“How did we all get so screwed up? Putting aside our damaged parents, poverty, abuse, addiction, disease, and other unpleasantries, life just damages people. There is no way around this. Not all the glitter and concealer in the world can cover it up. We may have been raised in the illusion that if we played our cards right, life would work out. But it didn’t, it doesn’t.” Anne Lamott, Almost Everything: Notes on Hope
As a child, was reciting numbers one of the first things you learnt to do ardently and re-peat-ed-ly?
Numbers let us tell time, set meetings/deadlines/expectations, handle money and generally, let the world know when we were born, what we look like (e.g. height, weight, age, blood count, etc.), how to find/contact us (e.g. identity cards, addresses, telephone numbers), keep a record of what we do and perhaps, even let us/others benchmark ourselves (e.g. via exam scores, wages, bank accounts, peers, Key Performance Indicators (KPIs).)
Numbers even super-reinforce how we read reality from the position of “What’s in it for me?” Through your lens of self, overly simplification may predispose you to taking things too personally even if:
“A huge percentage of the stuff that I tend to be automatically certain of is, it turns out, totally wrong and deluded. Here’s one example of the utter wrongness of something I tend to be automatically sure of: everything in my own immediate experience supports my deep belief that I am the absolute centre of the universe, the realest, most vivid and important person in existence. We rarely talk about this sort of natural, basic self-centredness, because it’s so socially repulsive, but it’s pretty much the same for all of us, deep down. It is our default setting, hard-wired into our boards at birth. Think about it: there is no experience you’ve had that you were not at the absolute centre of.” David Foster Wallace
“One of the big lessons from behavioral economics is that we make decisions as a function of the environment that we’re in.” Dan Ariely
“Of all the liars in the world, sometimes the worst are our own fears.” Rudyard Kipling
“Pretend that you have free will. It’s essential that you behave as if your decisions matter, even though you know they don’t. The reality isn’t important: what’s important is your belief, and believing the lie is the only way to avoid a waking coma. Civilization now depends on self-deception. Perhaps it always has.” Ted Chiang
Are you the “god” of your own universe because “Scarcity is what underpins all of economics?”
Does the bedrock of economics keep drilling Scarcity so you are constantly besieged by thoughts of not having/being enough? Preoccupied with lack, do your insecurities then focus you on trying to prove yourself? To win so others have to lose?
Numbers transactionalize relationships, emotions, expressions, communications and increasingly, all aspects of our lives:
Sum of What We Each do in our “Surviving for Self” Belief bubble = The Whole (But is the Whole/Context available to you and I?)
The more you have, the more you will want because lack brings out the worst addictions and also systemically manifests in “Taker and Giver” aka “Predator and Prey” dynamics. Money focuses you on you as comparison and competition ingrain envy, greed and apathy:
“I used to think that top environmental problems were biodiversity loss, ecosystem collapse and climate change. I thought that thirty years of good science could address these problems. I was wrong … The top environmental problems are selfishness, greed and apathy, and to deal with these … we scientists don’t know how to do that …” Gus Speth, US advisor on climate change/Yale professor
Aka Problems Perpetuated by the BAU system?
“There is a growing recognition that the society or system that we have developed over the centuries is a dysfunctional, entropic system that is not good for the people in it or the planet.” Anne Wilson Schaef, Addictive Systems
“Nowadays people know the price of everything and the value of nothing.” Oscar Wilde
Today, numbers dominate global politics and all aspects of our everyday lives but are you cognizant of how national economies are defined and measured? With no context outside of your “Surviving for Self” belief bubble, can their power rely on hardly anyone knowing their relevance in our daily lives?
For instance, how numbers rule us (e.g. mold unnatural behaviors), the obsession with “clock topics,” how BAU normalizes Scarcity and wars and even, how the Iron Law of Oligarchy has inculcated rising narcissism. Or how our world is so inhumane.
Can it be that the invention of double-entry accounting anchors the water we swim in?
That is the first system to allow merchants, financiers and businesses to measure the worth of their business. A general ledger records both sides of a transaction — debit and credit — as assets and liabilities used to calculate profit and loss have to add up to the same value.
