Newsletter No. 31 - July 2010
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1. The UK Emergency
Budget – Much Worse
2. Book Reviews
(1) Mary Mellor,THE FUTURE
OF MONEY: From Financial Crisis to Public Resource
(2) Clark McGinn, OUT OF POCKET:
How Collective Amnesia lost the world its wealth, again
(3) John Stewart, PRIME MINISTER
(4) Fred Harrison, THE PREDATOR CULTURE: The
Roots and Intent of Organised Violence
3. Further Points of Interest
(1) Latest "Tax Justice Focus" -
on Land Value Taxation
(2) Free Lunch
Blogspot 21 June on banking
and land monopolies
(3) Elected European officials call for a European
(4) Financial Times Deutschland praises "Creating
(5) Resistance to Corporate Domination
(a) "Taming The Corporations",
Austin Mitchell & Prem Sikka
(b) Benefit cheats compared with corporate
(c) GM food and the Food Standards Agency;
a sinister bid
(d) Agrarian Renaissance versus Corporate
(e) Campaign for Real Farming
4. Population Growth
1. THE UK EMERGENCY BUDGET - MUCH WORSE THAN
The UK Coalition Government's Emergency
Budget proposals of 22 June ignored a huge
potential source of expenditure saving and public
revenue. It has been estimated
at £200 billion (click
It consists of: the hidden subsidies that we
all pay to commercial banks because our governments
give them the privilege of creating our national money
supply as part of their profit-making business; and the
lost money we would be benefiting from if
new money was created as public revenue and spent into
circulation by the government on purposes that meet
Political and media reporting and debate about the
recent UK budget has been limited to conventional questions:
does it strike a proper balance between rich
and poor, between tax increases and
public spending cuts, and between a Keynesian
and a Thatcher/Reagan economic response to our
potentially disastrous prospects? Decision-makers and
mainstream commentators appear to be totally unaware
that monetary reform could change our prospects
dramatically for the better by providing a very
significant contribution to paying back our huge deficit.
As well as that contribution to our immediate needs,
there are other overwhelming arguments for monetary
reform. They require no academic economic teaching
to understand, just common sense. They include the following.
(1) In a more "normal" context,
if the banks are allowed to create over 95% of our money
as interest-bearing debt, the only way to maintain
a financially sustainable situation is to let
more money continually, in order that borrowers
can pay the interest on the debt already created. That
systematically creates inflation, a more
indebted society, and a growing gap
between rich and poor.
(2) "Normal" situations can't
last very long when money is created that way. As profit-making
businesses competing with one another, commercial banks
are inevitably under pressure to create too much money;
that causes recurrent booms which end
in busts; in busts the banks will not create
enough money to meet society's needs; then they
can hold the government to ransom to
bail them out with enough taxpayers' money to enable
them to lend us what should be our own!
(3) Allowing the banks to decide how almost all the
money in society is used on its first entry into
circulation, and to be paid interest on it as it
circulates until it is repaid,
distorts the economy in favour
of activities profitable to the banks,
imposes a hidden charge on everyone
who uses money, and
subsidises the banking industry,
and so reduces the efficiency of the
services it offers.
All these problems could be avoided by transferring
to an agency of the state (the Bank of England) the function
creating all the national money debt-free to
meet the monetary objectives laid down by the government;
giving it to the government as public revenue to
be spent into circulation under democratic budgetary
The present out-of-date, undemocratic way
of managing national money supplies is a central part
of how the world's money system now
operates perversely as a whole, nationally and internationally.
Citizens of other countries also suffer unnecessarily from
it, as the G8 and G20 meetings last month in Canada confirmed.
2. BOOK REVIEWS
(1) Mary Mellor, THE
FUTURE OF MONEY: From Financial Crisis to Public
Press, 2010, 208pp, £13.99.
This is essential reading for anyone
seriously wanting to understand the money system and
Its chapter headings are as follows:
2. The Privatisation of Money
3. 'People's Capitalism': Financialisation and Debt
4. Credit and Capitalism
5. The Financial Crisis of 2007-08
6. Lessons from the Crisis
7. Public Money and Sufficiency Provisioning.
It concludes that:
"money is a public
resource that should be used to provision human societies
on the basis of social justice, wellbeing and environmental
responsibility. A steady state economy would
be possible if the money system was not driven by the
demands of debt-based money, financial accumulation
and profit-driven growth. Money
should be reclaimed and democratised for the benefit
of the whole of society and the natural world."
Inevitably there are some disputable points in the book.
For example Gordon Brown did not make the Bank
of England independent from the state (page
54). The Bank is an agency of the state. It is required
to implement monetary policy objectives published by
the elected government and parliament, and then to account
to them for what it has done.
What Brown did was to take responsibility for
decisions on changing interest rates away from
politicians competing to serve their own electoral
objectives, and give it to the Bank of England
to respond professionally to what it thinks
is the right way to meet the public monetary policy objectives
the government has given it.
Another criticism could be that the book's title
claims too much. The future of money and how
it shapes the way we live won't entirely depend on
how governments organise the creation and management
of the money supply.
