Summarising our whole system shift for a new economy

Designing a new economy has major challenges politically. We want two major changes that actually aren't politically realistic in the current world where eight individuals own as much wealth as the poorest 50%. There is too much concentrated power.

If we want monetary reform it is unavailable at national level because there are simply too many bank lobbyists in the world's capitals who are spending far too much for any public interest lobbyists to match. Then again, if we want to replace

Then again, if we want to replace income tax with land tax, forget it. Not a goer either from a practical political viewpoint. No self respecting politician will touch it if taxing land reduces its market value and threatens a politician's votes.

What about getting a Basic Income and replacing the intrusive welfare system? Well that depends on how you would fund it. The problem is most of the current solutions are a drag on the economy. You must not fund it from GST which is regressive or from income tax which is a drag on the economy.You must fund it by sharing the rent on land and other monopolies.

Well where do we go then? You have painted a dismal picture.

Most respond by saying "Oh well bring A or B in gradually". That takes ages and moreover when A is implemented it affects B and C. So the idea of just imposing a 1% land tax and bringing it up gradually is quite impractical. We have to think in terms of whole systems. It is a whole system shift we need. Redesign the political economy from scratch.

The fact of the matter is that we must be politically savvy to come up with a solution. Many economists might agree that land tax is the most logical tax, but unless they are standing for office, they don't have to face the public. It is one thing to be an economist and another to be a politician. Victoria University's 2010 Tax Working Group which was stacked with economists from many government departments as well as consultants and academics, proposed a land tax. Did the government listen? Not that I can recall. I don't remember their recommendations on land tax being discussed in the public arena for more than a day.

What about Positive Money and all its followers saying that money should be spent into existence not lent into existence? They make a very good case, you can't fault it. And yes, the British Parliament took it seriously enough to have a parliamentary debate. But do you believe it will go further? You only have to read Nomi Prins book 'All the Presidents Bankers' to get an idea how close presidents have been to the big bankers for over a century. Hilary Clinton's campaign was funded by investment bankers and Trump has six Goldman Sachs bankers in his cabinet. He has already moved to get rid of the weak regulations they now have.

When considering the political feasibility of putting in the idea of Michael Kumhof and Jaromir Benes' Chicago Plan Revisited, a plan making bank debt illegal, Lietaer, Arnsperger, Goerner and Brunnhuber listed five reasons for not recommending it.[1]
"1.Replacing a monoculture with a monoculture is not the way to generate diversity in exchange media.
2. While it is true that a Chicago Plan reform would eliminate risk of widespread banking crashes and of sovereign debt crises, there would still be monetary crises.
3. If governments were the only ones in charge of creating money there might be a risk of inflation. Such a risk is real and demonstrated in 2009 by the hyperinflation crippling the Zimbabwean dollar after President Mugabe instructed the central bank to print its currency by the trillions.
4. The fourth reason can be summarised as ‘political realism’. Any version of the Chicago Plan will be fought to the death by the banking systems because it threatens both its power base and its business model. Even after the excesses triggering the 2007-8 collapse, or in the middle of the Great Depression of the 1930s, the banking lobby managed to deflect the implementation of any significant changes. In 2010, for every elected official in Washington, there were three high-level lobbyists working full-time for the banking system. The financial services industry including real estate spent $2.3 billion on Federal campaign contributions from 1990 to 2010, which was more than health care, energy, defence, agriculture and transportation industries combined." (In USA, according to Gar Alperovitz, in 2010-11 the FIRE section (finance, insurance, real estate) section spent nearly $1 billion in lobbying against bank regulation.)

"5. The final argument is about risk. Nationalising the money creation process cannot be done on a small pilot scale. It must be implemented on a massive, national scale or, in the case of the euro, a multinational scale. Any change always involves the risk of unintended consequences. Logically, large scale change involves greater risk."

Yes, there is a way to go. The ideas came from the permaculture teachers in our new economics movement. Reform the very structure of governance to give quite substantial powers to  local government, turn governance upside down as well and then we might have a chance. The centralised governance structure must be replaced with distributed governance. Then we need to rethink the powers given to or claimed by local governance. In fact central government is not going to give very local government big powers like money creation, land ownership or revenue raising power, so they have to claim it themselves. This is where rebellion must be focussed. 