Essential to empire building, Accounting — “the language of business” — has helped (the geniuses of mathematics behind) “corporate persons” measure their power and craft their policies.
The earliest extant accounting records that follow the modern double-entry system originated from Amatino Manucci. At the end of the 13th century, Manucci was employed by Giovannino Farolfi & Company, a mercantile partnership based in Florence that acted as moneylenders to the Archbishop of Arles, their most important customer. The firm’s ledger of 1299–1300 evidences full double-entry bookkeeping. Giovanni di Bicci de’ Medici may even have introduced this method for the Medici bank in the 14th century.
The first recorded history of the description of double-entry bookkeeping was made by Benedetto Cotrugli in 1458: Book on the Art of Trade.
“The rise and metamorphosis of double-entry bookkeeping is one of history’s best kept secrets and most important untold tales … Our world is governed by the numbers generated by the accounts of nations and corporations. We depend upon these numbers to direct our governments, organisations, economies, societies … Over the past one hundred years, Accounting has flourished to an astonishing degree, despite the many scandals it has left in its wake. The figures double entry generates have become a sophisticated system of numbers which in the twenty-first century rules the global economy, manipulated by governments, financial institutions and the quant nerds of Wall Street.” Jane Gleeson-White
Double-entry accounting likely led to the rise of joint-stock/public companies and stock exchanges in modern Europe. What C.E. Walker called “the growth of the idea of a corporation” in a 1931 paper on The History of the Joint-Stock Company.
Some were so successful in managing business and trade that they waged wars, conquered continents and evolved into global empires.
The Dutch East India Company was the world’s first joint-stock company while the English East India Company, “the original corporate raider,” was “the mother of the modern corporation.”
“I mean not … to throw any odious imputation upon the general character of the servants of the East India Company …It is the system of government, the situation in which they are placed, that I mean to censure, not the character of those who have acted in it. They acted as their situation naturally directed …” Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations
Isn’t money an agreement between a buyer and seller about the value for the exchange of real goods and services? But since Nixon unpegged gold from the US dollar, haven’t fiat currencies better enabled “legal fictions” (aka corporate persons/corporations) to have no greater god than growth?
Increasingly, money has made it easy-peasy for them to outsource their risks to us while retaining all the key benefits. Everything is seen as a resource to be commodified at the least possible costs for profit and then discarded when no longer of use.
Isn’t the real problem then that to survive, they have to have no greater god than growth?
The Ambrose Bierce’s Devil’s Dictionary defines corporations as “an ingenious device for obtaining profit without individual responsibility.”
But because Scarcity makes you give so much of yourself to earn money, have KPIs conditioned you to see value only through the lens of what’s in it for you through transactions — of making money with money — rather than how money is a Peer-to-Peer tool that psychologically divides us?
GDP and Double-entry accounting:
“The common way of looking at Gross Domestic Product (GDP) is that it’s a metric of economic success: more GDP is more wealth. Wealth is good. “Poverty” (meaning low per capita GDP) is bad. Nowadays, pretty much everyone talks about “economics” like this as if this truism was scribbled on the back walls of the cosmos. This is just looking at one side of the ledger in a kind of global double-entry accounting book.
A logically equivalent way of looking at it is that GDP is a metric of economic exchange required for survival in society as it exists. You can say that some area “produced” $1 billion of output (sounds good), but you can just as easily say that $1 billion was required for that area to sustain itself (sounds bad).
These two are simply logically equivalent. If your view of the world is mediated by GDP, you’re only seeing the extremely small sliver that pops into existence when people exchange something involving legal tender … Most of the increase in GDP across the world is simply the movement from local partially-social partially-under-the-table economies to economies mediated by taxable currency. GDP is only a measurement of how reliant a place or country is on the global economy. Self-sufficiency has a GDP of 0. Wasteful consooomerism has an extremely large GDP.” Luke Smith
Accounting for War authors Michele Chwastiak and Glen Lehman investigate how Accounting has actually helped to rationalize and normalize violence by not accounting for human costs. This numerically guided “thought system” provides decision-makers with a way to think about death and destruction without actually having to think about death and destruction.
What Accounting does not say is what makes the difference as it “reduces people, places and things to quantities and lends itself to an abstract, cold and calculating way of reasoning.”
