Category: Economics

Sustainable Economics paper published!

We have just completed our paper showing a practical path to reaching a sustainable state. This paper brings together various aspects of the Standards of LIFE to focus specifically on why and how universal services are the key to saving our environment. This is an important document – please read it.

Armed with the knowledge in this paper you will be able to explain to others how we can get to a steady state economy and why it will be fantastic once we get there. Truly the next stage in the development of empathic civilization, there’s on need to return to the “dark ages” to save ourselves.

You can read the paper at http://www.standardsoflife.org/Sustainable_Economics as well as download both an ePub version for iPad/iBook/kindle and a PDF version.

The wiki pages are open for adding comments and you can always give feedback via our Facebook page and email to feedback@standardsoflife.org.

Enjoy and educate!

LIFE SPAN – 2011.05.01

LIFE SPAN 2011.05.01 – First Edition of the new LIFE newsletter – subscribe now!
Situation – Nu-clear Power. Policy – No Alternative to Voting. Analysis – The inflation tiger is out of it’s cage and walking around the world economy with a gaggle of central bankers holding onto it’s tail.

LIFE SPAN 2011.05.01

Situational Policy Analysis & News from LIFE

Subscribe at lifespan@standardsoflife.org

Situation – Nu-Clear

Even before you factor in the pollution, proliferation and profligation of nuclear power, the most important thing to understand is the distraction that nuclear power represents.

The situation at Fukushima in Japan has brought the world’s attention to one aspect of the dangers of nuclear power generation, without even touching on the dangerous pollution resulting from mining and producing the nuclear materials in the first place, or dealing with the storage, recycling and disposal of nuclear waste at the other end of the cycle. But these dangers are not even the most dangerous thing about nuclear power, the most dangerous thing about nuclear power is that it distracts us from investing in the development of really sustainable renewable power generation.

Every single dollar invested in nuclear power could be used more productively invested in renewable power or improving efficiency. Every single physicist researching nuclear power could be more productively researching sustainability, deep chemistry or efficiency. The time for stop-gap measures has passed, we must aim straight for the finish line now.

Last month the world also committed to spending $1Bn on putting another protective cap over the leaking Chernobyl nuclear reactor. That has to be done, but it is just another example of time, money and effort that cannot now be spent on developing the sustainable energy infrastructure we need. Will we need to the same thing to Fukushima in 25 years from now?

A new clarity is developing in which we can see that any power source that is not re-newable is going to have insurmountable waste problems providing the energy we need to run a planet with 6, 7 or 8 billion prosperous people on it.

Now we can see Nu-Clear – we don’t want nuclear!

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Policy – No Alternative to Voting

This week the UK will hold its second national referendum ever to decide whether to change the vote counting process used in national elections from decrepit to deprecated. It’s a miserable choice that incorporates almost nothing learned from the last 100 years of democratic practice. If the “no” camp wins it will probably be the end of the Liberal-Democrat Party in the UK, but, other than that, either result will make almost no discernible difference to the quality of democracy in the UK. Minority political parties will still be able to win elections, safe seats will remain safe and the diverse, multi-layered needs of citizens will remain unrepresented.

Citizen empowerment through democratic process is at the root of dealing with the most pressing issues we face, and apathy about how our votes are counted and who gets to vote for what betrays a complete failure to grasp the importance of this subject. Voting is not a dry subject for “policy wonks”, it is the most vital issue at the heart of our evolution! Efficable democracy that harnesses the collective wisdom of everyone’s input is the vital building block on which we can make the changes necessary to move to a sustainable prosperity. This is too important to be be left to the whims of incumbent politicians, so the citizenry must take the lead on moving to the best available models for voting and representation.

If we are to retool our civilization for sustainability, the extent, depth and breadth of the changes we need to make to our economic and social structures will require us to have a massively more participatory and effective political structure than we have today. The politics we need must include:

  • self-selected constituency boundaries defined by the resident citizens, not by the politicians
  • multi-layered, multi-constituency, multi-member democratic structures that reflect all the glorious diversity of humanity spread across the surface of the planet
  • bottom up power structures that allow jurisdiction to originate at the bottom and move up and back down the layers, locating decision making power at the appropriate layer for the scale of the decision

These are not difficult structures to imagine or implement, but they will only come about when we, the citizens for whom democracy is supposed to work, take control of the agenda and require proper, modern and comprehensive change. A referendum proposed and framed by incumbent politicians is not the way to change this properly, real change will come as part and parcel of the policy framework of a government specifically elected to make the changes. Over to you, citizens.

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Analysis – Tiger Tails

Inflation. Inflation is the increase in prices without any corresponding increase in value, i.e. when the same thing costs more. There are three possible causes for an increase in price: an increase in the underlying cost of producing the thing, an increase in the demand for a thing that is constrained in supply, or an increase in the price just because there’s so much money lying around. The first two cases are not within the control of bankers or politicians and are simply a fact of life as materials, products and services become more or less available, and demand for them falls or rises. The important thing about the first two types of price changes is that they represent real changes in wealth, in other words the price changes are aligned with the change in the value of the thing. It is the last case, the one where the price of something changes without any change in its value, that presents a real problem for capitalist economies and politicians. This kind of inflation can only occur in a “capitalist” economy because the value of the currency in a capitalist economy is not based on anything real – the money supply is managed by special banks called “central banks” who are also responsible for minting the paper/coin money we use to pay for things and controlling the credit which commercial banks use to lend out.

