Things are hotting up on the monetary reform book front—two new ones have appeared since the last issue of SustEc: Creating New Money—published by the New Economics Foundation—and Fantopia, both reviewed in this issue, on pages 98 and 100.

Meanwhile, the booklet I wrote for the Economics Policy (now the Monetary Reform sub-) Group, Where's the Money to Come From??, has run out of its first edition of 400 copies, and I have produced a second one, slightly revised, with the above books added to the "Further Reading" list, together with Mike Rowbotham's Goodbye America! Copies from me at 45p including p&p, or 3 for £1.

Also in this issue is James Robertson's "Alternative Mansion House Speech" which he delivered on the morning of the official speech, courtesy of the New Economics Foundation, and which introduced his and Joseph Huber's new book.

We are still up against determined opposition to the Monetary Reform DVP. I am advised that it is unlikely that it will be allowed to go to a voting paper in the Spring. Jonathan Dixon has offered an alternative, published on page 99, which he suggests might be an acceptable compromise. What do readers think? Reply to Jonathan and/or to me.

William Gleeson offers in this issue a scheme for an official alternative, special purpose currency, based on the Time Dollars idea.

In the last edition, the e-mail address for the Henry George Foundation was out-of-date. The correct address is: [email protected]

at The Calthorpe Arms, 252 Grays Inn Rd, London, 26 August 2000

Present: William Gleeson (West Suffolk), Mercy Harmer (Diss), Brian Leslie (Tunbridge Wells), Terry Liddle (Greenwich), Donald Lowe (afternoon only, items 3-4, Brent & Harrow), Barrie Weller (Mid Sussex & Crawley), Nick Wilkins (Chesham & Amersham)

Apologies: Jonathan Dixon, Stephen Lawrence, Chris Padley

Chair: Mercy Harmer

Minutes: Nick Wilkins

1. Weekend Conference

1.1. It was agreed to hold a weekend conference, provisionally on the last weekend in November (25th & 26th). If successful, further conferences would be repeated at regular intervals. The format would be to have four sessions (Saturday morning, afternoon, evening and Sunday morning) with speakers or facilitators at each session on the Saturday. Outside speakers would be sought, but not necessarily for every session. Non Party-member attendees would be welcomed. The Sunday session was expected to be for drawing together what had been presented and discussed, and formulating action plans etc.

1.2. The conferences would aim to be primarily educational and informative, promoting a growth in understanding of the issues. It was hoped that they would spawn smaller special-interest groups interested in developing policy papers.

1.3. Suggested venues included Peterborough, Leicester, York, and Coventry.

ACTION TL to investigate viable venues.

1.4. The first conference topic proposed was Globalisation.

1.4.1. The proposed first session was to be on the Global Economy and Multinational Business.

ACTION BL to invite Colin Hines to speak

1.4.2. The proposed second session was to be on Third World Debt

ACTION TL to invite speaker from Jubilee 2000

1.4.3. The proposed third session was to be on Alternatives. No speaker was proposed, but Hartmunt Bossel's book "Earth at a Crossroads" (Cambridge University Press) was suggested as a good source of ideas.

1.5. These proposals would be discussed further and details firmed up at the Autumn Conference.

ACTION MH to book two fringe sessions at Autumn Conference.

ACTION TL to prepare handouts/booking forms to be available at Autumn Conference

1.6. Other suggestions for speakers at future conferences included a Fabian Society speaker, a speaker from Triodos bank, James Robertson, Richard Douthwaite, and a speaker from the Henry George foundation.

2. Policy leaflets

2.1. Jonathan Dixon had written to the group asking for help in producing A5 policy leaflets. There was some difficulty in getting anything done before Autumn Conference, not least because fairly major policy-matters were being discussed there. Nevertheless, efforts would be made to meet this request.

ACTION ALL to draft suggested A5 leaflets and send to MH

3. Monetary Reform Draft Voting Paper (DVP)

3.1. Various words were highlighted as being problematic because of their connotations (e.g. "usury"), ambiguity (e.g. "commodity" has specific Marxist meanings not consistent with the intentions here), or general unfamiliarity (e.g. "time deposits").

3.2. Jonathan Dixon had drafted an alternative paper. One notable difference from the official DVP was that it made no mention of money being created by the process of government spending it into existence. This issue had proved a stumbling block in the past, and it was felt, therefore, that time should be given to discussion of Jonathan's alternative at the DVP workshop at Autumn Conference.

4. Taxation Voting Paper / Time Credits

4.1. Amendments to the Taxation Paper designed to introduce the notion of Time Credits were discussed. These did not meet with general support, with some concerns being expressed that the "social deterrents" designed to dissuade liable adults from defaulting on their Social Insurance Service payments were sounding like proposals for forced labour.

A Failed Global Experiment: The Truth About the US Economic Model

Index

Ever since the 1997 Asian economic collapse, the US has been held up to the world as an economic model. The media daily trumpet its slogans as final truths. Experts venerate its "historically unprecedented combination of high growth, low unemployment and low inflation."

What is concealed is that the US economy is jettisoning its human, social and environmental capital for the short-term competitive gains of investors and consumers. Cheaper goods and costs come by the loss of tens of millions of secure domestic jobs. Real lower taxes for upper income brackets are achieved by stripping social assistance programs for the poor and unemployed. Equity values are increased by non-productive mergers, laundered drug billions, internet stocks with no earnings, and leveraged debt and asset-flip money. Low unemployment figures are achieved by massive increases in part-time and starvation-wage jobs and a staggering 2,000,000 citizens in prison off the unemployment rolls (over 12 times the number of US citizens caged as in 1968, and about six times the West European rate). The new regime rules the globe behind bars of money and iron.

On one level, the "restructuring" of the US economy is the revenge of the rich against those who advocate a more democratic and egalitarian social order. "The booming US economy" is, in essence, their after-tax profits masked by global figures and averaged aggregates. Government has been, in effect, bought as their servant -- privatising the public sector into subsidised for-profit services, enforcing corporate world rule by rafts of new trade and investment laws, and spending hundreds of billions of public revenues on police, prisons and weapons to terrorise te increasingly dispossessed across borders.

It is not just a social hollowing-out which we see here. The US economy is in decline on monetary indicators too. Its current account deficit with the world -- the measure of how much product and credit it imports compared to what it exports -- has skyrocketed. It is now on the road to doubling since 1998, and is poised to pass 5% of GDP -- the international bankers' marker of an economy in deep trouble. The surface prosperity rests on three shaky props -- windfalls of off-shore and portfolio money diverted from the Asian meltdown and the European doldrums, feverish leveraging of credit to stratospheric highs of citizen indebtedness (what Federal Reserve Chairman Greenspan celebrates as peoples' "new freedom" in his Senate confirmation hearings), and a no-standard regime of transnational trade that opens all gates to the competitive costs of near-slave foreign labour.

Underneath its saturation of the globe with "free market" slogans and its artificially ballooned domestic demand inputs, the underlying economy is running more and more on empty. What is not understood by conventional economists anywhere is that growth of real money demand on wealth is not growth of wealth. It has become the eating away of wealth -- the real wealth of human, social and natural capital upon which the economy depends.

Corresponding to the new floods of money demand loose in the US economy is ever more degeneration of the atmosphere and air, the water tables, the forests and the fishstocks, an obesity rate that has grown by 50% in less than a decade as the poverty of the bottom 60% of the population grows, and deteriorating conditions of civil life at every level. The US and world economy it leads are, in fact, sliding into a black hole. The giant sucking sound you hear is the rush of Canada and other imitators racing to follow.

While the US corporate propaganda machine manages to keep the country's accumulating decline of life conditions out of all economic discussion, another fact goes unobserved. Other nations have done much better in even monetised prosperity by investing in their social infrastructures and in public goods.

Ireland has recently led the world in economic growth. But despite all the flatulent talk of lower corporate taxes, the growth has been undergirded by the most developed credit union sector in the world, by massive spending on public infrastructure financed by European Union public revenues, and by major and increasing investment in higher education. Credit is not monopolised by big banks selecting for paper profits without productive gain. Interest returns to credit unions are ploughed back into small-business (such as family bed-and-breakfast establishments which are the backbone of the country's rural and village economy). At the same time, all qualified citizens can access higher education -- the most important public good for citizens in a knowledge economy. University and college fees have been abolished. Debt slavery is not, as in the US and now Canada, the price of being educated.

Then there is Norway. Wages have to been kept down by the blunt instrument of central bank interest hikes which disemploy workers and ruin small businesses. Wages have been established by partnership with labour in a national Stability Alternative. The nation's oil royalties are not given away to foreign oil corporations as they are here, but are invested back in the social infrastructure. Recent budget surpluses are not spent on tax cuts favouring the upper tax brackets, but are retained as public revenues. On the basis of policies which look to the long-term common interest rather than short-term money gains of stock markets and consumers -- the "sound fundamentals" of reality -- Norway's economy has grown at double the European average, controlled inflation, achieved near full employment, reduced inequality, and advanced democratic control over the economy.

Holland is another case. Like Norway, Holland has built its success on the basis of worker agreement with national economic policies. (Recall here that the US Labor Advisory Council, required by law to participate in foreign trade agreements, was handed the 2200-article NAFTA the day before its passage.) Since the late 1980s, Holland has quartered the official unemployment from 12% to 3.2% by means of the Wassenaar Agreement, a social agreement in which labour unions accepted wage restraint in exchange for shorter work time and state commitment to job creation. A higher rate of job creation was in this way managed than in the US -- without draconian welfare cutbacks or labour forced to work for starvation wages.

But where do you read or hear of these successes? The corporate media can only talk about "lower taxes," "less government," "more flexible labour markets" and "free capital flows." But the program of financial deregulation and privatisation once hymned as the source of economic miracles has precipitated declines in real life conditions everywhere. New Zealanders recently woke up, and returned a government to retax the rich and to re-invest in the country. Other nations have been less fortunate. The 1984 social experiment on New Zealand was imposed on other societies with still greater aggression. Among the consequences of the mindless program were the destruction of Russia's economy, the meltdown of South-East Asia, and the bankruptcies of Mexico and Brazil.

Why does no one yet talk about "the US's failed global experiment"? One reason is the control of the world's mass media by those who have multiplied their personal and corporate fortunes by the experiment. Another is the billion-dollar-a-day NATO war-machine which is used for strategic genocide of any developing nation pursuing an economic alternative -- from the Soviet Union and Nicaragua to Iraq or Yugoslavia.

But the US global experiment carries on in Canada as if no history had intervened. Funded by the banks and transnational corporations, and aped by financed politicians, media flaks, and director-in-waiting bureaucrats, the Reagan tax-cut revolution of the 1980s is retreaded as a Bold New Idea. The program grows more life-blind as the impoverishing of the social sector is force-fed to the public who in survey after survey prefer other social priorities. What has been kept very quiet during the corporate media campaign to lower taxes is the fact that 70% of Canada's taxed citizens have less than $30,000 in annual income, and receive virtually nothing from existing or demanded tax-cuts. Yet CRAP pitbull and KKK-friend, Tom Long, calls for a hacksaw 17% tax-rate on the richest citizens, as the governing Liberals give over 20 times more to tax-cuts favouring the wealthy than to health and education.

But the US model they mimic is in an accelerating downslide in the life economy that counts -- from the junk food its 33%-obese population lives on to its higher illness and birth fatality rates than poor neighbouring Cuba,from its world-leading social insecurity indices and private health-disaster system to its third-world inner cities, bought elections in which the majority no longer vote, and the tragically growing void of meaningful work for future generations. Behind the money aggregates flashed on the cave walls, the reality is that an economy that feeds on the life capital of its people is structured to ruin.

Selected Sources:

.. John McMurtry, The Cancer Stage of Capitalism. London G.B. and Sterling US: Pluto Press, 1999.

.. Tom Schlesinger and Jane D'Arista, 'The repeal of the Glass-Steagall Act,' US Fed Alert, December 21, 1999 (ER, April 2000, pp. 4, 14) and Timothy A. Canova, 'Can Mr. Greenspan Tame the Big Bull?,' Economic Reform, April 2000, pp. 10-11.

.. Anders Hayden, 'Dutch Model or Dutch Disease' and Jim Stafford, 'Tax-Cutter's Guide to the Class Structure of Canada,' Newsletter of the Progressive Economics Forum, November 1999, pp.3, 13.

.. Christian Debrie, 'Thick as Thieves' and Noelle Burgi and Philip S. Golub, 'The States We Are Still In,' Le Monde Diplomatique, April 2000, pp. 6-9.

.. 'Footsoldiers in war on deficit get little budget benefit, Most budget goodies go to those who need them least,' CCPA Monitor, May 2000, pp. 8-9.

.. 'Hog Nation,' Earth Island Journal, Spring 2000, p.23.

—from Economic Reform, Vol. 12, No. 7 July 2000

Copyright © 2000 John McMurtry (COMER Publications, used by permission).

Index

As far as I know, this is the first alternative Mansion House speech. So what kind of speech should it be?

Clearly, it should be about money. But from what point of view? Should it say things that people in the money business - those who attend the official Mansion House dinners - would want to hear? Should I imagine that, sitting here listening to me now, are "my Lord Mayor, Mr Governor, my Lords, Aldermen, Mr Recorder, Sheriffs, Ladies and Gentlemen of the City"? Or should I direct my speech to people who believe that the existing system of money and finance is a basic cause of the poverty, social injustice, environmental degradation and sheer economic inefficiency that disfigure our world today?