How Money Became A Central BAU Measure of Competition
“The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” Thomas Sowell
According to Eli Cook, author of The Pricing of Progress, when millionaire capitalists like John Rockefeller Jr. and J.P. Morgan came to recognize the power of financial metrics in their era, they began to plan for a private research bureau that would focus on the pricing of everyday life.
Founded in 1920, the corporate-funded National Bureau of Economic Research (NBER) would go on to play a major role in inventing official measurements of the Gross National Product (GNP) and other related indices of economic activity.
Simon Kuznets, the 1971 Nobel Memorial Prize laureate, was working there when the U.S. government recruited him to oversee the production of the first official estimates of national income. He presented the modern concept of GDP to the US Congress in 1934 but it was only after the 1944 Bretton Woods conference that GDP gradually became the main tool for measuring a country’s economy.
The first United Nations System of National Accounts — an international standard system of national accounts — was published in 1953.
Diane Coyle called GDP “one of the many inventions of World War II” and elaborates:
“But the use of national accounts for the purposes of warfare started much earlier. In 1665, a British scientist and official, William Petty, produced estimates of the income and expenditure, population, land and other assets of England and Wales.
His aim was to measure the whole of the economy in order to assess the country’s resources with regard to its ability to fight a conflict and finance it through taxes …Petty wanted to prove not only that the country could bear a higher burden of taxes, but also that it was capable of taking on its powerful neighbors, Holland and France …To keep proper records for the nation as a whole, he applied the tool of double-entry bookkeeping.
Another early set of estimates of what evolved into GDP, prepared by Charles Davenant in 1695, made the aim of his record keeping perfectly clear. It had the title “An Essay upon the Ways and Means of Supplying the War.”
Michele Chwastiak concurs: “I look at how Accounting influences our perception of war.”
In 1956, C. Wright Mills publishes The Power Elite to share how for the first time in American history, the military elite had formed a strong alliance with the economic elite. Since the 1950’s, most decisions were made behind the scenes so “The fit survive and fitness means, not formal competence-there probably is no such thing for top executive positions-but conformity with the criteria of those who have already succeeded.”
In the words of Alan Wolfe, Mills explains the three prongs of power that had changed the organization of power during their lifetimes:
“First, business had shifted its focus from corporations that were primarily regional in their workforces and customer bases to ones that sought products in national markets and developed national interests. What had once been a propertied class, tied to the ownership of real assets, had become a managerial class, rewarded for its ability to organize the vast scope of corporate enterprise into an engine for ever-expanding profits … Connections still mattered, but so did bureaucratic skill. The men who possessed those skills were rewarded well for their efforts. Larded with expense accounts and paid handsomely, they could exercise national influence not only through their companies, but through the roles that they would be called upon to serve in “the national interest.”
Similar changes had taken place in the military sector of American society. World War II, Mills argued, and the subsequent start of the Cold War, led to the establishment of “a permanent war economy” in the United States. Mills wrote that the “warlords,” his term for the military and its civilian allies, had once been “only uneasy, poor relations within the American elite; now they are first cousins; soon they may become elder brothers.” Given an unlimited checking account by politicians anxious to appear tough, buoyed by fantastic technological and scientific achievements, and sinking roots into America’s educational institutions, the military, Mills believed, was becoming increasingly autonomous. Of all the prongs of the power elite, this “military ascendancy” possessed the most dangerous implications. “American militarism, in fully developed form, would mean the triumph in all areas of life of the military metaphysic, and hence the subordination to it of all other ways of life.”
In addition to the military and corporate elites, Mills analyzed the role of what he called “the political directorate.” Local elites had once been strongly represented in Congress, but Congress itself, Mills pointed out, had lost power to the executive branch. And within that branch, Mills could count roughly 50 people who, in his opinion, were “now in charge of the executive decisions made in the name of the United States of America.” The very top positions-such as the secretaries of state or defense-were occupied by men with close ties to the leading national corporations in the United States.”
In 1968, Robert Kennedy explains what “measures everything except that which is worthwhile”:
“… if we judge the United States of America by that — that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.
If this is true here at home, so it is true elsewhere in the world.”