The job of a central bank is manage the amount of money that is flowing around the economy such that it is roughly equal to the amount of value, or wealth, that is recognized in the economy. As you might imagine, this is a pretty tricky thing to get right because the central bankers have to have a really keen grip on the state of the economy, the quantity of transactions and the amount of wealth being generated. If central bankers print too much money, or allow commercial banks to lend too much money, and that money is not matched to real increases in wealth, then the wealth that does exist simply gets revalued in terms of how much money is available: this is called “inflation” because the price of the same thing gets inflated over time without any real change in the value of the thing itself. If the central bank doesn’t print enough money or allow commercial banks to lend enough money, then the economy cannot grow at its natural pace and the lack of money can gum up the works. Not having enough currency can even lead to the strange situation where the price of a thing goes down even though its value remains constant, because the currency has gone up in value to reflect an increase in wealth that has not been matched by an increase in the supply of available currency. In fact, to stop this kind of problem happening, central bankers err very slightly on the side of extra money and allow for a minimal rate of inflation as normal, typically this inflation is considered controllable when it is less than 2% a year.

There are two tools in the central bankers’ briefcase that have proved invaluable for getting this tricky balancing act right: caution and confidence. Normally central bankers are very cautious about increasing the money supply and spend most of their time trying to make lots of small changes over time in response to continuous monitoring of the state of the economy, changes in wealth, and keeping a really keen eye on what the commercial banks are up to. The central bank controls the commercial banks by forcing them to keep a certain amount of cash on hand, as a deposit against what they are lending out – these are called “reserves”. Also, because in a capitalist system the commercial banks can lend more money than they have taken in deposits, there is always the risk that they might get asked by their deposit customers for the return of more money than the bank has on hand; so commercial banks can always turn to the central bank and borrow the money they need at an interest rate set by the central bank. This interest rate, that a commercial bank may at any time have to pay for money they borrow from the central bank, effectively sets the floor on interest rates charged by the commercial banks on loans they make to their borrowers, and in this way the central bank controls the “cost of money” in the marketplace. If the central bank is cautious in managing the supply of money, and keeps the commercial banks on a tight leash, then everyone’s confidence in the ability of the whole system to properly represent their real wealth in paper money is maintained and everyone stays calm.

Now, if things start to go wrong they can head south pretty quickly: prices inflate, depositors loose confidence in the value of their savings, they withdraw their money from the banks, more customers get worried about the ability of the banks to give them their money back; traders lose confidence in the ability of the currency to represent their wealth and start jacking up their prices, or start asking to be paid in other things that they think will maintain their value, like gold or some other country’s currency. It can get really messy really quickly and will cause an economy to collapse with wholesale destruction of wealth and confidence. It is the job of central banks to stop this from ever happening, and that’s why they typically operate independently of politicians so that they don’t get asked to do silly things like just start printing money to pay for things the government wants but doesn’t have any real wealth to pay for. Caution and confidence, caution and confidence: the watchwords of effective, modern, monetary management.

When caution is defrayed, confidence is sure to follow at some point, and that is what happened in 2008. After a couple of decades of deprecated caution, a sudden fall in the perceived value of assets on which the commercial banks had staked their reputations led to an almost complete collapse of confidence overnight. The commercial banks were bankrupt and the central banks were on the hook for keeping the whole system running – the massive fall in real wealth was absorbed by the taxpayers, in the form of loans and gifts to the commercial banks, to stop the commercial banks from actually going bankrupt. At this point in the debacle there was a choice: recognize the loss of wealth and reorganize the banking system, or try and cover the bases until the loss of wealth was regained. The central bankers and politicians chose the latter, and that is the world we live in now. Money was printed and credit expanded on a massive scale to shore up commercial banks around the world, especially in the US and Europe, on the grounds that the depreciated assets would regain their value and any permanent loss in asset value would be made up for by increases in wealth derived from other activities in the economy. In the meantime there shouldn’t be an inflationary risk because all the extra money printed was just going to be absorbed by the balance sheets of the commercial banks and wouldn’t leak out into the rest of the economy. In theory, as assets values recovered and economic activity picked up, the commercial banks would re-establish their balance sheets and the central banks would simply draw back in all the extra money they had printed, so that some time down the road the total wealth and the total amount of money sloshing around would be back in equilibrium again. Neat, tidy and easy, eh? Not quite so much.

In other parts of the world, like China, that weren’t directly affected by a collapse of their commercial banks, they did still feel a pinch from the slow down in economic activity that occurred. In those places they increased the money supply by letting their banks lend out tons of extra credit so that people and business could spend lots to make up for the lost demand that previously came from the economies that are now having banking problems. In these countries they figured they could control the inflationary risk of printing all that money by making sure that the money went into activities that resulted in real increases in wealth, like railways and other infrastructure investments. The trouble with that plan is that real increases in wealth only occur naturally with the development of better things and ways of doing things, wealth does not simply increase in response to expanded cash spending. Just boosting the amount of cash in the system leads to people making silly decisions about what to spend that money on, and too often those decisions fail to generate any real increase in wealth; so the money is wasted and sloshes around looking for a quick bet, like the “inevitable and certain” rise in the price of property or other assets like gold.

