Category Archives: Manifesto

Party policy

Letter to a budding politician concerned about inequality and climate change

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Letter to Miriam Pierard,

Miriam I listened to your radio interview with Wallace Chapman and I was very impressed.

Yes, the top issues of our time are climate change and inequality. You say you are concerned to find answers. Great news.

Gosh Miriam I have been looking to solutions to the environmental crisis for decades. I was a candidate for the Values Party in 1975. And we were saying in those days that the GDP wasn’t necessarily an indicator of progress, because we had noticed inequality then – and unemployment and deprivation. And it is still worshipped forty years later.

Late in 2012 we had a 40 year reunion of New Zealand Values Party activists. We reflected on progress and it was quite sobering. Inequality had got worse and the environment had deteriorated to the situation where our very habitat is threatened with climate change and all the storms, flood, drought and food insecurity it brings.

A year before that reunion I had helped co-found the New Economics Party. Whereas most of the Values Party seniors said they were frustrated within the Green Party, I said I wasn’t at all because I was actively engaged in finding solutions and believed I had come to understand two of the big solutions.

I know I have. The very money system we have is structured so that the money supply has to grow, debt has to grow and the economy has to grow. So when it comes to climate change talks, after all the dire warnings from increasingly alarmed scientists, we usually watch helplessly while official delegates back away, claiming that the economy mustn’t be harmed and economic growth cannot be jeopardised. “Balance” is the cry… and they come up with some puny version of what is needed.

The structural problem we have here is this. We have a monetary system where if the economy doesn’t grow, it collapses. That is how it is designed. You are damned if you do and damned if you don’t scenario. So it’s not a great choice – runaway climate change if we do nothing or economic collapse if we do something that will halt it.

So I had finally found the cause of the growth imperative. It was the money system whereby we allow banks to create money as interest bearing debt. The negative consequences would all follow. It had taken me till 2004 to realise this.

But finding the cause(s) of inequality? It has come to me in various forms over the last few years. But now it is crystal clear. The earth has a finite supply of land and natural resources – land, water, fish, electromagnetic spectrum and so on. We all can’t occupy the same piece of land. Some land is more valuable than other land. Land is given its value by the desirability of its surroundings. So those who claim monopoly use of the best land must compensate the others for the privilege. In other words pay a full rental on the land to the public purse and then let this revenue be shared with all, perhaps as a Citizens Dividend or for health and education and other government services. Add to this the rental on the monopoly use of fish stock, water, coal, oil, minerals and you get government revenue.

If we don’t charge a rent on the monopoly use of natural resources, the consequence is asset inequality and this leads to income inequality. You are always going to derive income from monopolising resources like land.

I had also realised this land issue must be solved at the same time as the money issue. When I was starting to understand the money system and advocating for money spent into existence without interest (the Reserve Bank issues its coins this way) it became clear that interest-free money would cause a rise in the price of property. That really meant a rise in the price of land. We would have a land bubble. (that is why economists wouldn’t ever agree to zero interest money; they knew the bubble consequences).

But the land bubbles only happen because freehold land originally meant land “free of rent”. Apart from a small amount as the land proportion of our rates, there is no price on the holding of land. We can see that in Auckland as speculators buy valuable sections or old houses, and sit on them while the area develops and the price rises. Without doing anything at all the land speculators get an unearned windfall gain. (And a Capital Gains Tax won’t solve it, but I won’t go into that now).

Those who have freehold land should pay the public a full rental. Any valuer will tell you they can work out the rental value of any piece of land, it’s easy. And it should be reviewed annually, otherwise there are unpleasant hikes upwards.

But is this another tax? No, it is a replacement tax. Since there is no logic in income tax because there is plenty of labour we should get rid of that. Labour and entrepreneurship are valuable and we should encourage them. GST is regressive and income tax illogical.

Now I won’t go on any more, except to say if you are seriously concerned about inequality and climate change I encourage you and your party to focus your energies on economics. Other wonderful results follow from understanding these two issues. It’s the money system. It’s the tax system.