As I thought about this, I recalled the saying that "If you can’t ride two horses at the same time, you shouldn’t be in the circus". The gap between the perceptions of those two groups of people - people professionally involved in the mysteries of the money business, and people outside it whose lives are affected by it - is an important gap. It needs to be bridged. The attitudes and actions of both groups will help to shape the world in the 21st century. So I should try to speak in terms that both will find relevant.

I shall speak about the need and prospects for a new economic strategy for this country and, by extension, for the world of which we are part. In particular, I shall speak about the challenge this raises for public finance - or, more precisely, for fiscal and monetary policy.

One of my main themes will be the need to share the value of common resources more equally than today, and to adapt existing fiscal and monetary institutions and procedures for that purpose.

-----------------------------------

I will start by outlining two aspects of the present situation.

* A negative aspect is the increasingly serious criticism and active opposition being expressed against the existing financial and monetary system - globally, nationally and locally.

* A positive aspect is that in the last three years significant improvements have been made in this country’s institutional arrangements for handling public finance and monetary policy.

Next, we will note another negative. Questions about the future of many of today’s taxes as reliable sources of public revenue are demanding an urgent response. But there is a potentially positive consequence - an opportunity to shift the collection of public revenue on to a new footing - more rational, more intelligible and fairer.

Then we will turn to the creation of new money, on which the New Economics Foundation is launching a report today. The proposal to issue new money as public revenue and put it into circulation as public spending, rather than continuing to allow commercial banks to issue it as profit-making loans, will benefit almost everyone. It reflects the same principle as will make sense for future taxation. The monetary value of common resources should be treated as public revenue. It should not be ‘enclosed’ as private profit.

Next we will touch briefly on public spending. In particular, we shall ask whether, in a society of responsible citizens, some of the public revenue generated by the value of common resources should be shared out as a contribution to the income of every citizen.

Finally, after a word about how these ideas could apply to the global economy, we will end with some thoughts about relations between commons, market, and citizens; about how regulating those relations will be a central task for an enabling State; and about how fiscal and monetary policies should be designed for that task.

Basic to much of all this will be the concept of a "free lunch". Mason Gaffney, the distinguished professor of resource economics at the University of Southern California, has pointed out that right-wing libertarian economists are wrong when they proclaim TANSTAAFL (There Ain’t No Such Thing As A Free Lunch). The truth is TISATAAFL (There Is Such A Thing As A Free Lunch). The important questions are: WIGI (Who Is Getting It)?, and WOTGI (Who Ought To Get It)? In fact the economy offers many free lunches, as we shall see.

The existing system of money and finance, and the dominant role of corporate power in world trade and investment, are attracting growing criticism and opposition.

Financial people are understandably outraged by the violent aspects of recent demonstrations in places like Seattle, Washington and the City of London. But these demonstrations are a symptom of a growing worldwide perception that today's economic and financial institutions are economically unjust, socially exploitative, and ecologically destructive. People in the banking and financial sector may not share this perception. But they do need to accept that it exists. And they need to take seriously that many people see them as responsible for much of what is wrong.

* It includes the systematic transfer of wealth from poor people and countries to rich ones.

* It includes the money-must-grow imperative that compels people to make money in socially and environmentally damaging ways.

* And it includes diverting economic effort and enterprise towards making money out of money, and away from providing necessary goods and services.

This growing attitude towards big money and finance is reinforced by more general dissatisfactions. Here are a few examples.

* People’s experience, well-documented by opinion surveys, is that more money does not necessarily mean more happiness. Economic progress in its present form can damage quality of life. The closure of branch banks in rural areas is one of many examples.

* People see a growing readiness on the part of governments to give priority to the goals of multinational corporations over the wishes and wellbeing of citizens (as over GM foods); and they see governments increasingly committing taxpayers’ money to support corporate business (as over public/private partnerships).

* In this country, the New Labour government’s support for business is supported by an old labour perception of work - that the only valid form of work is a job - that people should work for employers as employees - that business is the indispensable organiser of people’s work. The result is experienced as doubly negative: what are put forward as socially inclusive policies have socially divisive results; and the value of necessary unpaid work by people for people, like parenting and caring, is downgraded.

Over the last three years the UK government has introduced significant institutional improvements in the arrangements for handling monetary and fiscal policy. In his Mansion House speech last year the Chancellor, Gordon Brown, explained that the new long-term framework which the government had put in place was based on three principles:

(1) clear objectives for price stability and sustainable public finances;

(2) well understood rules, including

(i) the new system of monetary policy-making centred on the now operationally independent Bank of England, and

(ii) the ‘golden rule’ that the government’s recurrent spending budget must be balanced over the economic cycle;

(3) transparency in policy-making, and an open system of decision-making in both monetary and fiscal policy.

In my view, Gordon Brown and the present government are to be congratulated on these changes. They provide a starting point for progress towards a monetary system and a system of public finance that will be fit for a democratic country in the information age. Perhaps in his speech at the Mansion House this evening the Chancellor will develop what he said in his James Meade Memorial Lecture last month. He spoke then about the need, "not for big government, but for better government, what we might call an enabling state", and he spoke about the need for "a credible and radical view of citizenship as responsible citizenship". If, this evening, he were to explore what those ideas could mean for the future of monetary and fiscal policy, as we are doing here this morning, we would all be getting somewhere.

However rosy the British government’s finances happen to be at this particular moment, it is widely recognised that pressures to reduce existing taxes will continue to grow.

In an increasingly competitive global economy, the mobility of capital and highly qualified people will continue to press national governments to reduce taxes on incomes, profits and capital.

In ageing societies, opposition will grow to taxing fewer people of working age on the fruits of their efforts, in order to support a growing number of so-called "economically inactive" people.

Internet trading ("e-commerce") will make it more difficult for governments to collect customs duties, value added tax and other taxes and levies on sales. This applies especially to sales of products and services that can be downloaded directly from the internet - including music, films, pictures, games, and advice and information of every kind. The internet will also make it easier for businesses and people to shift their earnings and profits to low-tax regimes.

International bodies like the OECD and the EU are demanding action against tax havens. A 1998 report estimated that the £400 billion invested in Britain’s tax havens - like the Channel Islands and Isle of Man - meant a tax loss of at least £20 billion a year to the UK exchequer. $6 trillion was estimated to be held in tax havens worldwide. The results, apart from lost tax, include economic distortions and criminal money laundering on a massive scale. The best way to tackle this will probably be to shift taxation away from things that can migrate to tax havens - like incomes, profits and capital - to things like land which cannot migrate.

These growing pressures to shift the tax base away from things that can escape tax by moving elsewhere reinforce the positive economic, social and environmental arguments for taxing "bads", not "goods". Two recent American reports called "Tax Shift" and "Tax Waste, Not Work" spell out these arguments. The idea is to move the burden of taxes away from useful enterprise and employment on to the ownership and use of common resources, including land, energy and the capacity of the environment to absorb pollution. For example, the carbon/energy tax proposed by the EU in the 1990s would have used the revenues from taxes on fossil fuels to reduce the levels of tax on employment.

The fact is that the present structure of taxation is highly perverse.

* Today’s taxes fall heavily on employment and on rewards for work and enterprise, and fall lightly on the use of common resources. So they encourage economic inefficiency in the use of resources of all kinds - over-use of natural resources (including energy and the environment's capacity to absorb pollution), and under-employment and under-development of human resources.

* In addition to those damaging economic, social and environmental effects, today’s taxes are unfair and illogical. They penalise value added - the positive contributions people make to society. They fail to penalise value subtracted; only exceptionally do they make people pay for using or monopolising common resources and thereby preventing other people from using them.

* The present tax system allows rich people and businesses to escape, or at least minimise, their tax obligations. Among the devices available to rich people are tax havens and family trusts. Two business devices currently attracting attention are: the decision by some companies to pay their staff with stock options; and ‘mixer companies’ set up in Luxembourg or the Netherlands - estimated to save leading British companies £4bn a year by exempting their foreign earnings from UK tax.

It is all a great mess. After paradise lost, you can almost imagine Satan sitting down with Beelzebub, Moloch, Belial and the rest of his cabinet, to design the most damaging tax system they could persuade the human race to adopt. Could they have done much better than what we have now?

These problems open up the need and the prospects for a new approach to fiscal policy, designed to collect the value of common resources as public revenue, and to share it among all citizens.

Common resources are resources whose value is due to Nature and the activities of society as a whole, and not to the efforts or skill of individual people or organisations. Land is an obvious example. The value of a particular land-site, excluding the value of what has been built on it, is almost wholly determined by the activities and plans of society around it. For example, when the route of the Jubilee line in London was published, properties along the route jumped in value. Access to them was going to be much improved. So, as a result of a public policy decision, the owners of the properties received a windfall financial gain. They had done nothing for it and they had paid nothing for it. We had given them a "free lunch". Calculations made in a New Economics Foundation report in 1994, and based on 1990 values, suggested that the absence of a site-value tax on land might be costing £50bn to £90bn a year to UK taxpayers - an important failure, but only one of many, to collect the value of common resources as public revenue.

By contrast, the recent auction of licences to use the radio spectrum for the third generation of mobile phones in this country over the next twenty years, raised £22.5bn for the government. That is an excellent example of the contribution which the value of common resources can make to public revenue. The Chancellor and the Treasury deserve praise for it.

Important common resources include:

land (its site value)

energy (its unextracted value)

the environment’s capacity to absorb pollution and waste

space - for road traffic, air traffic (e.g. airport landing slots)

water - for extraction and use, and for waterborne traffic

the electro-magnetic (including radio) spectrum

genetic resources

the value arising from issuing new money.

Their aggregate annual value is very great. Sharing it out among all citizens would go far to eliminate the need for many existing taxes.

So, among future sources of public revenue there will be less reliance on conventional taxes than today, and more on payments for licences and tradable quotas, charges for the use of water, road space and other common resources - and revenue from issuing new money. We shall no longer tax people and businesses as heavily as now on what they earn - by useful work and enterprise, by the value they add, and by what they contribute to the common good. Instead, we shall require them to pay for the value they subtract by their use or monopolisation of common resources.

This change is essential if we are to create an environmentally sustainable economy. The New Economics Foundation’s Living Planet Index, developed with World Wide Fund for Nature, estimates that we have destroyed one third of nature’s resources over the last 30 years. The economic costs of climate change have doubled for each of the last few decades according to the insurance giant Munich Re. If that pattern continues, by 2060 the costs will be greater than total Gross World Product.

"Creating New Money", launched by the New Economics Foundation today, is about how new money is issued - new money denominated in the national currency, i.e. pounds sterling in the UK. It is not about new currencies - parallel or complementary currencies like LETS or Time Dollars. Those are important innovations, but different.

At present in Britain less than 5% of new money is issued and put into circulation by the government and the Bank of England as cash (coins and banknotes). The remaining 95% of new money is non-cash money created and put into circulation by commercial banks. The situation in other countries is similar. As J.K. Galbraith has commented, "The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent." The banks simply print the money out of thin air into the current accounts of their customers - as interest-bearing, profit-making loans.

Interest on these loans gives the UK banks supernormal, special profits of about £21bn a year - compared with their supernormal profits of £5bn a year from cash machines, which were criticised in the Cruickshank report earlier this year. The annual loss of public revenue from allowing the banks to create the non-cash money is about £45bn - equivalent to about 12p on income tax. Total supernormal banking profits from this source in the USA, UK, Eurozone countries, and Japan are about $140bn a year. With a "free lunch" on that scale, no wonder some of the cats get fat!

The necessary reform is simple - but our minds should not be repelled by its simplicity! There are two sides to it.

(1) Central banks should create the amount of new non-cash money (as well as cash) they decide is needed to increase the money supply. They should credit it to their governments as public revenue. Governments should then put it into circulation as public spending. In deciding how much new money to create, central banks should operate with a high degree of independence from their governments - as the Monetary Policy Committee of the Bank of England now does.

(2) It should be made illegal for anyone else to create new money denominated in the official currency. Commercial banks will then be excluded from money creation. They will be limited to credit-broking as other financial intermediaries are - borrowing, but no longer creating, the money they need to lend.

This reform will restore "seigniorage", in a form adapted to the conditions of the Information Age. That is to say, it will restore the prerogative of the state to issue money, and to capture as public revenue the income that arises from issuing it, in an age when most money has become information. Originally, seigniorage was the revenue enjoyed by monarchs and local rulers from minting coins. It reflected the fact that the coins were worth more than the costs of producing them. As, over several centuries, the physical characteristics of money have changed from metal to paper to electronic bits and bytes, and as banking practices have developed, the relative importance of that original source of seigniorage has gradually dwindled. Now that almost all money takes the form of electronic entries in computerised bank accounts, extending the traditional principle of seigniorage to non-cash money will correct the anomaly that has grown up over the years.

The arguments for this monetary reform are not limited to the contribution it will make to public revenue, considerable though that will be. As the report explains, it will have beneficial social and environmental effects. It will be very beneficial for the economy as a whole. For example, it will tend to bring about lower interest rates and lower inflation; and it will tend to create greater economic stability, by enabling the central bank to smooth out the peaks and troughs of business cycles more effectively than it can do today.

It will also help to clarify monetary statistics, monetary definitions and monetary terminology. This is a crucial point. The distinction between means-of-payment money and store-of-value money - between the functions of sight deposits and savings deposits - has become blurred in recent decades. The result is that the concepts and definitions on which monetary understanding and policy-making are based are now even more obscure than they were before. It is not at all clear what is now included in the "money supply". The different definitions of money - M0, M1, etc, up to M4 - are abracadabra to most people. One might imagine that a monetary priesthood had deliberately set out to conceal from citizens and politicians of democratic countries how the money system works, and how it could be made to work better for the common good.