So we have proposed spending money into existence at the very lowest level of government (in New Zealand that would be the Community Board). That money will gradually buy up land. The Community Board would then receive land rent from the property holder and pay the rates (local taxes) of that property holder. This process happens gradually, while closely monitoring inflation. If there is a sign of inflation, the rate of decay of money can be adjusted or the money spent at a higher level of governance.

So the Community Board claims the right to issue money, to buy land with that money, to receive public revenue. It could also impose certain resource rents to be determined.

With the growing revenue from land rent the Board would be able to distribute regular Citizens Dividends and build and maintain essential infrastructure.

There would have to be participatory budgeting so that the balance between infrastructure and dividends was maintained and the public was behind the Board.

Now if we are going to reclaim the right to issue money, we might as well design it properly while we have the chance. It is there we look to history and read Bernard Lietaer. He cites a period of 2000 years of a decaying Egyptian currency which had huge social, educational and economic benefits, 200 years of European currencies in the central middle ages that resulted in an age of prosperity, equality, high education and more leisure and finally a period in 1932-3 in a small Austrian town during the Great Depression. Each of these had a decaying currency, much as goods decay.

So the new money would be designed to decay. In practical terms, it would keep its face value but attract a regular payment to keep it valid. The local Board would develop a more equal relationship with its local Council who would inevitably end up accepting the new currency for rates. This would eventually pass on to central government who would have to accept it for taxes.

So what we propose is a new currency that soon is accepted by central government for taxes. This means it is a new national currency. They way this works out is that each local board keeps its currency from inflation so all are on a par. They flow into a stream that flows into a river towards central government.

John Fullerton on the Regenerative Economy

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Occasionally you strike a book or long article that you really want to pay attention to. For me I have discovered John Fullerton's white paper called Regenerative Capitalism How Universal Principles and Patterns will Shape our New Economy. It is 120 pages long and very dense, dated April 2015.

I found Fullerton through watching a large part of After Fossil Fuels The New Economy, a filmed seminar from Oberlin College, Ohio held in early October. (Try 1 hour 5 mins into this particular section, as it is long) I was excited because here was someone saying what we have been saying. I knew that people rarely are the sole inventors of new ideas. He wrote we need to design an economy according to nature's principles. He knows that creativity and regenerative potential happens at the edges, a teaching from permaculture. He even quotes evolutionary biologist Elisabet Sahtouris.

He appeared with Juliet Schorr, a sociologist, former economist, who agreed with him yet reminded him that power and conflict must not be omitted and that one must not be attached too strongly to a metaphor.

When I looked at his acknowledgements I got quite excited. Here was a former JP Morgan banker listing Fritjof Capra, Janine Benyus, Hazel Henderson, David Korten, Thomas Berry, Buckminster Fuller, Jane Jacobs, Dana Meadows, EF Schumacher and Gar Alperovitz. Reading the text over the next few days I found he even knew a little of Bernard Lietaer and Elinor Ostrom and his scientific advisor is engineer Sally Goerner a student of flow and energy network sciences. She taught him about the optimum balance between efficiency and resilience. Goerner was a co-author with Bernard Lietaer in their Club of Rome book on Money and Sustainability.

Reading Charles Eisenstein's book Sacred Economics was punctuated for me with long pauses while I digested one amazing sentence after another. Fullerton had this same effect on me in that he was articulating ideas only half formed in my mind, and doing so with such eloquent language. Then again, because he is qualified in finance and business, I learnt from his perspective. People who have voluntarily opted out of Wall Street to think and read and explore new ideas are very precious to the new economy movement and Fullerton is one of these.

John Fullerton has outlined eight principles for what he calls a Regenerative Economy and has expanded them in his white paper. He says his experiences with regenerative entrepreneurs as well as his exploration of systems theory, biomimicry, ecology and the physics of flow networks has led him to this list. Briefly, an economy must be or must demonstrate:

1. In Right Relationship – realising we are part of an interconnected web of life.
2. Views Wealth Holistically – realising there are multiple forms of capital.
3. Innovative, Adaptive, Responsive. This applies to individuals, businesses, society, governments and is the way for maximum fitness. It means the end of rigid hierarchical systems that control today’s centralised states.
4. Empowered participation. Everyone matters and the health of any human economy is dependent on everyone’s unique contribution to the health of the whole.
5. Honours Community and Place. Diversity and richness are essential to system vitality. Each human community embodies a mosaic of traditions, beliefs and potentialities, each uniquely shaped by long-term pressures of geography, history, culture, environment and changing human needs.
6. Edge Effect Abundance. The most innovation and abundance of life happens at the edges of systems e.g where rivers meet the ocean.
7. Robust Circulatory Flow. "Just as human health depends on robust circulation of oxygen, nutrients etc, so too economic health depends on robust circulatory flows of money, information, waste, resources, goods and services to support exchange, flush toxins, and nourish every participant at every level of our human networks."
8. Seeks Balance. There is a delicate balance between resilience and efficiency. Small, diverse and flexible will lead to stagnation while big, efficient and focused will lead to collapse. There is a window of vitality half way.

He doesn't really address tax reform in a big way, or the need to share the rents though he appears to have read Peter Barnes. He approves of progressive taxation, financial transaction tax and wants aggressive inheritance taxes. So there is  more thinking to be done there. Like many others he probably conflates land with capital. Yes university teaching has been very successful in getting rid of land as a factor of production. Well done neoclassical economists – your strategy worked brilliantly. 

I think he would love to read Silvio Gesell's book The Natural Economic Order to learn about the design of naturally circulating money. That would set him thinking. And perhaps some of Lietaer's books, particularly where he describes how Gesell's ideas were put into practice in Dynastic Egypt, Central Middle Ages and in Great Depression towns in Europe.

Oh, and how he would love to read Reinventing Organisations by Frederic Laloux!

Deirdre Kent

@deirdrekent

The Rise and Rise of Evonomics

It’s not often that a blog takes off at speed but http://evonomics.com is an exception to this.

Like us they want a new view of economics.

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Here's what the About page says in part: "Today’s economic ideas will create the world we live in tomorrow.

Good economic thinking, widely shared, understood, and implemented in public policy, can make the world a far better place. We’re committed to helping that happen.....Evonomics was launched in October 2015 by founding editor Robert Kadar and co-founder Joe Brewer. Steve Roth, an early and active advisor and participant, serves as publisher. It seems to have a struck a nerve, rapidly attracting hundreds of thousands of page views a month. Evonomics has become an amplifier and soundboard for new economic thinking, expanding the reach of that thinking to a broad community of citizens, thinkers, influencers, and policymakers."

It looks as though it comes out of Seattle. Not unsurprising, as Seattle seems to have much in common with Vermont.

Yes it is impressive and very professional. Blogs by Joe Stiglitz, David Sloan Wilson, Tom Streithorst,  Lyn Stout, George Blackford, Philip Kotler, John Perkins, Amna Silim, John Komlos, Steve Roth, Peter Barnes, George Monbiot, Paul Ormerod, Frances Coppola.

Advisors include Steve Keen, Sarah Van Gelder, Yanis Varoufakis, Robert Reich, Paul Krugman, Sally J Goerner, Francis Coppola, Robert Schiller. And these are only a few.
 
Apart from economists, advisors are pyschologists, journalists, evolutionary biologists, ecological economists, civic entrepreneurs, sociologists, scientists, lawyers, historians, authors and so on.
 

The layout of the front page is simple and it works. Only two items in the menu, graphics to die for, photos of bloggers and advisors on the right column and wherever you go you are invited to receive the newsletter, loud and clear. Simplicity is the hallmark. Simple title indicating it is the next evolution of economics. Facebook, twitter and search and one partner (there are blogs by David Sloan Wilson of the Evolution Institute). And there it all is.

Being a keen tweeter I have enjoyed scrutinising the pattern of their tweets and the people they follow.

Deirdre Kent

Self organising systems in business are springing up all around us

trademe-logoDuring a Radio NZ panel I once heard ex ACT MP Stephen Franks sing the praises of the self-regulating nature of the businesses Trademe, Uber and AirBnB.

He said that since traders were required to post a comment about the person they traded with on trademe, uber or airbnb, the system ran itself. People on trademe are so keen to keep their reputation, that they are pulled into line to pay promptly. If they are seller they send the item promptly. The system regulates itself. It's the same with airb2b and Uber. Nobody wants to lose their reputation.

