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.

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

Government Superannuation, Basic Income, Duplication and the Housing stock

1280px-Eureka,_California_two_yellow_housesUp till today I always thought the Government Superannuation was the nearest thing we have to a Basic Income for over 65s. It was unconditional and was given to all in that age group.

But I was wrong. Today I heard from a friend on Government Superannuation who has just had to pay for a second toilet (she chose a compost toilet), a new letterbox, a second electricity meter and a new shower. She had to do this because otherwise Work and Income would have cut her Government Superannuation.

Why? Because she is retired, drawing Government Superannuation and owns a biggish house near a shopping centre. A few months ago a recently retired friend came to live in her back building and is doing it up. They have known each other for zonks and being sociable creatures, just wanted company. They both enjoy the same movies and books, both cook well and their conversation is stimulating.

My friend’s superannuation is $366.94 a week living alone but the single, sharing payment is $338.71 a week. Both of them would be deemed sharing if they shared a toilet, letterbox, electricity bill and shower. So the house will now have two of each.

Furthermore, there is a third category from Work and Income and that is married, civil union or de facto and that is $282.26 a week.

What message does this send our society? That the government will not encourage friendship and sharing of facilities, and certainly not sexual intimacy, or even, dare I write it love.Old Couple

And if you think it doesn’t have housing implications, think again. The said male friend could well have taken up a whole house and section by himself and had a full single superannuation. Two houses, two sections, two letterboxes, two electricity meters is better than one? Of course not.

I think of the retired single people living in Christchurch where the rentals are horrendous and people live in garages. I think of the Auckland housing bubble, exacerbated by this illogical Work and Income policy. So not only do we have more houses than we otherwise would have had, but this puts up the demand for houses and so house prices rise.

This has been happening of course with younger beneficiaries for decades. Two single parents get together. Both are on the Domestic Purposes Benefit and there is a major financial disincentive to share a single house, a single washing machine, car etc etc.

So not only does the lack of a Basic Income (unconditional, whatever your living arrangements are) discourage intimacy and thrift, but it expands our cities towards ever more green fields, costs us in infrastructure of sewerage, water and stormwater, but it leaves the poor to fend for themselves in caravans and garages or to share with other families.

Punitive welfare legislation shows up need for Citizens Dividend or Basic Income

The new legislation against relationship fraud shows we are overdue to move to a Citizens Dividend, handed out unconditionally to individuals, according to the New Economics Party.

Spokesperson Deirdre Kent said the Bill, supported by both National and Labour, just highlights the need for a payment to all citizens where there is no asset testing, no means testing and no prying into the bedrooms of the citizens.

The legislation that would make both parties in a relationship responsible for welfare fraud will only result in tears. “Blaming and punishing doesn’t work and costs heaps in administration.”

“Everyone in our society has probably known someone that has defrauded the Social Welfare Department. The whole benefit set-up just invites beneficiaries to deceive WINZ because a couple gets more income if they live separately. We need a system where there is no financial benefit for those pretending to live apart. Our current targeted welfare system is no way to build a society which claims to value intimacy, honesty and strong families”, she said.

She said the New Economics Party wanted an unconditional Citizens Dividend for all individuals that was not means tested, asset tested or work tested. She said they believe that the benefits of the commons – land and the natural resources should be shared equally and this is a way of introducing an unconditional citizens income, small at first but growing.

She said New Zealand had three precedents for unconditional payouts. In 1948 every household was given a dividend because we had a particularly good wool cheque that year. The second was the Universal Family Benefit that existed from 1946 to 1991 when family support became targeted. The third was in 1977 when the unconditional National superannuation was paid to all over 65 without asset or income testing.

“British Columbia imposes a carbon tax and redistributed the revenue to all citizens and this is a popular policy.”