Why not create a national currency at local level?

upmapOver a period of two years or more we have proposed:

1. A second national currency. The currency to be issued by Treasury, spent into existence to buy land. The new currency will have no other taxes than land rents, natural resource rents and taxes on bads. We aim to move to a tax system that taxes the monopoly use of the commons rather than labour and sales. Some revenue will be distributed as a Citizens Dividend to all citizens who have lived there for a year or more, the rest will be shared by all levels of government. We advocate a Land Rental Index to be set up in each area, with land rents being adjusted annually according to the index. Land rentals are relatively very stable over time. It is only when there is a major event like and earthquake that they decline or when a railway is put in or a labour intensive business arrives that they rise more than just a tiny bit. The new money would be good for the payment of rates and taxes. No further rates would be payable.

2. We have occasionally advocated a Christchurch currency and an Auckland currency created by spending it into existence to buy land. This would require complete cooperation from the central government as legislation would be needed to make it free of income tax, GST and company tax as before. Rents would be shared as a small Citizens Dividend. The rest would be shared with central government. So a similar design but a city currency as well as a national one.

3. Then very recently we went a step further and suggested that Local Boards (the Auckland supercity calls them this and there are 21 Local Boards as shown on graphic) create the currency, spend it into existence to buy land. A monetary authority will have to be set up to ensure there is no inflation. Revenue from land rents and some natural resource rents can be gathered by Local Boards and first distributed to the local citizens then the rest used at local board level and then sent up the line to supercity and to central government. Supercities would have power to impose taxes on water pollution e.g. leaching of nitrates that uses the commons of the aquifers and rivers. (and to tax the use of water for commercial purposes.)

This option 3 would require several currencies to co-exist. The usual NZ dollar, the new NZ dollar, the supercity dollar and the Local Board dollar. We had considerable difficulties and confusion when discussing exchangeability of currencies.


4. Option 4 arrived a couple of days after I spoke to a meeting at a Motueka ecovillage in response to the questions and problems. This one is simpler and is like the formation of a river from the small streams to the river to the sea. Create the new national currency at Local Board level and pass it up the line. Local Boards would set up a Land Committee to decide which land should be bought first. Each local board might decide differently in consultation with its community. Every decision has the right to be vetoed by the local hapu or iwi and where applicable the Maori Land Court should be involved. You would also need a local committee (perhaps the same one) to administer a Land Rental Index or where appropriate because of different desirabilities of sites e.g. Wellington hill suburbs for sun. You would also need a local Monetary Authority to monitor inflation. It would work closely with the Supercity Monetary Authority and the Treasury Monetary Authority to ensure there is no inflation and that no local board would issue too much or too little new money. These are such important entities that they would have to be voted in.

There are so many issues to comment on here, it would be really good to have a general discussion. Then we can perhaps divide up the discussions. Option 4 finally gives real powers to the local economy, which is in line with our policy. The land board may, after consultation with the local community, choose a local business which needs capital, or choose undeveloped land owned by absentee speculators or the local iwi may have very strong preferences.

For instance, if the local committee chose five sections each valued at $200,000 it would create $1m of national currency. If the committee chose to purchase the land of a speculator, that speculator, seeing no future, might sell the lease and thus release the land for genuine use. Many with mortgages will want their mortgage reduced and, because the new currency is legal tender, the bank would have to accept it for paying off a mortgage. Or the committee may be persuaded that a local business needed capital to employ local labour and grow. A community land trust might ask for their land to be bought so they can take land out of the market. This would enable them to sell houses to younger people to join their village, as otherwise the cost would be unaffordable. They could then use the considerable injection of capital to develop their labour intensive businesses and the ones that use local materials.

Then the monetary authority, in conjunction with the monetary authorities of the supercities and the government would make sure the local board did not issue more money than it was allowed, as inflation must be kept strictly under control.images-1There could be problems with certain rogue local boards. Either they issued too much money and wouldn’t cooperate with the monetary authorities elsewhere, or their leadership was questionable. In that case there should be provision in law to instal a Commissioner until the Board's administration improved.

In models 1-3 we have designed in a circulation incentive in the form of a dated currency. However perhaps in model 4, since all money flows downstream from local to central, there may be no need of this.

