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Newsletter No. 9 - April 2006

Links to other Newsletters can be found here.

You can subscribe to my free newsletter here.

CONTENTS

1. Editorial

2. Climate change means our present way of working must change radically

3. Carbon Trading or Green Taxes?

4. Book Review: The Citizen's Stake: Exploring the future of universal asset policies

5. Book Review: Wheels of Fortune: Self-funding Infrastructure and the Free Market Case for a Land Tax

6. Journal Review: International Journal of Green Economics, Vol. 1,
Nos. 1/2

7. Shorts

(1) Eric Britton & Wikipedia

(2) Conall Boyle

(3) Walt Patterson

(4) American Monetary Institute

(5) "The Impact of Inequality: How to make societies healthier"

(6) Roy Morrison

(7) New Links

 

1. EDITORIAL

It is "as though a man had been seeking to build a substantial house by working spasmodically on odd portions of the structure on quite isolated plans, fashioning minute details of some upper parts, when he has not set up, nor indeed even planned out, the substructure which is their sole possible foundation and stay: his very best efforts being thus necessarily rendered abortive by the fact that, while he is hammering at this portion of it or that, he possesses no clearly thought-out plan of the structure as a whole".

In the early 20th century the distinguished civil servant Sir Robert Morant was commenting on the British approach to government reform. A hundred years later, as we contemplate our present government's failure to develop "joined-up government", should we be content to murmur "plus ça change"?

Was Morant consciously echoing Copernicus who, 400 years earlier in On the Revolution of the Heavenly Spheres, had said of the Ptolemaic system of astronomy, "It is as though, in his pictures, an artist were to bring together hands, feet, head and other limbs from quite different models, each part being admirably drawn in itself but without any common relation to a single body"? If so, Morant may have hoped that his insight, like Copernicus', would lead to a paradigm shift.

Thoughts on these lines occurred to me as I read through the material for this newsletter. Climate change; the way most of us have to work; increasing land values, house prices and transport failures; whether - and, if so, how - citizens should be allowed their share of the value of common resources; how to bring rational political analysis to bear on critical problems that lie outside the boundaries of conventional economics - all these raise the question: should we develop separate schemes to deal with each issue that arises, or should we prefer solutions that can develop over the next half-century into a mutually reinforcing and coherent new pattern of self-governance for the peoples of the world?

 

2. CLIMATE CHANGE means our present way of working must change radically.

Chapter 3 of Future Work concluded that "As the industrial-age way of organising work as employment has become ever more deeply engrained in the structures of industrialised and industrialising societies, it has turned work into a form of activity which is dependent, remotely controlled, and instrumental.

"Work in the post-industrial age will have to develop in a positively different direction. It will have to become more autonomous, more self-controlled, and more directly related to the needs and purposes of those who are doing the work. As we reach the end of the employment age, it is becoming urgent to think out how to reverse some of the main features of employment as a way of organising work."

In the 20 years since Future Work was written, the need to reduce carbon emissions has made it all the more urgent to change how we work.

Browsing recently, I found Francis Kinsman reporting in The Telecommuters (John Wiley, 1987, ISBN 0 471 91789 3, pages 9-10) that, as far back as 1975, the USA could have saved 75 million barrels of oil and completely eliminated the need to import oil from abroad, if just one eighth of urban commuting had been replaced by telecommuting.

A conclusion (page 117) of Teleworking Explained (John Wiley, 1993, ISBN 0 471 93975 7) was that "if the commute didn't already exist, only the maddest of mad economists would invent it". The authors estimated that the energy spent on commuting in UK, Europe and USA was "equivalent to lifting a third of Mt Everest and carting it 15 miles, and repeating the exercise on five days of every week of every year".

Telecommuting is only one of the ways more of us could work in or near our homes. Meeting more of the needs of our own households and local communities than we do now offers many other ways.

 

3. CARBON TRADING OR GREEN TAXES?

This question is now surfacing in mainstream politics in the UK. My article on "Fairer Distribution of Common Resources: the pros and cons of carbon trading" in "It's Simpol", Simultaneous Policy News, Winter 2005/06, noted some of the practical difficulties of rationing and trading schemes. It concluded that people who care for the world's future should consider whether an alternative policy, based on national and international developments in tax and public spending, might be preferable and more effective.