Few economists can tell you much about how money is created and, as two economists from the IMF and three from the Bank of England have recently embarked on a campaign to teach the economics profession about bank created credit. They say the textbooks are wrong.

However politicians worth their salt will also be aware that it is political suicide to favour a third tax on land. People will protest they pay their rates and they pay their mortgage so why should they pay another? Quite right. Actually the bank is getting the money that rightfully belongs to government. It’s a challenge.

Look I don’t know how this could all be implemented without shocking the economy. I have worked out one solution. I am not sure it is right. But I do know that somehow, someone must be politically creative, politically determined and wise enough to win the public over and finally address climate change and inequality at the root. Nothing else will suffice. Artificial bandaid solutions can’t work because they don’t get to the root of the problem.

As a woman in her seventies addressing a clever young budding politician I wish you the very best and hope that you can help make a better world for my grandchildren. Meanwhile I will keep doing what I do.

Financial analyst and former oildrum editor joins New Economics Party as spokesperson

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Top Financial Analyst to join New Economics Party

Friday, 1 August 14

The New Economics Party has just added top financial analyst Nicole Foss to its group as spokesperson on the global economy.

“We are delighted to welcome Nicole, Senior Editor of The Automatic Earth website to our team” said party co-leader Deirdre Kent. “Nicole, a Canadian has recently arrived to live in Motueka and is in demand as an international speaker on finance, energy and resilience,” she said.

Nicole is former Editor of The Oil Drum Canada (canada.theoildrum.com). She used to be a Research Fellow at the Oxford Institute for energy Studies in the UK and used to run the Agri-Energy Producers’ Association of Ontario in Canada. Her formal background is in science and law.

Nicole says she aligns with the New Economics Party idea that the global financial crisis is far from over. “The recent credit bubble was the biggest ponzi scheme the world has ever experienced and it’s not yet unwound.” The bailouts now add up to at least $4.6 trillion or $4,600,000,000,000. Foss says the bubble is leading us into a very long and painful depression.

The New Economics Party https://neweconomics.net.nz
is not contesting this election.

For further comment phone Deirdre Kent 06 364 7779 or 021 728 852 or Nicole Foss 022 312 5120

Petition asking for a Parliamentary Enquiry on Bank Stability declined

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Our petition on Bank Stability Dismissed 31 July 2014

The New Economics Party is disappointed that their 877 strong petition asking for a Parliamentary Enquiry on bank stability has been declined.

Spokesperson Deirdre Kent said they were not just disappointed with the outcome (which was expected) but also by the process where the Select Committee met behind closed doors.

“There is so much at stake with banks playing in the derivatives casino, that the issue should be taken more seriously. The public is being kept in the dark as to what is going on internationally in the credit blowout. Their reply suggesting that they had it all in hand was by no means reassuring yet they have gone to the trouble of setting up a system whereby ordinary depositors will have their accounts confiscated in the event of a bank collapse.”

Ms Kent said “I don’t remember the Reserve Bank predicting the Global Financial Crisis, so why should we have faith in them now?

“The fact that the Select Committee meets behind closed doors is a big worry. We weren’t invited to give oral evidence, we didn’t get to eyeball them and we don’t know which politician said what. When Parliament has legislated 22 years ago for local authorities to have all their meetings in public without a good excuse, they continue to meet in behind closed doors. Such a process is unfair, undemocratic and not in line with their stated policy of open government.”

For further comment phone Deirdre Kent 06 364 7779 or 021 728 852

Henry George influenced a movement, now reviving

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Alanna and Deirdre at pool - Version 3I have just returned from California where I attended a conference of the Council of Georgist Organisations and delivered a presentation on the Land Dollar.

