and unfair outcomes. The fact that some of the very highest levels of marginal taxation in the UK occur at very low levels of income, when workers lose benefits and pay tax and pay national insurance contributions strikes me as ludicrous as well as grossly unfair and regressive. A single universal system could iron out much of the complexity, bureaucracy and unfairness in the tax and benefits systems. It would also deliver many of the benefits Graeber and others boast for UBI.

David Graeber also flirts with the idea of centralised economic planning in Bullshit Jobs: A Theory, wondering whether improvements to computerised modelling techniques might right most of the wrongs of Soviet-style economic planning. This was one of the few places in the book where I disagreed with David profoundly – I think macro-economic modelling is one area where the onset of technology couldn’t help unless the society was unbearably repressive, as the same advances that would enable theoretical state-level planning would also enable private sector operators to emulate and game the state-based planning system. It is a surprising suggestion from Graeber who is, for the most part, a small-state anarchist thinker rather than a statist.

What I do believe is that advances in technology and systems can help address many of the social ills that Graeber observes and anticipates, but more through providing infrastructure for bottom-up societal movements than models for top-down state-driven ones. For example, I have long favoured, in theory, local exchange trading systems (LETS) and in particular a subset of such systems known as time banks.  Michael Mainelli discussed these in his 2009 Gresham Lecture Local or Global Network Economics And The New Economy. I explored them further in the a monetary context in my 2010 lecture Changing Money: Communities, Longer Term Finance and You. But despite my enthusiasm for these ideas conceptually, back in 2010 I identified practical problems:

“Yet, word from the front line of LETS is that organising a currency, even a simple, local time bank one, can be very hard work.  Many volunteer-based schemes disappear as rapidly as or even faster than they appeared.  Very few LETS make a transition from community organisation to influencing significant chunks of local business.” Changing Money Transcript p9.

I now believe that advances in distributed systems, not least mutual distributed ledger (or blockchain) technologies could enable many LETS and time banks to flourish beyond the  attractive but small-scale initiatives achieved to date.

I also believe that such technologies could be transformative in the simplification of tax and benefits systems; not only for developed nations such as the UK (discussed above) but also in  developing nations, where many people face far more basic problems, e.g. the inability to prove their identity and/or financial exclusion. Those who are financially excluded are mostly condemned to perform either shit jobs or bullshit jobs. Coincidentally, the various estimates for financial exclusion range between 30% and 40% of the global adult population. Similar to the “problem percentages” that emerge from David Graeber’s research into bullshit jobs and certainly as important if not more important, if our aim is to improve lives, reduce misery and value individual’s contribution to society more fairly.

Further Reading

David Graeber, Bullshit Jobs: A Theory, Allen Lane (15 May 2018), ISBN 0241263883.  See also: On The Phenomenon Of Bullshit Jobs, Strike Magazine, 17 August 2013, 

Dr. Malcolm Cooper, In Search of the Eternal Coin: A Long Finance View of History, Long Finance, Eternal Brevities Series, March 2010,

Ian Harris, Machine Learning and Professional Work – A Lookahead To 2040, SAMI Consultiung 25th Anniversary Series, 7 October 2015,

Carl Benedikt Frey and Michael A. Osborne, The Future Of Employment: How Susceptible Are Jobs To Computerisation?, September 17, 2013,

C. Northcote Parkinson, Parkinson's Law, The Economist, Nov 19th 1955,

Ian Harris, Commercial Ethics: Process or Outcome?, Gresham College, 6 November 2008,

Michael Mainelli, Local or global? Network Economics and the New Economy, 26 January 2009,

Ian Harris, Changing Money: Communities, Longer Term Finance and You, 16 November 2010,

David Graeber, Debt : The First 5000 Years, Melville House Publishing (2014) ISBN: 1612194192

Michael Mainelli and Ian Harris, The Price of Fish: A New Approach to Wicked Economics and Better Decisions, Nicholas Brealey Publishing (2011) ISBN: 1857885716 

An eternal coin perspective on a problem forces us to think globally and to think sustainably. Current paradigms about jobs, value, values and work are neither equitable nor are they viable in our changing world. Humankind no doubt has the intelligence to recognise the problems and invent workable solutions, but do we have the strength of character and leadership to adopt and implement those solutions?