The proposed reform will mean that the whole stock of national currency circulating in the economy will have been issued by the central bank. It will include all the non-cash money in everyone’s current accounts, together with the cash which everyone holds. It will be easy to calculate how much of it there is. It will no longer be necessary to juggle with M0, M1, M2, M3, M3 extended, M4, and so on. There will simply be the one amount of plain money M. Everyone - and that includes politicians, officials, bankers and monetary experts, as well as a growing number of citizens, bank customers and taxpayers - will be able to understand better than today how the system works. As befits the citizens of a democracy, we will be better able to evaluate and discuss the monetary and financial policies and policy options which are presented to us. This reform will mark an essential further step towards what, at the Mansion House last year, Chancellor Gordon Brown called "transparency in policy-making, involving an open system of decision-making in both monetary and fiscal policy".

I shall now mention briefly three points that are likely to play a more prominent part in public debate in the coming years.

The first is about the payment of taxpayers’ money to business corporations. Governments now dole out huge sums in contracts, subsidies, inducements, incentives and various other contributions to corporate budgets. To take subsidies alone, it is estimated that, worldwide, $1.5 trillion is spent every year on perverse subsidies - perverse, in the sense of having economically, socially and environmentally damaging effects. This surely can’t go on.

The second point is about "hypothecation". This means earmarking revenue from particular taxes or charges to be spent for specified purposes. It applies particularly to environmental taxes. For example, congestion charges on motor transport in cities are expected to be more readily accepted if the revenue from them is used to improve public transport. And studies have shown that the regressive effects of energy taxes - which hurt poor people relatively more than rich people - can be reversed if the revenue from them is recycled as "ecobonus" payments to everyone in the area affected by the taxes.

The third point is the probable further extension of benefit payments or tax credits to guarantee a basic income to various categories of people. The working families tax credit scheme, introduced by the present UK government, is leading on to a debate about how to guarantee the income of active citizens such as carers (for example by paying their national insurance), parents (an idea championed by Harriet Harman) and even social entrepreneurs. Foreseeably, combining developments like these with the ecobonus principle, may lead towards a universal citizen’s income - support for which is already growing. This would be paid, as of right, to all citizens. It would replace many existing social benefits and tax allowances. It would recognise that, in a society of responsible citizens, some of the public revenue arising from the value of common resources should be shared directly among them - and only some of it be spent by government officials and businesses on other public spending programmes.

The principles we have been discussing for national public finance and the creation of new money apply at the global level too.

The Commission on Global Governance recognised five years ago that global taxation is needed "to service the needs of the global neighbourhood". Global taxes, based on the use each nation makes of global commons, could include:

* taxes and charges on use of international resources such as ocean fishing, sea-bed mining, sea lanes, flight lanes, outer space, and the electro-magnetic spectrum; and

* taxes and charges on activities that pollute and damage the global environment, or that cause hazards across or outside national boundaries, such as emissions of CO2 and CFCs, oil spills, dumping wastes at sea, and other forms of marine and air pollution.

The Commission also pointed out that international monetary reform is becoming urgent: "A growing world economy requires constant enlargement of international liquidity". The "Creating New Money" report suggests that the principle underlying the reform it proposes could be applied at the global as well as the national level. We can create a true global currency.

Revenue from global taxes and global seigniorage could then provide a stable source of finance for UN expenditures including international peace-keeping programmes. But not only that. Some of the revenue might be distributed to all nations according to their populations, reflecting the right of every person in the world to a "global citizen's income" based on an equal share of the value of global resources.

This approach:

* would encourage sustainable development worldwide; it would generate a much needed source of revenue for the UN;

* it would provide substantial financial transfers to developing countries by right and without strings, as payments by the rich countries for their disproportionate use of world resources;

* it would help to liberate developing countries from their present dependence on aid, foreign loans and institutions like the World Bank and the International Monetary Fund, which are dominated by the rich countries;

* it would reduce the risk of another Third World debt crisis; and

* it would recognise the shared status of all human beings as citizens of the world.

First, then, the value of common resources should be fairly shared.

Second, sharing the value of common resources should be seen as predistribution. Whereas redistribution aims to correct the outcomes of economic activity after the event, predistribution shares the value of essential inputs to economic activity. Whereas redistribution is dependency-reinforcing, predistribution is enabling. Because it addresses the underlying causes of economic injustice, inequality and exclusion, predistribution is an essential feature of a prosperous economy in an inclusive society. It reverses the private ‘enclosure’ of common resources on which so much conventional economic development has been based - and still is.

Third, whereas there are such things as free lunches, a free market economy is a sheer impossibility. In countries like this, governments take about 40% of GDP (the total value of the country’s economic activity) as taxation. They take it out of the market economy as taxation, and then put it back into the market economy as public spending. This has a massive impact on relative costs and prices throughout the economy - with the taxes adding to the cost of everything that is taxed, and the public spending reducing the cost of everything it supports. The proverbial ‘level playing field’ is a mirage. The total composition of public revenue combined with the total composition of public spending will always provide a framework for the economy which skews its price structure some ways rather than others. That being so, the central aim of fiscal and monetary policy must be to provide a framework that encourages outcomes which accord with democratically decided choices and preferences.

Growing numbers of people share a vision of a more people-centred and earth-centred society - less business-centred, state-centred and employer-centred than the society we have today.

* As citizens of such a society, we will be more equal in esteem, capability and material conditions of life than we are now.

* We will find it easier to get paid work. But we will no longer be so dependent on employers to organise it and provide our incomes.

* The industrial-age class division between employers and employees will continue to fade - as the old master/slave and lord/serf relationships of ancient and medieval societies have faded. It will become normal to work for ourselves and one another. Public policies will enable us to manage our own working lives.

* In exchange for our right to share in the value of the ‘commons’, we will expect to take greater responsibility for ourselves and for the wellbeing of our families, neighbourhoods and society.

This vision of the future calls for a reconstruction of public finance and the monetary system. To some it may seem utopian. But, as I said three years ago in a report to the European Commission, the dividing line between the new economics and the mainstream is not static. As independent voices spread awareness of the need for change - as, for example, about the environment - mainstream opinion shifts, after a time lag. As forward thinkers move ahead and mainstream opinion moves to catch up, no firm boundary can be drawn between the policy implications of the new economics and the evolving political agenda.

As Ed Mayo says in his Foreword to "Creating New Money", "Many of the ideas developed by the New Economics Foundation and sister organisations around the world seemed obscure or unlikely when we first set them out. We look forward to monetary reform moving to the centre stage of public and policy debate in the way that ecotaxes, stakeholding and debt cancellation have done. We invite your participation in helping to shape this debate for the economy of the future".

Index

Book review:

Reviewed by Alistair McConnachie

Many people today think that the State creates all the money in circulation. It doesn’t. Almost all money in circulation, around 97%, is created by the banking sector "out of nothing" and circulates as electronic and cheque book money — see PROSPERITY April 2000, for the process by which money comes into circulation.

The 3% created by the State is the notes and coins, and the only cost to the taxpayer is the relatively insignificant cost of minting. However, taxpayers benefit directly because an amount equivalent to the face value of those notes and coins is spent by the State, into the economy, as a direct, debt-free input.

It would not be practical to return to a state of affairs where everyone dealt in cash. But if the State can issue money debt-free in the form of cash then it can extend that principle and issue electronic money in the same way also.

This would mean that when the State found itself short of money raised from taxes then — instead of printing Treasury Bonds, selling them to the banking and non-banking sector in order to raise money, and then having to pay them back when they become due, and with interest attached, and with money that has been raised from taxpayers and the sale of even more Bonds — it could simply create the money required "out of nothing", in the way that banks create money today, and spend it into society as public revenue.

Instead of the benefits of our money system accruing to banking interests, it would accrue to the whole of society. That is a just and democratic goal worth aiming for.

A new and valuable book from the New Economics Foundation entitled Creating New Money: A monetary reform for the information age, by Joseph Huber and James Robertson makes the case that the value created by issuing new money should be a common, not a private, resource. New money should be put into circulation as public spending, not as profit making loans by commercial banks, and that the result would be equivalent to 12p off income tax.

The authors term this seigniorage reform and it is twofold:

1. A Central Bank should create the amount of new non-cash money (as well as cash) it decides is needed to increase the money supply. It should credit it to the government as public revenue. Government should then put it into circulation as public spending. In deciding how much new money to create, a central bank should operate with a high degree of independence from the government.

2. It should be illegal for anyone else to create new money denominated in the official currency. Commercial banks will then be excluded from money creation. They will be limited to credit-broking as other financial intermediaries are—borrowing, but no longer creating, the money they need to lend.

This reform will restore seigniorage, that is, the prerogative of the State to issue money, and to capture the value that arises from issuing it, and use it as public revenue.

This reform will mean that the whole stock of national currency circulating in the economy will have been issued by the central bank, including all money in everyone’s current accounts, together with everyone’s cash.

They argue that this reform will not only bring benefits in terms of increased public revenue, but will also bring lower interest rates and lower inflation.

It will create greater economic stability, by enabling the central bank to smooth out the peaks and troughs of business cycles more effectively than it does today.

It will have administrative benefits also, as it will be easy to calculate how much money there is. Instead of monetary statistics such as MO, Ml, M2, M3, M3 extended, and M4, there will simply be one amount of plain money M.

It will make the system more understandable and transparent and will make it easier for more people to participate in economic policy debate.

The book is a very thorough presentation of the authors’ case including chapters on implications for public finance, banking, and, especially useful, replies to suggested objections. At only 92 pages, it is also easily and quickly read.

The authors state that support for money reform will be needed from the following helpful list:

- politicians and public officials, not necessarily connected with banking and financial affairs;

- the banking industry itself, the central banks, and other national and international monetary and banking institutions;

- the mainstream community of economic and financial policy-makers, policy-analysts, policy-debaters and policy-commentators;

- the community of respected monetary academics, monetary historians and other specialist monetary and banking experts;

- the wider community of individuals, NGOs [Non-Governmental Organisations] and pressure groups, who are committed to the support of proposals for greater economic efficiency which involve a fairer sharing of resources, but who may as yet be unfamiliar with the relevance of monetary reform; and

- the community of already committed supporters of monetary reform.

Ed Mayo, the Executive Director of the New Economics Foundation writes in his introduction, "We look forward to monetary reform moving to the centre stage of public and policy debate in the way that eco-taxes, stakeholding and debt cancellation have done.

This book is an immensely important and significant step towards that goal.

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Creating New Money is available for £7.95 from the New Economics Foundation, Cinnamon House, 6-8 Cole Street, London, SEI 4YH. Tel: 0207 407 7447.

James Robertson’s presentation at "The Alternative Mansion House Speech 2000", on 15 June, entitled Financial And Monetary Policies For An Enabling State, is on the web at www.neweconomics.org/mansionhouse.html

This review first appeared in Prosperity, August 2000 268 Bath Street, Glasgow, G2 4JR: Tel: 0141 332 2214, Fax: 0141 353 6900; [email protected]

Index

Money is created by the banking system, generally from the simultaneous creation of loans to private individuals and corporations. Under the present banking system, this gives an enormous amount of power to commercial banks and financial institutions to influence and control the economy as a whole. These commercial banking institutions work to a purely commercial agenda in which the desirability of making loans (and thereby creating money) is assessed only in terms of its financial viability to the lenders.

In a Green society, the emphasis in monetary policy will be to redirect the creation of money towards socially and environmentally sound areas of the economy, and away from unsustainable and consumption-driven areas. In order to do this, the money creation process must be largely brought under democratic control, preferably at a local level. This will allow the process to work in the best interests of the community as a whole, rather than principally in the interest of banks and their shareholders.

To bring about the democratisation of the money creation process, a network of local Community Banks will be established. These will be democratically accountable nonprofit making trusts, which will be able to provide low-cost finance both at district and regional levels. Any operating surplus arising from these Community Banks will be reinvested into their local communities.

The place of the commercial banks in financing the economy will gradually be replaced by the Community Banks, particularly in areas which are considered to be essential to an ecologically sustainable, democratic and socially-just society (e.g. housing, local government finance etc.). Community Banks will be empowered to create credit in the same way that commercial banks presently do, and will be given favourable conditions for doing so by the central bank. Phased restrictions on the powers of commercial banks and other institutions to create money by credit can be introduced by such means as reserve asset ratio requirements, special deposits and personal credit controls.

However, it is recognised that there are some areas of the economy in which it would be inappropriate for government at any level to exercise complete control (with the accompanying power of veto) over the administration of the money creation process. There will still, therefore, be a reduced role in the economy for private banking institutions to the extent that they are able to operate and survive within the new restrictions in their powers which have been placed on them.

The central bank (currently called the Bank of England) will continue to be the institution for the regulation of the national currency, and the setting of base interest rates for both commercial and Community banks (which could be offered differential base rates). However, its focus will be widened so that it does not concentrate on narrow economic indicators such as the rate of inflation, but instead takes a broader view on the impact of its decisions on the economy as a whole. Final decisions on the setting of base interest rates will be made by a democratically accountable committee, made up of representatives elected from the different regions of the country.

—Jonathan Dixon, 69 Wykeham Street, Scarborough, N Yorks YO12 7SA

Index

Book Review:

A new book by James Gibb Stuart and Ossian Publishers which deals directly with the biggest social, financial and economic problem of our day: the dominance of private finance over publicly issued money.