Isn’t what’s measured how corporations coldly commoditize and monetize what we do, including from our miseries? In our human-fueled economy, does a nation’s income grow at the expense of our well-being, our real wealth and our humanness?
Does it measure how society systemically transforms nature and human activities into an accounting simplification — with our money — rather than what makes us human?
But when your only context for money is you — don’t numeric targets (money as the bills/debt/status/price you have to pay) self-organize you to conform, to work hard for money and to be oblivious to how you and I fuel the BAU system we depend on?
By the 1960’s, the framework for BAU — the paradigm of all paradigms — was almost in place where to rule us with numbers, Scarcity reigns supreme by churning out the Greater fools:
Only TWO companies, Vanguard And BlackRock, today control the planet while the world’s richest 1 percent own 82 percent of the world’s wealth:
“Bloomberg calls BlackRock “The fourth branch of government”, because it’s the only private agency that closely works with the central banks. BlackRock lends money to the central bank but it’s also the advisor. It also develops the software the central bank uses. Many BlackRock employees were in the White House with Bush and Obama.
Its CEO, Larry Fink can count on a warm welcome from leaders and politicians. Not so strange, if you know that he is the front man of the ruling company but Larry Fink does not pull the strings himself.
BlackRock, itself is also owned by shareholders. Who are those shareholders? We come to a strange conclusion. The biggest shareholder is Vanguard.
But now he gets murky. Vanguard is a private company and we cannot see who the shareholders are.”
“BlackRock is an asset manager that helps pension funds and retirees manage their savings through “passive” investments that track the stock market … It is the world’s largest asset manager and “shadow bank,” larger than the world’s largest bank (which is in China), with over $7 trillion in assets under direct management and another $20 trillion managed through its Aladdin risk-monitoring software. Despite its size and global power, BlackRock is not even regulated as a “Systemically Important Financial Institution” under the Dodd-Frank Act, thanks to pressure from its CEO Larry Fink, who has long had “cozy” relationships with government officials.” Ellen Brown
How the world’s top 17 asset management companies invest in each other:
“JP Morgan and 14 other trillion dollar giants are invested directly in Blackrock.” They also invest in Silicon Valley technology companies like Apple, Microsoft, Alphabet and Facebook. “Highly interconnected and inner invested,” they “hold 56–58 percent of Amazon shares. … They meet on a regular basis to maximize their profits. They are responsible for any illegal activities by their firms. JP Morgan Chase, UBS, Barclays, 13 other of the Giants were all implicated in the LIBOR scandal that falsified data used to create the benchmark rates going back to 2003.” Peter Phillips, Giants: The Global Power Elite
“The US has now become the global center for money hiding and illicit wealth storage … An estimated $24 trillion to $36 trillion in wealth, controlled by the planet’s wealthiest 0.1 percent, is now hidden in various mechanisms.” Chuck Collins
Let’s connect some dots over the last hundred or so years to explore the water we swim in. Ask yourself whether numbers self-organize us in a “cradle to grave” business plan.
Snapshot of the last one hundred+ years
“One believes things because one has been conditioned to believe them.” Aldous Huxley
In America, the financial panic of 1907 saw John Pierpont Morgan, then the country’s leading banker, spearheading the 1913 creation of America’s central bank on December 23. Although World War I broke out less than a year later, the Federal Reserve system has been the most powerful single actor in the US economy since.
In 1911, the year Robert Michels publishes Political Parties, Frederick Winslow Taylor, one of the world’s first management consultants, summarizes his efficiency techniques in The Principles of Scientific Management, bluntly articulating:
“In the past the man has been first; in the future the system must be first.”
Money Self-organizes Humans like Cogs in the Machine
”Give me control over a man’s economic actions, and hence over his means of survival, and except for a few occasional heroes, I’ll promise to deliver to you men who think and write and behave as I want them to.” Benjamin A. Rooge
“Let me issue and control a nation’s money and I care not who writes the laws.” Mayer Amschel Rothschild (1744–1812)
Increasing work rate and reducing wages have always been at the core of management science.
Inspired by the assembly line concept he saw in slaughterhouses in the Midwest, Henry Ford consulted Frederick Winslow Taylor on his simplistic “scientific management theory” to completely strip all craft out of the minds of craftsmen and put that into machines and the minds of managers.