Published: Friday, 11 May 2018 06:07
This article was contributed by Dr Shann Turnbull, Principle of the International Institute for Self-Governance

Neither current Blockchain money nor official money is fit for the purpose of defining economic value or for sustaining life on earth. Both are too complicated. We have standards for weights and measures but the International Accounting Standards Board has no standard unit of value!

Technology now allows: (a) money to be simplified to be only a medium of exchange, (b) economic value to be automatically defined by the ability of humanity to sustain life on earth without consuming non renewable energy resources, and (c) a medium of exchange to be created on a decentralized basis with a negative interest rate so it is no longer a store of value or source of inequality and exploitation. Real assets that sustain life and well-being would provide a superior way to store value.

The concept of economic value is a social construct created by humans. There is no official money that can be defined by any one or more specified goods or services. Money has become disconnected from reality. Astoundingly, disconnected money is used to price real assets for their supposedly “efficient” allocation. But how can this belief in market efficiency make any sense if money cannot be defined by anything real? Is this belief a religion and/or are we insane?

Even if the value of money was defined by a basket of commodities, why should efficiency be the paramount criteria for asset allocations? Efficiency becomes meaningless if humans cannot sustain their wellbeing on the planet. There are many more important criteria for allocating resources such as surviving pollution, extinction of flora and fauna and climate change.

Modern societies are crucially dependent upon energy. Energy can provide the essentials of life like clean air, water, food, clothing and shelter. Sustaining life in any region of the planet becomes dependent upon the ability of each region becoming dependent upon access to benign renewable energy. A sustainable global population depends upon the capacity of each region to service humanity from only benign renewable sources.

The Internet of Things (IoT) allows an index of sustainability to be automatically determined from the efficiency of investment providing benign renewable energy from local sources and the dependency of the host bioregion on using such energy. Data on the efficiency of consuming the production of renewable energy from the installed capacity is already collected . Data is also available on the reliance of each region on renewable energy. The most efficient and dependent regions would obtain the highest index of sustainability.

As renewable energy technology has a life of from twenty to hundred years, a five-year rolling average of its efficient and dependable use would change only slowly and in a predictable way even if major breakthroughs in technology arose. This makes the sustainability index an ideal anchor for defining the value of a medium of exchange. The most sustainable regions would obtain the most value for trading with others.

The stability of the index would exceed any current official or current crypto currencies and so it would promote investment. Official currencies are subject to unpredictable, unknowable, complex political and economic variables. Official currencies are subject to official manipulation or offhand remarks by political leaders as well as unofficial manipulation by bankers, hedge funds and speculators.

It would make compelling commercial sense for trade or investment contracts to use the sustainability index of value, rather any official or crypto-currency to minimize uncertainty. Such contracts could be created by anyone anywhere. Financial innovators could then use credit-insurance to allow such contracts to become publicly traded. The cost of the insurance could be attached to the contract to create privately issued cost carrying money. This type of “negative interest” money emerged in Europe and the US during the Great Depression .

At that time it was issued as paper money that typically was only valid for one week. To maintain its validity users had to affix a stamp to the script each week purchased from the issuer. A stamp of two percent of the face value of the scrip meant the after 52 weeks the issuer had collected 104% of the face value. This allowed the issuer to redeem the money with a 4% profit. Digital money and the Internet now make this type of money practical again. Even without a Great Depression it is now circulating again in Germany . It circulates much quicker than official money because it has the human attribute of “use it or lose it”. For this reason I refer to it as “ecological” money in my writings.

