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    In Search of an Economic Quantum In the World Economy.
    In Search of an Economic Quantum In the World Economy.
    In Search of an Economic Quantum In the World Economy.
    Ebook185 pages1 hour

    In Search of an Economic Quantum In the World Economy.

    By Aline de Valdomond

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    Considering the World Gross Domestic Product WGDP as a representation of all the production by humankind, is it possible to define a smallest common quantitative measure, an «economic quantum» at an individual level, whose aggregate will lead to the word GDP ?

    Is this economic quantum the GDP by an individual, produced using his sole physical forces of some 180 kWh/year ? Or is this «economic quantum» the GDP of an ancient Roman or Greek democratic citizen with his 100 slaves, with 15 000 kWh/year ? In any case, the average individual today in Europe uses 47 000 kWh per year, which is much higher than expected if each citizen had only 100 «virtual slaves» at his disposal.

    Written by a non-specialist, a «scientific economy» student, this essay is a kind of visit through the arcanes of modern finance. It reviews elements of economic theories, applies a historical perspective, reviews the link between population, economy and ecology, and the question of the ecological balance, discovers systemic «economic wars», see why the current institutional and legal setting is inadequate, then derive a few practical aphorisms and a speculative model of a world organisation.
    LanguageEnglish
    PublishereBookIt.com
    Release dateApr 26, 2016
    ISBN9781456614294
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      In Search of an Economic Quantum In the World Economy. - Aline de Valdomond

      instrument.

      Figure 1 : L-curve (basic form, from wikipedia)

      Figure 2 : A sequence of L-curves

      Figure 3 : Generational learning model

      Figure 4 : Lucky and Unlucky generations

      Figure 5 : Rate of growth of population per century in Western Europe

      Figure 6 : World Average GDP per Capita (WGDPc)

      Figure 7 : Population and World GDP (from Maddison Tables 8a and 8b)

      Figure 8 : From Unsynchronised & Uncorrelated to Synchronised & Linked L-curves.

      Figure 9 : Price of a Jeans, ZDF, 2009

      Figure 10 : Peak oil

      Figure 11 : M1-M3 velocity

      Figure 12 : Atlantic Cod Stocks (source: Wikipedia)

      Figure 13 : R & D in the EU

      Figure 14 : World Investment Report 2009

      Figure 15 : Maddison p.262 Table 8c WGDP per capita

      Figure 16 : Budget Deficits 2011 in OECD countries

      Figure 17 : Economic Quantum Estimates

      Figure 18 : GDP per capita in Western Europe = 100 slaves, or more?

      1     Introduction

      The economist Richard Cantillon (1680-1734) used the concept of force of Gravity from the scientist Isaac Newton's (1643-1727), along with human reason, to argue in On the Nature of Commerce in General, that rational self interest in a system of freely adjusting markets would lead to order and mutually compatible prices. Unlike the mercantilist thinkers however, wealth was to be found not in trade but in human labour.

      The present essay will start from these premises and investigate the state of the world economy in view of the history of humankind, and lead to the conclusion that the problem of the world today is not capitalism, it is a question of ownership of capital and of a wild financial system, of interest-rate-ism.

      In addition, physics has evolved from Newtonian gravity theory to relativity and quantum theories. Does this evolution also applies to the evolution of economy?

      Jean Jaurès, a French parliamentarian, said in a discourse on 21 November 1893 ² in essence that the People has become king in the political order but slave in the economic order.

      The essay will explore our contemporary reality in 2010, possibly anticipate the 22nd century, with a world perspective, and investigate if that opinion of Jaurès is still valid, at the world level and across generations.

      It will attempt to demonstrate that the world economy is circular, that world finance is elliptic and relate this fact to the observed cyclical crisis. Furthermore, the earth resources are finite and the oppositions between economy, finance and ecology could have negative effect because organised matter is transformed into less organised matter by human activity; multiple garbage together with over-exploitation of natural resources could destroy the basis sustaining human life.

      2     The world economy

      2.1     Definitions

      Creating new theoretical material is outside the scope of this work. Following, at a smaller scale, economists ³ who defined a scientific economy, the essay will review elements of economic theories, try to refine some of their results, interpret others in view of the contemporary conditions in the world, apply a historical perspective, see why the current institutional and legal setting is inadequate, derive a few practical conclusions.

      Dictionaries define that Economy is the science of, within a community, accumulation and use of richness and goods that are necessary to the well being of the individuals. Textbooks teach us that Micro-economy deals with single actors, companies or individuals, and that macro-economy deals with aggregates at a state or nation level.

      Finance represents a flow of monetary resources applied to develop the economy. Finance being a flow and mostly dematerialised is often opposed in the press to the real economy. But it has also become a market on its own, the capital market, whether publicly or stately owned, or private.