Now its 2011 and here’s a summary of where we have ended up. The commercial banks have taken all the cheap money the central banks gave them and used it make huge “profits” using activities that do not create any additional wealth, often by lending the money back to the government at a higher rate than they borrowed that same money from the central bank. There has been no re-appreciation in the value of the assets that lost their value in 2008. The extra money injected into the system by the central banks has found its way into “quick bets” on assets around the world, jacking up the prices of property in Asia and raw materials in developing countries. One intended consequence of the rescue plan has come true: there has been relatively little fall in overall demand, a few percentage points here and there but nothing like the 20% revaluation that the other choice in 2008 would have required. Lastly, we live in a very financially orientated world because we are trying to use money to provide for the future security of our old age, and that means that we have a lot of wealth tied up in financial investments we call pensions. All these investments are effectively part of the overall money supply, and in places like the US the total of these investments is greater than the total annual GDP of the country – that’s a lot of free-floating money in the system.

Now, before we bring the strings of this story together, I want to remind you of the other types of price increases that occur naturally in markets: increases in the demand for constrained things (‘materials, products and services become more or less available, and demand for them falls or rises’). We live in a world where demand (population x aspiration) is increasing faster than we are developing new ways of meeting that demand, so the demand for the materials that drive our current way of life (food, oil, metals) is increasing without a commensurate increase in supply. This means that we are living in a world where the price of basic inputs is rising naturally, and will continue to rise until we retool for sustainability. The more successful we are at raising living standards (aspirations) the greater the increase in demand, and the higher the prices go. It is important to recognize this because the effect on the economy of naturally rising prices is the same as the effect of inflationary price increases: workers demand higher wages to allow them to maintain the same standard of living. This is the “price-wage” spiral that central bankers have learned to fear, because once it starts it stokes inflationary price rises through cyclical reinforcement, and it is really difficult to control without severely affecting living standards, which often results in social unrest and upheaval.

Think of money supply management as the tiger than drives the incredible development of wealth in a modern economy; so long as the tiger remains in a cage, or at least on a leash, the economy grows and wealth can appreciate naturally as a result of everyone’s efforts to add value to each other’s lives. The growth in wealth is not constrained by the availability of some fixed material, like gold, and every contribution by every participant can be recognized at the point when value is created. But if the tiger gets out of its cage and off it’s leash, it marauds around the economy spreading destruction and fear. Then it becomes the problem that has to be dealt with, instead of the enabler of greater good.

The inflation tiger is out of it’s cage and walking around the world economy with a gaggle of central bankers holding onto it’s tail.

While we would all like to wish the central bankers the very best of luck in their attempts to hold on to the tiger’s tail, the following factors suggest that they will not be able to hold on for long:

  • demand for finite resources is increasing naturally (outside of their control) and that will result in price increases
  • price increases will lead, and has already, to demands for increases in pay
  • the imbalance in the ratio between available cash and real asset values remains uncorrected from 2008
  • the socio-political system of attempting to provide social security using financial instruments (i.e. pensions) means that there is a lot of money floating around the system that cannot be controlled without degrading the social security that that money is supposed to provide; i.e. in a capitalist economy where social security is provided by pension investments, it becomes politically unacceptable to properly manage the money supply in line with real asset values if the value of those assets falls, effectively quashing the independence of central banking and degrading the ability to keep the true value of monetary investments in line with wealth
  • democratic politics and capitalist economics both require processes for orderly failure, a “permanent” political power structure cannot accept failure so it will inevitably intervene (unsuccessfully and counterproductively) in monetary management to preserve its political hegemony
  • the money in the current system is controlled by a very small percentage of the population who are already wealthy and who do not see the need to maintain the ratio of money to wealth, they simply seek to increase the quantity of money they have; remember that money affects the human brain the same way that sex and drugs do, it acts on the most primitive reward structures of our brain, overriding the newer “thinking” parts of our brains

The benefit of a capitalist economy is the near universal and instant recognition of value added as wealth; the condition of that is the requirement to carefully manage the money supply. If the social security of the people or the political power of the rulers is dependent on the preservation of wealth, then the necessary leeway to control money supply in line with wealth will be degraded and the economic system will collapse. Capitalist economics requires the ability to recognize wealth destruction, and that in turn requires a political system that allows for the destruction of power and a social system that survives the destruction of wealth.

In the end the only way to maintain monetary credibility is to be able to adjust money supply in line with wealth, both up and down, and that will require that we decouple social security from financial investments. In the meantime we/they will try and make the current system work for as long as we/they can, and so we are in for a spectacle of monetary gymnastics over the coming years as the bankers of the world try and keep the tiger from running loose.

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News – SPAN gets wings, fly with us!

This the first issue of the new newsletter from LIFE: Situational Policy Analysis and News (SPAN). LIFE SPAN is published online and provides more in-depth coverage of situations at the forefront of public policy at the current time.

To keep information flowing we encourage you to sign up for direct delivery of LIFE SPAN to your mailbox, so that any disruptions in the availability of Facebook, the blog site or the web wiki site do not affect your ability to get the latest news and updates from LIFE. Just send an email to lifespan@standardsoflife.org and we will add your email address to the distribution list, you can always do the same to unsubscribe at a later date if you want to. We will never share your email with any other organization.

Euro Tour 2011: if you are in Europe and would like to meet up to discuss starting a Local LIFE group, we are scheduling events from June 13th to July 7th. Email europe2011@standardsoflife.org if you’re interested in hosting an event.

Wake up!

Sleep-walking would be a particularly tragic way to go. After all that evolving, developing and civilizing, to just sleep walk into oblivion would hardly seem to do those millennia justice. The good news is that there some fairly sharp jabs to the collective ribcage happening, and there seems to be some awakening.