Additional details are in my conference paper. My paper answers in the affirmative the question in its title: “Is a stable financial system possible?” It concludes that sustainable indexed ecological money would:

1. Establish a medium of exchange with a stable predicable value;
2. Recognize only indirectly, over the longer-term, changes in production, consumption or technology;
3. Avoid manipulation by speculators;
4. Reduce the cost of the financial system;
5. Eliminate a financial crisis in one region spreading to another;
6. Eliminate financial instability within each region;
7. Eliminate inflation created by excessive money creation;
8. Create incentives for investment in benign renewable energy and storage systems;
9. Reduce and/or eliminate the need for carbon taxing or trading;
10. Encourages the location and size of the population in each region to become sustainable in perpetuity.

Written by Dr Shann Turnbull who has developed his ideas from three earlier postings in 2013, 2015 and 2017

More discussion on money and the concept of value can be found at The Eternal Coin 

Published: Thursday, 08 March 2018 15:42

Whenever the topic of fraud in the financial sector is discussed, the conversation soon moves on to Ethics. There is usually the subtext that by enforcing ethical behaviour, all backed up with effective teaching of the topic in school, colleges and business schools, fraud will be minimised. It’s not that simple. Ethics is not an absolute and singular notion, however, it is taught as if it is well-defined, usually as some variant of Judeo-Christian morality. That naïve stance does not bear close scrutiny.

In her book Systems for Survival, Canadian economist Jane Jacobs proposed a very interesting model for the ideal community, based loosely on her reading of Plato’s Republic. By looking at how humanity deals with its needs, she divided us up into two groups, each with radically differing value systems; she calls them ‘moral syndromes’. One ‘produces and trades’: this is the ‘commercial’ syndrome and includes the occupations that produce and supply our physical needs. The other ‘scavenges and takes’: this is the ‘guardian’ syndrome composed of individuals who maintain the cohesion and coherence of society. In order to trade effectively commerce needs the guardians both to ward off predators, and to set down and enforce standards of probity. The costs of this service are paid for out of the profits of commerce. The trick is getting the balance right.

Jacobs’s book describes a series of conversations between various characters as they compare and contrast the syndromes. They concluded that each syndrome has a code of ethics, which is not only distinct from the other, but also they are often mutually incompatible, as can be seen in the table below. A society is healthy when members from the two syndromes co-exist in relative harmony. However, Jacobs warns us that “you can’t mix up such contradictory moral syndromes without opening up moral abysses and producing all kinds of functional messes”. She states her “Law of Intractable Systemic Corruption”. Any compromise to the ethical standards of a particular syndrome, for example by employing the ethics of the other, will corrupt the former syndrome’s integrity. The expediency needed to function in such a world of distorted values will convert some virtues into vices, or at the very least individuals become morally inconsistent.

Jacob’s book is full of examples. The transfer of titles and property from father to son is perfectly acceptable in aristocratic societies, but in commercial groups this is considered nepotism. The Mafia was originally formed to protect a Sicilian community from exploitation by its political elite. Only when they moved in on trade to fund their operating costs did their guardian attitudes trigger the Cosa Nostra’s mutation into “a monstrous moral hybrid”. Then their definition of trade began to involve intimidation and bribery. By the same token, whenever economic planning is subsumed by political guardians, as in socialism, the claimed material support of the masses always degenerates into cronyism.

Table: the two codes of ethics 

The Commercial Moral Syndrome

The Guardian Moral Syndrome

  • Shun force
  • Come to voluntary agreements
  • Be honest
  • Collaborate easily with strangers and aliens
  • Compete
  • Respect contracts
  • Use initiative and enterprise
  • Be open to inventiveness and novelty
  • Be efficient
  • Promote comfort and convenience
  • Dissent for the sake of the task
  • Invest for productive purposes
  • Be industrious
  • Be thrifty
  • Be optimistic
  • Shun trading
  • Exert prowess
  • Be obedient and disciplined
  • Adhere to tradition
  • Respect hierarchy
  • Be loyal
  • Take vengeance
  • Deceive for the sake of the task
  • Make rich use of leisure
  • Be ostentatious
  • Dispense largesse
  • Be exclusive
  • Show fortitude
  • Be fatalistic
  • Treasure honour