On December 1, 1913 — the same month as the creation of America’s central bank — Ford launched his factory assembly line system at his Highland Park plant to systemically start folding our lives into mechanically growing and supporting “legal fictions” around numbers and conformity.
(Earlier that year on May 1, the Rockefeller Foundation was founded as an American private foundation by Standard Oil co-founder John D. Rockefeller (“Senior”), his son John D. Rockefeller Jr. (“Junior”), and Senior’s principal business and philanthropic advisor, Frederick Taylor Gates).
By breaking the assembly of the Model T Ford into the simplest repeatable activities any unskilled immigrant could do, Ford removed the need to think and turned work into a rote task. The less human the workers and the more they resembled machines, the better Ford’s system worked. Like cogs in the machine or gears in a clock, workers became interchangeable or replaceable.
Standardizing the production was easy but the workers had thoroughly disliked the pressure and monotony of the assembly lines. By late 1913, the company had to hire 953 just to expand the workforce by 100 men.
To get workers to do the same repetitive, specialized tasks hour after hour, day after day, Ford introduced the $5 workday. In 1914, the year World War I started, that was over twice the average wage for automakers and he also reduced their workday by an hour.
To show he was the Boss, Ford’s workers first had to be “qualified” for the new wage. Their personal lives were investigated, with advisers conducting home visits, checking bank deposits and even monitoring the workers’ children’s school attendance.
By instilling psychological control and then using money to entice, the Ford Motor Co. went on to double its profits in less than two years. Ford called that the best cost-cutting moves he had ever made.
Can Ford be credited for turning us into the Greater fools as we create goods and services on the world’s factory assembly line that we then fight to buy back from corporations (“legal fictions”) to survive?
“The greater fool is someone with the perfect blend of self-delusion and ego to think that he can succeed where others have failed. This whole country was made by greater fools.” Aaron Sorkin
To survive, “legal fictions” have to compete to have no greater god than growth. Since they control what we need to survive and dangle wages to control our access to that, how can real people not be addicted to competing to mechanically grow them, doing their jobs?
Particularly since the decade-long Great Depression that started in 1929 was the longest, deepest, and most widespread depression of the last century.
Laying the modern BAU foundation?
“The hidden hand of the market will never work without a hidden fist — McDonald’s cannot flourish without McDonnell Douglas, the builder of the F-15. And the hidden fist that keeps the world safe for Silicon Valley’s technologies is called the United States Army, Air Force, Navy and Marine Corps.” Thomas L. Friedman
The Modern Corporation and Private Property was a 1932 book regarding the foundations of United States corporate law where one of its authors prophesized that corporations might become “the dominant form of social organization.”
“Our paper shows that Berle and Means espoused a stakeholder theory of corporate governance that challenged the idea that the sole purpose of a corporation is to create value for the shareholders.
Whereas shareholder value ideology was dominant in the United States in the 1920s, the nation’s corporate governance system moved towards a stakeholder model during the New Deal. We argue that the influential text by Berle and Means contributed to this shift … the cultural shifts that shaped how US companies have historically defined success, treated their workers, and influenced inequality in society.
We suggest, somewhat tentatively, that the ideas of Berle and Means prompted corporate managers to behave in ways that contributed to the relatively low levels of income inequality that prevailed in the United States between the New Deal and approximately 1980. The paper documents how political cultural shifts in the 1970s undermined the popularity of the idea of Berle and Means and promoted a revival of shareholder value ideology. In advancing our explanation for the rise and fall the Berle-Means variant of stakeholder theory, we relate their ideas to United States cultural, political, and military history.