America makes for a good example because its big, and when a giant is sleepwalking, you can see the others in room scurrying to get out of the way. Mr Obama is a nice enough guy, and that guy Ryan looks decent, but they are both selling a load of twoddle. A 10% cut or a 20% cut? Either way the giant’s pants will fall down, and he’ll trip. Last week Obama warned the good people of the USA that in 14 years from now (2025) the amount of taxes paid would only be enough to cover pensions and medical costs for the poor and the elderly. Wow! Except that: the taxes paid today (2010) are only enough to cover pensions, medical costs for the poor and the elderly, interest on the debt and the other mandatory programs – the entire military and discretionary budgets of the US are uncovered! No education, no transport, no infrastructure, no defense! See for yourself.

This economic model doesn’t work, it simply cannot add up; no matter how many cuts are made or how many taxes are raised. Total Economic Awareness (TEA) is bust – not everything can be priced in dollars and paid in dollars. The TEA Party are the only honest ones about this: their solution is to disband society, every dog for itself, and devil take the hindmost. That’s the only economic model in which TEA works, and it’s not a world I want to live in, do you?

“Can’t we just go back to where we were a few decades ago?” (Old liberals ask some version of this simple question, born of a lifetime fatigue of fighting the good fight and a nostalgia for less urgent times.) No, we can’t. We can’t because we no longer live on borrowed infrastructure, with swollen productive demographics, and easy exploitation of a ‘third world’. Sorry, those times have expired and now we have to deal properly with billions of people, a finite planet and honest respect for everyone’s rights.

We didn’t pay for what we’ve got.
We’re not paying for what we’re using.
We haven’t saved for what we need.

This not a budget balancing problem, this is a philosophical realignment problem.

If we don’t want to live in a TEA-dog-devil world, what’s the alternative? The only real option is a universal-social-love world. It so happens that that is also the cheapest, most sustainable and funnest world to live in!

Let’s get some clarity about the world we do actually live in, so we can be clear about why TEA economics doesn’t and won’t work. We live in relative peace, with fairly good healthcare and decent nutrition: that means that our society has a “balanced demography”, in which less than half the population is out of school, able bodied and under retirement age. We live on a warming planet, on which the next 50 years of climate instability are already locked in by our actions during the last 100 years: a healthy, sustainable society has to have the kind of infrastructure that we will have to work really hard for several decades to build. In a multi-polar, mutually-respecting world, a prosperous economy cannot be dependent on the exploitation of other people, stored energy or the waste of resources: that is going to require a really fundamental reorganization of our society and its economy. We need to be able to rebuild our global infrastructure for sustainability while we support a majority of our contemporaries, without exploiting each other or the planet.

Is it starting to get clearer now? Are we going to get to where we need to go, in the time we have available, with spending cuts and tax rises? No, tinkering with the percentages simply won’t do it. Universal Social Awareness (USA) is the route to understanding how we can rearrange our social and economic structures to achieve what must be done in the coming decade or so. As we wake up we will start to see that our mutual promise of social support is not properly represented in a cheque, and when it is delivered in kind instead it liberates our economy, empowers our democracy, and liberates our nature.

Go to the wiki and read about how simple changes to the way we deliver social security, organize our democracy, and pay for it all, provide a path to a future we want to live in.

Peace, love and awakening.

Scale Matters

What do Spain, Japan and Croatia have in common? They are all suffering the consequences of industrialitis. Industrialitis is the inevitable malaise brought on by the failure to understand our economy as a function of our society, which mastaassizes into disease with the concentration of political power.

Business is actually a function of society, it is fundamentally dependent on the political process to create the conditions for commercial success. Businesses need legal systems, infrastructure, academic research and a host of other supporting conditions in order to operate successfully. It follows that businesses coalesce around political structures, and the level of which political power is concentrated is the level at which commerce is most successful. For the last century political power has been concentrating at the national level, and it is businesses that operate at the national level that get the most attention from national politicians. Some of this is a self reinforcing cycle, but once it has started it is certainly a self-perpetuating structure, mostly innocent but inevitably corruption also accompanies decision density concentration.

The true nature of human society is not adequately or properly represented in the concentration of political power at the national level, nor do national scale businesses harness the full economic potential society. Human scale politics and economics start at the local community and build up from there, and that’s how we need to arrange our political and economic structures if they are to serve the humans that comprise the society.

Spain, Japan and Croatia all have different problems, but they are all symptomatic of industrialitis, and their politicians are grasping for industrial-scale solutions, when what they really need to do is to rightscale their politics. In each case, the hollowing out to local and regional economic activity has followed concentrations of political power to the national level.

In Japan the result of their industrialitis is the loss of rural sustainability as commerce has focused in national and global scale clusters, necessitating economic migration to the cities where those businesses are located. Large-scale businesses are capital intensive and naturally gravitate towards geographic concentrations for their operations, a tendency that is only constrained by limits to market access. This is not a failure of the businesses, it is a natural outcome of their capital intensity. The national Japanese government has tried to employ national-scale solutions in an attempt to maintain the economic and social viability of its rural regions: top-down infrastructure projects, and subsidies. In the former, the national government allocates funds to build or improve infrastructure in rural areas, which results in temporary construction booms without sustained commercial activity. In the latter, a very commonly prescribed remedy in countries with industrialitis, the national government attempts to persuade industrial-scale businesses to do what is not in their self-interest, by providing subsidies and other financial incentives to locate some part of their operations in a region that they would not choose to be in, if left to their commercial instincts. Subsidies have the pernicious effect of corrupting the politics, the market and the businesses that accept them, and only further exacerbates the incentive for businesses to build and maintain political influence. It probably never even crosses the mind of most national politicians that the effective and sustainable solution to regional and local economic self-sufficiency is to devolve political power down to the regions and communities.