Source: Jane Jacobs, Systems for Survival, Appendix, Page 215

Commercial planning for guardian priorities, as in the Soviet Union, indeed all socialist states, leads to a collapse of commercial endeavour. Mikhail Gorbachev summed it up beautifully: “they pretend to work, and we pretend to pay them”. By the same token, the imposition of commercial measures will inevitably corrupt the guardian’s sense of honour. Placing key performance indicators on police officers will lead to them ‘fitting up’ innocents so they meet their targets, or letting guilty parties go free ‘for the greater good’.

Practicing guardianship under commercial precepts will lead to ethical dilemmas. Legal systems across the world see nothing wrong in ‘Plea Bargaining’. The accused plead guilty to a lesser charge to save the cost of an expensive trial. However, it ends up with innocents pleading guilty rather than risk both the lottery of a trial and the huge costs of legal fees to themselves. Paradoxically, convicted criminals are routinely set free after serving only a fraction of their sentence because the cost of jailing them has become prohibitive.

Paul Condon, head of the Metropolitan Police for most of the 1990s coined the phrase “noble cause corruption”. In other words officers believed they were justified in bending the rules to get a conviction of career criminals even though they had no proof. By the same token criminals were let off charges provided they ‘traded’ the names of other criminals, or were charged with lesser offences if they admitted to a string of offences (many of which they didn’t commit) just so that the police ‘clean-up’ rate would improve. Jacobs herself describes how officers from the New York Transport Police falsely arrested innocent African American and Hispanic men systematically, just so their productivity measures (arrests-per-working-hour) looked good. It all came to light when they booked an off-duty policeman.

‘Noble cause corruption’ is coursing through the veins of both HMRC and IRS. Virtuous with indignation, tax collectors are targeting the rich, and see nothing wrong in assuming High Net Worth Individual (HNWI) taxpayers are ‘guilty until proven innocent’ – they assume the rich are automatically guilty of not paying their ‘fair share’. Sending out arbitrary tax demands and then insisting that the target must pay up or go to jail, and that it’s the taxpayer’s problem to prove overcharging and claim back the excess. Imagine what would happen if this process is incentivized! What if the tax collectors receive a percentage of every extra dollar/pound/euro they pull in to treasury coffers. We would see Jacob’s ‘Law of Intractable Systemic Corruption’ in operation, and tax collectors would revert to the archetypal social pariahs known from biblical stories.

The stressing of commercial priorities contaminates guardianship, as when politics becomes a profession and politicians display no sense of pride and no sense of shame. “When buying and selling are controlled by legislation, the first things to be bought and sold are legislators”.

Ogden Nash hit it on the head “professional people have no cares, whatever happens they get theirs”. The 2009 scandal of British MPs fraudulently receiving substantial expenses claims is a classic example – Jacqui Smith, the then Home Secretary no less (with the role of overseeing law and order in the U.K.), reclaimed amounts both small (the cost of hiring pornographic movies) and large (declaring her sister’s house in London as her second home, and thus chargeable).

When the normal practices of a group, whether a guardian or a trader, diverge from the ethics of its syndrome then virtue and vice become indistinguishable. The rules of the game lose all meaning. Most of the disgraced MPs saw nothing wrong with what they were doing, because they were operating within the letter of the law, but not the spirit – for example Sir Peter Viggers using taxpayers’ money to furnish a duck house on the family lake! Added to this there are numerous stories of MPs selling influence and access.

