Newsletter No. 40 - March 2013
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2. Recommended Books
3. Other Topics
This newsletter comes out as George Osborne, UK Chancellor of the Exchequer, is preparing for the thankless task of presenting his 2013 Budget to Parliament on 20th March. Meanwhile, collectively the leaders of this country seem not just traumatised, to quote Item 2 (4) below, but deranged.
Why on earth are they and other countries' leaders allowing the professional money experts to continue wasting the world's public money and other scarce resources in order to maintain the privilege of commercial banks to create the public money supply as profitable debt for themselves? How much longer do they expect the world's people to endure increasingly severe "austerity" measures, to achieve an objective becoming more and more widely recognised as unnecessary and unacceptable?
Against that background, much of this newsletter explores the urgent need for a simple policy framework to ensure the survival of human civilisation in the 21st century.
Two linked concepts provide the basis for it. The first is "The Commons" (interpreted today as the money value of Common Resources); the other is "Predistribution, not Redistribution" of money values.
Those concepts figure between pages 128 and 140 of my recent book Future Money - www.jamesrobertson.com/futuremoney.htm - see the offer of free access to a pdf copy). In this context, those pages refer to the money values of "The Commons" and how we should treat them. But I will say a bit more here about the meaning of "Predistribution".
An early reference to it as a preferable alternative government policy to "redistribution" was in my Alternative Mansion House Speech of 15 June 2000 on Financial and Monetary Policies for an Enabling State - www.jamesrobertson.com/ne/alternativemansionhousespeech-2000.pdf.
The speech was given at the launch of Creating New Money (www.jamesrobertson.com/books.htm#creating), the book published by the New Economics Foundation that I had co-authored with Joseph Huber - www.soziologie.uni-halle.de/huber/index.en.html.
The relevant passage on page 13 of the speech was as follows:
"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.”
* I owe this thought to Joseph Huber, co-author of “Creating New Money”.
(For interested readers, a search for "predistribution" on my website will give you a few more references to it - www.jamesrobertson.com/search.htm.)
Against that background, I was interested to hear twelve years later in September 2012 that Ed Miliband had "introduced a new idea to British politics: 'predistribution'". But the short relevant passage in his speech at www.policy-network.net/uploads/media/27/8053.pdf shows that the meaning he gave to 'predistribution' was a good deal weaker than the one above.
(Other recent references include www.guardian.co.uk/commentisfree/2012/sep/12/ed-miliband-predistribution.)
2. RECOMMENDED BOOKS
In these short reviews I warmly recommend all these books. They are mostly about various aspects of the money system. Some will appeal to some readers of this newsletter and others to others.
(1) Andrew Jackson and Ben Dyson, Modernising Money: Why our Monetary System is Broken and How it Can Be Fixed, Positive Money, 2012, 334pp., with Foreword by Professor Herman Daly. For details see www.positivemoney.org/shop/modernising-money.
I have been personally involved in the origins of Positive Money and this book. It is an excellent book and I recommend it wholeheartedly. Please read through the webpage above and the linked 37-page FREE PREVIEW. They should convince you to get hold of a copy of the book if you can.
(2) Robert Pringle, The Money Trap: Escaping the Grip of Global Finance, Palgrave Macmillan, 2012, 328 pp.,with Foreword by Lord Skidelsky. For details see www.themoneytrap.com.
This is a thorough, readable and potentially influential book, primarily for a professional, financial and academic market. Its user-friendly website (above) provides very full information.Read the Home page's links to "Download Sample Chapter (PDF)", "Explore The Money Trap: PART I to IV", and many others labelled "read more". Also read the pages "About the Author", "About the Book" and "Using this Website".
Robert Pringle was among the people whose company I remember enjoying in the City of London forty years ago. He was then editor of "The Banker" and I was doing my spell with the big banks, setting up and directing the then Inter-Bank Research Organisation (IBRO).
He later founded Central Banking Publications, and has edited and developed the "Central Banking" journal that now has subscribers in 120 countries, including the great majority of the world’s central banks. So he has been as closely involved for many years as anyone else as an observer of the workings of the Global Financial System (which he refers to as GFS), and the present financial crisis and recession (FinCR). That crisis hit the world in August 2007, is still with us, and will continue until we compel the world's political and financial leaders to act more radically to put the money system right than they are doing now.