The Greek philosopher Plato, wrote, some 2400 years ago, "I wonder if we could contrive some magnificent myth that would in itself carry conviction to our whole community."

Fantopia could be that magnificent myth, updated for the new millennium. It faces up to the problem — repeatedly aired by money reformers — that the private banking system has taken upon itself a virtual monopoly of credit creation; whilst seigniorage, the historic right of the Sovereign, or Governing Authority, to issue money in the name of the people it serves, has been eroded.

In the UK today no more than 3% of money in circulation is created by the government. That money is the notes and coins, which are created, debt free, by the process described by Mike Rowbotham in the April 2000 issue of PROSPERITY The rest of the money circulating is electronic transfers and cheque-book money created by, and owed to, the private banking system.

Yet for the preservation of social services, community life and national infrastructure, the right of the government to create money remains vitally important. Just how important, it is both the purpose and the significance of the Fantopian myth to place beyond any doubt. By quote, cartoon illustration and allegorical role-playing it spells out the consequences for our national life and wellbeing, as private finance is surreptitiously allowed to take the place of publicly issued money.

But in Fantopia at least, the problem is there for the solving. And the solution emerges when representatives of banking, economics, politics, the media and academia get together. After slightly acrimonious debate, during which the orthodoxies of banking and economics take a beating, there is a refreshingly new spirit of compromise, and that which had seemed intractable, so rigid and so immovable, could in fact be subject to change.

It appeared in the end that the answer was simple, so simple that only the self-important dogma of macro-economics and the smothering omnipresence of banking mystique could have kept it under wraps for so long. It meant breaking the monopoly of credit under which private finance, no matter how well intentioned, was slowly strangling the social and community life of the nation; and restoring a healthy proportion of public finance such as had formerly been made available by the Governing Authority of the day. But why only in Fantopia? That’s the question asked on the front cover, and it might legitimately be repeated as you read the final page. Why only in Fantopia?

William Krehm, publisher-editor of Economic Reform, Canada, wrote, ‘James Gibb Stuart’s Fantopia has the down-to-earth directness of Adam Smith ... A dry-as-dust but terribly vital subject is transformed into a highly readable tale."

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At 64 pages, colour-printed and cartoon-illustrated by Neil MacLeod, Fantopia retails at £3.95. Trade terms on request. Please make cheques to Ossian Publishers at: Ossian Publishers, 268 Bath St., Glasgow, G2 4JR; Tel/Fax: 0141 332 8507.

— This review first appeared editorially in the July 2000 issue of Prosperity—Freedom from Debt Slavery.

Index

2. "Real wealth" includes all goods and services that contribute to the satisfaction of human needs and the promotion of human well-being. The measure of the real wealth of a community is its ability to deliver goods and services when, where, and as required. It therefore includes goods and services ready for consumption, unfinished goods in process of manufacture, stocks, raw materials and natural resources, surplus of imports over exports, productive capacity both actual and potential, transport and similar services, manpower, inherited and acquired skills and knowledge, educational and cultural facilities, and so on.

It will be seen that the above definition does not draw a hard and fast line between capital and consumer production. In the sense that all capital production ought to be directed solely to the end of supplying the needs of the consumer, it does not appear that such a line would be significant. We may however use the term "capital" in the same sense that "real wealth" is used in the definition above. It seems necessary however to point out that the word "capital" is also used by economists in an entirely different sense, that is to say, money or credit for the purpose of buying and exploiting the means of production.

We may therefore have the position where capital (real wealth) is in plentiful supply, and capital (money) is short — or vice versa: it appears to us important to maintain this distinction, and we would prefer for that reason to avoid the use of the word "capital" altogether.

We would like to stress particularly the inclusion of "educational and cultural facilities" under this heading. The spiritual well-being of its members is as much a part of the real wealth of a community as is the satisfaction of their material needs— a truth that the present monetary system finds difficult to recognise!

3. Whatever form a "monetary system" may take, its essential function is to serve as an accounting system recording, as credits and debits, the movement of real wealth within the productive system and into the hands of the consumer.

It appears to us that the fulfilment of this function would require a new and unorthodox approach to accounting technique. Orthodox accountancy requires that, wherever there is a credit, there must be also a debit. But this, when applied to the real wealth of a community (or even an individual) does not reflect the physical facts. If an individual owns a house, free of mortgage, etc., he may be said to be "in credit" to the value of that property. Who is correspondingly "in debit"? Similarly, the community is always "in credit" to the extent of its accumulated real wealth: the only "debit" to be set against this is the concurrent consumption of real wealth, which is self-evidently less than the whole. The financial situation of a community should always reflect this "credit" position; instead we find that all communities except the most primitive are in a position of permanent and unrepayable debt.

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—The full report is being serialised in The Social Crediter, (Nos. 3, 4, 5) 16 Forth Street, Edinburg, EH1 3LH

Index

A survey has shown that two thirds believe a tax on land values would encourage urban renewal. The same survey gives overwhelming support to one or two local pilots of this ‘Smart Tax’ idea from the US before any national decision is taken.

The postal survey earlier this year, of some 3000 ‘property tax stakeholders’, was part of a research fellowship for the Lincoln Institute of Land Policy by Tony Vickers, Chief Executive of the Henry George Foundation (HGF), a charity. Nearly 200 people responded to 16 statements on the subject of property taxes, in particular land value taxation (LVT). In Pennsylvania, where all cities and towns can now choose to shift property taxes off business rents and onto land rents, it is called The Smart Tax: it stimulates urban renewal without needing extra public funds.

Vickers’ Lincoln Fellowship grant includes a book Questions around The Smart Tax, exploring the issues that are commonly raised about LVT, with reference to its possible implementation in the UK. The book, with a foreword by Managing Director of Hammersmith & Fulham London Borough, Richard Harbord, will be launched at a conference Ground for Hope: The Smart Tax and Urban Renewal in Bournemouth on 3-5 November.

The conference is the first annual gathering of a new research network, an initiative of HGF to study resource economics. The Progressive Forum has members among a wide range of academics, think tanks and professional organisations, including the Institute of Revenues, Rating & Valuation (IRRV), Empty Homes Agency, Fabian Society, New Economics Foundation and the Forum of Private Business (FPB).

Liverpool City Council recently voted to call on Minister for Local Government Hilary Armstrong to allow it to run a pilot of LVT ‘as a matter of urgency’ to aid urban renewal. A report for the Town & Country Planning Association (TCPA) last month called on Government to undertake serious research into LVT. The Urban Task Force said ‘mixed model site value rating’ deserved to be looked at again. The Scottish Valuation and Rating Council is considering LVT as part of the recommendations of the Land Reform Action Plan.

For the next phase of his Lincoln Fellowship, Vickers plans a week-long Study Tour of Pennsylvania in March 2001 for a group of local government experts, including valuers, planners, benefit administrators and economists. The Local Government Association (LGA), Convention of Scottish Local Authorities (CoSLA) and DETR have all expressed keen interest in the Tour.

Vickers is a founder member of the Association for Geographic Information (AGI). A paper Prospects for a Smart Property Tax, describing his work, will be presented at AGI’s annual conference in London on 27 September. Vickers believes that the Government’s Modernising Government and Information Age initiatives could be the key to an effective and fair tax policy for urban renewal, allowing ‘landvaluescape’ to be mapped like landscape for the benefit of the property industry and government alike.

The Henry George Foundation of Great Britain (HGF) is an independent charitable economic think-tank. It promotes and conducts research and publication on ‘resource economics’. Its web-site is: http://www.HenryGeorgeUK.cjb.net. HGF has members from all parties and none and advises on policy development at every level of government. It publishes the international quarterly journal Land & Liberty and belongs to the International Union for Land Value Taxation & Free Trade, which is registered as an NGO at the UN and has member organisations in over 30 countries. E-mail: [email protected]

The project by Tony Vickers Preparing for Land Value Taxation in Britain was subject of a David C Lincoln Fellowship in LVT awarded in November 1999. Only six such awards were made world-wide in this first year of the new Fellowship scheme of the Lincoln Institute of Land Policy, 113 Brattle Street, Cambridge, MA, USA: www.lincolninst.edu. A briefing paper on the project can be obtained by ringing 01635 34251 or e: [email protected] A summary of the responses to all 16 statements is attached. Further details of the survey findings will be available later this year. The sample of ‘stakeholders’ in property taxation were mainly selected by AGI, IRRV, LGA and FPB.

Questions around The Smart Tax will be published in November by HGF, price £6. Free copies can be ordered for review by e-mailing the author [email protected] (tel/fax 01635 34251 or HGF fax 020 7377 8686)

Liverpool City Council debated LVT on a motion by Liberal Party councillor Steve Radford. The ruling Liberal Democrats amended the motion, which was passed against Labour opposition. It "calls for a Commission of Inquiry into the relationship of tax systems and local democracy and local economic and social regeneration…" and says ".. the City would benefit from considering a pilot scheme of site value rating as a matter of urgency". Liverpool’s Chief Executive is required to write to the City’s MPs as well as to the Minister.

TCPA commissioned the report A Taxing Question, with a grant from the Joseph Rowntree Foundation, following the Urban Task Force report Towards an Urban Renaissance last summer. "The Government should seriously examine the case for establishing a system of land value taxation in the longer term", said authors Bob Evans and Richard Bate (a standing adviser on planning matters to the House of Commons Select Committee on Environment).

Details of the AGI conference and exhibition ‘GIS 2000’ at Earls Court 26-28 September can be found at www.gisexpo.com The paper by Vickers is part of the Sustainability Track of the conference, commencing at 0900 on Wednesday, after a breakfast reception for local and national politicians. Details of further analysis of responses to the survey will be published at the conference. The table below includes the views of 81 members of FPB, 52 of AGI, 15 of IRRV and 21 of LGA/CoSLA (total 174 responses).

Index

Human life time, together with energy, skills and materials, is a productive resource, whether employed in the formal (contractual) economy remunerated with money or within the family/gift economy where social and domestic work is undertaken for reciprocal relationship. If the State (the sole taxing authority) can appropriate the earnings of the former to fund its own functioning, for the same purpose it can call upon the productive resource in the informal economy. With the diminishing tax base of paid employment, due to a shorter week, part-time work, early retirement and fewer jobs available (indicative of mechanisation, saturated production and a shortage of currency to trade services), the shortfall in tax receipts to finance a Welfare State can be amply filled with the allocation of people’s life time for Public Service.

The State, or any of its taxing subsidiaries (councils), can institute the payment of Time Credit (TC) for hours of Public Service undertaken by Citizens, by issuing Time Credit Cards to keep their account using a network of computers. Four hours of Service in a nursery class is credited as 4TC (what the council treasury owes) on the Time Credit Card, which when used in purchasing Child Care and Education evening classes in a council college, TC is deducted and cancels the Council’s debt to one with ones indebtedness for its classes. By working extra hours in the nursery class, TC can be amassed in one's account and spent on other council facilities, like going for a swim in its pool. The TC accumulated cannot be taxed as income: that would adulterate the account of tax credits, Time Service the State owes which is cancelled by Time Tax liability or by an equivalent Service supplied by the council. TC Tax or its equivalent is a claim on the time of a human, so that this productive resource is utilised. It is like a capital tax on human potential, like on property and land, where dormant, residual monetary wealth is extracted. We are all billionaires considering the precious high technology needed to replace our bodily mechanisms.

Taxing the productive resource of people’s life time, or its equivalent in TC, unlike conventional levies on monetary wealth obtained in the formal economy, will utilise vast reserves of time, energy and skills (ever growing as the former decreases but locked in as there is no medium of exchange) mobilising them to support a faltering, under-resourced, welfare system in need of restoration. The payment of Time Service, or its equivalent saved TC, in exchange for welfare provision such as medical attention, education and police protection, into a Social Insurance Service (SIS) Fund, will buttress such resource-starved utilities and by substituting for conventional money, considerable sums will be saved for extra investment. By making Time Service, and its equivalent TC, a contribution towards Housing Benefit and as a means of paying Land Value Taxation, billions of pounds can be saved for the Basic Income.

SIS Funds can be established on a regional basis to expedite full devolution of public sector provision, and TC can be used as an alternative currency for regional resource taxation; surplus TC earned will fuel the expansion of educational/recreational facilities at subsidiary council level.. TC keeps account of the service liabilities between State and Citizen; it is not an exchange currency between Citizens as in LETS schemes. It is a special instituted currency for earning and deducting Tax Credit, which enables the State to depend less on private sector jobs for a tax base and to directly resource services -possibly a great social real. created. Doctors, scientists, teachers, nurses, cleaners, gardeners, etc, can all meet their tax liabilities with TC and accrue more, to be accumulated which may win a public service award or to be spent within the public sector. Roles assigned will depend on training (done under TC payments), qualifications, experience, personal factors and urgency of tasks. A certain percentage of public sector conventional remuneration will be needed for people to meet their debt requirements.

TC is not for exchange beyond the public sector or into a conventional currency. For tax a cash equivalent can be paid, the cost of some hourly service taken as the norm equivalent. By being based on the price of labour, one that is essential and universal, TC and its equivalent keeps up with inflation. The cash equivalent can be used to calculate non-labour costs in TC, the printed hand-outs, the heating, the building and its accessories for providing the evening class. The private sector cannot obtain or pay TC. This prohibition prevents private employers and companies from appropriating the surplus monetary value when a doctor, scientist or the like is paid in TC: their clients are charged the market value but they pay a socialistic flat rate. However, special cases of the private sector can be subsidised with TC workers, e.g. the development of organic agricultural products. Charities and non-profit eco/socially orientated organisations will be eligible for such TC secondments.