In Spain there is an employment crisis, with national unemployment at 20% and youth unemployment running at 64%. This symptom of industrialitis, caused by the concentration of financial capital at the national and supranational levels, is the result of a busted property and construction boom. The failure to develop local and regional economic activity independent of centralized, external capital has left the entire economy at risk, now that the global financial crisis has caused the flow of capital to evaporate. The national government sees itself as saving the regions by bailing out regional banks, but it is really just doing debt collection for national and international banks – everyone still has to carry the debt burden, but without the local and regional economic infrastructure to maintain commercial activity and employment. It probably never even crosses the mind of the average national politician that they need to devolve political power down, to get their economy working and make their society sustainable.

In Croatia people are coming out in spontaneous and leaderless protests against the failure of 20 years of “market capitalism” to deliver any improvement in their lives. The reality is that the national government has been concentrating political and economic resources at the top, while waiting for an even bigger entity, the EU, to rescue them by bringing large-scale businesses to their economy. In the meantime economic policy has consisted only of selling public assets to large, and largely foreign, businesses, further impoverishing their ability to develop internal, localized, self-sustaining economic activity. Their legacy of 20th century Communist centralized planning probably contributed to the failure to develop a more diverse economy, but the failure to devolve political power was the root cause.

When the Industrial Revolution started it developed on top of an existing economy that had local and regional fabrics, but during the last century the codevelopment of large-scale industrial commerce and national political concentration has led detrimentally to an almost exclusive focus on enabling national, and increasingly global, businesses. Many, and far too much of, modern societies have become dependent on the prosperity generated by large-scale industrial businesses, and the large-scale service industries that support them. We have neglected local and regional development in favor of an almost exclusive focus on national and international structures. But the reality of human society is multilayered, wherein each person lives in a community, that is part of a region, that comprises some part of a state; and that natural truth of our existence has to be reflected in the way we organize our power structures and economic fabric if we are to develop sustainable human societies.

This weakness in the sustainability of our societies is not confined to Japan, Spain and Croatia; it is ubiquitous and pervasive around the world. Until we acknowledge the multilayered nature of our human condition, we will not make the adjustments to our political structures necessary to enable more deeply rooted and broadly-based economic fabrics.

If Japan devolves political power to their rural regions, those regions will develop the marketplaces and infrastructure that enables local businesses to meet local needs. If Spain and Croatia did the same they wouldn’t be so dependent on external financing to provide employment for such large percentages of their populations. Every society has sustainable economic potential in the needs and wants of its population, but in order to to develop that potential into prosperity each society has to enable marketplaces at each level of social organization (local, regional, national, etc) where needs can be met by willing providers at freely floating prices. The Industrial Revolution spawned the capital revolution so that the creation and recognition of value was not constrained by physical representation, and this revolutionary development allows for accelerated prosperity in non-capital-intensive micro economies, just as it does in large-scale, capital-intensive ones.

A sustainable economy is: multilayered, scale appropriate enterprise operating in free markets, fostered by universal service societies that enable marketplaces for local, regional, national and international commerce. The prerequisite for a sustainable economy is a multilayered, scale appropriate free democracy.

Scale matters. We cannot look to industrial-scale businesses to satisfy local micro needs, anymore than we can expect national politics to satisfy local community aspirations. We humans are multidimensional beings, living in multilayered social configurations, and only a structural organization of power and commerce that reflects those realities will serve us and enable us to develop sustainably.

Growing Brains

We’ve all got to start growing a brain. Then we can use that brain to see through the fog of our common delusions. Here are some examples of myths circulating in today’s “news” that you can see through.

Governments create jobs.

Jobs are work that you do that someone else is prepared to pay you for. Apart from working for the government doing things that the government is prepared to pay you for, the only thing governments do is decide whether to stop you working or not.
Governments can help create the conditions for employment by investing over longer terms than private enterprise is prepared to, and by reducing barriers to working. Governments can also protect work by preventing monopolistic and anti-competitive activity in private enterprise.

Governments do not create jobs. You have skills and desire and when you have the chance to put those to good use you create your own job. The two biggest barriers to full employment today are the lack of marketplaces for micro services and products and minimum wage regulations.

We can’t afford welfare.

Only societies that are dependent on exploitation can afford to pay for comprehensive cash benefits instead of welfare, but no society can afford not to provide welfare for all.
If welfare means sending out checks to cover the market value of every basic need in the society, then it’s true that no one can afford to provide welfare.
If welfare means ensuring that everyone has access to basic life sustaining materials and services, then it’s true that no society can afford not to provide those services to all of their citizens that need them.

We can afford to provide universal services.

The answer to global climate instability and the energy crisis is “X”.

There is no single answer to the problem of moving from the unsustainable exploitation of stored energy resources to the satisfaction of all energy needs from sustainable energy sources. This is a massively multifaceted problem that requires many massively multifaceted responses.

The simple change that will stimulate ALL of the many answers we need, is to price the energy we use today so that it incorporates the future cost of transitioning to new energy infrastructures and sources. It’s called “waste loading” and EVERY product and service, including energy, needs to include the cost of dealing with its waste, in its purchase price.

Private enterprise is the original source of wealth, and it allows us to collect the taxes that support our society.