We suggest that the same cultural shifts that contributed to the re-emergence of shareholder value ideology in the 1970s were connected to neo-liberalism and the post-1980 growth in economic inequality in the United States.” Andrew Smith, International Business lecturer at the University of Liverpool Management School
Check out President Franklin D. Roosevelt’s Top 10 New Deal Programs, Bernard Baruch, chair of President Wilson’s War Industries Board (WIB) cum Wall Street financier with a seat on the New York Stock Exchange with responsibility for mobilizing the nation’s industries for war, Hugh Samuel Johnson, the architect for the initial New Deal program who drew upon Mussolini’s National Corporatist system in Italy and
“the man often considered the chief ideologist of the “first New Deal” (roughly, 1933–34), was Rexford Guy Tugwell. Tugwell was a follower of the school of thought known as Institutional Economics, founded by the eccentric writer on economics, Thorstein Veblen. His official position was assistant secretary of agriculture, that is, second in command to Henry A. Wallace, but his influence and empire-building extended far beyond that. In more ways than one, Tugwell is reminiscent of Ellsworth Toohey, in Ayn Rand’s great novel, The Fountainhead.
Tugwell was another of the progressive thinkers enamored of the experiment in war-socialism under Wilson, especially of Bernard Baruch’s War Industries Board (WIB). The First World War, Tugwell gushed, was “an industrial engineer’s Utopia.” He lamented the Armistice, which prevented the WIB from expanding into “a great experiment” in control of production and consumption.” Ralph Raico
For corporations to be free to pursue “the true logic of the global economy,” Trilateralist George Ball later stated, “Global corporations are the best means yet devised for utilizing world-resources according to the criterion of profit: an objective standard of efficiency.”
Growth in Manufacturing Post-War
“The modern spirit is a hesitant one. Spontaneity has given way to cautious legalisms, and the age of heroes has been superseded by a cult of specialization. We have no more giants; only obedient ants.” Roger Lowenstein, Buffett: The Making of an American Capitalist
Russell L. Ackoff, a pioneer in the field of operations research, systems thinking and management science had observed: “The characteristic way of management that we have (been) taught … is [to] take a complex system, divide it into parts & then try to manage each part as well as possible. And if that’s done, the system as a whole will behave well. That’s absolutely false, because it’s possible to improve the performance of each part taken separately and destroy the system at the same time.”
Since a complex system broken and divided into parts leads to increasing operating complexity, functions have to be further divided into smaller managerial hierarchies like accounting, engineering, research and development, human resources, information technology, distribution, marketing, and sales.
In Political Parties, Robert Michels explains a political theory called the Iron Law of Oligarchy — how rule by an elite or oligarchy is inevitable as an integral part of the “tactical and technical necessities” of organization.
Bureaucracy works when the jobs are highly specialized so the work can be highly standardized.
Doing their jobs on the factory assembly line, did the Iron Law measure and benchmark everyone against numeric KPIs? With bureaucratization and specialization as the driving processes, won’t the rise of professional administrators lead to the rationalization and routinization of authority and decision-making?
As centralization occurs, power then ends up in very few hands:
“Bureaucracy happens. If bureaucracy happens, power rises. Power corrupts.” Darcy K. Leach, The Iron Law of What Again? Conceptualizing Oligarchy across Organizational Forms
These few — the oligarchy — will use all means necessary to preserve and further increase their power. “Oligarchy” comes from the Greek word oligarchia, and it means “few governing” :
“The “Iron Law of Oligarchy” states that any organization or society will eventually become an oligarchy. That’s because the people who learn how to succeed in the organization gain a competitive advantage. The larger and more complicated the organization becomes, the more advantages the elite gain. Oligarchs only associate with others who share those same traits. They become an organized minority, while average citizens remain an unorganized majority. The oligarchs groom protégés who share their values and goals. It becomes more difficult for the average person to break into the group of elites.” Kimberly Amadeo
For leaders in organizations, Michels argues: “The desire to dominate . . . is universal. These are elementary psychological facts.” Scarcity ensures seeking power and dominance becomes addictive.
A powerful elite may even operate outside of the formal structure as “cogs” — decentralized and distributed in bureaucratic corporations everywhere — organize and coordinate all the necessary functions, often on a world-wide basis.
In his 2016 article, Michael West identifies the “Oligarchs of the Treasure Islands” as the “Big Four” global accounting firms — PwC, Deloitte, KPMG and Ernst & Young — the masterminds of multinational tax avoidance, the architects of tax schemes which cost governments and their taxpayers more than $US1 trillion a year:
“Although presenting as “the guardians of commerce” they are unregulated and unaccountable; they have infiltrated governments at every level and should be broken up.
