Week 6 — more money
We had class about the role of science in the transition to a Circular Economy. It turned out more philosophical than I had expected; in my opinion we talked about the role of science in society in general. The discussion was about how scientists should behave in different roles: in their role as a consultant or as a scientific researcher. Some claimed that it is okay to be less ‘scientific’ as a consultant, under the condition that you are clear about your current role to others. However, of course you should still be able to stand behind your decisions and judgements, no matter what the organisation you work for would like to get out of your research.
In the second class, all groups had the opportunity to ask Lucas Reijnders some advice regarding their projects. The most important message I got from this class was the advice to look for examples in other parts of the world. In our case, the examples are to be found in Japan, a naturally resource-scarce country. I decided to find out at what they are doing, and read this paper, where the Australian and Japanese recyling methods for concrete in structural applications are compared.
After researching a few very detailed questions on specific instances of recycling, I want to return to the theory on Circular Economy again. There are a few concepts I would still like to clarify: first of all, what is waste? I found a nice definition: “Waste is defined as by-product material of human and industrial activities that have no residual values.” This definition is in agreement with he claim that in a Circular Economy, there is no waste, because in that case all by-products have a value in a new application. Another definition was given by … : “anything different from the absolute minimum amount of resources of materials, equipment, and manpower
necessary to add value to the product.” In this definition, activities that do not have value also fall into the category ‘waste’.
My main research interest is now with the Economy part of CE (as a mathematician I can tell you all about the circle of course).
Economics & Banks
The person I wanted to call is on a holiday now, so I planned an appointment with him next week to ask all my questions. I’ll try to answer some of my basic questions now, so that I can get more out of that conversation next week.
First of all, what is the definition of an economy? Wikipedia: “An economy (Greek οίκος-household and νέμoμαι — manage) or economic system consists of the production, distribution or trade, and consumption of limited goods and services by different agents in a given geographical location. The economic agents can be individuals, businesses, organizations, or governments.” It surprises me that in all definitions I found, the word money isn’t explicitly mentioned. I guess money is a ‘limited good’?
How does the definition of economy relate to the concept of Circular economy? The Ellen MacArthur Foundation defines it as “an industrial economy that is restorative by intention. It aims to enable effective flows of materials, energy, labour and information so that natural and social capital can be rebuilt.” So it is a regular economy, except that after consumption we should add restoring. And what about ‘limited’? When we reuse materials, and keep them in the economy, they should be sort of unlimited, as we can use them over and over again. However, the amount of materials that can be in the Circular economy at one point in time ís still limited.
But still, I don’t understand where money fits into this picture: what is money, and where does it come from? I watched this short video, which explains that banks create money out of nowhere when they give out loans. As long as they have faith in the economy, banks benefit from giving out as many loans as possible, so that they can earn money from interest. “ By creating money in this way, banks have increased the amount of money in the economy by an average of 11.5% a year over the last 40 years. This has pushed up the prices of houses and priced out an entire generation.” I got intruiged- how come I had never heard of this system? So I watched the entire video course from PositiveMoney on banking, I would recommend you watch it in case you are as surprised as I was. The videos are about the situation in the UK, so I’ll have enough to talk about next week, about the situation in the Netherlands. Next week, Joris Luyendijk is guest at Room for Discussion, to discuss his findings from his book Dit kan niet waar zijn, which is also about banking. I’m guessing he will talk about this big surpise too…
Moreover, I did some research on banks in the Netherlands. An initiative called de Eerlijke Bankwijzer (‘the fair bank guide’ or something like that) compares the larger Dutch banks on several criteria. Reading this, the lecture on the role of science in society was still on my mind. How fair is this comparison really? Such an ‘independent comparison’ can greatly influence consumers decisions. Is that fair? In my opinion, the site is pretty harsh in grading the different banks: they get this grade because … . It seems there’s little room left for interpretation and criticism: for instance, the grades for category ‘climate change’ are based on the existence of written-down policy on that matter, not on the actual performance. This means that among others, Triodos gets a lower grade for this category: they only invest in clean companies, but don’t have policy that stimulates CO2 reductions. I find the way the Bankwijzer presents its information too persuasive: it seems that by making the comparison more straightforward to read, they had to omit some subtleties from the analysis. In their role as scientists, they should remain more critical of their own advice, and discuss the limitations of their research on their website. The initiative is meant to increase competition between banks on sustainability, so that they will all invest more sustainably. According to a project manager of the Eerlijke Bankwijzer, it is not their goal to persuade customers to switch banks, however, I think they do have this influence now.
Anyway, I have started the procedure to switch banks, but have not fully based my decision on the Eerlijke Bankwijzer. If I would have, I would switch to ASN because it is tested as most ‘fair’ bank. However, I read many articles where people disagreed with this result, because ASN is part of SNS Bank, and 38% of ASN’s capital is spent on mortgage loans from SNS! A spokesperson of the Eerlijke Bankwijzer claims that one of the reasons why ASN comes out as a winner of the test, is the transparency of their policy. In my opinion, the test is based too much on the policy of a bank, instead of being based on their actual behavior.
I also listened to this podcast about a bank from Sweden, Handelsbanken. It has a different perspective on how banks should work. They have small scale offices in which the managers really know their customers, so that they can make safe, knowledge based decisions when giving out loans. They avoid risk, which to me sounds like a good thing. However, their policy seems directed to a limited group of people, while everyone needs the services of a bank. So I’m not fully convinced that theirs is the way to go, and I am sure that at this point, they cannot be compared to the larger banks. The latter are obliged to allow anyone who wants to open an account.
Called Provamel: my email couldn’t be found, but the person on the phone was very nice and is going to send my email address to the people who make packaging decisions. Update next week ☺
Called Eurest, but was connected many times to people who did not pick up their phone. Will have to find another way?
- Why does the economy have to grow? What does it mean for the economy to grow? What is economic growth of a company? (to Eric & call/email a professor from the UvA)
- How do banks in the Netherlands/Europe work? Do they also ‘create money’ when making loans, like in the UK? (to Eric)
- How does the amount of money in the economy relate to the amount of ‘valuable materials/goods’ in the economy?
- How can economic drivers help in the transition to a more sustainable/circular system? (to Eric)
- Is it necessary to study finance in order to really understand the system? I have the feeling that not every banker has a background in that field… And in the video course I watched, they said that current economics students learn outdated principles. I want to ask Ellen, a classmate from Atelier Nikola, what she is learning about the deposit system.
- How does Japan serve as an example for concrete recycling?