Our society is actually the original source of wealth, and it’s our social infrastructure that allows private enterprise to exist at all. What part of basic history can we not remember from the oft repeated story of civilization?

Peace allows the flourishing of trade and education, which facilitates the development of infrastructure and technology, which stimulates innovation and enterprise. Without the social structures that engender peace, there is no wealth or enterprise.

We must steal our selves to remember the true order of things, we much pinch ourselves awake from our walking dream. The economy is a child of our society, not the other way around!

There’s nothing we can do about it.

Oh yes there is!

We aren’t bankrupt/trainwrecking/deluded, we just need to change this rate/law/rule.

It’s true that any single problem is amenable, in the short term, to a particular or minor change.

If we didn’t spend money on this, then we could afford that.
If we elected this politician instead of that politician, they would sort something out.
If people were just a little more free, it might work itself out.

If we only had one or two things wrong, if we only had one or two problems, if we could just get through my lifetime without having to address the big picture… then a little change would do.

But there aren’t, we don’t and you can’t. We need system change. Not because we like change, not because we’re jonesing for more excitement, but because the reality of our predicament is that we have arrived at the point of decision and time waits for no one.

Join us as we learn to grow our brains. www.StandardsofLIFE.org

Social Security is Serious Stuff

If you think that social security is the generous expression of care for others in a civilized society, think again.

This may come as a surprise to many Americans, even a few Europeans: a functional social security system is a vital underpinning for a capitalist economy. Without functioning social security, there is insufficient society to support a vibrant economy; social security systems actually catalyze economic activity, and the prosperity it generates.

There are other vital reasons for maintaining a functioning social security system (a basic social “safety net”): maintaining social peace, elevating confidence, satisfying our natural empathy and improving sustainability. But even without those reasons, our economy simply cannot prosper without social security. It’s serious business – social security is really important. It isn’t a policy “option”, social security is the imperative at the root of all the things we cherish about our peaceful and prosperous life.

In the face of massive debts and monetary instability, our “Total Economic Awareness” (TEA) delusion jumps up and we make the kind of mistake that everyone makes in a panic: we grasp for simplistic, obvious solutions. No money left: OK, stop spending it. That’s the kind of reaction you get to apologize for later, in your personal life (so long as you didn’t destroy something or do something unforgivable) but when you’re a sophisticated, modern society, that kind of reaction just won’t do. We didn’t come this far, or get to this point, without a lot of careful attention and wisdom gained from many experiences – we need to remember that, and cultivate the poise that allows us to make sensible decisions about serious matters at important moments.

The current fashion for degrading the social security of our societies, as a means of supporting huge debt burdens, is extremely dangerous and very short sighted. And this is happening just as we enter the times when climate instability is likely to test us all.

The reasons why social security is an absolutely essential foundation of our society include:

  1. Our social cohesion is fundamentally dependent on the maintenance of basic life services for everyone
  2. The health of our economy is dependent on broad economic participation, both as producers and as consumers
  3. Innovation requires risk taking, and social security encourages risk taking
  4. Situations and circumstances change: our societies and their economies need to transition as smoothly and quickly as possible
  5. The rule of law and the control of crime are dependent on broad participation by all
  6. The quality of our democracy is dependent on an educated, informed and involved citizenry
  7. Our ability to withstand shocks and natural disasters is heavily dependent on our social cohesion

Social security is not an optional, luxury expression of generosity, that we can afford to do away with when money is short. Social security provision is an absolutely essential, basic building block of a peaceful, prosperous and sustainable society – without it, peace, prosperity and our survival are all endangered.

How do we square that essential nature of social security, with the budget dilemmas and economic weakness of these times? To resolve this conundrum we must revisit what it is that makes up the essential nature of “social security”: it is the provision of personal security from the elements, hunger, sickness and depravation to each and every member of our society. This is not a monetary transaction, it is a social intention. We will not make our way out of this until we fully grasp the proper nature of social security.

In the Standards of LIFE we have modeled the impact of delivering social security as a set of universal services, and found that this not only fulfills the essential nature of social security, but has positive knock-on effects across the economy and budgetary process that address the concerns of fiscal responsibility and fosters sustainable prosperity.  We must solve our budget problems, resolve the monetary dilemma and build sustainable societies, all at the same time – and the only way to do that is with the parallel adoption of universal services and micro-economics.

Read more and find out how to fix our problems without breaking our societies at www.standardsoflife.org.

The Path to A Future: Platting the Super-Trio

So there you have The Path: a new democracy, real personal security and a micro economy. No barriers to their implementation save for our own decisions to do so, especially if led by the ‘developed’ world.

To use the same language that you will see repeated later in this book, the term “super-trio” refers to the presence of all three of these primary elements of The Path: super-democracy, super-security and a super-economy.

There is a great deal of synergy between these three aspects of The Path, and in many ways they are interdependent. For instance, the promises of micro-economic inspired prosperity will not bear fruit without universal personal security.

Embedded in the required precursors for the new democracy, are the freedoms and protections that will enable the new economy to leverage technology fully, as is necessary for marketplace development. The new democracy is dependent
on the promises of security and prosperity to stimulate the effort required to make the changes that are necessary. It’s all intertwined.

Although one inevitably wants to start somewhere, all of these processes are interdependent and it is important that we make progress in all aspects of The Path as soon as we can. If we can harness personal security before we have the chance to change the democratic structure, we should do so. If we can start introducing digital marketplaces for micro needs, we should not wait for personal security to arrive first. We don’t have a lot of time, and every small aspect of the path that comes into being supports the rest of its development.