For the text of the article, click here. For the whole newsletter, click here.

 

4. THE CITIZEN'S STAKE

Will Paxton and Stuart White with Dominic Maxwell (eds), THE CITIZEN'S STAKE: Exploring the future of universal asset based policies, The Policy Press, University of Bristol, 2006, 212pp, £15.99 (paperback).

Two of the three editors and two other contributors to this book are from the Institute of Public Policy Research, which describes itself as "the UK's leading progressive think tank". In 2000 it conceived the Child Trust Fund announced in 2005 by the present government. New Labour has followed up other IPPR policy research findings too. The book is important for that reason, as well as for its own merits.

Starting from Thomas Paine's idea that a modest stake in the value of society's resources could help people to become "useful and profitable citizens", the book discusses:

  • possible ways of financing a citizen's stake , including a reformed inheritance tax and stakeholder trusts to reclaim the value of common assets like land and the environment and other natural resources; and
  • questions about how people should be allowed to spend their citizen's stake : should they be unrestricted in what they use it for? Or should its spending be limited to such activities as training or providing care? What principles should govern any restrictions designed to ensure its being used responsibly?

The book was launched at an IPPR event on 19th April to discuss questions like:

  • Can and should asset-based policies like the Child Trust Fund become a “fourth pillar" of the welfare state?
  • Can they form the basis for a more egalitarian form of market economy?
  • Can asset-based policies be paid for from taxes on inheritances, or "common assets" like land value?
  • How can and should the state promote the responsible use of universal capital grants?
  • How might asset-based welfare improve the work-life balance and support carers?

For further details or information about any follow-up, please contact Ruth Eldridge or phone 020 7470 6105.

I find this book very interesting. Its proposal to distribute a share in the value of common resources to citizens as a capital asset differs from the proposal I have preferred - to distribute a share in the annual value of common resources as a basic citizen's income.

My feeling is that the second of those two proposals will prove simpler and easier for citizens to understand and accept, and simpler and easier and less costly for the government to administer; and that introducing a citizen's stake partly as capital and partly as income would be unnecessarily confusing. But I have no doubt that we will hear more about the idea of a citizen's stake in the coming years.

 

5. WHEELS OF FORTUNE

Fred Harrison, WHEELS OF FORTUNE: Self-funding Infrastructure and the Free Market Case for a Land Tax, The Institute of Economic Affairs, 2006, 187pp, £12.50 (paperback).

The Institute of Economic Affairs' mission - in contrast with IPPR's - is "to improve understanding of the fundamental institutions of a free society with particular reference to the role of markets [my italics - JR] in solving economic and social problems".

Well-known associates and supporters of IEA have included Friedrich Hayek, Samuel Brittan, Patrick Minford, Alan Walters and Brian Griffiths. Its researches contributed to the policies of the Thatcher Conservative government in the 1980s.

Fred Harrison's previous book - see my newsletter of July 2005 - convincingly explained that the root cause of the economic and social problems of housing in Britain - house price rises vastly outstripping rises in wages and salaries and consumer prices - can be traced to the fact that wages and salaries and consumer prices are taxed and the value of land is not.

Wheels of Fortune now convincingly explains why our failure to provide efficient and financially viable transport infrastructures is also due largely to the failure to tax land values.

Increases in neighbouring land values created by building roads, railways, and airports - and, in the past, canals - have not been captured to finance the capital investment needed to build them. "Infrastructure projects almost always bring about an increase in the value of adjoining land. ...[The London Underground Jubilee Line is given as an illustration - JR] ... When such projects are publicly funded, this represents a substantial transfer of wealth from taxpayers to local property owners" (page 20).

Wheels of Fortune, like its predecessor, makes it clear that the "pathology" of our present tax system inevitably generates economic inefficiency and injustice - not just affecting housing in the first book and transport in this one, but throughout the whole economy. "Taxes on wages and savings are regressive tools for transferring money from people at the bottom end of the income scales (who tend not to own land) to people in the middle and higher income brackets (who tend to own land). This is the process of transforming earned income into windfall wealth via investment in infrastructure" (page 57).