Jane Jacobs makes it totally clear that no single system of morality can accommodate both commerce and guardianship. Taking and trading are two fundamentally different syndromes. Mixing them up eventually must create enormous tensions … but not straight away. A series of minor misdemeanours, each in itself trivial and convenient, useful even, are the first steps on the road to perdition. No alarm bells ring; but whenever a ‘nice little wheeze’ is copied, or there are variations on the theme, society gradually slides into full-blown corruption. Drip, drip, drip, until the floodgates open. Then the guardians, instead of being the source of standards, and the punisher of wrongdoers, are corrupt and corrupting. Meanwhile the traders are making you ‘an offer you can’t refuse’. No one asks quis custodiet ipsos custodes? (Juvenal); ‘who guards the guardians’ when morality collapses into vice.

Throughout most of human history, trade and guardianship were rigidly separated, a fact that has been carelessly ignored since the Industrial Revolution. Mediaeval orders of chivalry barred any man whose parent, grandparent, or great-grandparent was a merchant. Anyone who was remotely involved in trade would lose all rank and privileges. Usury, lending money at interest was singled as particularly repugnant. Dante’s Inferno placed usurers alongside sodomites in the seventh circle of hell – both apparently guilty of heinous sins against the natural order of God’s will. This is why it was left to communities on the margins of society to undertake this necessary but distasteful chore of money lending: the slaves in Ancient Athens, the Jews in medieval Europe. According to Franciscus Gratianus, a medieval monk from Bologna “business is nothing but the struggle of wolves over carrion, men of business can hardly be saved for they live by cheating and profiteering”.

India has had the caste system for millennia, with the guardians (warriors and priests) at the top, and trade and crafts in subservient roles. For example, just after the time of Alexander the Great, the Maurya Empire (321-184BC) maintained a huge standing army (200,000 men by some accounts) on the back of trade. The tentacles of the requisite bureaucracy that supported this military state insinuated its way right down to the village level. Tax collectors kept detailed records of people, land and livestock, and all this was supported by a sophisticated network of informants.

The modern day nation-state may seem more sophisticated, but many are still based on the assumption of the same tribal values in that citizens are all property of the state, or rather of the leaders of the state. HNWIs believe that politicians seek to harvest their wealth in order to support the idle poor in society, who in return vote the political elite into power. Although it must be said that it is not just the rich who are targeted. Everyone who is merely successful in what they do can expect to see their consequent above-average income ‘fairly’ redistributed, to support those that the wealthy deem parasites in society, by demanding the right to the good life, free of effort. As a consequence the unemployable observe governments stealing from anyone who works, and so see no point in even seeking work. The problem of moral jeopardy arises when the employed also start questioning the merits of working.

The well-run state recognizes the need for harmony between the guardians and trade. The guardians must deliver the freedom for commerce to operate, and in return they should receive a fair payment from taxes. Death and taxes are always with us, but those taxes should be set at a level where trade sees them as fair payment for services rendered. The state should be one large social network of trust; and trust will only flourish where honesty is the norm. We have witnessed a growing resentment. The HNWIs see their tax dollars being spent on unnecessary wars, on vanity projects, on pork barrel politics, and dissipating in inefficient bureaucracies. This is made worse when interfering and excessive regulations become ‘a denial of service attack’ on the freedom of business to operate effectively.

In a well-run state, the rule of law must be maintained, and the social status of the parties in dispute should not impact on the result of arbitration. In Jacob’s ideal society high rank or political connections should not permit the holder “to terminate a lease on a whim, evade a legitimate debt, welsh on a promise to deliver, withhold agreed-on wages, and so on”. It is the guardians who enforce these virtues, which is why it is best that they are in no way involved in trade, and do not force their ethical values onto traders. To avoid Jacob’s “Law of Intractable Systemic Corruption” disrupting the practice of both trade and guardianship, then the two groups must remain separate. This means that ex-politicians should be barred from taking up highly paid consultancies and directorships in business.