His book provides an insider's analysis of what has gone wrong with the money system at national, regional (e.g. eurozone) and international levels, and the deep-seated changes now needed in it.
The message of its concluding part is summarised as follows.
"The need for a profound change in existing monetary arrangements will persist, even if the developed world recovers from this particular period of weak growth and high unemployment. Such a recovery would enable governments to shelve proposals for real reform for a few years, but the underlying problems would persist. Yet so will pressures for fundamental reforms, and these are likely in the end to gain the upper hand. ...".
The final chapter is on "The Emerging Global Financial System". An explanatory account of "Pressures for Change" follows "the conclusion that a far-reaching restructuring of the institutional and ethical framework of the financial system is required". He asks "Is gold the answer?" and concludes that "We should be able to design a better anchor".
The anchor he proposes "would put money into a quasi-constitutional realm above the cut and thrust of day-to-day politics." I agree that politicians should not interfere with how people make lawful use of their money. But for the following reason I question his further statement that "money is not properly used as a weapon of social control" (p.288).
I pointed out in Future Money (pp 32 ff) that how the money system works is bound to motivate our behaviour in one way or another. So, although the use each of us makes of money as it is currently designed to work should not be subject to day-by-day political interference, the ways the money system is designed to work and motivate our behaviour should surely be understood and subject to democratic political control and approval.
In other words, the quasi-constitutional role we give to the money system should be like the one we give to the law. In both cases, day-to-day regulation and administration should be free from political interference; but because the way the systems work influences the behaviour of society as a whole it should be democratically approved.
However, I agree wholeheartedly with the book's last few sentences:
"It is time for people to tell governments: give us back our money. We don't trust you to look after it for us. It is time to try another route. The restoration of money to the people would be the best foundation of a better global financial order."
In short, this book gives a perceptive picture, seen from the heart of the global money system, of how the system must now develop.
(3) Mark Braund and Ross Ashcroft, Four Horsemen: The Survival Manual, Motherlode, 2012, paperback, 275 pp - see www.markbraund.com and, for further background, www.renegadeeconomist.com and http://motherlode.org.uk.
This Survival Manual follows Motherlode's film on the Four Horsemen of the Apocalypse, interpreted as follows:
"The Black Horse: A rapacious financial system";
"The Red Horse: Organised violence and terrorism";
"The White Horse: Poverty"; and
"The Green Horse: Environmental breakdown".
It starts by recognising that "When western civilization reaches the end of the road it will take the rest of the world with it. ... . The challenge, post-globalization, is to create a single global civilization that is sufficiently aware of its own shortcomings to become the first in history to transcend the age of decadence and propel itself into a new uncharted age: the age of humanity".
It then explains how, over the last century, economics has become a "pseudo-scientific discipline", based on a number of "frankly absurd assumptions" by its dominant school of thought - "neo-classical economics". The following are among the typically absurd assumptions the book criticises:
- "overall wellbeing is maximized when individual behaviour is primarily motivated by self-interest",
- "the current entitlements of land ownership are just and efficient",
- "public revenue is best raised by taxing effort and enterprise", and
- "the process by which money is created is best left in the hands of privately owned commercial banks".
In short, "over the last three decades, the economic system has been redesigned to serve elite greed rather than the basic needs of the wider population. It no longer has any moral dimension".
That provides the background for powerful chapters on:
- Banking and Finance. "The simplest way positively to re-incentivize and reconfigure the commercial banking system is to remove from it the ability to create money".
- Rent Seeking and Unearned Wealth. I find ''rent seeking" a confusing term, best left to pundits in the history of economic thought. However, "Unearned Wealth" accurately suggests the essence of how a rich minority now takes wealth from the majority, "justified by an amoral economic system to which fashionably ignorant politicians and economists still insist there is no alternative". This chapter shows clearly how the present system gives massive 'free lunches' to the rich by making the poor poorer.
- Violence and Terror . "Ultimately, all conflict is about power, and power is inextricably connected to the economy. The immediate causes of violence and terrorism may be deeply embedded in culture and history, but there can be no solution without first addressing the problems of economic injustice and exclusion".