My questions are (and you will raise plenty too):
  1. Exchangeability with the national currency NZ dollar? We had it as they are issued at par and redeemed at par and in between the value changes according to the market. Some have argued there should be no exchangeability with the old national currency.

  2. Will the creation of a second national currency at local board level stimulate the local economy?

  3. How does this all line up with the Maori Land Trust boards and Incorporations situation?

  4. How would the public be protected from local board that go rogue and how would the wider public ensure that local boards representatives can deal with this level of responsibility?

Now there is one more thing that comes before any of this. Councils and Government should never sell land. The idea of the government buying up the land in the Green Frame and then selling it off into private hands is unacceptable. They should keep it and auction the leases to the highest bidder, then share that revenue with the public (via a Citizens Dividend) and the central government. This should be entrenched in law somehow. Meanwhile a private bidder Auckland City Council has been offered $75,000,000 for a council car park. What a dreadful thing that would be if the council sold off this prime city land for cars to park and for a private enterprise to gain, both in car parking, and in capital gain. As they said in a The Nation programme on TV3, they are developing around traffic hubs. Of course. That means the public pays for the transport infrastructure and private land "owners" benefit from rising land values. Not fair, all wrong. Let logic prevail!

Reservations about Crown Leasehold Land. There are many who will have reservations about the government or the local board buying up their land. The alternative we used to have was that the Government pays you for your land, and the title of your property then bears a covenant, an obligation to pay a ground rent from then on, whoever owns the land. While it is more difficult to explain to the public, a covenant of this nature would give much more peace of mind when it comes to secure tenure of the land. "Leasehold title" has such a bad reputation that it is difficult to explain there are no sudden rent rises if the rent is linked to an index and that the tenure is for a lifetime, with rights that your descendants can get the next lease. No matter how much this is explained it may be better to have a covenant.

Sharing the rents brings social justice – solution to the Auckland housing crisis

imagesDuring Parliament’s question time there are always a lot of questions about house affordability, especially in Auckland. The National government’s solution to rising house prices is just “release more land”. And the Prime Minister usually replies that home affordability was worse when Labour was in government because that included the period leading up to the Global Financial Crisis. Stalemate. Election year biffo. They then go on to questions about poverty, especially child poverty. In New Zealand, ever since Helen Clark introduced an income support scheme called Working for Families anti-poverty groups have rightly pointed out that as it only goes to families in work, children of beneficiaries are the ones that miss out and that is unfair.

Sadly nobody in Parliament ever raises the issue that when “land owners” monopolise land without paying a full rent to the public for the privilege, the rental they should have paid just capitalises into the market value of their homes. Rent is thus privately captured not publicly captured. That capital gain doesn’t belong to them. The very meaning of “freehold” land is land without rent. When settlers came to New Zealand from England in the late 1800s what they wanted was to stand on a piece of land and know that a landlord couldn’t push them off. But the English colonists brought with them their very entrenched legal system of land ownership and imposed on the Maori a strange concept they called “ownership of land”. It was the land tenure system together with the English banking system which was at the very heart of the colonisation process.

Leaving aside the banking system for the moment, let’s concentrate on the land tenure system. When land is held in common, land tenure is about rights to use land. What the settlers really wanted was security of tenure and they wrongly equated this with a freehold land ownership arrangement. Indigenous people share the rights to use the land with others in their iwi or tribe or in their hapu or subtribe through a complicated system different in each iwi or hapu. Colonisation changed the land tenure system and introduced commercial banks.

We are coming up to a general election and the Labour Party, Mana and the Internet Party are all showing concern to engage and enrol the one million non-voters from last election. The Internet Party rightly makes it easy to join a party and participate, through their clever use of smartphone apps and discussion websites.

But what better way to engage young disaffected voters than to share the land rents? Wouldn’t they be delighted it a political party said it was going to charge a full land rental and share it with them by giving them a Citizens Dividend from time to time?