 

Part 9 in the serialization of the The Path to A Future – originally published in 2009.
A new section will be posted every 2 weeks during 2011. Enjoy!
To get a free PDF of the book go to www.standardsoflife.org/thepathtoafuture.

 

Decision Density – Corruption Catalyst

The relationship between decision density and corruption provides the clue to reducing both.

Corruption is the pernicious rot that bedevils even the most “civilized” of our modern societies. At its worst it deprives millions of even the most basic dignity, but it always perverts the course of democratic will, our intentions, the peoples’ good. Far from being a compulsory attribute of life, corruption is the outcome of human tendencies that we can, indeed we must, intentionally construct our societies to minimize. After all, corruption is just another form of crime, and we do plenty to deter other criminal behaviour.

Corruption is the misappropriation of other peoples’ money, the perversion of standard processes and the manipulation of good intentions. Like all crime, it is dependent on two primary factors: the opportunity and the motive. Given that the motive is part of an internal process in the individuals who commit the crime (that’s the bit used to excuse it), structural solutions must focus on the opportunity (that’s the bit we can do something about). The opportunity for corruption stems from the confluence of two conditions:

  • the abstraction of the decision point from those affected,
  • a lack of oversight and transparency.

When decisions get condensed into a small group (such as Gaddafi’s family in Tripoli, the policy elite in Washington DC, the super-bankers in the City of London or NY) they become subject only to the oversight of others within that group. It is inevitable, even desirable, that some decisions affecting millions are taken centrally, but we should be cautious about any centralization of decision making on the understanding that this propensity for undersight exists. Oversight takes time and resources, and when decisions are clustered in a small group the likelihood that decision density will exceed oversight capacity is greatly increased.

A decision taken at a substantial distance from those affected is less likely to be questioned effectively. Even if the interested parties have the resources to review the decision, they cannot access the remote decision makers. And visa versa, if the decision maker is not subject to the effects of their decision, they inevitably care less about the impact.

LIFE MLR Model
LIFE MLR Model

Spreading decision making out to the lowest effective layer is the key to improving decision quality and reducing corruption. The absence of an integrated framework of distributed democratic power, that allows for the placement of decision making at the most effective level, is the most glaring hole in our current constructs for democracy; and we must remedy that if we are to make the progress we need to make on so many fronts. Those who are starting now to implement democratic systems for their societies should pay close attention to the critical importance of formally integrating distributed democracy, because just democratically electing a national president is likely to do very little to improve their condition.

Multi-layered representation is an important development for 21st century democracy, and it’s time we started to incorporate it into our thinking and our demands for our futures.

The Path to a Future: Prosperity

Part 6 in the serialization of the The Path to A Future. Real prosperity.

A new section will be posted every 2 weeks during 2011. Enjoy!
If you want to get a free PDF of the book go to http://www.standardsoflife.org/thepathtoafuture.

This brings us to the third premise of The Path: prosperity. Prosperity is a mixture of wealth, peace and freedom that delivers a high standard of life. It is a natural human ambition to aspire to increased prosperity; a natural outcome of the combination of our instinct for survival, and our desire for relief from hardship.

The challenge is to reconcile this natural inclination, with the sustainability of our actions to attain it. Prosperity for the minority, at great cost to the planet, is plainly possible for a short time. We have already achieved that, but sustainable it is not. Not only is our current path to minority prosperity environmentally unsustainable, it is also socially unsustainable.

We need a new economic vision for our future. The prosperity we create going forward must be environmentally and socially sustainable, and to do that it must be resilient to the cycles of monetary systems and resistant to the vagaries of climate change. That requires us to move beyond mastering the crude art of industrial-scale extraction, to develop the finer skills of production with reduction, recycling, renewables and, above all, sustainable resilience.

Many thanks to Amory Lovins, Rocky Mountain Institute, for the following definition of resilience, as it so well describes the economy and prosperity we must build:

“An inherently resilient system should include many relatively small, fine-grained elements, dispersed in space, each having a low cost of failure. These substitutable components should be richly interconnected by short, redundant links. Failed components or links should be promptly detected, isolated, and repaired.

Components need to be so organized that each element can interconnect with the rest at will but stand alone at need, and that each successive level of function is little affected by failures or substitutions at a subordinate level. Systems should be designed so that any failures are slow and graceful.

Components, finally, should be understandable, maintainable, reproducible at a variety of scales, capable of rapid evolution, and societally compatible.”

A finely grained, richly inter-connected economy made of many small parts that are understandable, maintainable and societally compatible. Such a micro-economy can satisfy the desires of prosperity and sustainability concurrently.

There is enormous prosperity potential latent in our societies today. The time has come to extend the opportunity to contribute at our highest capacity to the entirety of our populations. The development of communications technologies in particular, but also transport, engineering, miniaturization and alternative energy technologies, have opened the way to pluralistic economic development on a scale that was not possible before now.

These advances in technologies allow us to leverage the unique skills, interests and capabilities of people everywhere to create a rich fabric of micro enterprise that compliments and balances our industrial enterprises. There are as many unfilled needs in a day as there are people on the planet, and somewhere there is someone ready and willing to produce the product or service that will fill each one of those needs. This is the prosperity potential of our planet. If we can unleash even a fraction of that potential, we will easily generate the wealth necessary to power our societies along the Path to sustainable prosperity for all.