This is the view of George Rozvany, Australia’s most published expert on transfer pricing, which is one of the principal ways large corporations pursue cross-border tax avoidance.
At the heart of the issue is a conflict of interest. While the Big Four advise governments on tax reform, they make lavish fees advising their multinational clients how to avoid paying tax.
“They are both architect and engineer,” says Rozvany. “They sell the (tax avoidance) schemes to the multinationals; and in the case of the LuxLeaks scandal last year, they arranged the deals in secret with government, to the detriment of all other sovereign nations and their taxpayers”.
‘Like the Mafia, the Big Four operate with a six-level hierarchy: Partner, Director, Senior Manager, Manager, Senior Associate and Associate,” says Rozvany.
“Compare this with major international law firms whose hierarchy in the provision of advice is three or four levels. And risk is more easily controlled”.
As is also the case with mafia, loyalty and tribalism also have been key factors in the growth and preservation of the business. When it comes to branding however, the accounting firms are without peer.”
The Big Four all have their antecedents in mid-19th century England and grew by merging and taking over smaller firms. By the 1970s, they had become the Big Eight. When Arthur Andersen collapsed amid the Enron scandal in 2002, the Big Five became four.
The individual country partnerships are now similar to a MacDonald’s franchise where they own the local store but owe certain obligations to the franchisor.
“In both cases the brand name carries cache. The difference is that at MacDonald’s the customer gets the same burger every time but, with the Big Four, the customers may get a Lehman Brothers’ burger, or an Enron, WorldCom or AIG burger.”
As Nicholas Shaxson, author of “Treasure Islands”, the bestselling work on tax havens, told us over the weekend, “Like the too-big-to-fail banks, they pose multiple threats to our societies”.
“The Big Four are too influential, in too many countries, in too many parts of the economy. They help their clients exploit loopholes in the law, they milk multiple conflicts of interest, and they lobby governments relentlessly. The wealth they obtain for themselves and for their clients is extracted from the rest of us.”
Since these people maintain power through their relationships with one another, they also create policies that exclusively benefit them, including reinforcing how a Scarcity mindset has you competing to “make money with money” for the Winners to Take All.
As accounting principles became influenced by commercial and political interests, Frontline, the PBS documentary series, details the accounting wars. Three major political battles were fought over stock options, tort reform and an all-out war over the SEC’s attempt to separate auditing and consulting.
On the Enron scandal, James Hooton, then chief of Andersen’s worldwide auditing and Senior Partner (1976–2002) explains how the accounting industry had flexed its lobbying muscle on Capitol Hill:
“It was the first time that accounting principles had become very, very much influenced by commercial interest and political interest. Congress got involved in that debate. Certainly, every company in the United States with a commercial interest got involved in that debate.
“If you move accounting and accounting standards into the political environment, then you’ve lost control over whether those standards are the best standards.”
That decision moved who’s in control away from the principles and the professional standards and more to the commercial side, the client side of the business, the presenting a transaction the best way to present it to show the company’s side of the story, as opposed to the profession’s side.”
At the core of Control/Governance is Accounting — the invisible underlying (distributed and decentralized) operating system that’s embedded into competing “legal fictions” that use numbers to self-organize us.
With our survival embedded into our jobs/belief bubbles, this has us fight to perpetually keep feeding ourselves and each other to the insatiable BAU beast so:
“ … our society is filled with hatred and violence. Everything is like a bomb ready to explode, and we are all a part of that bomb; we are all co-responsible. We are all the policemen and the victim.” Thich Nhat Hanh
Isn’t hidden in plain sight, this massive BAU Operating System (OS) of Control driven by oligarchs running a powerful but opaque Accounting program of Scarcity via the Iron Law of Oligarchy?
But rewarded to think, behave and respond as robotic cogs, many BAU “addicts” fight to sacrifice themselves at the altar of Big Business for no greater god than growth.
The Iron Law of Oligarchy ensures we co-create a toxic paradigm that’s legally more pro Big Business than real people to live. As the cost of living becomes increasingly unbearable, won’t you be wired to constantly FIGHT to buy what we produce to build corporate empires — even if that means racking up huge debts?
Rent-Seeking Experiments by the Greater Fools?