- Resources. "We need to redefine economic progress: instead of increased production and consumption for the sake of it, we need to focus on the right kind of wealth". That means encouraging small-scale local producers instead of faceless mega-corporations, and ownership models that encourage participation; and removing environmentally harmful, community-destroying incentives that businesses cannot now ignore.
Chapter Seven (50 pages) on Progress takes the discussion forward. Its conclusion is that
"The challenges we face are too great for incremental solutions implemented within existing political and economic frameworks. .. Only a global revolution of ideas can bring about revolutionary economic change. We can't simply stand by as hopelessly inept politicians continue to trash the economy and threaten our children's futures. Only people who are fully engaged can begin the process of peaceful, democratic revolutionary change. So now it's over to you".
Finally, Chapter Eight lists 27 Principles for discussion (see www.renegadeeconomist.com/fourhorsemenfilm/the-27-principles.html).
It is followed by Frequently Asked Questions (FAQs) and Further Reading.
To sum up, this book offers a convincing and necessary peaceful, constructive, revolutionary strategy for achieving our survival.
(4) Fred Harrison, The Traumatised Society: How to Outlaw Cheating and Save our Civilisation, Shepheard-Walwyn Publishers, 2012, paperback, 240 pp. See www.shepheard-walwyn.co.uk/book_details.asp?Bookid=256 and the links it offers. Also see www.ekklesia.co.uk/node/17330 for an excellent fuller review.
This book prompted me to ponder some fascinating questions.
For example, were humans in community destined from the start to behave toward one another and their natural environments in ways that would ultimately lead to our collapse? As that fate now becomes more imminent, what can enable today's one-world civilisation to escape it? Then, if we humans eliminate ourselves, will other species compete for our dominating role? and will history then eventually repeat itself in the far distant future? (Or, perhaps before that, will collisions with forces from outer space have reduced our planet to lifeless rubble?)
But enough of my speculating! The practical challenge we face is to get through the next half century; and this book has a lot to offer on that.
Having correctly foreseen in 1997 the onset of the present financial crisis in 2007-8, Fred Harrison expects that "the next 18-year business cycle, which would ordinarily culminate in the recession (Depression) of 2028, will not conform to previous trends. The prospect is that World War III will disrupt the cycle" (p. 212), unless we can prevent it happening. That will need us to outlaw the prevailing culture of cheating.
He defines "Cheating" as "rent-seeking" which I find rather confusing, as I have mentioned in the previous review. I know that economic historians use the term to mean capturing private profit from land values that should be treated as common wealth; and I know that cheating today still includes capturing land values as untaxed private profit. But cheating today also includes important things other than land. It is easier for people to understand how to deal with cheating, if we start by seeing the cure as "the recovery of the commons for the benefit of us all", as in the book's last few words - see below.
Then we can explain that "the commons" today covers a whole range of value that has been created by public endeavour and public spending, and by natural ecological bounty, in contrast with value created directly by the efforts and skills of individuals who deserve to be rewarded for their work.
So, when the section of the book on "Restoring Morality to Money" (p. 168) says "Rebalancing the economy relies on the willingness of people to challenge the conventional wisdoms about taxation", I feel that by itself "taxation" defines the problem too narrowly.
On that point, my recent book Future Money stresses that policies on:
(i) how the public money supply is created,
(ii) what is taxed and what is not taxed, and
(iii) what is public revenue spent on and not spent on,
work together today to transfer money values to mainly richer, less deserving people at the expense of mainly poorer more deserving ones. To rebalance the economy effectively, all three of those government functions must be reformed.
In spite of this mild criticism, I must say that the book is full of interesting evidence in support of its message. For example, three quotes from Adam Smith (pp. 175-6) clearly confirm his view that "in treating rent as public revenue, incentives in the capital and labour markets are not distorted", whereas taxes on wages and profits diminish the outputs of wealth.
The relevant views of Alfred Russell Wallace, the co-inventor of Darwin's theory of evolution who died a hundred years ago, (pp.179-181) are also most interesting. One example is about Gold:
"The larger the proportion of the population of a country that devotes itself to gold-production, the smaller the numbers left to produce real wealth - food, clothing, houses, fuel, roads, machinery and all the innumerable, conveniences, comforts, and wholesome luxuries of life. Hence, whatever appearances may indicate, gold-production makes a country poor, and by furnishing new means of investment and speculation helps to keep it poor".