So here we have three businesses that run without the interference of a Securities Commission, local or national government regulators. There are no sanctions or fines, just a loss of reputation therefore of trade. Reputation is so precious to us that we don't want to sacrifice it. Rate your driver, provide feedback. Rate your trading partner, rate your host, rate your guest: it is an important element of the system design.

airbnb_new-logo-2014You will be able to quote more examples I know. Just as an organism runs itself without a central conductor, so a properly designed natural economic system requires no regulation as it has an inbuilt monitoring system to keep up quality.

Giovanna Di Marzo Serugendo, Marie-Pierre Gleizes, and Anthony Karageorgos say, "Intuitively, self-organisation refers to the fact that a system’s structure or organisation appears without any explicit control or constraints imposed from outside the system. In other words, the organisation is intrinsic to the self-organising system, and it results from internal constraints and mechanisms, which are based on local interactions between its components."

uber-carThey say "Self-organising and emergent phenomena can be observed in many natural systems. For example, insects that live in colonies, such as ants, bees, wasps and termites, have been shown to seamlessly integrate their individual activities, while every single insect seems to operate individually and without any central supervision."

With Uber you can rate your driver publicly and the driver can rate you. That's a constraint on bad behaviour if ever there was one. Whether your are driver or customer you build up your reputation ride by ride.

Just as taxi-drivers complain about Uber, the hotel industry complains about Airbnb. Spokespeople usually say that's because people listing on Airbnb usually don't have to comply with the same regulations that apply to the hospitality industry.

And Air BnB blindsided the hotel industry. Forbes Magazine says, "it is an example of how today’s networked platforms compete with traditional industry behemoths without appearing to do so, at all. Platforms connect producers and consumers – hosts and travellers in the case of Airbnb – and facilitate their interactions and exchange."

This will surely be a great business model for the future.

Social bonds an experiment that can’t work because…

This morning during a Q and A current affairs programme I tweeted the following tweet. "#nzqanda Social bonds experiment risky. Can't solve social problems separate from wages, jobs, tax, governance issues @NZQandA" Six people retweeted it and many marked it as favourite, showing it resonated with others watching the programme. Quite frankly the Minister of Social Development, Anne Tolley, is bound to fail with this experiment. And it is not just that you can't privatise social welfare and expect good results. It is because the whole political system is one system so you can't put welfare in a silo, treat it separately and expect good outcomes. Yesterday I heard Kim Hill in a Radio NZ interview with UK Renegade Economist Ross Ashcroft utter this telling remark: "It seems nothing you can do in an economy isn't going to cause some bad effects somewhere else." Well Kim you hit the nail on the head there! Everything is connected. And it is not just within the economic system. It is the tax system, the welfare system, jobs, governance, the credit system and wages structures that are all tied up together. Change the paradigms of a few of these and the whole system gets tweaked for the better. So how do we get a healthy economic system that results in good social outcomes? Looking at the range of social problems from truancy, mental health problems, crime, family dysfunction, stress, educational issues, loneliness, health where does it all stop and where is the best place to intervene? Try education of young mothers? Oh no, they are victims of domestic violence and poverty. Try wages alone? Oh dear the businesses shed jobs. Try crime alone? Nothing changes. Poverty persists, the wealth gap keeps widening. Try housing without changing the tax and rating systems? Oh dear, you get urban sprawl and an inability of councils to build essential infrastructure so you get more social problems. Fix the money system by itself with zero interest rates but fail to address the tax system? You just exaceberate the housing bubble and widen the wealth gap further. Whanau Ora , a cross-government system, an approach that places families/whānau at the centre of service delivery, requiring the integration of health, education and social services, gets it right as far as it goes. This system treats the family as a whole system and refuses to accept that ten state agencies must enter the home that has a social problem. Everything affects everything else. The presenting problem of the misbehaving adolescent may reveal a range of other issues – domestic violence, poverty, educational failure and health problems, housing problems, job insecurity and so on. But even the integrated Whanau Ora programme can't solve the fundamental issues of a structurally faulty currency system, tax system, welfare system and governance system. A currency must circulate at an optimal pace, businesses must create well paid and satisfying jobs and be constrained by a tax system that protects exploitation of the habitat. One of the more interesting admissions from the Minister of Social Welfare was that a lot of problems can be solved locally rather than centrally. Panel member Josie Pagani agreed. Yet devolving functions in the way we have previously understood it isn't going to work either. Why not? Because the state can still intervene, give councils less money, legislate to put further financial burden on councils and so on. The only way to restructure an economy is to change four major paradigms. Instead of central devolving functions and finance try the other way round. Instead of banks creating the country's credit as interest bearing debt, let the people create their means of exchange interest free. Instead of taxing work and spending and enterprise, let's put a rental on the exclusive use of the commons like land, minerals and so on. Instead of a welfare system that is asset and income tested, let's give a basic income derived from the land rents that were previously privately captured. There is a great deal of thinking to do. When the global financial system's huge credit bubble finally bursts let's make sure we start again, but start properly. The New Economics movement is a vehicle for this new thinking. We can and we must develop a new economic system that works for nearly all life. Otherwise we are going to repeat the same failed experiment. And it is not just the social bonds experiment.