The situation is further complicated when freewheeling HNWIs decide not to stay in a jurisdiction where they are treated as second-class citizens. Having flown the coop at least once, they think nothing of fleeing again, and again, totally undermining the state’s ability to tax and regulate the super-rich. If the guardians want the wealthy to stay, and thus benefit the local economy, then tribal leaders must not overly intimidate the entrepreneurial elite in their society (immigrants and home grown) no matter what the demands of the great unwashed. Any attempt to extort excess wealth from them for the ‘common good’ would be a grave mistake. As far as the HNWIs are concerned the ‘common good’ isn’t good, it is merely common! They agree to pay their ‘fair share’, as long as it is also fair to them: they will insist that their money is spent on projects of which they approve, and from which they see the benefit. The rich did not sign up for excessive taxes and regulation. And yes, they did sign up; but only by default, and unlike the poor, the rich have the choice of leaving. They can un-sign. A world full of regulatory arbitrage and tax holidays awaits. This freedom inevitably places a huge strain on the relationship between trade and guardians.

According to Judge Billings Learned Hand: “Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.” Flying in the face of this logic, nowadays perfectly legal tax avoidance schemes are being treated as anti-social behaviour. To HNWIs all enforced taxation, solely in support of a political machine, is theft; it is the state obtaining money with menaces. For then government has fallen prey to the “Law of Intractable Systemic Corruption” and mutated into legitimate organized crime.

In a healthy society the commercial and guardian syndromes are symbiotic and synchronized, and the abuse of government power by officials is not tolerated. Richard Nixon’s analysis of the state’s power, “When the President does it, that means that it is not illegal”, is simply not allowed. Neither should the behaviour of political elites of the European Union, which ignore the stench of cronyism, corruption and economic mismanagement that hangs heavily over Brussels.

This leaves democratic governments in a quandary. Today’s informed voter demands that their representatives deliver value for money. However, any consequent ‘payment by results’ strategy will inevitably merge the two incompatible moral syndromes into systemic corruption. Therefore Ethics has itself become a problem, and certainly is not a solution.

Ian Angell
Emeritus Professor
London School of Economics

Published: Tuesday, 06 February 2018 15:26

The Global Green Finance Index (GGFI) provided by Finance Watch and Z/Yen aims to promote the uptake of green finance in the world’s financial centres. The GGFI is based on a perception survey of the depth and quality of green finance offerings in different financial centres.

This blog post looks at how perception can complement historical data in measuring and promoting change and how this thinking has been applied to the GGFI.

Perception and measurement

Perception is a natural part of observation and measurement. In finance, a large number of indices and benchmarks rely on the opinions or perceptions of people in a market, such as the Baltic Exchange, or the potash and coal markets, where benchmark prices are set by polling market participants on their price expectations.

Indices that are based on historical transactions also embed some element of perception: benchmarks such as the Dow Jones or DAX 30 are calculated by multiplying the number of shares outstanding by their closing prices. But the closing price of a share is only the value as perceived by the last two people who traded it. Other people may have different views, and large stake sales or takeovers are almost never executed at the previous day’s closing price.

The story is similar outside of the financial sector. Someone trying to identify the world’s biggest shipping port, for example, might look for empirical data on capacity such as the number of container (TEU) movements, the physical area covered by the port, or the number of berths. But empirical measurements still involve perception and judgements. Should we count transhipments as well as imports and exports? Does port area include only land, or also water? How do you account for differently sized berths?

Selecting which metrics to use is itself an act of judgement, incorporating a subjective view about which data is reliable and relevant to answer the question. If the decision-maker has a particular view on how the size of ports ought to be measured, their choice of metrics is likely to reflect that outlook.

Measuring green financial centres

For any index provider, choosing whether to use historical data or informed judgements about the future will depend on the audience and objectives. A house price index based on last year’s historic transactions could give very different readings from one based on informed judgements of next year’s prices; an official from the land registry and a land speculator would probably choose different metrics.