In my view this book is a must-read for anyone concerned with economic efficiency and economic justice. But I do have one important reservation.

Readers may notice an apparent contradiction. The early chapters present arguments for raising investment finance for each transport infrastructure project separately, through its own private sector scheme to tap the prospective increases it will generate in local land values.

The message of later chapters is a different and more universal one: we need a revenue-neutral reform of the whole tax system.

On the one hand, we need to tax the financial benefits which property owners everywhere get from the value of their land - which is due not to their own enterprise but to the various activities and demands of society, including the investment of taxpayers' money in transport infrastructure.

On the other hand, we also need to reduce by the same amount of money the tax burden now imposed by economically and socially damaging taxes on incomes and capital.

That would have a doubly beneficial effect on the efficiency and justice of the economy right across the board, first by charging a proper price for the financial benefits enjoyed by landowners from the publicly created value of their land, and second by reducing the negative effects of existing 'deadweight' taxes on the rewards people get from contributing to the common wealth.

To me, that simpler and more universal approach seems obviously preferable to a proliferation of separate private sector schemes dealing only with transport infrastructure and ignoring the other reasons for taxing land values. For one thing it would be more transparent, making it easier for citizens to understand the basis on which priorities were being decided.

It would involve the initial investment finance for public projects continuing to come from taxpayers through the systems of public revenue collection and public spending. But it would also involve developing more competent and realistic methods of

  • appraising the economic and social merits of competing projects than the present Treasury methods that Harrison rightly criticises,
  • attracting private sector participation in their financing,
  • and managing them through to their completion and operation.

Click here to read the pdf of the publication.

 

6. JOURNAL REVIEW: International Journal of Green Economics, Vol. 1, Nos. 1/2, Miriam Kennet and Volker Heinemann (Eds), Inderscience, 2006, 224 pp.

This new academic journal will be of interest to many readers of this newsletter. Coming from the recently established Institute of Green Economics, it "attempts to develop a progressive alternative to conventional economics with the aim of achieving a more sustainable and equitable society ... - a solution-based, real-world, problem-solving economics that speaks the language of other different viewpoints", and reconnects economics with the more human and natural and social sciences.

A short review can't do justice to this volume, which contains 17 contributions from 14 contributors including the two editors. Apart from the editors' substantial contributions introducing the journal and discussing the scope and aims and philosophical underpinning of Green Economics, the following are four points about the need to transcend the boundaries of conventional economics that caught my eye.

(1) Victor Anderson's "Turning Economics Inside Out" draws attention to some of the ways, such as climate change, in which the economic system is now affecting environment and natural resources, and some of the ways, such as marriage breakdown, insecurity of employment, labour mobility, stress, and work-life imbalance, in which it is affecting personal, family and social life. It now invades the culture and psychology of consumers and their aesthetic, symbolic, experiential and psychological wants - for example in the marketing of products like food, clothing, and cars, and in the use of marketing tools like the 'pester power' of children.

Uncertainty about the outcomes of rapid technological development - information and communication technologies, biotechnology, nanotechnology - and growing debate about the relevance of ethics to economic behaviour are other 'externalities' of economic activity (as conventionally understood) that are now rebounding to affect the economic system itself.

Those and other key issues of our time arise "in a 'ring' just outside the boundary drawn by conventional economics". In other words, "the boundary drawn around economics by conventional economists is drawn in exactly the wrong place" for helping us to understand and deal with those issues.

(2) Mary Mellor describes "Ecofeminist Political Economy" as providing "an analysis of the current destructive relationship between humanity and non-human nature through an understanding of women's position at the boundaries of economic systems. From this perspective women, or rather women's work and lives, like the natural world, are externalised and exploited by the valued economy...that values human activities in money or prestige terms".

She describes "the increasingly recognised insight that the money system has its own independent dynamic" as "central to an analysis of money issue and circulation as a possible transformative space for a feminist and green economics". She emphasises that what is important is that money has come to dominate modern economic systems with patterns of exclusion - a question not just of gender equality and environmental damage, but of right to livelihood and economic democracy.