I was one of four presenters in a session on Land and Money. I was invited by author Alanna Hartzok, (photo above with me) an amazingly vital and wise woman who seemed very well respected in the movement. My presentation offered a wholistic solution to the three issues and was generally well received, though some dismissed the money issue as secondary. We have a money system that leads to rising debt and a growth imperative on a finite planet which threatens to leave it uninhabitable for our grandchildren. Second we have a tax system that treats labour as scarce and land as infinite and this needs to be turned right side up. Otherwise the inequality will continue to get worse as those who seek to “own” land and resources will accumulate more wealth. Third we all need sufficient income for all but we have a welfare system that encourages lying about relationships, even to the point where couples live in different houses to get more benefit money. What sort of society are we aiming for when we disincentive intimacy and love? The slideshow I delivered is now online at http://tinyurl.com/ou9stc6.

First let me tell you about the elevator pitches on Georgism I tried. When asked in the hotel lift what the conference was about I sometimes blundered and sometimes succeeded. “What is Georgism?” was usually the question. “Well it’s a old movement you probably won’t have heard of. It’s based on the writings of a man called Henry George. He was a San Francisco journalist during the Depression of the 1870s and saw a lot of poverty. He believed the value of land rose because of the activities of the public and so the increase really belonged to the public. Basically the idea is for the public to recoup this rise in land value. And he effectively said you should pay for what you hold or take not for what you do or make. No income tax but a land tax. At this stage the person said “Oh he must have been a good thinker. Sounds fair enough” or something like that.

IMG_1720And that is where the elevator usually stopped. That one worked. I was also asked the same question by a woman I befriended on a Los Angeles bus tour but I botched my answer completely. I started off saying we believed the land belonged to everyone and all the minerals, fish, water, trees etc. After that I blundered on and naturally she didn’t light up.

Sometimes people would ask why hasn’t the movement made much progress? And it is sad. So many Georgists have lived and died without seeing change. But, like the monetary reformers who followed Major Douglas, they have continued staunchly on till their eighties, loyal to the end. Their numbers dwindle and they speak more and more to themselves. At this session as will the Social Credit movement during its 60th anniversary in Christchurch next month, we had a time remembering those who had passed on the previous year. (I must say I think I heard one older woman report she had been president of her little society for 50 years, hope I was hearing wrong)

I met many who had taught courses at Henry George Schools for decades. They know that wealth is accumulated by monopolising the land and all its bounties. They weep to see the cheating society we have all become, pocketing the unearned gains from rising land prices. Their knowledge of the money issue varies. Dan Sullivan, the president of the council, attends the Modern Monetary Institute gatherings and was a fellow presenter. Many understand that if we create money as interest bearing debt we add another parasite. As Dan said “If you kill one parasite the other grows larger. You have to tackle them both together”.

One blog post can’t do justice to the variety of competent speakers. We had Peter Barnes, the author of “Who owns the Sky” tackling the twin issues of inequality and climate change. He said “Recycle the rent is a better term than tax the land”, as did other speakers. A giant Rent Recycling Fund should be redistributed as a dividend. He thinks it could be $5000 a year, enough to revive the middle class.

A young women PhD graduate had studied the man who influenced Henry George and gave an excellent talk on the geneology of the ideas.

The older Georgists were all greatly heartened by the infusion and energy of the new young men who have come into the movement. Two came, I believe, from working on reintroducing an inheritance tax, and the others arrived simply through trying to find a solution to inequality and environmental issues. They were self taught from the web and found their own way there. They were obviously struggling financially. I hear five of them shared a room. Karl Fitzgerald, of Prosper Australia and one of only five people worldwide working full time for the movement helped me greatly and seems to be a mentor for the new blood, all of whom are on the Facebook group called LVT.

Of course the group should be called something else but that is for another day… The session on campaigning was speakers from another movement. Hopefully next time there will be better teaching on soundbites, controlling the language, controlling the images, writing media statements, working with bureaucrats and journalists.

Next year the conference will be held in Detroit and for it the Council of Georgist Organisations will combine with the International Union for Land Value Taxation. So let’s make sure we get someone there from New Zealand.