TC is the education currency. Post school students supported by a Basic Income and additional benefits for their study, will be able to earn through 8 hours allocated within their weekly programme, TC to purchase their college tuition. Mature students can serve in youth work and students generally can assist in the schools or work in their curriculum fields. Whatever, TC will fuel a major reorganisation and reorientation in education: Flexi-Schooling, the accomodation of pupils’ needs, who with tutor and parents, devise their own individual learning plans. Junior, secondary and tertiary facilities merge and expand with other educational/recreational centres (libraries, museums, sports centres, art centres, nature parks, etc) to form a network of learning resource centres open to the local population. An army of part—time childcare and education, learning and play facilitating, teaching and instructional, student auxilliary, coaching and learning resource, coordinating workers together with clerks, cooks, cleaners, gardeners, maintenance staff for infrastructural support, all mostly mobilised with TC payment, will operate these centres from morn till night. Education/recreation will go on almost round the clock, and the utter under use of schools in the late afternoon, evening, early night, week-ends and holidays throughout the year, will be recognised as a great blunder in resource efficiency. With TC currency, the more earned by supporting the public sector, adults will fill these schools in the evening and early night satisfying their appetite for learning. For their physical, intellectual and spiritual well being, education is nourishment.

Councillors and other elected or appointed officials can be paid TC, so that the poorer are supported to stand in office; plutocracy is undermined and the full spectrum of Citizenry is available for governance. The introduction of the Basic Income (Citizen’s Income) will also free individuals for Civic thought and action, and although thought of as a convertible tax credit, it cannot be paid in TC. For one, the currency cannot purchase products from the private sector—they are banned from acquiring it. Secondly, paid as Basic Income, TC is not backed by labour or Time Service; this would dilute the currency, each credit now spurious, not worth one hour’s service or the standard equivalent in cash. The characteristic of the universal benefit is unearned income, its generation from land value taxation, the reallocation of unearned wealth from the rent (socially created) and natural resources of land (Nature’s gift). That TC has to be backed by Time Service, in fact its only derivation, it cannot be lent. However, it can be owed to the State without being loaned: tax liability and judicial penalties.

Apart from receiving the Basic Income in cash, the monetary representation of Nature’s bestowal and the redistribution of profits from the monopolisation of her sites, it is possible for socialistic citizens to do without the capitalistic money. As State employees or Citizens doing Time Service the TC they receive will pay their taxes, their rents for social housing, purchase energy, water and other services from publicly owned utilities, and for groceries and household goods, State owned retail outlets will redeem their TC. If all land and capital was publicly owned, with no private claims on Earth’s resources or on socially generated capital, then capitalistic cash (exchange and rental tokens for such) will be obsolete leaving TC to trade what is truly private, ones life time. Because as in tribal societies Nature’s resources are free (not held), abundant but access regulated (scarcity is caused by private hoarding, obsolescence, wastage of warfare, overpopulation) and there is no renting of monopolised assets, the Basic Income becomes redundant. TC charge on the use of housing, environmental and technological stock will have to be made for their upkeep, development and replacement, but not for profiteering: as materials and energy are provided by Nature, only TC is required for the necessary labour.

In such a socialist society, TC (acquired only through labour) would normally be required for the necessities of life, and although these take minor life time to provide through the use of machinery, the state of freedom is not guaranteed. It’s not freedom from work that liberates, but the freedom to express and develop. Ten men taking only a day to make a Beetle car, by dividing the fabrication into ten separate, repetitive tasks, are enslaved, for in freedom they would rather work as a gang employing craft skills to make a whole car, even if it takes ten times as long. Because labour is willing—it is free. A Socialist State for the sake of productivity would insist on Fordism (deskilling and division of labour), but this is a thieving Socialism, stealing the Soul of the Citizen, his volition and self realisation in vocation, reducing his life time to becoming a machine (life time nil). The State by being more time efficient through dehumanisation has to recompense with TC what time more it would take using unenslaved labour—otherwise it owes life time stolen. The Citizen pays for any thieving by hours in prison (life time denied) or with Time Service.

With no financial backing from the Basic Income and by social propaganda to maintain a commodity rich society, people are pressurised for the sake of remuneration into dehumanising work, the negation of individual expression a necessity for competitive Capitalism to cut costs and maximise profits by standard products for a mass market. There are unpleasant jobs to be done, but with Socialism these are undertaken as Service to the Whole, a specific role chosen (by the Soul) not just a job to get a pay packet: if willing labour is not forthcoming, then double TC is paid to include sacrifice of life time or such work is fairly allocated. In the old Socialism one was born a worker and determined, unfree to discover ones code and create an Ethical Self. In the Economy of the Universe, a numinous Whole of divergent spheres, in which man participates as creator, maker and moral agent, spiritual work such as contemplation, prayer and preaching is TC supported.

In freedom a hospital cleaner’s life time is equal to a doctor’s: all human life is equal. Since it is time that is traded, it would be inequitable to pay the doctor treble the TC of a cleaner’s time, and this would adulterate the currency, the doctor’s credits each worth a third of an hour. And it is only time that’s theirs to give. Their vocations were chosen (no sacrifice of self), their education and preparation provided by society, their energy and capacity from the workings of Nature. Thus it is only for time they are paid. Work is undertaken for intrinsic reward and/or Service for the community. Without an independent means of subsistence, people are dependent on those who manage capital and money and are under threat: they have to submit to the conditions and biddings of employment, and because their time has been appropriated they feel robbed and seek recompense: no matter how high the wages and the pleasures they buy, nothing makes up for the loss of Soul expression. The position of power and wealth, dependent upon the impoverishment and powerlessness of others, is a false substitute for true autonomy. Access to copious education, with the quest for truth and the nourishment of the individual, will enable each district to flourish with its ‘great’ poet, scientist, writer, engineer, architect, etc, and Citizens so developed that distributive democracy and a classless economy are installed. The plentiful supply of highly capable people, not filtered out by class standard examinations and exclusive entry requirements, will flood the ranks of doctors and other professionals, so that monopolistic high pay is stopped and differentials close.

Income is dependent on sales, and so apart from personal time and effort, the buying public creates the wealth of individuals, so any fortune accrued due to mass taste and appetite belongs to it. A poet who makes a comfortable living from the sales of his volumes, transmitting aesthetic stimulation to many, a brand name in a brand culture, is penniless and good for nothing in another where his volumes are ignored benefiting only a few. If a poet of residence in a school or college, or an arts centre, he could be supported by TC and allowed to flourish. Likewise musicians, composers, dramatists, actors, dancers, artists can be paid TC by councils to provide performances for pupils and a public with excess TC to spend. The arts will boom and bloom, a social service for the whole of society (aesthetic expression, communication, edification, entertainment) through the press, media, theatres, galleries and public spaces, not to be debased becoming a sales commodity for private gratification. The productivity per time of artists will vary, so slow fruition shouldn’t be penalised: Beethoven it is said took much longer than Mozart to compose, but who would begrudge him the extra TC no matter how long he took. Excellence is an aspiration of the human spirit: in each man’s art standards will be maintained. Many maybe motivated to take their time (more TC for their work), but it is their time, their identity: sluggishness will undermine spiritual pride and integrity (including that of TC ). Managers maybe needed to eradicate any wastage and inefficient use of time, materials and energy.

Conventional currency too, like TC, can be credit issued by a State Treasury for Service done in the public domain. A council wanting to build a million pound learning centre, unable to find the money from its expenditure budget, may go to a bank for a loan. The bank in loans excess of its savers’ deposits, conjures up money that didn’t exist: a million pound cheque at the stroke of a pen—unsubstantiated. From the negative side of nil it is minus money, for which the council has to pay rent. This counterfeisance, if adopted by the State (then it is proper and socially controlled), supplying a building firm a million pound cheque, is credit creation backed by the labour and assets consummated in the school, and unlike minus money that is eventually collected back by the bank with hefty hire charge subtracting wealth, the State’s credit is given to the council, and through the firm’s wages, profit and expenditure on goods, is spent throughout the economy enabling further creative action, and can be collected back as taxation for further social good. Like TC, this credit is representative of social wealth, but because it is durable (not a tax credit for tax deduction) it can be exchanged for services from the private sector.

If the United Nations (World Authority because of its Universally accepted Ethical Declarations) through one of its institutions issued Time Credits to States that undertook World Service, such credits earned could be used for exchange of services between States (kept in the public realm) and could be cancelled out of existence if due as tax liability to the United Nations. Such State Time Credits (STC) would be a durable currency (backed by State Time Service) exchanging for services between the public realms of Nations —an international currency of government. STC (what a State has earned) is distinct from TC (what an individual has earned) and should always be kept separate. TC could be used to purchase services from a foreign Exchequer and thus cancel out, but services will have to be returned for TC from its Citizens to keep National claims balanced. The spending of TC transnationally is further complicated when many Nations have no Basic Income (or living of the land equivalent) and a low life expectancy: in such countries TC would be of higher value because life is shorter and less free (actual Citizen’s time is more precious) and thus would have a higher exchange value. Equity in Life and its currency demands that living conditions are equal for all people.

Take heed, like many good discoveries, TC can be used for evil. It is not only a Socialist’s but a soldier’s currency, a dangerous one. Dictators can pay their mercenaries with TC, if lacking the computer technology then with tax numbered certificates, to wipe out separatist ethnic minorities and political opponents, or with a vast TC paid army, lead them to death in conquest of neighbouring territory, achieving with one swoop the extermination of armed resistance and the debt caused thereby, with expired TC in the pockets of dead soldiers. To counter this scenario, the institution of STC and the exaction of taxation on States by the United Nations is urgently required so that it can finance an International Standing Army and other armed forces, to act as deterrent: that crimes against Humanity will not be tolerated, such as genocide, that human rights will be swiftly defended, anywhere, anytime, according to the rules of International Law, and that culprit political figures will be apprehended and put on trial. The military everywhere will be under legal constraint, and if there is abuse of power, then their commanders will be held liable and wanted for questioning.

Because the holding of soldiers by the United Nations is a drain on the use of State Time Service, and on financial resources held, warfare will become increasingly mechanised, and with its monopoly on military, technological research (the expense of which on States is pointless and wasteful when the potential might of the World’s armies are their to defend the Citizen) the military power of the United Nations will be supreme. Under its umbrella, States will have no need to pitch their armed services against each other, and apart from contingents seconded to the United Nations, they will be made redundant. Multilateral Disarmament of weapons of mass destruction has to be achieved, and their possession illegal.

Because STC is a universal currency of exchange within social realms (States), it can be used to buy food, hardware and energy, just as TC can be used in Socialist supermarket. So STC can incorporate not just the labour component of State Time Service, but the remaining elements of provision, which means resources other than human life time are also legal tender for taxation and can be exchanged for STC when additional World Service is performed, and those States poor in human resources (low population, education and skills) but rich in others, can pay their tax due and earn STC by providing mineral, vegetative, and animal resources, including energy, food and water. Private, Corporate or Social Institutional holding of these resources will have to be taxed by land value taxation to raise equivalent Capitalistic cash, the unit rate of conversion being the price of a day’s Service (24 hours for 1STC); an hour will be too miniscule a unit in the scale of States. Maybe the going rate for hiring a soldier for a day will be acceptable.

STC will be a desirable international currency, being Global in scope. Based on a day’s Time Service, its value is immutable. Only State Institutions will be allowed to hold, receive, lend, pay, exchange and donate with it. The surplus monetary value gained when using STC in purchasing the time of doctors, scientists, engineers, technicians, etc, will accrue to State Institutions only, thus preventing private profit from what are public realm resources. The United Nations, with State Time Service due as tax and the paying out of State Time Credits, eagerly sought for their currency value and only obtained by Service to the Ecological Community, will have at its disposal the entire expertise, energy and wealth of the planet outside Social Institutional, Corporate or Private hands. As education is a universally State controlled operation it will be able to direct the most important resource. It can set about upon any daunting, challenging task and need, with its army of scientists, mathmaticians, doctors, engineers, technicians, professors, teachers, students and even pupils, to do research and find ways, like restoring the Sahara and Arabian Deserts to their former Green Glory.

All this and the prevention of death and devastation through the institution of STC. However, it will not have decimal divisibility, but consist of 248TC hours, and then 3OSTC days can comprise the unit month and 12 of these can make up a STC Year (36OSTC days). Because 20 minutes (1 third of an hour), 30 minutes (3 sixths of an hour), and 40 minutes (2 thirds of an hour) are common lesson times in education and thirds and sixths are unitary fractions of STC units, thirds and sixths will rival halves and quarters in our estimations. The international currency will be linked with the natural cycles of Earth, Moon and Sun.

Kleptocracies, if they do not reform, can expect heavy STC penalties and their political leaders face jurisdiction in International Courts on the Sovereign Rights of Democracy. States are expected to secure the security of their Citizens, which means basic economic regional/national self reliance and as international resource disputes over oil, water, fish, timber and minerals will be mediated by the United Nation’s parliament and judiciary, resource wars will be forestalled. STC penalties and those settled as World Community Service or cash fines are fiscal appropriations for the United Nations, and any STC fine payments expire on collection.

One may ask what principle will the United Nations adopt in determining the tax liability of States. It may need be only a small percentage of total National Resources (including the financial) and estimating this, the Sociological and Ecological wealth of Nations, their tax base, has yet to be done. It will be argued that since it is States that are taxed and not the people, then it is the State’s assets that are the tax base, and that the people’s wealth is disregard. But then benevolent, Socialistic Exchequers with huge assets that are used by the public, will be penalised while a Capitalistic Exchequer with huge resources in the domain of Private Sector , will hardly pay anything. Any unused or surplus resource may be acceptable (bar illegal things) if of any benefit for the health of the planet. National Debts will be held in disregard as questions arise concerning their legitimacy. They can be paid off by National Treasuries creating their own credit. Banks are under the taxing powers of States.