      I call commonalism the sense, in a given community, that the common public interest is at least as important, or more, as private interests. It is not communism since communist theory asks for a planned economy and anathematises profits as well as non-work related valuation.

      2.2     The ideal of a World Currency Unit WCU

      Since the renunciation in 1971 of the Gold Standard (established by the «Bretton Woods» agreements in 1944) by the US president R. Nixon, currencies are not any more linked to a physical item. This has the advantage to enable a neutral measurement for all goods worldwide.

      I use the term World Currency Unit WCU to describe a theoretical currency, ideally used and valued worldwide. It would represent the same purchasing power parity ppp among all nations or regions and not be linked to any precious metal. The assumptions are that:

      - The world GDP is approximately the sum of the GDP of South America, EU, USA, ASIA and the Rest Of the World ROW,

      - Each currency represents a proportional portion of Special Drawing Rights (XDR) of the Fonds Monétaire International FMIIMF. A refined weighting system is in use at the FMI but for the sake of simplicity, it is considered here that the major currencies have approximately equal weight, so that

      1 US$ppp ≈1 Europpp ≈1 RMBppp ≈1 BRLppp ≈ 5/5 = 1 XDR ≈ 1 WCU.

      It is to be noted that the current distribution of currencies in 2010 does not reflect the relative economic weight of the various zones: The US$ accounts for 34% of foreign exchange currency turnover while the Euro accounts for only 18,5%, see [⁴], despite their economies being of similar sizes, even slightly larger for the Euro. Therefore, the above formula represents an ideal, that does not hold in view of reality.

      Because of the Euro/$ differential in currency turnover, and apart of a few short temporal windows to promote exports from the Eurozone, the Euro should be higher valued than the US$, at least during a catch up period, to reflect their relative economic weights.

      WCU will be used in this dissertation and, apart for the original citations, the other currencies will be disregarded.

      2.3     Units and Abbreviations

      Internationally normalised measures will be used instead of relics of middle-age nomenclature: The term Dollar is a reminiscence of the Austrian, strong and monopolistic silver money Thaler, first emitted in 1750 by Maria Theresa, Roman Imperator, Duchess of Burgundy, Queen of Hungary, Archduchess of Austria. Throughout Europe, the Thaler was massively exported, accepted, and even seeked for its stability. It remained more or less in use until … 1961 ⁵. The incomparable advantage to have a highly valued and widely recognised Thaler was that it enabled a large chronic deficit in the Austrian current account.

      In the 21st century, some of the data concerning the world, used by world institutions, are still in non International-Standard-Institute ISI units : 1 Barrel oil = 0,156 m³ / 1 Mile = 1,6 km. / 1 Billion US = 1 Milliard EU = 10⁹ / 1 pound = 0,453 kilogram / 1 ounce = 28,35 gram. The international nautical mile corresponds to one minute of arc of latitude (or 1 852 meters).

      I will use also following abbreviations : UK for United Kingdom, EU for European Union (27 states), MS for Member State, L-Curve for Logistic Curve, ONU/UNO for Organisation des Nations Unies/United Nations Organisation (192 states), WGDP for World Gross Domestic Product, OTAN for Organisation du Traité de l’Atlantique Nord, IGK$ for International Geary Khamis dollars 1900, FMI / IMF Fond Monétaire International/International Monetary Fond, ISI International Standard Institute, ETSI European Telecom Standard Institute, ROW Rest Of the World.

      2.4     The Economic Circles

      Several circles will be observed which have specific communities at their centre. The assumption is that the world economy is circular in terms of geographic localisation and outputs, is cyclic in terms of time. The jumps between circles are not continuous, they are defined by multiples of constant minimum quantities: A time quantum k and several economic quantum Qi.

      2.4.1     Negative-Economy

      A child or any person in a developing country who dies of thirst or dysentery because clean water is too expensive or of too bad quality does not have any purchasing power, therefore one can not speak of purchasing power parity.

      These persons can receive help only in direct form, paper money, food or medical consultations, all humanitarian help that depends on charity organisation and goodwill of governments or private persons. That was the main model in the 19th century.

      Since these people only receive, I call this the negative economy, where basic needs are not covered. No amount of work can improve the situation. A small number of people in rich countries also belong to a negative economic circle. The measuring units are a bowl of rice, a bottle of clean water and the volume of relief help sent by rich countries to poor countries or disaster areas; this represents some 50 Milliards WCU/year worldwide. Assuming 1 milliard people in this situation, Q1= -50 milliards/1 milliards = -50 WCU.

      Concerning EU aid, the exchange rate with developed countries is so high that it is often not worth it for the poor countries to reimburse the loans. To give without conditions is not reasonable. To lend with obligation to replenish the capital, not to return it but to further lend it to others even poorer, would be more effective.

      2.4.2     Pico-Economy (10-12)

      A

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