(Second Photo: Peter Barnes with a Canadian Green Party man, Erich Jacoby-Hawkins)

An open letter to Helen Clark UNDP re climate and the economy

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searching-blindfolded-man

Late last night I engaged with you in 140 character tweets on the topic of climate and the economy. You were expressing the strong desire that we can have economic growth at the same time as halting climate change. And I pointed out that unless and until you reform the money system you are going to get a growth imperative built into the economy.

Helen, I believe the future of life on the earth depends on people like me pointing this out to people like you. There are a great many people wanting the same thing – a thriving economy AND a liveable climate. We need it desperately.

I see that your current meeting is another high powered one. Called The Global Commission on Climate and the Economy it has on it the Chairman of the Bank of America and the former chairman of the China Development Bank, the Vice Chairman of Deutsche Bank Group, as well as someone from the International Energy Agency with the UN Special Envoy on Climate Change. Nicholas Stern is there and so is a trade union representative as well as many ex Prime Ministers.

I see the purpose of this Commission is to “analyse and communicate the economic benefits and costs of acting on climate change.”

It looks as though the plan is to go down the path of green growth, to change towards sustainable energy sources. That is what economist Nicholas Stern and many others want. It is a good goal but not enough. It is just too limited.

But that is like mopping up a leaky pipe without stopping it leaking. It doesn’t get to the core of the problem.

What the bankers on your committee won’t tell you is that the function of banks is to create money and create it as interest bearing debt. You must know that having been Prime Minister of New Zealand for nine years. The country’s money supply comes into existence every time a bank makes a loan and disappears every time a loan is paid back. But it must keep on increasing. That’s the design of it.

What you have probably never had time to find out in your busy life is that when a bank creates the principle but not the interest, there is not enough total money in the system to pay off the debt and the interest. So someone has to get another loan. This increases the money supply and the money supply can’t be bigger than the number of trades in an economy. So the economy has to grow. See the Parable of the Eleventh Round for a story to illustrate this.

That is the growth imperative. It is built in to the current dysfunctional money system. You can’t have a thriving economy without growth in this system. All the time there is pressure to grow the total number of exchanges in the economy. And it can’t be done on a finite planet. Christchurch is helping our GDP grow because it had an earthquake. The economy grows when tobacco consumption or gambling rise. The economy grows when dairy farmers pollute the rivers with their runoff. Stupid.

This is not just debt money but it is interest bearing debt money. There is a world of difference. The latter has many other damaging and negative consequences like rising debt, instability and wealth concentration.

But let’s concentrate on the growth imperative.

Over the last couple of years there have been two excellent articles written by economists from the IMF and by economists from the Bank of England. Michael Kumhof of the IMF subsequently talks at a January 2013 seminar on Financial Reform for a Sustainable Economy here. Economist and former money trader Bernard Lietaer co-author of a Club of Rome book called Money the Missing Link in Sustainability speaks at the same seminar.

Gosh it is sad. Here you are at this high powered meeting of bankers, ex and current politicians, energy experts, CEOs of multinationals seeing if you can stop climate change without damaging economies. You are trying to find a way to get a thriving post fossil fuel economy and yet you are still working blindly. The paradigm of creating money is just not within your vision. The idea of radically reforming the tax system is probably far from member’s minds. Sad.

Look around the room and think “Who among you know that if we go on blindly allowing banks to create money as interest bearing debt we are never, never going to get sustainability?” Tragic.

And whatever decisions you make at this Commission, I hope you get on to the issue of tax policies. Can we in fact have a sustainable economy while we fail to tax the monopoly use of the commons – land, natural resources and the cultural commons.

So it won’t be any use having a series of indicators on green growth (as does the OECD). They want to monitor the natural asset base. Well if there aren’t tax policies that protect that asset base that base will just deteriorate. Measuring is good, but you might as well implement tax policies that are going to protect that natural asset base in the first place.

Government Superannuation, Basic Income, Duplication and the Housing stock

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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.

Why not create a national currency at local level?

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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.

images

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.