The State World Bank will be the powerhouse of the planet. It alone, with the Peace Parliament of the United Nations, will issue and cancel out STC. It will be so powerful, it does not lend, it will give. Beyond State Tax Service, governments are able to exchange their services for STC, including hard currency, for money is latent Service locked up. The rich Nations will exchange for STC, because for one, they are tax credits and so be accumulated against future taxation; they are based on the value of a day’s Time Service, a constant (Inflation Proof); an international currency that doesn’t need to be buffeted with reserves; and last but not least, cannot be spoiled by speculators—they can’t get hold of it. Dollars, Sterling, Euros, Yen, will pile up in the State Bank a mountain high, and because the currencies are an exchange of service, where you give, the Bank is under obligation to give it all away. The Majority World, starved of financial and technological resources, is a good dumping ground, and unemployed capital and labour in the overdeveloped world will swing to life, as eco-vehicles, solar panels, medical equipment, computers, etc, are exchanged for the Dollars, Sterling, Euros, Yen, the Socialist Bank disposed off.

The World State Bank doesn’t need a penny. It can operate with a balance of nil. Because there are always jobs to be done, in maintaining Self, Society and the Benefit of Nature, STC will always be paid out for World Service, so that forever the currency will flow from nothing (sounds like magic). And this money won’t just have value, but power, for each STC buys a soldiers day, so any malign, despoiling, enslaving contender will not be sovereign, and destitution, disease, and injustice can be fought. The currency claims Service, like TC on Public Services, so States won’t find Evil with STC; it flows only in the realm of Social Service and Ecological restoration. Governments can exchange back their Tax Credits for Dollars, Sterling, Euros and Yen, so maybe a mountain of Capitalistic money ought to be kept and a State Exchange established. Any returned STC, instead of being a stack, is transferred to currency poor Nations; the stockpile has to be allocated, it’s for Service remember.

In issuing STC the World State Bank creates substance money that can form part of a Nation’s Financial Reserve or used against World taxation. The World Bank’s ‘I owe you’ (for Service done) is cancelled by a Nation’s ‘I owe you’ (for tax due). If the Bank issued STC with no reciprocal Service, a loan infact, it will not be the Bank’s ‘I owe you’ and therefore could not be used for tax deduction or payment —it has no claim. Lending STC would undermine its basis as a Tax Credit, but States which by definition do not tax each other (colonies are annexations) can lend STC because there is no trading of Tax Credit. However, the charging of interest, say 10% on 100STC for a year, 10STC gained, is tax credit created in which case it is illegal, for only the World State Bank can issue State Time Credit, or the 10STC days have been stolen (unsocialistic): the surplus STC of an Exchequer has extracted Time Service (10STC) or its monetary equivalent from the deficiency of another. In reality no State should need to borrow STC: like wages it can be earned or gained by exchange. It is possible for Nations to exchange their currencies amongst themselves for STC.

Capitalistic banks can lend out multiples of their assets and because firms or persons are skinny with money, bankers can become fat by sucking little by little the blood from them, the interest, the equivalent of which their clients have to extract from the environment or they would be shriveled and withered. A farmer in Africa, because his currency is peanuts, for his tractor he has to borrow a hard currency, and a hard cruel master this currency is, enslaving his tractor and himself to pay the hire charge, hard while the land is ransacked to grow its cash and the farmer, bent under its burden of debt, has to sell up and become a pauper in some slum, scavenging for peanuts or picking up tit bits from a dump. He ends up in a putrid gutter or kept down some mine sweating and choking to death. This hard currency, because their is no rival (its Western Cartel monopolising industrial production it buys) rules the world of Commerce and demands tribute, and with heavy debt enslaves Nations into bondage. Unlike the great Socialistic STC, this currency is phoney and only comes out when there is want and deficit in the World, as a loan, numbers from nothing to plunder for the vaults of Mammon the people’s wealth, its interest, stacked high in the Capitalist Bank.

For too long criminality has ruled the planet: Mafia families, Psychopaths, Parties and politicians in bankers pockets. Party activists, foot soldiers fighting for policy, clear the way for echelons who hear echoes from the Chambers of Commerce. Is enslavement forever our history? Where are the Statesmen, where are the Citizens? They belong to Utopia some will say. But whose Utopia is this? Monopolies and Cartels in charge of crops, energy and money, whose hard currency has usurped the resources of Earth and State; Imperial Masters in the underworld of work, where wage—starved slaves shackle themselves more to win their favour; the flow of Knowledge and Image under control to paint their realm a Shopper’s Paradise. The Earth is converted into Commodity and Cash. How long the Beauty of this World is looted?

A District Council can institute TC as Council tokens and for local taxation, so that a whole locality is motivated into sociological and ecological action. As mentioned, TC is only exchanged between a fiscal body and a Citizen (not between Citizens nationally or internationally). An Englishman, unable to spend his TC in a German Grocery may if he wishes to learn German Literature, spend it at Heidelberg University in the Public Sector, but for equivalence of TC equality of quality of Life conditions is required and for ease of payment a common type of time credit card. Considering the trade in education that is to occur, maybe the universal and eternal value of a tutor’s hour should be the monetary basis of TC throughout the World. Twenty four hours total tutor time would amount to more than a soldier’s day in terms of pricing, so pecuniarly 24TC doesn’t equal 1STC day. It doesn’t matter because the currencies don’t mix and interchange, but they buy the same time: a State’s purchase of 1STC of tutor time is the same if purchased by 24TC. However, the STC of a repressive regime, although its Citizens’ TC is more precious than that in a freedom State, by the same offset its value is docked as penalty.

The peoples of Regions wth the advent of Regionalism on the Planet will seek and gain Regional Government and Independence which follows the logic of democratic subsidiarity and human scale management and interaction. The demarcation of regions will not only represent cultural and ethnic but also ecological interests in the form of bio-regions, self sustaining systems co-evolving together. Because Universities are likely to be regionally based and specialist agricultural and industrial production regionally coordinated, States can depute autonomous Regions and Sub-States to trade for STC, to be exacted as part of tax to the central Exchequer or used to purchase foreign services. So cocoa, coffee and cotton, grown on exotic State owned farms in the Americas, are shipped to East Anglia paid for by STC; then merchandised by a Regional Enterprise providing jobs for local inhabitants in its retail outlets. Or in Egypt a Regional University to earn STC offers courses in Egyptology to resource-starved students from distant parts of the Globe. It is possible for Regions to trade for STC in the same Country. Regions and Sub-States may be able to earn the currency directly from the United Nations in non-fiscal arrangements by providing expertise and commodities to impoverished peoples and ecologies. Separate and Geographic, characteristic with custom and costume, Regions with quirky technologies will interchange services and although highly differentiated by culture and a diversity of languages, inter-regional friendships and cordiality will be established.

TC is a rational currency. It is created by the taxing powers of the State, saying to its populace credited with the efficacy of Life, that for the benefit of the Ecological Community, particularly themselves but not exclusively, all those able and liable owe certain amounts of life time to Life on Earth, of which the State is an administrative organiser, and that any life time in excess given will be credited to the Citizen as TC, so that TC is also created by the Citizen’s time donation to Life and is recognised as an account of honour from which Time Tax can be paid and Public Services purchased. The Citizen’s TC account is closed down when he or she departs from Life and the residual TC left behind represents his or her bequeathal to life on Earth. STC is instituted because it is in the best interest of the Ecological Community to give taxing powers to a United Nations on States, that have yet to respond to the rights of all beyond their borders, so that resources can be allocated to where most needed and appropriate on planet Earth.

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Jane Jacobs 1985 Viking ISBN 0 670 80045 7

Review by Brian Leslie

In this book Jane Jacobs argues that economic life depends essentially on productive cities. She argues that stagflation—concurrent high prices and high unemployment—is a chronic condition in many poorer areas, and that it confounds the theories of both 'supply side' and 'demand side' economists. In 'formerly developing and expanding economies' it is an indication of 'sliding into profound economic decline'.

Her essential message is that national statistics hide the variations found in different parts of a country; that some parts of developed countries are chronically in decline, despite efforts to help them. She identifies cities, not nations, as the vital focus of economic developments, affecting their supply and trading regions, sometimes over great distances.

She claims that 'Economic life develops by grace of innovating; it expands by grace of import-replacing.' This expansion consists of 'five forms of growth: abruptly enlarged city markets for new and different imports consisting largely of rural goods and of innovations being produced in other cities; abruptly increased numbers and kinds of jobs in the import-replacing city; increased transplants of city work into non-urban locations as older enterprises are crowded out; new uses for technology, particularly to increase rural production and productivity; and growth of city capital.' That is, there are 'five great forces which transform regional economies': 'markets, jobs, technology, transplants, capital.' City regions are generated by the process of import-replacement, and only some cities develop this process.

Citing a wealth of examples from ancient and modern times, she argues that supply regions, rich or poor, have essentially 'third world' economies—they are over-specialised, unbalanced, not self-reliant.

She asserts: 'The emergence of new products in place of old ones is absolutely necessary to economic life; otherwise the planet would long since have been ruined from excessive, monotonous exploitation of the same few resources. Still, substitutions are hard on supply regions that have lost markets for sealskins, zinc, tin, linen, coal, copper', and her argument assumes the need for perpetual development and 'jobs'.

Not allowing for the inherent effects of the huge growth of machine power—mechanisation, automation, computerisation—in recent decades, she concludes that constant innovation and growth are essential for continued prosperity.

Taiwan is cited as an exception which proves the rule that a 'self-generating economy' cannot be built on 'a foundation of transplanted industry'. The crucial difference here is that in 1956 it introduced 'Land to the Tiller'—a programme which transferred agricultural land ownership from landlords to the peasants who worked it, with part of the compensation having to be used for investment in light industry. This led to the growth of the capital, Taipei, as a thriving import-replacing city. (She makes no comment on the subsequent effect on the peasants or their agriculture.)

Noting the redistributive effect of taxes and benefits, she remarks that 'In our time, loans, grants and subsidies provided to regions without capital-generating cities of their own have been incomparably more abundant than at any other time in history'; she claims that 'cities are the milch-cows of economic life', and concludes that 'We must realistically assume that what happened to Detroit and the cities of Britain is being generalized, as it were; that the powerhouses of economic life, the cities, taken in total are gradually winding down their own development, foreshadowing a deep decline for themselves and for all economic life.'

Asserting that 'Development is a do-it-yourself process', with 'historically, … two major patterns: reliance of backward cities upon one another, and economic improvisation', she regards inter-city trading as essential for affluence. Freedom to trade and interact to meet needs is advocated.

Early currencies were city-, not nation-based. The Roman Empire gradually eliminated these, but by early mediaeval times they were again the norm in Europe, and 'Swiss cites, as cantons, retained their own currencies until 1848'. … 'national or imperial currencies give faulty and destructive feedback to city economies and … this in turn leads to profound structural economic flaws, some of which cannot be overcome no matter how hard we try'.

This is perhaps the most important observation she makes, going on to point out that 'When net international exports of goods or services rise, relative to those of other nations, the currency, being in demand, rises in value; when exports fall off, it declines in value. International imports and exports of capital work in just the opposite way. If a country has been importing more capital than it has exported (by borrowing abroad, for example), the value of its currency is automatically bolstered. Conversely, if it has exported more capital than it has been importing (by lending, making gifts, paying interest on prior foreign loans, exporting the profits of foreign-owned industries), the value of its currency is automatically depressed to that extent'.

Thus, 'Because currency feedback, at bottom, all has to do with imports and exports and the balance or lack of balance between them, the appropriate responding mechanisms for such information are cities and their regions. Cities are the specific economic units that can replace imports with their own production and the specific units that cast up streams of new kinds of exports'. This implies a strong case for convertible local currencies, city/region based; and against free international trade in currencies, or imposition of high interest rates to attract foreign currency, or of tariffs to protect internal industries (which tariffs disadvantage the rural economies—tariffs on manufactured goods can stimulate domestic production of them, but work against the rural population by increasing their cost of living).

National currencies, through the inappropriate feedback to their cities and regions, tend to create 'one ‘elephant’ city [which] would become increasingly dominant economically, and the others increasingly passive and provincial'.

Her analysis contributes some valuable insights into the factors leading to growth and decline of cities and 'city-regions', and the need to consider their economies, rather than 'the national economy'. What is missing is recognition of the effects of the colossal increase in recent decades in the replacement of human labour by machines, and therefore the need for distribution of 'the wages of the machine', as Citizens' Incomes, to avoid the destructive competition for non-existent markets and jobs—and the over-pricing of human labour relative to mechanised work; also the role of the usurious debt-money system in creating both the desperation for markets and the extremes of wealth and poverty. Instead, she sees perpetual innovation and import-replacement as necessary for economic wellbeing.

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LOCALIZATION A Global Manifesto by Colin Hines

Published by Earthscan, July 2000 Price £10.99 ISBN 1-85383-612-5

Last year's 'Battle of Seattle' stopped the World Trade Organization in its tracks and was symptomatic of the growing world-wide opposition to globalization. It is now time for a coherent alternative to emerge to take its place and this is what is comprehensively detailed in Colin Hines' new book .

