Over the past decade, the super-rich and big corporations have been able to borrow at historically low interest rates. This influx of cheap money boosted credit markets, allowed record dividend payments and stimulated share buybacks and mergers and acquisitions.
On the other hand, those who, at the same time, were not considered “solvent” found themselves excluded from credit, helpless witnesses in particular to the constant rise in rents. Time and time again, the financial sector flooded parts of the economy while others remained dry. Why then does it seem so difficult to get the monetary system right?
The lack of financial literacy of most citizens is at least one of the causes of this situation, even if there is no consensus on how to define what financial literacy is. On June 7, the European Commission deplored “too low levels of financial literacy in the Union”, which impacts “personal and financial well-being, households and society in general”.
However, the institution takes a rather narrow view of financial education, limited to personal finance, that is, teaching people how to manage their budget, reach their savings goals and understand the different financial products. At the beginning of March, Sigrid Kaag, Dutch Finance Minister, echoed a https://twitter.com/Minister_FIN/status/1640309155650060288 :
“By practicing saving, planning and making choices from an early age, children learn to make wise financial decisions.”
We envision an approach that involves a much more ambitious understanding of the monetary system. We call it “systemic financial culture” and we imagined it to be understood by as many people as possible using a metaphor and a visualization.
Bypass the economic jargon with a map
“In the age of CDS and CDOs, most of us remain financially illiterate”
Here is what wrote in an article of the magazine RollingStone American financial journalist Matt Taibbi in 2009, in reference to the complex financial products that triggered the Great Recession. Fourteen years later, most of us still don’t know the lingo of economists, bankers and tax experts. As in 2009, today’s democracies continue to be divided within what Taibbi described as a “two-tier state, with wired financial bureaucrats at the top and clueless customers at the bottom.”
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We therefore believe that any project aimed at strengthening financial culture must inform us not only about the role of a central bank, but also about the payment infrastructure, the tax system and the investment of our retirement savings (note: the pension system in the Netherlands where the authors work is partly based on a capitalization mechanism). What do we mean by “public services”? Which financial services are best outsourced to private companies? Who has the power to create and allocate new money – and for what purposes? Answering these big questions requires not only a better understanding of financial structures, but also continued political commitment.
Together with cartographer Carlijn Kingma and investigative financial journalist Thomas Bollen, we therefore sought to create a project that would encourage people to ask such questions and demystify the world of finance. For two and a half years, we have been developing an architectural visualization of our monetary system that bypasses economic jargon. We call it the “waterworks of money”.
Finance as an irrigation system
Carlijn Kingma spent 2,300 hours drawing this map by hand, based on extensive research and interviews with over 100 experts: central bank governors, board members of pension funds and banks, politicians or monetary activists. The water metaphor, which we use in an animated video, played an essential role in the design of our map. The financial sector is indeed to the economy what the irrigation system is to agricultural land. Just as irrigation helps crops grow, money helps the economy thrive.
-The architecture of our financial irrigation system and the way the sluices and gates are operated impacts all of us.
“What do we water and what do we leave dry? »
This was the question posed by Sigrid Kaag to economists, bankers and journalists in June 2022 before continuing:
“The choices made by the financial sector determine what grows and what dies. This is where banks, pension funds, asset managers and insurance companies can make a difference. »
Runoff is not natural
In our map, the long and complex process of financial irrigation begins at the top of the so-called tower of society, where the great fortunes keep their reservoirs. This is where the largest corporations in the world are housed, including major oil, pharmaceutical and distribution companies. If you open the floodgates, the money flows downstream and sets the wheels of industry in motion. Wages work their way through the water distribution network and fall into employee piggy banks. In return, everyone works.
Provided by the author
The money eventually infiltrates the lowest ranks of society, where a conveyor belt is always running to assemble the products and raw materials extracted. People then spend the wages they have earned. Proceeds from sales are pumped to the reservoir at the top, and the cycle begins again.
At least that’s the idea because this trickle-down economy popularized in the 1980s by US President Ronald Reagan and British Prime Minister Margaret Thatcher doesn’t really exist. In reality, the money mainly flows between the top of the tower and the financial sector. In addition, the enormous growth of the financial sector over the past decades has widened the gap between the haves and the have-nots. The growing amount of money is driving up stock prices, housing prices and management fees, but most of the money is not reaching the day-to-day economy of society’s tower – where it can be. used for productive investments, generating income and adding social value.
The structure of our monetary system is not a natural phenomenon. The way in which the water supply network was set up is a political choice. In democracies, higher levels of systemic financial literacy are a prerequisite for changing this architecture and making the financial sector better serve society.
Investigative financial journalist Thomas Bollen and cartographer Carlijn Kingma contributed to this article.
