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“The Earth Plus 5%” Story by Larry Hannigan

The modern economy is a complex system built on the interdependence of government and banking operations and principles. Larry Hannigan’s story demonstrates the gradual creation of such a system and its principles through fictional characters and exaggerated images. Such explanations help the reader understand the basics of banking and economics while avoiding complex terms. However, despite Hannigan’s fiction, the principles of taxation, free-market competition, and the fragility of the banking system are real to the modern economy.

Hannigan, in his history, has consistently explained the development of the economy from a primitive barter system to the modern practice of electronic bills, as well as the impact of such changes on the trading system and social trends. The first feature that Hannigan (2014) describes is the emergence of competition and the free market, which is displayed in the occurrence of the different cost of goods, as well as their quality and uniqueness. This fact is one of the fundamental principles ocostsdern trade and the economy, since, in a competitive environment, sellers must attract and retain the interest of the buyer by offering them better quality at a lower price (Salin, 2017). Consequently, the company’s profit depends on the uniqueness and quality of their product, as in the example of the watchmaker in the world of Hannigan. In reality, one can also give an example with a watch, since the cost of the Swiss brand Rolex exceeds hundreds of thousands, while a buyer can find mass-market watches for several dollars. Consequently, the Hannigan example describes a modern free market and competition system.

However, the history of Hannigan also demonstrates the flaws of such a system in society. The system that Fabian created forces people to take harsh measures to stay on the market as they need to pay the debt in the conditions of limited funds. Such measures include reducing employee wages to cut costs of production and unequal distribution of wealth in society in general. The state prints a limited amount of money, so the wealth of one part of the population means the poverty of another. Moreover, employers most often do not have other options in this situation, since they are obliged to pay the debt to the bank. The modern world also shows similar trends, although the public policies of most countries inhibit and reduce the manifestations of economic inequality. However, any state has a population division into socio-economic classes.

Both in the story of Hannigan and the real world, the state uses taxes to avoid serious manifestations of economic inequality and create public goods for the population. The system of tax distribution in the story and reality is the same, and those who earn more are forced to give a significant part of their profits. This logic is partially unfair, especially for those people who have to pay high taxes, but it is necessary. Hannigan (2014) explains that this need exists due to an initially limited amount of resources for distribution, most of which remain in the hands of banks. In the conditions of the modern world in which business operates with huge sums, this system is less clear; however, in Hannigan’s interpretation, taxation mechanisms are becoming more transparent.

An interesting feature is that citizens turn to the government eto expresstheir disappointment, while the cause of the problem is the banking and economic system in the hands of the minority. In other words, as in the story, Fabian and his friends left power in their hands, shifting responsibility for their actions to the government, which try to protect the population (Hannigan, 2018). An example of such a situation is almost any strike or rally of workers who oppose government action. However, in most countries, national banks that control and regulate currency are independent bodies that interact with the government.

Another important feature of the economic and banking system is their fragility, the signs of which can be seen in The Earth plus 5%. Throughout almost the whole story, Fabian has been carrying out various operations and frauds, changing the system, and at the same time, he is constantly afraid that people will understand the problem, and this system will collapse (Hannigan, 2014). Fortunately for Fabian and his friends, all ideas and plans are accomplished without problems, bringing power and profit to them (Hannigan, 2014). Considering the entire history of banking and economic system creation, one may note that the situation has developed in the same way in the real world. However, multiple financial crises led the system to near failure, and its destruction was often held back only by the interdependence of many elements and the lack of alternatives. For example, the Great Depression is one of the most protracted financial crises that has occurred due to the collapse of financial markets and the overproduction of goods (Shaw, 2019). This crisis had significant consequences for the country’s economy, production, and operation of the system as a whole, and it took years and many reforms to restore normal functioning.

A more recent example is the global financial crisis of 2008, which began in the United States but had significant consequences for all countries. In this case, fraud and greed in the banking system caused a collapse that destroyed many companies. Banks issued mortgages to almost anyone who wants to receive it and turned nonconventional loans into mortgage-backed securities by using frauds and earning short-term profit from these operations (Coghlan, McCorkell, & Hinkley, 2018). However, most citizens’ inability to pay debts led to the destruction of the mortgage industry and the national economic crisis, which brought significant losses for the whole world. Mostly government intervention, along with the action of the Federal Reserve, helped slow down the recession and unemployment and helped the U.S. restore the economy to its previous level (Coghlan, McCorkell, & Hinkley, 2018; Epstein, 2019). Another example is the COVID-19 pandemic, which already has economic consequences for many companies and countries, and could cause another crisis. Therefore, these examples demonstrate that the system in Hannigan’s story and the real world works on a set of mechanisms, the interaction of which is strong to influence each other but fragile to ensure stability.

The Earth plus 5% by Hannigan is a story that reveals many meanings and economic concepts in simple words. The ideas and concepts that I took out of it were familiar to me, although not all of them I recognize perfectly. For example, now I understand more clearly that an unequal tax system is necessary to ensure the functioning of society and that it is a consequence of the free market system’s operation. Also, I see more clearly the source of inequality, which lies in the essence of the banking system itself. For this reason, I improve my critical thinking, which allows me to evaluate the reforms and proposals of the government and representatives of various political forces more accurately. This knowledge also helps me to look differently at popular ideas or solutions to various social problems. I believe that The Earth plus 5% is a useful source for understanding the development of the USA and the world’s modern banking and economic system, as it helps me to delve into topics that I knew only at a superficial level.

In conclusion, The Earth plus 5% by Hannigan consider many ideas and principles of banking and economics; however, the main ones are the free market and competition, taxation, and the fragility of the entire system. Hannigan. This story demonstrates the interdependence of the various elements that arose with the creation of a system of monetary exchange and lending. A detailed and consistent history of the events helps to determine the consequences for the social and economic life of the population at each stage of a change in the banking system. Private fictional examples of the main characters, government, and their interaction simplify the understanding of macroeconomic processes. All these features, principles, and patterns took place in the real world, which demonstrates the accuracy and logic of work. In addition, Hannigan avoids complex terms and large numbers, making banking processes understandable even for beginners. Therefore, The Earth plus 5% is an excellent example of a source for studying the basic principles of banking and economic activities for anyone who wants to understand them.

References

Coghlan, E., McCorkell, L., & Hinkley, S. (2018). What really caused the Great Recession? Institute for Research on Labor and Employment. Web. 

Epstein, G. (2019). The political economy of central banking: Contested control and the power of finance, selected essays of Gerald Epstein. Edward Elgar Publishing.

Hannigan, L. (2014). (I want…) the Earth plus 5% [PDF document]. Web.

Salin, P. (2017). Competition and Free Trade. Routledge.

Shaw, C. W. (2019). Money, power, and the people the American struggle to make banking democratic. The University of Chicago Press.

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Essay4Business. (2022, April 13). “The Earth Plus 5%” Story by Larry Hannigan. Retrieved from https://essay4business.com/the-earth-plus-5-story-by-larry-hannigan/

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Essay4Business. "“The Earth Plus 5%” Story by Larry Hannigan." April 13, 2022. https://essay4business.com/the-earth-plus-5-story-by-larry-hannigan/.

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Essay4Business. 2022. "“The Earth Plus 5%” Story by Larry Hannigan." April 13, 2022. https://essay4business.com/the-earth-plus-5-story-by-larry-hannigan/.

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