Colin Hines moves the debate about globalization beyond issue-specific horror stories such as banana and beef hormone wars, GM food, and leg-hold traps. Instead he focuses on what should be the goal of world trade and how radical change might be achieved. He issues a blatant and heretical call for the rejection of the worldwide theology of globalization and international competitiveness. Unless this occurs, social, community, environmental and third world ampaigners, trades unions and small businesses will win the odd skirmish, but continue to lose the war.

Hines shows how 'it is crucial to play the globalizers at their own game. They have a clear end goal in view: maximum trade and money flows for maximum profit. From this end goal comes a clear set of policies and trade rules supporting their approach. Those seeking a more just, secure and environmentally sustainable future need to be clear about their own

end goal and the policies for achieving it. This book has been written to kick-start the debate. It aims to produce a 'mindwrench' away from simply opposing globalization towards the policies that will deliver its alternative - localization.

Localization reverses the trend of globalization by discriminating in favour of the local. Depending on context, the 'local' may be part of a nation state, the state itself or even a regional grouping of states. At the heart of localization is a rejection of today's environmentally and socially damaging subservience to the shibboleth of 'international competitiveness'. In its place we must prioritize local production and the protection and diversification of local economies. What can sensibly be produced within a nation or a region should be. Long-distance trade should supply only what cannot be produced within the local economy. Localizing policies will increase control of the economy by communities and nations, creating greater social cohesion, reduced poverty and inequality, improved livelihoods, social infrastructure and environmental protection, and with these a marked enhancement of the all important sense of security.

Localization is not about restricting the flows of information, technology, trade, investment, management and legal structures that themselves further localization. These would be encouraged by the new localist emphasis in global aid and trade rules, and such transfers would play a crucial role in the transition from globalization to localization. The rules for this diminished international sector would be those of the 'fair trade' movement, giving preference to goods supplied in a way that is of benefit to workers, the local community and the environment. Beggar-your-neighbour globalization would give way to better-your-neighbour localization. This is not a return to overpowering state control, or an attempt to put the clock back, but the provision of a policy and economic framework which allows people, community groups and businesses to rediversify their own local conomies.

Part I of Localization - A Global Manifesto defines globalization and localization and describes the adverse effects of globalization on society, equity and the environment. It goes on to debunk the myth that concentrating on the cheapest source of supply is nationally and globally efficient ('comparative advantage') and the idea, already in tatters after the Asian economic crisis, that money should flow unfettered in order to make the world run more successfully ('capital advantage').

Part II details a set of policies to protect the local globally and bring about localization. These include:

· safeguarding national and regional economies against imports of goods and services that can be produced locally

· site-here-to-sell-here rules for industry and services

· localizing money flows to rebuild the economies of communities

· local competition policies to ensure high quality goods and services

· introduction of resource and pollution taxes to pay for the transition, while protecting the environment

· fostering democratic involvement in the local economic and political systems

· a redirection of trade and aid, geared to help the rebuilding of local economies, rather than international competitiveness

Part III deals with why and how such a fundamental change should come about. It explains how globalization and international competitiveness are leading to rising unemployment and a concomitant decline in effective demand.

The book also demonstrates why the politically active are more likely to achieve their aims if they put their issue-specific campaigns within an overarching localization framework. ntil they do, they will at best

only delay the juggernaut of globalization rather than bring about a

wholesale and constructive shift in policy.

Only when rules for trade have a different end goal - a GAST, or General Agreement on Sustainable Trade in place of the free market emphasis of the World Trade Organization - will there be any hope of providing for the basic needs, livelihoods and security of the world's billions - in the rich as well as the poorer countries.

Colin Hines is an Associate of the International Forum on Globalization, a San Francisco-based alliance of activists, academics and economists committed to challenging the adverse effects of globalization and free trade and in the process to develop alternatives. He is also the coordinator of 'Protect the Local, Globally', an anti-free trade, pro-localist thinktank. Before that he was the Co-ordinator of Greenpeace International's Economics Unit.

He has worked in the environmental movement for over 25 years on the issues of population, food, new technology and unemployment, nuclear proliferation and most recently on the adverse environmental and social effects of international trade. He is co-author with Tim Lang of The New Protectionism (Earthscan, 1993), Agribusiness in Africa and Automatic Unemployment (on the effects of new technology on jobs).

e-mail: [email protected]

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There is in mainstream economics a group of theories, which set out to explain how politicians and parties attempt to ensure their election and subsequent re—election. One of the most interesting of these is that of The Political Business Cycle. This theory shares with the others, the view that political parties and elected representatives are essentially guided by self—interest, rather than by the public interest. It has been used to explain, at least in part, the rise and fall of macro-economic cycles involving prices, production and employment. It explores the notion that governments make decisions and behave in ways designed to ensure that they remain popular with the general electorate, and perhaps even more importantly with powerfully influential special interest groups, in order to enhance their prospects of winning the next election. Hence the careful husbanding of resources in the early part of a government’s term in office, in the hope of building up a "war chest" with which to engineer an "over—expansion of public expenditure programmes" and engender voter popularity during the run up to an election.

The complementary element of the theories is the proposition that electorates themselves are myopic. As a result they frequently forget their anger that government pledges have been unfulfilled in the earlier years of the new government, and so, in the light of the subsequent loosening of the purse strings, are just as frequently persuaded to lend their vote again to the incumbent party.

The theory is certainly not watertight in practice, governments do come and go, but it is justified more often than is good for the reputation of the democratic process. The related absence of a consistently expressed, and long term view, by the electorate of what is actually good for society and the environment, ensures in fact that the proximate causes of most of our socio-economic problems are never properly identified. And as a result these problems are never satisfactorily addressed on any lasting basis.

And so, if we consider any arbitrary period — e.g. the twentieth century - we may note that around the world, we have had a very wide variety of governments; Labour, Conservative, Liberal, Social Democratic, Communist and Fascist—each following one or other of the mainstream orthodox economic models. Each expected to be more successful than the last. Yet everywhere throughout the period, we have observed the same distressing results; poverty amidst plenty, homelessness, unemployment or underemployment, escalating indebt-edness of every sector of the world’s community — national governments, local governments, business and consumers, - ending in the reality of, or tendency to, periodic social breakdown and the imminent prospect of truly devastating environmental breakdown.

Surely, the only sensible conclusion we must draw from this observation, is that the socio-economic and environmental problems which so concern us, are simply too complex to be resolved, no matter which kind of government we elect or what kind of mainstream economic policy we are persuaded to follow. Or that there is some significant causal factor/s which, by design or neglect, is/are studiously ignored by both politicians and electorates, and as a result, are neither properly analysed, nor effectively dealt with by successive governments.

There is indeed one such factor, which is of absolutely primary importance. It is the one we have so often referred to. It is the fractional reserve monetary system, which simply must be reformed if our other pressing socio-economic and environmental problems are ever to be properly addressed and eventually resolved.

Its importance is reflected in the fact that, over the last three hundred years, there has been an unrelenting struggle between democratic institutions and international bankers for control over the authority to create and issue the nations’ money supply The nature of the process can be observed in our national statistics. In 1948, for example, the British government created and spent into the economy, interest free, £1.3BN while commercial banks created £1.4BNwhich they lent into the economy in the form of interest bearing debt. Some fifty years later, in 1996, government created £22.4BN while commercial banks created £563.6BN!

On the 5th. of March 1997, the Earl of Caithness suggested that a debate on the economy in the House of Lords had come "at a most interesting time in the run-up to the general election and, as a result, we could not have envisaged the parties opposite saying anything thought-provoking or interesting about the economy." He suggested that it was however, "a good time to stand back, to reassess whether our economy is soundly based." He then went on to suggest that it was in fact, not soundly based, because "our whole monetary system is utterly dishonest, as it is debt-based... (and) . . . has within it its own seeds of destruction."

He noted that the money supply in 1971 was just under £31 billion whereas "at the end of the third quarter of 1996 it was about £665 billion" and that during the intervening 25 years government had "minted only about £20 billion" of the increase, whereas "It is the banks, the building societies and our commercial lenders who have created the balance of £614 billion."(1) There can hardly be clearer evidence of the proposition that banks are not simply financial intermediaries, taking in depositors’ savings and re-lending these at a higher rate of interest, in the process of earning income and profit. They are unequivocally creators of credit which they claim ownership of, and lend into the economy only in the form of interest bearing debt.

Indeed the central proposition of basic orthodox economic theory, that savings equal investment (S=I), is simply unsustainable. At best this might describe a simple steady state economy. But in an advanced debt-based economy, there must be growth if interest on debt is to be paid. For such an economy to grow however requires that the money supply must also grow, and for the economy to keep growing there must be continuing growth in the money supply Therefore, the central question of economics (which is very rarely addressed even by academic economists) should be, how might this need for a continuing growth in the money supply be best achieved? Is it better that an institution, answerable to the community, should produce the community’s money supply in the public interest? Or is it better that private profit-oriented institutions -commercial banks - be allowed to create and issue the money supply, claim its ownership, and lend it as interest-bearing debt for the principal benefit of their shareholders?

Lord Caithness shows that in Britain the answer has essentially been the latter, and that to a huge extent, the necessary increases in the UK money supply have been produced as interest-bearing debt, by the banking sector, in the private interest.

This is of course an arrangement, which is not confined to Britain. It is universal and it has been arrived at only after a monumental struggle over three centuries between public and private interests. William Hixson for example notes, after a detailed examination of two hundred years of struggle for control of the money supply in America, that by 1914 the banking lobby had "finally prevailed over common sense and over the public interest; banks created money apace, and government created none. A more inane and shameful abnegation of government power is hardly imaginable." (2) And in yet another remarkable book (3) Hixson also demonstrates, in the table reproduced below, how in America during a similar period to that referred to by Lord Caithness, the creation of bank credit and legal tender money created by government very closely mirrored that of the British experience.

These statistics are the subject of public record, but when presented in this relationship they reveal with great clarity why our debt-money system is at the root of so many of our socio-economic and environmental problems. Furthermore, since virtually all of the money supply is now created by commercial banks, it finds its way into the economy only in the form of interest-bearing debt. When banks agree to lend that money however, they clearly do not create, simultaneously, any money with which the interest attached to the loans might be paid. Yet the interest must be included in final market prices. There must therefore be, period by period, a shortfall in purchasing power at least equal to the total interest applied to the sum of the loans.

In fact the shortfall is even greater than this. For there are a number of other factors, most of them related to this debt-money arrangement, which aggravate the observed purchasing power deficit. Of these, probably the most significant is the fact that in a modern dynamic economy, fairly long production periods are required prior to final goods appearing on the market. Consider for example, the process of design and construction of a major project like the Channel Tunnel, or that even a new model car may take upwards of five years to move from drawing board to showroom. During this lengthy production period, payments are made to suppliers of intermediate factors of production and are returned by these suppliers as repayment of loans to the banks, from whence they were first issued, for cancellation.

When the money represented by these payments is cancelled in the books of the banks, it clearly also disappears from the economy, in advance of the liquidation of prices of the final goods to which they relate, and the deficit in total purchasing power is further exacerbated.

The effect of these and other factors is that, on a global basis there is period by period, a chronic shortage of purchasing power and a corresponding tendency to growing surpluses of goods and services.

We may attempt to ameliorate this problem by exporting the resulting domestic surpluses, but since the system is universal, so is the surplus problem. A struggle for exports results, and from time to time it escalates to the level of "trade war", and sometimes to real military war.

We may try to help ameliorate the problem by inducing consumers to borrow against future income, using a variety of consumer credit arrangements, and in this way further postpone the full impact of the purchasing power shortfall. In fact in the UK outstanding consumer credit, excluding mortgages, grew from £56.1billion to £87.4billion in the ten years between 1987and 1997! (4)

We may try to resolve the problem by stimulating still greater economic growth, despite the damaging implications for the global environment, with which we are increasingly familiar. For in this way, during the process of this new production, additional purchasing power is continuously released as wages and salaries and helps to clear current surpluses. But again, for reasons already noted, when the new production appears on the market the purchasing power deficit will have become even greater.

And meanwhile, the indebtedness of every sector of the community -national and local governments, business and consumers continues to grow. As a result, there can be no escape from increasingly severe periodic crises of over-indebtedness, during which bankers are forced to call in their loans or claim title to related collateral. There is a reduction in economic activity, bankruptcies, unemployment and an increase in all of the associated social ills that inevitably flow from an imploding economy.

Today, we may observe a global economy approaching such an implosion. As in the late 1920s and 1930s we note rapid change in the structure of the economy. On the one hand the speculative frenzy in TMT (technology, media and telecommunications) shares and in the "real" economy rapid consolidation by merger and take-over tending to oligopoly if not outright monopoly. Although absolute unemployment is not yet on the scale seen in the 1930s we have, in addition to those who are unemployed, very large numbers of people engaged in low paid, insecure and dispiriting employment. And, in addition, we face huge new and escalating ecological problems of population growth, resource depletion, economic migration and climatic change etc.

It is well past time therefore, that there was powerful and co-ordinated organisation for radical reform of the monetary system. Such change to involve, inter alia, the return of the authority to create the nation’s money supply to the state, under strict rules, so that we might have at last, a sound basis on which to find lasting solutions to most pressing social, economic and environmental problems. In this context, it is vitally important to understand that such transfer of power of money creation to the state, via an independent National Credit Authority operating to strict rules, would not result in inflation. Those who suggest otherwise must tell us why money creation by a National Credit Authority is bound to be more inflationary than the same money created by private bankers. They should also explain why it is that, despite the rapid transfer of this power of money creation from governments to private banks over three centuries, inflation has remained chronic in the system.