The money-valued economy is parasitical on important aspects of human and natural existence, and its failure to acknowledge them as its true resource base means that they are exploited and damaged.

(3) Chit Chong puts forward "Restoring the Rights of Future Generations" as one of the ethical principles on which politics, economics and justice in the 21st century should be based. We, who live today, are stealing and destroying resources which rightly belong to people of future generations. The concept of Sustainable Development is not enough. Restorative Development is needed.

This is clearly far outside the boundaries within which conventional economics can offer responsible guidance. Conventional economics teaches the principle of 'discounted cash flow' - that getting money now is worth more than getting the same amount of money in the future, and that therefore it is economic to convert real resources into money as fast as possible.

The discounted cash flow principle will have to be turned upside down, to favour investment that benefits future generations. But, as Chit Chong rightly concludes, we will have to look beyond the dogmas of conventional economics for this, to legal and political and educational competence.

(4) Derek Wall's largely favourable review of Amartya Sen's "Development as Freedom", describes it as a progressive, radical version of market-based economics. Sen is, of course, widely respected for his concern with poverty, capacity-building and related aspects of development, and is regarded as an exceptionally enlightened Nobel-prize-winning economist.

But Wall also points out that "what Sen ignores is as important as what he includes. He sees markets as natural and universal, implying that the economic alternative to markets is heavy-handed state oppression. The notion that markets are just one economic mechanism among many lies outside his thought. The ecological effects of markets that tend to lead to ever-increasing production and consumption is also absent".

So is awareness that "the 'free' market often requires violent processes of enclosure" to steal communally managed resources and turn them into private property.

Conclusion: for all his merits, Sen appears to remain a prisoner of the limited discourse and concepts of conventional economics.

 

7. SHORTS

(1) Eric Britton & Wikipedia - Eric Britton, a distinguished pioneer of internet research and communication on sustainable development, commends the free encyclopedia Wikipedia for those purposes. I have found it useful myself. He suggests we should also see it as a possible means of spreading the word, while respecting its code as an open encyclopedia. His own contributions include articles on Carsharing and Jane Jacobs (and yours truly).

(2) Conall Boyle - Congratulations to Conall Boyle (63) on his M.Phil. His thesis was on on lotteries, "Who gets the prize: the case for random distribution in non-market allocation". We hope it gets published. The case deserves to be seriously considered. To download it, click here.

(3) Walt Patterson - After a 15-year break from writing about nuclear power, Walt Patterson reminds us why it was so widely agreed that no more nuclear power stations should be built in Britain. To download his article on "Nuclear Amnesia", published in the April 2006 issue of the Chatham House monthly "The World Today", click here.

(4) American Monetary Institute - The agenda for the AMI's 2006 Annual Conference on 21-24 September in Chicago will include discussion of a draft reform bill - the American Monetary Act - and strategies for mobilising support for it in Congress. For Stephen Zarlenga's announcement of the conference programme and other details, click here.

(5) "The Impact of Inequality: How to make societies healthier" - Our thanks to consultant psychiatrist Sebastian Kraemer who has drawn this book to our attention.

Written by Richard G Wilkinson, it reports that if Britain changed from being one of the most unequal of European countries to being among the most equal, average life expectancy would increase, homicide rates and levels of violence would fall, people would trust each other more, and community life would be revitalised.

This is clearly an important book - from many points of view. For details click here, and then on paperback book.

(6) Roy Morrison has sent details of his new book "Tax Pollution, Not Income: A New Prosperity in An Ecological Age", No 1 in a new series on "Directions for a New Millennium" . It "answers perhaps the fundamental question that American democracy must address in the 21st century". Details from Writers Publishing Cooperative.

(7) New Links

Recent additions to the Links page include the Global Basic Income Foundation and the U.S. Basic Income Guarantee Network.

 

James Robertson

27th April 2006

 

The Old Bakehouse, Cholsey
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Tel: +44 (0)1491 652346
e-mail: james@jamesrobertson.com

 

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