That will continue to play a dominant part. But how
governments raise public revenue - what
they tax and what they don't tax - and how they decide
to distribute it through public spending will
also help to determine the allocation of resources and
relative costs and prices throughout an economy. How
governments manage those functions today is just
as perverse as how they manage the creation
Finally, there is the question of capitalism
In the book's 175 pages of text I counted 215
explicit references to "capitalism" and "capitalist" in
a pejorative "anti-capitalist" sense.
When they are not providing quotations from other writers,
like Marx, they could almost always have been left
out without any loss of meaning about the actual practices,
policies, or purposes the particular bit of text is
It's a pity that this potentially
very important book is presented as part of a crusade
against "capitalism". Presenting
it as such could have the following consequences.
the positive side, its insistent
anti-capitalism may perhaps attract support for
its vision of the future of money from committed "anti-capitalists" who
might otherwise have ignored it.
Outweighing that, however, it will
turn off everyone who is still determined
to protect the idea of "capitalism" against
the idea of "socialism".
More importantly, it may also repel potentially
active supporters of reform who recognise
that for the practical purpose of defining specific
reforms the old opposition between "capitalism" and "socialism" is
obsolete and backward-looking - unconstructively
tilting at windmills, and distracting us from the
practicalities of re-organising our money system
to deal with needs of a democratic society today.
Some years ago I felt the same, but in the other direction,
about the title to Jonathon Porritt's important book Capitalism
as if the World Matters.
(2) Clark McGinn, OUT
OF POCKET: How Collective Amnesia lost the world
its wealth, again, Luath
Press, 2010, paperback, 316 pp, £12.99.
Clark McGinn is a senior Scottish banker. His book is
an informative, entertaining and well-written account
of the crises of financial boom and bust that have resulted
regularly over the centuries as the pendulum has swung
between greed and fear. It is highly relevant to us today
as world leaders fail to agree on how to recover from "the
greatest financial debacle in history".
Part I is based on eleven case
studies, including the South Sea Bubble of
1719, the absurd Dutch tulip price bubble of
the 1630s, the Railway Mania of the
1830s/1840s and the Dot.Com Bubble of
the 1990s. Going back to ancient times, Part
VI's 11-page "Memorable Chronology of
Collective Amnesia" summarises events since then
in which our grandparents and their ancestors lost
Part II is on "Banking
Basics Gone Wrong - But How Does Banking Really
Work?”. Part III is on "The
Ten Laws of Banking and how they got broke";
the Seventh Law is "The Bonus Pool Does Not Reward
Behaviour - It Sets It". Part IV is "Epilogue
(Or Is It An Epitaph...) - The End Is Nigh". Part
V is an amusing and informative fifty-page "Glossary
of New Meanings For Old Words" - like "Casino
Banking", "Dead Cat Bounce", "Due
Diligence", "Insider Dealing", "Leverage", "Sovereign
Wealth Funds" and "Too Big To Fail".
I recommend this book warmly. That's partly because
it's an interesting read and quarry of information. But
it's also partly because McGinn challenges us powerfully
to disprove his forecast that, before many years have
passed, collective amnesia will return and another boom
and bust will hit us again. As our political and financial
world leaders fail to agree at one international meeting
after another on effective measures to prevent that happening,
it seems all too probable.
We must agree with him that we won't be able to prevent
it by seeking to change human nature; that would just
be too naive. We need to change the institutional framework
to motivate people positively, including bankers, to
behave in ways that benefit themselves and their associates
by serving the needs of society.
That means there is no alternative to depriving the
banks of their present privilege of creating the public
money supply as part of their profit-making business.
Competition with one another is bound to compel them
to create money faster and faster until bust follows
(3) John Stewart, PRIME
2010, paperback, 224 pp, £9.95.
This appealing novel tells a great story of
an unmarried thirty-six year old Prime Minister elected
in a general election resembling our recent one, and
faced with a complex of economic, financial and social
challenges much like those we face today.
I won't spoil it by giving away all the plot. But it
starts with him receiving a letter from a
tall, trim, grey-haired family publisher, whose twenty-five
year old unmarried daughter helps him to run his business.
The letter suggests that the crisis calls for a
shift of taxation from earnings and enterprise on to
community value, "the value that accrues
to site location by the collective presence of the
community". (We usually call it "land value
taxation"). The story develops from there, and
culminates with the parliamentary battle over the necessary
As many good stories do, it calls for some suspension
of disbelief. But it's a page-turner; once it captures
your attention you won't want to put it down. Splendid
holiday reading - perhaps with a bottle of wine
at hand, and a box of paper handkerchiefs for when you
get to the tear-jerking bits.
Will the book be read by people who don't already understand
the need for this tax shift? I very much hope it will,
that they will enjoy it, and that it will convert them
to support that reform.
(4) Fred Harrison, THE
PREDATOR CULTURE: The Roots and Intent of Organised
2010, paperback, 192 pp, £17.95.
Strategic policy-making is organised now in such a way
that it fails to take account of the connections between
socio-economic policies and policies for creating and
maintaining a more peaceful and safer world. The
present difficulties of the NATO coalition in Afghanistan
are a current example of that. This book addresses one aspect
of the need to remedy that general failure, and is welcome
for that reason.