Let’s have a look at the home values in central Auckland suburbs for a start. Parnell, Mission Bay, Mt Eden, Epsom, Herne Bay, Ponsonby and Grey Lynn houses have risen in value by probably an annual rate of exceeding 10% over the last year. In some cases it is 14%, but let’s take the lower value. An article the other day in the Weekend Herald showed a three bedroom home in Grey Lynn for sale at $895,000 and the subsequent text showed it had probably risen at least $103,000 in the last year. What land tax did that owner pay? Rates contain land tax but actually everyone pays on their capital value these days. (by legislation when the supercity was formed, no choice these days like we used to have). So if every home in the inner suburbs has a capital value rise of say an average of $100,000, just think of that accumulated rental which has been privately captured in the inner Auckland suburbs. This rental rightly belongs to the public because it is government both central and local that has paid for the infrastructure, the hospitals, schools and parks and it is the public which has provided the inner city shops and businesses and activities. Suppose there are 100,000 homes in those inner suburbs each rising by $100,000 in a year. That is a capital gain of $10,000,000,000. Yes it is $10 billion which rightly belongs to the public and we haven’t even tried to calculate the rising value of the CBD and Parnell and Newmarket and Ponsonby shops and offices. This total will be far higher.

Dividing this three-way between central and local government and the 4.4m citizens of New Zealand is the next challenge. But for electoral purposes it would make very good sense to give out a citizens dividend straight away. Let’s, for instance, use $4.4 billion of the $10 billion. That is $1000 per citizen. When dependents get it, the money is taken by the designated carer, usually a woman. So a woman with three children would get $4000 a year from this dividend. Nice one. A young solo mother in Northland or Hastings or Greymouth. Since she is on a benefit she doesn’t get Working for Families. She spends it on the basics of food. The next dividend would bring more. When land rents are shared everyone gains. Labour spokesperson on Welfare Jacinda Ardern would not have to think up anything more complicated than this to right the wrong of children in poverty. It would answer the “Feed the Children” plea of The Mana Party.

I have discovered Fred Harrison's site http://www.sharetherents.org/ where his videos tell a great many stories about the value of sharing the land rent. Fred Harrison is a long time campaigner for sharing land rents.

Labour and the Greens both go into the election advocating a Capital Gains Tax on property that isn’t the family home. Unfortunately the Greens have chosen a 15% Capital Gains Tax. That means when a house is sold (and only then) the Government gets a small fraction of the total rent. The property “owner” gets to keep the 85% that rightly belongs to the public. Well I guess it is a start, but honestly it is an extremely timid policy when you see the whole logic of sharing the rents.

Nobody in this whole debate has raised the issue of how many vacant sections there are in Auckland. If speculators are sitting on sections and not paying much (the council even slashes their rates) then naturally they will continue to speculate. A Capital Gains Tax will only delay the sale even further. You must make people pay for the privilege of "owning" land, or monopolising it. If speculators had to pay a full land rental rather than reduced rates, that would spur them into action. Either they would build or they would sell.

The New Economics Party – What’s in it for me?

markets-headerWhat is in it for me? What ordinary people want to know about a party’s policies are “What is in it for me?” And that’s a very valid question.

What are the outcomes for you the voter when we fundamentally alter the structure of the tax system and the money system as we are proposing?

OK here is what is going to happen. The whole prices structure will be altered. Because GST and income tax are a component of the price of everything you buy, prices will drop. Because interest is included in the price of everything you buy, prices will drop.

And that will make everything more affordable. But wait? What about other taxes? You said you were going to tax the use of land and other natural resources including the use of the biosphere for waste. Yes for those items that will put the price up again.

For example, for imported petrol the price won’t drop, it will actually rise if we want to do something about climate change. The price of any fossil fuel based goods will rise including artificial fertilisers, pesticides and insecticides. So the farmer will have to learn how to use EM (effective microorganisms), together with other good farming methods, to keep the soil full of nutrients.

What about imported whiteware and vehicles? The lack of GST will keep the price down and since they are manufactured in other countries, but that is about all. It is only when it is manufactured in New Zealand that it drops because of the lack of income tax. And it will include some natural resources taxes, depending on the metal.

The land, because it is fully taxed, will be more efficiently used. The sheer waste of city people living on valuable “lifestyle blocks” just outside a city or township will vanish as Crown Leasehold land gradually replaces freehold land. This land will once again be used by genuine farmers growing food for the city. The need for transport will decline. So we will see fewer huge trucks on our roads transporting chilled goods from Auckland.