In green finance, activity levels are small compared with the overall market but are growing quickly. A balance of historical and forward-looking metrics should, therefore be more useful than either approach on its own.
Historical data on green finance assets is beginning to emerge but remains patchy. For example, there is no official data on the proportion of green bonds listed on each exchange; data often comes with a long time-lag (in markets that can double in a year); and rules for labelling and reporting ‘green’ assets vary widely between countries. There are many other gaps beside these.

There are also definitional problems. If a green bond is issued by a French company, underwritten by American banks and listed on exchanges in Luxembourg and London, which financial centre should the bond be attributed to? How meaningful is that attribution, given the global nature of many financial institutions and the aim of encouraging green finance uptake across the board?

The alternative to historical data is to use informed judgements about the future, but this approach also has its complexities. As Professor Michael Mainelli from Z/Yen explains: “an informed judgement index needs to find ways of ‘normalising’ a diversity of short-term adjustments, for example a lack of known underlying trades at a point in time, or diverse product sources and destinations, using arithmetic approaches, statistical approaches, panels, ‘model’ contracts, or weightings.”

Our approach in the GGFI

Our approach with green financial centres is to use perceptions as the core data and minimise subjective judgements elsewhere. The GGFI thus gathers informed judgements about the depth and quality of the green finance offerings in the financial centres that respondents know – typically around 5 per person – and then applies “factor assessment” to complete the data set.

Factor assessment is a statistical technique to analyse survey responses against a large set of quantitative data and look for correlations. These are then used to predict the ratings for unrated centres using the correlations that already exist in the survey data.

The technique is used in medicine and industry and has predictive accuracy above 90%. Using it here allows us to bridge the gap between available historical data and forward-looking survey data.

Perceptions can change behaviour

There is also a practical reason to focus on perceptions: the way people think is a big factor in changing behaviour.
Before organisations such as Carbon Tracker began talking about stranded assets – the idea that assets such as oil or gas reserves may become worthless if climate change policies prevent them from being used commercially – many professional investors did not consider the financial risk of owning such assets. But now that perceptions about the role of fossil fuels and climate change have evolved, investment portfolios are changing too. Well-known fossil dis-investors such as New York City and the Norwegian sovereign wealth fund have been joined by more than 800 pension funds, cities, universities, foundations, churches and other organisations in exiting fossil fuel investments.

People’s perception can thus be a powerful force for change and knowing what those perceptions are is the first step.

The comparison between perception and historical data can also be useful. Measures of “green intensity”, which compare green finance with overall financial activity levels, show how far there is to go before financial centres can be said to support a sustainable economy. Historical data shows a green intensity of 2% or less in some asset classes. This stands in stark contrast to the perception that penetration rates for green finance are 30% or more, as revealed by the GGFI survey, even allowing for the time-lag.

Such a difference can illuminate people’s thinking. Whether it reflects optimism or complacency, or something else completely, it will enrich the feedback for policymakers as they develop sustainable finance policies.

The GGFI joins a growing list of initiatives that aim to encourage financing for a sustainable economy, including: UNEP FI’s Positive Impact Initiative; UNEP’s Financial Centres For Sustainability Initiative; the Climate KIC, I4CE and PwC Benchmark of the greenness of financial centres; and UN PRI’s Sustainable Stock Exchanges Initiative.

The GGFI will provide a valuable catalyst and complement to these initiatives.

Greg Ford is a Senior Adviser at Finance Watch

Published: Tuesday, 06 March 2018 09:33

This is the second scenario for the Brexit process: The core argument put forward by the government is for “managed divergence” as the basis of the post-Brexit relationship with the EU27.

So far, the EU27 have stated consistently that there can be no cherry picking with the single market and customs union.  Either we are in or we are out. The Italians have recently stated that the Canada +++ model sounds like the single market without the obligations. Yet this is what the government wants. The basic argument is that there will be some areas where we wish to be fully aligned, some where we wish to diverge and a middle where we can have regulatory equivalence and mutual recognition.