It offers "a theory that explains socially
organised violence in terms of a particular set of
property rights ... historically the main
intent behind the major events of violence having been
the quest to appropriate other people's land, or the
resources of nature in and on that land".
A Prologue on "The
Failed State" is followed
by three Parts: "A General Theory of Violence"; "The
Social Pathology of Land Grabs"; and "Structures
of Violence". Chapters on "Freedom through
Taxation", "Truth and Reconciliation" and "Principles
of Non-violent Governance" make up the concluding
Part 4 on "Healing Humanity".
Among the many practical illustrations that Fred Harrison
cites of how the way we deal with land rights affects
peaceful co-existence in a society, he looks at lessons
to be learned from Costa Rica about the sociology of
peace, and from South Africa's efforts to achieve land
justice after the end of apartheid.
On the latter, Harrison cites the programme to restore
land to black citizens with an ancestral claim to tracts
owned by white citizens. On a recent visit to South Africa
he found that that programme is
failing and threatening the food security of the country in much the same way
as has brought Zimbabwe to its knees.
He suggests that an alternative more likely to succeed
would be for white farmers to accept that they should
pay the whole "economic rent" (site value)
of their land as public revenue; and for Community
Land Trusts to be set up, to be funded by some
of that revenue, and to help black claimants to acquire
the skills and capital to put the land to its best use
- thus meeting both their own interest and the food needs
of the rest of the population.
Many readers will, I believe, find much to interest
them in this book and stimulate their thinking.
However, I should confess to a feeling
that the book claims too much. Its first words stress the
link between socially organised violence and capitalism.
Its last few words are as follows:
"We need to
re-socialise the publicly created value, and reprivatise
the personally created value. With
the adoption of that one principle, contests
over who owns the land disappear; and with
them systemic violence."
Surely a propensity towards violence, including socially
organised violence, is more deeply
rooted in human nature than that?
For example, socially
organised violence began long before capitalism was
thought of. A few examples would
be: the campaigns of Julius Caesar, Alexander the Great
and Genghis Khan; the slave trade and the systematic
working of thousands of slaves to death in silver mines
by the city state of ancient Athens and the Spanish invaders
in 16th-century Potosi; or the Crusades and the massacres
of Jews in 12th-century England.
Certainly, many acts of socially organised violence
can be connected with the violation of land rights. I
strongly support the principle that people should pay
for the benefits they take from the common wealth, including
the site value of land. I also think some of the resulting
revenue should be distributed to every citizen as a share
of the common wealth.
But, although implementing that principle may be a necessary
precondition for the disappearance of socially
organised violence in a society, I find it difficult
to believe it will be a sufficient condition.
3. FURTHER POINTS OF INTEREST
(1) The latest issue of Tax
Justice Focus - guest editor Carol Wilcox, secretary
and treasurer of the Labour
Land Campaign - is on Land Value Taxation. It
is a very important presentation of a key money-system
reform by a group of well qualified contributors.
In his keynote contribution Nicolaus Tideman, Professor
of Economics at Virginia Polytechnic Institute and
State University, sets out six convincing arguments
for LVT. This issue of Tax Justice Focus is a very
welcome development by the Tax
Justice Network, hitherto best known for its powerful
opposition to the damage caused by tax havens.
(2) Charles Bazlinton at www.the-free-lunch.blogspot.com (21
June posting) concludes that "our political masters...
should boldly take control of these banking and land
monopolies for the public good . Other recent postings
are also interesting.
(3) Elected European officials call for a European
Finance Watch, as a counter-power from civil
society to balance the power of banking and finance
industry lobbyists in Brussels.
article in Financial Times Deutschland of
6th June 2010 (in German) refers to "Creating
New Money" (written by Joseph Huber and myself
ten years ago) as offering the best remedy to current
monetary and financial ills.
(5) Resistance to Corporate Domination
(a) "Taming The Corporations" is
a 56pp paper by Austin Mitchell MP and Professor
Prem Sikka (click
here, then click on Publications and then on "Taming
the Corporations" - third on the list). This
important paper provides evidence of systematic
abuses of corporate power in virtually every sector
of the economy.
(b) Benefit cheats cost the UK government £millions,
whereas corporate tax cheats cost
the UK government £billions. But “corporate
fraud is treated more lightly than benefit fraud
because it is committed by wealthy individuals and
companies, who walk in the corridors of power and
who are able to point to major economic consequences
that they say would result if they were prosecuted" (from
food and the Food Standards Agency: a
sinister bid to twist public opinion.
Renaissance: an Alternative
to Corporate Supermarket Consumerism.
for Real Farming -
Colin Tudge's blog.
4. POPULATION GROWTH
Population growth is a feature of our world today that will
affect future developments in almost every aspect of
our lives. In that respect it is comparable
in significance to how our money system works.
For a Summary of Forum For The Future's recent
report, "Growing Pains: Population and Sustainability
in the UK", click
here. It sets out key issues, makes seven recommendations
to policy makers, and tells you how to download the
8th July 2010