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.

For some good new people to follow, try Ann Pettifor from UK and the Renegade Economist.

Last Saturday Radio NZ interviewed an English guy called Ross Ashcroft, who calls himself the Renegade Economist. Like all good campaigners he interviews people and puts the interview up on Kim Hill’s interview with him is at Ross has produced a film called The Four Horsemen, which is part of The Documentary Edge Festival. Welington shows are at the Reading as follows:

Monday 21 May 8.45pm, Sunday 27 May 4.45pm and Thursday 312 May at 8.45pm. I gather it is also on in Auckland.

Tonight I have just watched Ross Ashcroft interview Ann Pettifor, whose name had been cropping up recently in various tweets. Half an hour interview with this bright woman economist, who has been a Fellow of the New Economics Foundation of UK for three years. She led a huge campaign, successfully winning the relief of $$350 billion worth of debt for Third World Countries in Jubilee 2000. There were 60 countries involved. Back in UK she noticed her friends getting huge mortgages when they were not exactly in secure jobs and she wrote a book called The Coming First World Debt Crisis in 2003. She said people thought she was a loony and she sold only a few copies.

The growing debt really began to blow out in 1971 after Nixon delinked from the gold standard and the UK deregulated credit. She talks of an article she is reading by Ben Broadbent, who is on the Board of the Bank of England but came out of Goldmann Sachs. She said the paper is deceptive yet packed with data. But she was convinced it was written in Goldmann Sachs office because it argues the Global financial crisis was due to low interest rates. Broadbent is defending the right of banks to be deregulated. He has huge political and economic power.   Why should banks get a return on an effortless activity, by entering numbers into ledgers or by engaging in speculative activities?

Ann Pettifor has just returned from an INET conference in Berlin financed by George Soros, where Steve Keen and Michael Hudson participated. (Initiative for New Economic Thinking). She concludes by saying she thinks people should be politically involved.

Roosevelt stood up to the banks in the 1930s and it takes leadership to do it. We need the leaders. We need capital controls to control borrowing across borders. Banks go looking to find they can borrow at 3% from China but 4% at home. Roosevelt brought in capital controls. Secondly we need to stop banks lending for speculation.  She says politicians have been taken in by bribes from banks. We must hold our politicians to account. Once the public understands, there is no stopping them. If people understand that banks create money out of thin air and charge exorbitant rent on it, then it snowballs. One in five voted for Fascist party in the French elections, very worrying, similar to Germany in the1930s. People are desperate and can’t articulate it.