Why we need to solve wicked problems using systems thinking

Do we solve the big political problems one by one or as a whole system? We say as a whole system.You can't do it one by one.

In a system where everything affects everything else, if you change one element it has an effect on at least one other element and sets off a chain of responses.

We have assumed there is a need to change the tax system, the money system, the welfare system and the governance system. What happens if we don’t tackle it as a whole system?

Let’s just change the tax system. The result of taking off the deadweight taxes like income tax, GST and company tax and changing to charging a rent on the monopoly use of natural resources only, we still get an increased systemic pressure from the money system for growth. The result is continuing growth of private debt at interest. The banks become more powerful than ever.

If we change the money system but don’t tackle the tax and welfare system we get huge land and resource inflation resulting in inequality and booms and busts.

If we change two of them e.g. the tax and welfare system the result is more equality but still the growth of interest bearing debt.

Change all of these but not the governance system and the result is an equal but increasingly dissatisfied population. They are disenfranchised and don’t trust the government. Democracy deteriorates.

Everything in the political economic system affects everything else.

So we to change them all together by obeying Buckminster Fuller’s warning that “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”

The new model that makes the existing model obsolete is this: Money is created at the smallest possible level of government by spending it into existence, not lending it into existence with interest. The rules governing the trade in that currency are made locally to turn the tax system on its head. The rules of rent are decided at local level to share the values of location of land and of monopoly resource use. A small Citizens Dividend growing to a full Basic Income is distributed. Power, function and revenue flow from the periphery to other centres to create a new system – a complex, dynamic and self regulating political economy.DSCF0029

Why we do what we do and what we believe

Why we do what we do in the New Economics Party

We believe that a political economy should be like a living organism and obey the laws of Nature. It should have both protection mechanisms to protect us from harm and growth opportunities to allow everyone to develop and specialise. In a healthy organism there are jobs for every cell and organ. It should have a thriving economy fuelled by the energy of money yet constrained by the limits of Nature. We believe the human species is part of Nature not there to dominate it. The riches of Nature and our heritage must be fairly shared and wisely managed.

Cooperation for common good
We believe in the collective power of good people to work for our common purpose and we refuse to say, “Change isn’t possible”. We know in our bones that the design of an economy is the critical factor needed to sustain and nourish life on this beautiful planet and that that like the 50 trillion cells in our bodies, seven billion people can actually work cooperatively without poverty, climate crises or war. We must do it or else perish as a species. Failure is not an option.

We are audacious enough to believe that people of every colour and creed can live together in peace with their basic needs met. With our collective refugee population now amounting to millions, it is time to address the causes of the injustices causing war, for without justice there will be no peace. We are adamant that every person has the right to the basics of life – a safe warm home, nourishing food, education health care and a sense of belonging.

We are one with our habitat
We believe that a political economy designed along the laws of Nature doesn’t result in the belching of greenhouse gases into a warming planet. We are impatient to protect our grandchildren from ever worsening storms, droughts and food shortages. After the wakeup calls of climate change and gross inequality, there is no time to waste trying to dominate and subdue Nature. Our country and indeed the world must be subservient to Nature and listen to her wisdom. Our laws and our human created currencies and structures must be in line with Nature’s laws. Only then can we live in harmony, solve climate change and live happily with our families free from war and Nature’s ravages. Nature bats first and last.