The important condition needed to prevent inflation is simply that the money supply should accurately reflect period by period, the real potential of the economy to produce those goods and services which it is agreed should be produced. That is a condition that is not possible to engineer under current arrangements, because of the characteristics of the current monetary system. It would however be a central feature of proposed reform, that there would be appropriate intervention by the National Credit Authority when it was agreed that (a) human and physical resources were being under-utilised, or (b) the wider community interest appeared to be disadvantaged. The Douglas proposals that:

1. There be new monetary arrangements involving a National Credit Authority with responsibility, under strictly applied rules, to create, interest free at source, the nation’s money supply

2. Newly created money be spent into the economy in the form of-

a. A National Dividend to every citizen.

b. Voter approved government provided public works

c. Prime Adjustments (a kind of negative VAT) to ensure price stability.

would change greatly for the better, the very nature of our society and economy. Economic cycles, as we know them, would disappear from our economy and governments would not require, or indeed be allowed, to resort to manipulating expenditure in order to ensure their continuance in office. The related theories with which we began would disappear from the lexicon of economic theory.

(1) Hansard, Vol.578, No.68, columns 1869-1871

(2) William F. Hixson, Triumph of the Bankers, 1993, Preager, Westport, Connecticut, London, ppl8l/l82

(3) William F. Hixson, A Matter of Interest, Re-examining Money, Debt and Real Economic Growth, 1991, Preager New York, Westport, Connecticut, London. P.159

(4) Social Trends 29,1999, Table 6.18

—from The Social Crediter, May-June 2000

"The annual bill for paying interest on the national debt is some £20 billion, roughly equivalent to £500 a year for every person in the country. Indeed, we spend substantially more on debt interest than we do on defrnce or education... ....... If the Chancellor succeeds in running large surpluses, this debt interest total will start to fall... but this is constrained to be a budget for the City, with the prospect of thereby bringing about the circumstances that will please the voters in just over a year’s time."

(Roger Bootle writing in The Times of 13th. March 2000, on the budget due on the following Tuesday.)

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It is now generally accepted that a staggering number of new housing units will be required in the next ten or twenty years. Many people are rightly worried about the encroachment on our countryside which this seems to imply.

Is it possible to meet these housing requirements without losing too much ‘greenfield’ land? Furthermore, can this be done in a fair way which will not give a few people unjusti-fied windfalls while many others lose out’?

In answer to these questions, we begin by making what looks like a long digression.

All forms of wealth, including buildings, are the product of human effort and intelligence applied to natural resources. These natural resources are what economists call ‘land’. The word includes not only the surface of the earth but all that lies buried within it, flows through it or surrounds it. Long, long ago land was re-garded as something fundamen-tally different from chattels which people had made, like knives and tents. Chattels belonged to individuals; land belonged to everybody equally.

Then, over many centuries, this state of affairs gradually changed and some people ac-quired land as a personal pos-session. Their heirs sometimes continue to derive great wealth from those possessions to this day. To give but one example, in February 1998 it was reported that Earl Spencer had agreed to sell 400 acres of his Althorp estate for £50 million.

In a complex society like ours, it is impossible either to treat all land as common property or to divide the land so that every-body gets a fair share.

But the wealth that comes from the control of land can be shared equally if everyone pays into a communal fund, a fair rent for the land he or she occupies. A fair rent would take into account the extent of a particular site, the fertility of its soil, the convenience of its location for trading, the agreeableness of its surroundings, its ease of access to transport systems etc., but would discount what human effort had added to the site: like houses, offices or factories. This arrange-ment is known as Land Value Taxation or LVT. The revenue from LVT could enable many of our existing taxes to be reduced and, in some cases, disappear altogether.

How would all this bear on the housing problem? It is vital to remember that a ‘house’ consists of two entirely different things:

the building, which was set up by human effort, and the land on which it rests, which no human being has made. Land Value Taxation will allow us to make a good start in solving the housing problem by eliminating the waste and misuse of land that now occurs.

Urban sprawl has been encouraged by the high price of land within towns and cities. Builders and developers have moved out to districts where selling price and rents are lower. Plots of land suitable for housing, industry or commerce have been left empty for various reasons – often because the owners had acquired their plots in anticipation of a future price rise and were able to hold on to their land without putting it to profitable use. A tax on the value of such land would discourage that practice and bring more land onto the market at lower prices. This valuation would be conducted on exactly the same basis as would apply if the owner were seeking to sell it

- that is, the question would be how much the land would be worth to the prospec-tive purchaser who could put it to its best use. A tax on such a basis would make brownfield sites more attractive to builders and developers.

Idle land within towns is a deplorable waste. Derelict land is both a waste and an eyesore. Although regeneration of decayed urban areas has been promoted by succes-sive governments since the seventies, there still remained, in 1993, 396 square kilometres of derelict land in England alone. This would be enough for three-quarters of a million new homes at 8 to the acre.

LVT would also help by encouraging suburban ‘infilling’. Some suburban plots are much bigger than the owner requires, and often the local planning authority has no objection if the surplus land is used for ‘infilling with more homes. With LVT, the owner of such land would have a further incentive to dis-pose of it for that purpose.

This would also help reduce the pressure on greenfield land.

As has been seen, one effect of LVT would be to allow other taxes to be reduced. At present, VAT is charged at 17.5% on rebuilding, while there is no VAT on new building. This is one of the factors which inclines build-ers to prefer greenfield to brown-field sites. Why not make a start in tax reduction by removing VAT on rebuilding?

Removal of taxes on improve-ments would also help the recla-mation of derelict land which is

seriously polluted and expensive to reclaim. The problem of cleaning up polluted land must be tackled in various ways and not exclusively by VAT. Allowing those who regenerated derelict land to benefit fully from their enterprise and labour would make it more likely that these blots on the urban landscape would be transformed into places where people would be happy to live and work.

Planning permission can raise the value of a site by millions over-night - a situation that inevitably

would be collected for the benefit of the community and would therefore not enrich individuals or companies.

Towns would be renewed with-out gain to speculators, and planners would be relieved of the pressure of landowners intent on maximising the rent from their plots. The will of the community would become the deciding factor in planning decisions.

Land Value Taxation would work to do away with waste of natural resources and of human resources. It would ex-tend production onto all appropriate sites, thus increasing opportunities for employment and raising real wages. A more prosperous commu-nity would be in a posi-tion to demand a higher standard of design and construc-tion. The use that was made of this power would depend on current taste and prevailing ideas, but opting for fairness and equal opportunities through Land Value Taxation could only increase our chances of protect-ing the countryside and improv-ing the urban landscape.

—text of a leaflet, No 9- 1999

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The polarity in our title is rooted in ancestral tongues. "Quick" in old English means "alive" in obvious kinship with the Latin "vivus." Advice is embedded there as well: in the jungle from which humans emerged and into which we are rapidly sinking again, one has to respond "quickly" to stay alive. Then, too, to thrive under the current dispensation you must be more than a little "vivo," which in Spanish has overtones of roguery.

But it is the contrasting ways in which economists apply these two concepts to key statistics that should ring an alarm bell. A few key statistics are condemned to being "dead," i.e. immobile, — notably the price index, wage rates (except downward), unemployment figures (except upwards) whereas others, interest rates, and hot money, are the "quick" that simply must be free to move around, up and down, 24 hours a day.

Such an arrangement was not heaven-ordained. In most of the great religions usury is a sin. Such agreement must sum up traumatic social experiences over aeons.

"Quick" interest rate hikes are supposed to keep prices "dead" and bestow a monopoly as stabiliser on mobile money. All rival ways of "fighting inflation" that had been successful in financing WWII and a couple of postwar decades of improved living standards were ruled out, one by one. The Bank of Canada had played a brilliant part in financing the war at quite nominal rates. This was not funny-money — since 1938 the BoC had a single shareholder, the Government of Canada, and by virtue of that all interest paid on government debt held by the Bank came back substantially to it as dividends. In the mid-seventies the BoC held well over 20% of the federal debt. Ceilings were in place on the interest chartered banks could pay or charge.

The banks too, were required to deposit with the BoC non-interest-bearing reserves ("statutory" reserves) that for years had been 10% ofrheir deposits in non-interest-bearing money, plus "secondary reserves" in interest-bearing securities that amounted to another 10%. When too much demand was pushing up prices remedy was available in a variety of ways other then raising interest rates. The statutory and/or the secondary reserves could be increased. This would restrict the volume of bank credit without increasing interest rates.

In short there are disturbing indications that the beneficiaries of the "quick" statistics have conspired to render the proscribed statistics "dead." That amounted to a double-header. Not only did money-lenders increase their revenue from the higher rates, but they were also guaranteed flat prices for everything they buy even though prices may have risen because of the increase in public services. Pushed high enough, interest rates can move beyond usury. By bankrupting viable businesses, they empower monied interests to create their own flea-market bargains. There is an obvious conflict of interest there that has been kept under wraps.

There has been a similar lack of curiosity as to whether prices can or should be required to lie "dead." It is widely recognised that our present price system ignores the damage inflicted on the environment, on households, and on our public services, and on subsistence economies. But mainstream economists don’t allow such concerns to disturb their faith in "controlling inflation" by raising interest rates.

There is in fact no more destabilising instrument than raising interest rates. Higher interest rates do more than transfer money from those who have less of it to those who already have much more. In all developed countries ofthe ‘West the sixties were a period when institutions for bringing in a greater measure of social justice were being put in place. World War II had been won in part by the promise of such measures. Since these delivered higher education at nominal prices to those who qualified, and health insurance, unemployment insurance, and old age security to almost everybody, this inevitably entailed a higher price level. Their costs were paid largely from taxation which showed up as a deeper layer of price.

Making no distinction between such "structural" price increases that reflected the vast investment of the public sector in physical and human capital, and responding to the misdiagnosed problem by raising interest rates was a fail-safe method for undermining the welfare state. Use of the central bank to help finance government needs was declared inflationary. Instead government borrowing was directed to the chartered banks at mounting rates that had been elevated to the sole remedy in the official policy kit.

All this gave rise to the Mother Hubbard syndrome: the old lady’s cupboard was guaranteed always to be as bare as a newborn babe’s bottom, and she would always have more children than she knew what to do with. Indeed, unemployment, too, was declared a weapon against inflation. It was an ingenious plan for circumventing democratic process — especially since less and less dialogue on such subjects was being allowed. Economists aspiring to tenure in our universities, to lucrative positions with brokerage houses or the government, fell into line.

High interest rates not only deprive the less privileged portions of the population of current income, but of the possibility of ever accumulating the reserves essential for bettering their lot — either through education or by enough saving for investment.

On the international arena it thwarts any possibility of the former colonial countries from amassing the capital that would allow them to undertake a peaceful redistribution of lands taken from the natives at the time of their conquest. Democratic constitutions without such land reform are doomed to fail and to give way to violent confrontations.

In recent years various factors have hastened the crisis of the "leave-it-all-to-the-market" model. The end of the Cold War and the declassification of key documents on covert operations of the CIA have led to some startling disclosures on how the world was run during the past half-century. The subversion of legitimate governments bythe Western powers, the fostering of civil war, of terrorist activities attributed to local Communists were all directed to deepening the subservience of the raw-material producing countries. If we collate the timing of these cloak-and-dagger activities with the landmarks of the counter-revolution that wiped out much of the achievement of the Keynesian revolution, a close correlation emerges.

The preparatory moves in reversing the Keynesian revolution are usually dated from the Federal Reserve-Treasury Agreement of 1951. By that time the School of the Americas had already been set up in the Panama Canal Zone to teach Latin American army officers high-tech methods of murder, torture and subversion. The sixties were not only the high point in setting up the social institutions of the welfare state, but saw the Americans bogged down in Vietnam. They had been led to that disaster by their too facile successes against democratically elected regimes in Iran, Guatemala, the Dominican Republic, Brazil, Chile, and elsewhere. So determined a plan of world domination could hardly have overlooked the need to secure a grip on the world’s public treasuries and central banks.

A couple of decades ago it would have appeared ungentlemanly to suggest that the suppression of the ideas that lifted the world out of the Depression, financed the war and gave us two very positive decades of peace, might have been anything other than the outcome of scholarly dialogue. Today, however, the only scholars who count seem to be economists who work for banks and financial firms. Valuation in academia has converged strikingly with the valuations of the stock market.

Recently I read the proofs of a remarkable book by J.W. Smith that will shortly be published by M.E. Sharpe: Economic Democracy: The Political Struggle of the 21st Century. It sees in the current deregulation and globalisation a continuation of the conquest of their hinterlands by the cities of Renaissance Italy. Their purpose was to destroy the industries that had begun springing up outside the city walls, and annexation of the surrounding territory as sources of cheap raw materials. In this way they strengthened their own monopoly of lucrative manufacturing that could provide the high "value-added" multipliers that allowed capital accumulation.

Such capital accumulation for its part was the path to power. Smith tracks the process to later centuries — Britain’s conquest and destruction of the superior textile industries of India; to the Napoleonic wars in which France excluded Britain’s industrial exports under its continental system. He sees a reflection of their own interest and little else in both Britain’s advocacy of free trade and in the protectionism of the United States and Germany during the 19th century. That also explains the frantic empire-building of the great industrial nations in the same period.

These disclosures blow the very method of statistical regression of econometrics out of the water. If economic history has been shaped essentially by a hyperactive interventionist policy posing as a free marker, how could the future possibly be foretold from the best fit for the coefficients of the free market model to the statistics of this manipulated past? The leaves in a teacup would provide as good clues to our future.

—from Economic Reform, June 2000

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