Wallace also agreed with Henry George's message in Progress and Poverty, that the creative potential of the mass of working people was suppressed by landlords actively depriving them of access to the natural resources they needed. He condemned the way in which Britain exploited peasants in India, turning many of them into tenants of money lenders instead of owners of their farms. Also, from personal experience in Ceylon (now Sri Lanka) and anticipating the ecological concerns of the later 20th century, Wallace also wrote prophetically in "Plunder of the Earth" about "the reckless destruction of the stored up products of nature wholly in the interests of landlords and capitalists".
The book's final paragraph deals with the need to link "personal trauma to the cultural and environmental ramifications. It becomes apparent that, if we wish to restore health to the individual, we need a multi-disciplinary collaboration that also rehabilitates culture and people's relationship to nature. The cathartic renewal of personality entails the recovery of the commons for the benefit of us all (p.224)”.
(5) Michael Lewis and Pat Conaty, The Resilience Economy: Cooperative Transitions to a Steady-State Economy, New Society Publishers, Canada, 2012, paperback, 389 pp. For the text of Chapter 1 on " Resilience: the 21st-Century Imperative" and a full Contents List, see www.newsociety.com/Books/R/The-Resilience-Imperative.
I have known Pat Conaty and admired his work ever since he was inspiring inner city community regeneration in Birmingham and directing the UK Social Investment Forum twenty or thirty years ago. Michael Lewis is the Executive Director of the Canadian Center for Community Renewal, internationally well-known as a leader in Community Economic Development and the Social Economy.
In contrast to The Money Trap, their book consciously concentrates on the subnational dimensions of economic life. In that context, the two authors have together produced an outstanding book about two key aspects of future human development and survival - correction of the present over-centralisation of wealth and power, and purposeful concern for the wellbeing of ourselves and other life on earth instead of our present commitment to the idol of money-based "economic growth".
They define resilience as the capacity to adapt to change, and explain seven principles on which it will rely:
- Diversity: A resilient world would promote and sustain diversity in all forms (biological, landscape, social, and economic).
- Modularity: A resilient world would be made up of components that can operate and be modified independently of the rest.
- Social Capital: A resilient world would promote trust, well developed social networks, and leadership.
- Innovation: A resilient world would place an emphasis on learning, experimentation, locally developed rules, and embracing change.
- Overlap: A resilient world would have institutions whose governing structures include "redundancy". It would also have a mix of overlapping common and private property rights, increasing access to land.
- Tight Feedback Loops: A resilient world would possess tight feedback loops (but not too tight). Feedback loops refer to the communication flow within a system.
- Ecosystem Services: A resilient world would consider and assess all the ecosystem services that the market currently disregards.
Four broad strategies are based on those principles:
- Reclaiming the Commons,
- Reinventing Democracy,
- Constructing a Social Solidarity Economy, and
- Pricing As If People and the Planet Mattered; and
those lead up to the question of Navigating the Transition to a Steady -State Economy.
Within that framework, as its Table of Contents shows, The Resilience Imperative provides a rich survey of past worldwide experience, present activity and future possibilities, ranging through the spread of community land trusts, affordable housing, pathways to energy sufficiency and sustainable food, convivial banking innovations, a path beyond debt, economic democracy, trusteeship, co-operative capital, local land banks, and countless other ways of contributing to the Great Transition that we must bring about.
It concludes on page 341 with "one personal question we need to ask ourselves: What stories will we be able to tell our loved ones about what we did to advance the Great Transition".
(6) The message of the 40-page report on The UK Co-operative Economy 2012: Alternatives to Austerity at www.uk.coop/sites/storage/public/downloads/economy_0.pdf follows the review immediately above very neatly.
It contains a wealth of description and figures confirming that a revival of the co-operative economy in Britain can provide an important part of the answer to our continuing financial crisis.
Ed Mayo 's Introduction is as follows.
"Our economic system is lost at sea . Steered for too long by the wrong compass, we have privileged short-term, rentier finance over long-term and sustainable wealth creation. In the process we have neglected enterprise and allowed deep inequalities to become the norm.