Biomimcry
We believe it is imperative to design a political economy that is both elegant and simple. Add-on policies like Working for Families or Accommodation Supplements are simply signs that the basic design is poor. We want a simple tax system, not one full of ways to avoid tax and only serving to employ bureaucrats and accountants. We won’t tolerate a benefit system that invites dishonesty and penalises thrift and cooperation.

Honouring the Treaty
We recognise that Te Tiriti o Waitangi is a living treaty that must constantly be honoured. We understand the pain of colonisation of the Maori people by the British and will work cooperatively with Maori at each hapu and iwi level to work out policies in line with our principles. We acknowledge the injustice of the forced change to privately owned land that was brought by colonisers. We acknowledge the pain of a new money system on Maori and the need to pay tax in that currency.

We acknowledge the catch 22 demands of collective land ownership and the demands of the banking system for collateral for loans that has locked Maori outside the mainstream economy, generating an inability to finance productive investment in Maori enterprise for the last 175 years and that still ongoing. We understand the ongoing dispute between local government and Maori about unpaid rates originates from this demand.

We acknowledge the contribution Maori culture has made to the wider New Zealand culture, and the contribution it may yet make as pakeha are ready to receive - in particular the understanding of reciprocity in economic relations (sometimes known as utu) that underpins sustainable economy and sustainability per se.

We acknowledge the destructiveness of forced aggregation of Maori interests to iwi level that has resulted in the corporatization of ownership of Maori resources and consequent alienation of the bulk of the Maori population from those resources.

Energy transfer
The lifeblood of an economy is its flow of money. We believe we must take full control of our money systems – that is the sovereign right of any country. No longer will we allow commercial banks to create and control our money supply and gamble with our deposits, while they are poised to leave the innocent depositors to pick up the mess if they fail. We reserve the right to design the currencies we need.

Diversity, recycling
Everything manufactured is sourced as close as possible to where it is needed, and recycled for a no-waste economy. In a natural economy nobody will go hungry or homeless. Every individual is of worth and has the right to meaningful work. Nobody will be neglected, living in cars or crowded homes while others amass wealth they do not need. That is not Nature’s way.

Redistribution
Without revenue neither central nor local government can build infrastructure, schools and hospitals. The revenue we aim should tax the exclusive use of the commons (in its wider sense). Everyone should have the inalienable right to a share of the common wealth so the rents from the commons are be shared by distributing Citizens Dividends. Nobody should own the earth, water or fisheries or anything left to us by our ancestors.

Governance
A living system is a self-organising organism with a multitude of feedback and feed-forward mechanisms in a state of tension and negotiation till equilibrium is established. So we believe that decisions must not all be made centrally but all over the country. Local and national government must constantly be negotiating. We want strong communities with the inalienable right to elect their own decision makers; the fundamental unit of government must be a powerful Community Board.

Cities
We won’t tolerate sprawling cities with an elite landed class occupying desirable land near good schools and regular transport while those on the outskirts must wake early, leave their children and catch two buses to unsatisfying low paid jobs. For parents of young children two hours commuting is not conducive to anyone’s wellbeing. We can do better. We want compact walkable cities with efficient rapid transit without the use of fossil fuels. We understand that economic signals like rating systems and tax systems are driving our irrational behaviour. That is no way to plan a city.

We want local and national governments to have sufficient reliable income to pay for rapid transit, education and healthcare – revenue derived from charging a full rent on the exclusive use of the commons in its wider sense. Taxing the good things is not an option – it’s illogical to tax work, sales or enterprise. We will not watch on while governments struggle for revenue, people work long hours while property owners grow rich on the rising price of land.

Managing borders
We believe firmly in our national sovereignty. Although we know how to control our borders when it comes to pests and threats to our agriculture we don’t yet know how to control our borders when it comes to money. While hot money sloshes round the globe in search of higher returns and international trade agreements are written largely by the corporations that rule the world, we will not rest. We demand our country’s freedom to make laws without fear of being sued by a foreign corporation in a secret offshore tribunal.

New Zealand’s opportunity
We believe New Zealand with its small educated population and rich resources has an obligation to be a model of how to run a vibrant and exciting post fossil fuel economy where entrepreneurs can truly thrive and nobody is left uneducated or in poverty.

http://neweconomics.net.nz