And a Citizens Dividend distributed in Land Dollars – how will that change things? Once again, a marvellous result. Even if every man, woman and child gets, say, a L$50 dividend, for a family of two adults and two children that is $200 in land dollars. Spend it at the Farmers Market. The local producers then pay their suppliers with it and can employ labour tax free, thus boosting production. So Farmers Markets could soon occur more often and pretty soon you have the revival of the small fruit and vege store and butcher. Welcome back! Mainstreet is invigorated and the supermarkets that rip off the suppliers of produce take the hit. Meanwhile the local farmers and horticulturists have an incentive to go more and more spray free and organic and employ more labour.

The distribution of the land rental to the citizens through a Citizens Dividend will have a huge impact on poverty. Poor people will spend it on essentials, thus invigorating the local food growing industry. These dividends will eventually be quite big. In the end they will free citizens from boring jobs they dislike so they can take up something they really want to contribute – be it entertaining, art, creating inventions, volunteering or caring for an elderly parent. Mothers with factory jobs two bus rides away will be able to leave the job if they prefer to devote themselves to their family life.

Jobs will return to the provinces. Because when you build in an incentive to use local building materials and locally manufactured fertilisers there is no impediment to building a sawmill or a factory. Factories in Levin lie empty. The clothing manufacturing jobs went to the Pacific islands and to Asia long ago.

We know the changes we advocate in designing and creating a second national currency backed by land are massive. After all 79% of our government revenue is from either income tax, GST or company tax. We believe that you should pay for what you hold or take and not for what you do or make. We need to share the rents of land and the harness the power of monopoly. We need to design and issue our own currency and not let the private banks keep control.

Health and Education When essential food items become more affordable the health of the population improves. The Asian takeaways that line the streets of the small poorer centres will gradually disappear as young mothers are empowered through their Citizens Dividend. Remember the plan is to give the children’s dividend to the primary carer, which is most often the mother. Once the Citizens Dividend rises to the stage where it frees the mother financially, she can choose further education, once again benefitting the children too. Our population will end up healthier and better educated.

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.”

Slideshow on the Post Fossil Fuel Economy – Jobs, leisure and innovation

The new slideshow is at http://www.slideshare.net/deirdrekent/steady-state-economy-jobs-for-a-postgrowth-economy. It addresses many of the questions our members have been asking and hopefully makes it easier to understand. There are presenter notes with most slides.

A dual currency for New Zealand (Starve the Banks and Pay the Government)

We are in a depression. Yes the first stages of one and of course politicians will not name it as that until we are well into it. Good thinking emerges from depressions. In the 1870s depression Henry George figured out that since we can't all occupy the same land, those who have monopoly use of the best land should compensate the rest of us for the privilege. The way to do that was not for government to own the title to the land, but for land occupiers to pay a tax or rental to government instead of income tax. He wrote Land and Poverty. In the 1880s depression Silvio Gesell, a German businessman working in Argentina, noticed that those with goods were at a disadvantage compared with those with money. Since money gained in value from being withheld, it stopped money circulating. He therefore advocated that money should decay like goods and be as disagreeable as goods. He wrote The Natural Economic Order and sparked a movement which lasted. In the 1930s John Maynard Keynes worked out that governments should spend money into existence to stimulate an economy, including on infrastructure. During the last two decades Bernard Lietaer has observed that situation where governments issue one monopoly currency can't help but lead to sovereign debt crises, monetary crises and inflation crises. Like the late Richard Douthwaite, he advocates an ecology of currencies for resilience. Search on youtube for his presentations. In the proposal presented in the following slide show, with inspiration from Adrian Wrigley of UK, I have put together all these ideas. http://www.slideshare.net/deirdrekent/starve-the-banks-and-pay-the-government-13876092. I recommend you take the time to look at it. This idea continues to develop as I run it past our supporters and others. I expect it will develop and clarify further yet. Please respond! And the actual paper is now at http://neweconomics.net.nz/index.php/2012/08/proposal-for-a-dual-currency-for-new-zealand-one-for-domestic-use-only/