Weathering the storm are the UK people and its businesses, reluctant passengers who are weak from battening down the hatches and bracing themselves for waves of austerity measures.
Austerity is one way to allocate the costs of past failure, but it does little to address the reasons for that failure.
Our economy needs a new engine and a fundamental change of course based on principles such as widening ownership, sharing profits and encouraging long-term, sustainable enterprise.
We need to redefine the way that we see economic progress, to lead towards a more hopeful and inclusive horizon of future, common wealth.
This report shows that in 2012, the United Nations designated International Year of Co-operatives, we are seeing co-operatives across the UK proving to be resilient businesses. They are providing alternatives to austerity in the form of a new co-operative economy".
Ed Mayo, Secretary General, Co-operatives UK
(7) Molly Scott Cato, The Bioregional Economy: Land, Liberty and the Pursuit of Happiness, Routledge, 2012, paperback, 254 pp. - see www.routledge.com/books/details/9780415500821.
Please read the Description of the book, its Contents, and a short bio of Professor Molly Scott Cato on the above website. There is also a form on which teachers can ask for a complimentary exam copy.
My personal knowledge of the author and her previous work suggests that, like the two items at (5) and (6) above, it will represent an important contribution to the promotion of a more decentralised national and global economy focusing on the wellbeing of people and the planet.
P.S. Molly has recently circulated a call for evidence for the Welsh Co-operatives and Mutuals Commission by 19 April 2013 - www.cooperatives-wales.coop/?p=1930 - more-1930.
(8) A P.S. for Margrit Kennedy's new book. See www.newsociety.com/Books/O/Occupy-Money.
3. OTHER TOPICS
I recommend the following interesting links:
(1) Money and Banking
(1a) Positive Money: 3rd Annual Conference, January 2013
(1b) The Cost of Allowing the Banks to Create our Money Supply?
"A trillion pounds is a lot of money. ..., the amount of money the UK government could have saved if there were more restrictions on banks, according to banking reform campaign group, Positive Money". Lee Williams, The Independent, 27 November 2012. http://tinyurl.com/cu6wzm3
(1c) Triodos Bank's Comments on Banking Reform http://tinyurl.com/a9fkzc7
(1d) American Monetary Institute: 9th Annual Monetary Reform Conference will be in September 2013
(1e) The Trillion Dollar Coin: Joke or Game-changer?
It "represents one of the most important principles of popular prosperity: the creation of money by sovereign governments, debt-free". www.alternet.org/economy/trillion-dollar-coin-joke-or-game-changer
(1f) Secret and Lies of the Bail-out www.rollingstone.com/politics/news/secret-and-lies-of-the-bailout-20130104
(1g) Public Banking Institute Newsletter, February 2013 http://us5.campaign-archive1.com/?u= 2d0710975e6d9e441e255e659&id=3c8ece3581&e=a79515d300
2. Land Value Taxation
(2a) Alanna Hartzok
I had good meeting in January with Alanna - www.earthrights.net. She is now Secretary General of the IU - International Union for Land Value Taxation - www.theiu.org. She was with David Triggs, Chairman of the Henry George Foundation - www.henrygeorgefoundation.org.
In London for a few days on her way home to USA from India, she was organising the 2013 IU Conference on 24-28 July. Before that, she will be giving an important paper on Socializing Land Rent, Untaxing Production in Washington on 8-11 April at the Annual World Bank Conference on Land and Poverty.
(2b) "A Telling Silence"
(2c) "Why all progressives should support a land value tax"
(2d) Michael Kumhof of the International Monetary Fund (IMF) has become widely known for the IMF research study published last year on "The Chicago Plan Revisited". - see www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf. It supports the approach to monetary reform that Joseph Huber and I recommended in 2000 (see this newsletter's Introduction above).
It is very good to see Michael Kumhof also supporting land value tax as a progressive tax - see www.theiu.org/news/imf-speaks-taxing-economic-rent.html.
3. USA Allegations of Corruption
4. Choice and Voice in Public Services
www.guardian.co.uk/commentisfree/2013/jan/27/public-services-choice. An independent study for the UK government by David Boyle - www.david-boyle.co.uk.
5. Environmentally Sustainable Development
(5a) Food and Farming
(5b) Climate Justice: A Declaration
5 March 2013