“You might think that giving away money is free, but it is not. Even if you hold a random lottery, potential winners still need to take the time to enter. At my $5 hourly wage, my entry cost me $15. I learned later they received 450 entries. If my experience was typical, the rent-seeking cost of all the applicants was $6,750 just to win a $1,000 scholarship. If you add the time to judge the competition and send return letters, the waste gets even greater.” David John Marotta
Historically, whenever there are new technologies, entrepreneurs will try all sorts of exciting ideas to change the world based on their “Surviving for Self” belief bubbles. A tremendous period of disruption usually follows. But once ideas, experiments, reactions (now aggregated via social networks) and money are pumped, they turn into dumps.
Isn’t what happened during the first dotcom bubble and all the bubbles how real assets get transferred from real people to corporate persons in their rampage to maximize shareholder value/profits?
In the BAU paradigm, any form of competition is a hidden form of rent-seeking.
A Change of Forms based on the Same Direction?
Built on the hierarchical structures Ford pioneered, the BAU paradigm is centered on control and efficiency so “legal fictions” can have no greater god than growth. Today, only the forms are changing.
As data becomes the future of (no) money, there is a gold rush to bridge the virtual economy with the physical world.
According to Investopedia, Gross National Income (GNI) may now be the most accurate reflection of national wealth given today’s mobile population and global commerce:
“GNI calculates the total income earned by a nation’s people and businesses, including investment income. Residence, rather than citizenship, is the criterion for determining nationality in GNI calculations. It also covers money received from abroad such as foreign investment and economic development aid.”
Ian Grigg on Triple Entry Accounting:
“The digitally signed receipt, an innovation from financial cryptography, presents a challenge to classical double entry bookkeeping. Rather than compete, the two melded together form a stronger system. Expanding the usage of accounting into the wider domain of digital cash gives 3 local entries for each of 3 roles, the result of which I call triple entry accounting.”
Amid that, breaking up Big Business continues to be the favored solution:
“To solve the problems created by social media platforms, many politicians are now giving the call to break up big tech. Empowered by their own limited understanding of the matter and blinded by their own biases, their brain has made them believe that impeding the growth of big tech companies will magically give power back to the people.
Here they act just like another kind of anti-intellectuals, who can’t even perceive the real problem, so they think of breaking up the companies as the ultimate solution. The real problem here is the psychological inability of the human population to use the platforms in a healthy manner.” Abhijit Naskar, Mission Reality
In a paradigm that’s legally pro “legal fictions,” Accounting and numbers sit at the core of this system to reinforce “I win, You lose” as our way of life. With the Iron Law of Oligarchy intact, will the above or even decentralized and distributed platforms make any difference?
To outsource our value to codes, to mathematical algorithms formulated and tweaked for powerful interests, the Blockchain and smart contracts have already been bandied about as “trustless” solutions.
Instead of addressing how trust is systemically broken, Bitcoin could even be an early experiment to mind flip us from trusting money to trusting “trustless” technology — to prepare us for new technological inventions hurtling our way.
The crypto/Blockchain people don’t want you to trust people. Just trust their platform. The machine. Trust the algorithm.
We are still deeply enmeshed in an empire building thought system that vests control to “legal fictions” with no greater god than growth. Won’t any new tech/change simply reinforce our living a “cradle to grave” business plan? Especially as AI, robotics, transhumanism, the Blockchain, tokens, smart contracts become probability and statistical attempts to maintain even greater control with data.
Can we really solve our systemic problems with the same BAU logic used to create them?
This is Part I of a two-part article to explore the Water We Swim In (aka how the BAU paradigm systemically molds behaviors). For Part II, click here.
References:
Double Entry: How the Merchants of Venice Created Modern Finance
A Short Account of the History of Mathematics
Why Is There Philosophy of Mathematics At All?
Numbers Rule Your World: The Hidden Influence of Probabilities and Statistics on Everything You Do
How Numbers Rule the World: The Use and Abuse of Statistics in Global Politics
The Power of a Single Number: A Political History of GDP
GDP: A Brief but Affectionate History
Governance by Numbers: The Making of a Legal Model of Allegiance
National Income and Social Accounting
The Making of National Money: Territorial Currencies in Historical Perspective