The two keys to unlocking this latent potential are:

  • development of micro market places
  • free availability of human resources

Marketplaces are essential to the development of prosperity, and modern communications technology creates the possibility for markets in which every person can offer their unique contributions to meet the needs of others. The reason that the congregation of people in cities has been a hallmark of our historical prosperity development, is because cities enabled marketplaces. Now we have the capability to create location-independent marketplaces in the virtual world, for products and services in the real world. We need systems that can connect the billions of needs with the billions of producers, locally and transnationally, through fluid marketplaces that allow the natural ingenuity and innovation of the human spirit to flourish.

To a certain extent, this has already started with the advent of the Internet and the appearance of market services such as eBay and craigslist. What is needed now is a set of trans-global marketplace standards that will enable different markets all over the world to interact. This flourishing of micro- economic activity will be intensely local, but it is vital that each local market can exchange with its neighbours. The barriers of language and culture are not going to go away anytime soon, and the cost of transport is only likely to rise in the future, but trade will remain a vital aspect of our economies. So a rich fabric of geographically specific local marketplaces need to be the hubs around which networks of regional and transterritorial marketplaces rotate.

Small businesses have always been the largest employers in our economies, and the backbone of our social fabrics. Now we have the opportunity to extend the chance to be self-employed to everyone, because we can provide the marketing, technical and social support necessary.

Removing barriers to micro-enterprise is also necessary. Many tax regimes and social support systems today create “poverty traps” that actually discourage people from using their skills and capacity to build their own livelihoods. That will be completely resolved by implementing super-security.

In addition to the marketplace mechanisms, people need to be free to participate in them. That freedom is a function of the peace and security of the society, and requires that we build the structures and services that support them. We all need to be delivering our maximum individual contribution to the greatest extent possible, and that means having the super-security that allows us to live above the level of survival or subsistence.

Prosperity is the fruit of the tree, and it springs naturally from the branches of well nourished and protected populations. Lots of people using their unique and personal talents to create products and services that can be sold and bought through micro-enterprise markets. That is the engine of sustainable prosperity! That is a super-economy.

The diverse and diffuse nature of micro-economic activity makes it vastly more resilient to the ebb and flow of particular markets and economic cycles. It also has the potential to generate significant wealth, because the growth of wealth is largely driven by the volume of value-generating transactions in an economy. The liberation of micro-economic potential has an explosive capacity to exponentially increase transaction volumes.

This is the “super-economy” of our future, and it needs the personal security that will enable us to contribute at our highest capacity, as well as the marketplaces in which to find the needs for our contributions. If we provide these, our individual and collective prosperity will flourish gloriously.

New Economics

Along with the newly emerging democracies of the world, a new economics is desperately needed. The current economic model is at the end of its road and that is readily apparent to many savvy observers.

There are two factors driving the need for a new economic model:

  1. The desperate need for social and physical infrastructure investment
  2. The crisis of monetary management

We can see a new economic model by reconnecting with the truth of our existence: individual humans, born in relationship and seeking purpose – in that order. Understanding that sequence and priority, we can place our economy in its appropriate context: our economy is a client of our society. In so doing we can shed the delusion of “total economic valuation” (in which everything has a price tag), and clearly see that there is much activity that is not, and cannot be, valued in monetary terms.

In the new economics, social value is not accounted for with money. Demonetizing social value immediately transforms our economics; it makes investments affordable, protects the value of money and creates sustainable social structures.

Investments

We need to make some massive investments. The demographics of the developed world demands social infrastructure to manage the changing ratios of contributors and dependents. The demographics of the developing world requires economic infrastructure to support the burgeoning youth population. And the demographics of the entire world requires physical infrastructure for transitioning to a sustainable energy supply.

Among the recognized investments that we all need to make are:

  • education – life long, civic and skills
  • energy – replacing stored & extracted with renewable & sustainable
  • transport – leveraging the new energy infrastructure
  • water, food and health
  • shelter and sanitation
  • information, democratic accountability and transparency
  • investment in research, innovation and development

These investments are not only large, they are essential! We have to find a way to make these investments, and no one in the current economic modus has got a clue, let alone a practical path to their accomplishment. The most significant reason why none of the current practitioners has advanced any concrete ideas is because they are mired in the current morass that is modern monetary policy.

Monetary Mess

The worldwide crises in monetary management of fiat currencies has exposed the fundamental flaw of attempting to visualize all human activity as economic activity: the debt burden is unreasonable and unsustainable. This is resulting in the need to bankrupt national societies just to try and maintain a delusion of currency rectitude.

The economists and economic policy makers of today are stuck between what seem to them to be unreconcilable problems:

  • massive public debt
  • unbalanced budgets
  • unaffordable social security systems
  • currency credibility issues
  • inflationary pressures
  • massive investment deficits

Central bankers across the world, in the vacuum created by political inaction, are trying to balance the credibility of their currencies and budgets with massive debts and the need for growth and investment. In a world where prosperity is seen as a gift to the people from the bounty of commercial enterprise, these problems cannot be resolved. But they can, if we just pause for a moment and observe the reality.

New Economics is the only option

Into this world of monetary and investment crises arrive the newly emerging democracies of North Africa and the Middle East. The need to replace decrepit, crony economies with sustainable economies is a parallel requirement of the arrival of freedom and dignity. The demands of the protests are overtly political, but they are subliminally economic as well. What do they see when they look around the existing economies for inspiration for their new world?

None of today’s dominant economic models are providing a sustainable path to a future for their current adherents, nor would they for any new arrivals. Read this collection of essays from some of the preeminent economic experts of the day, and you will see that no one has a solution to the debt v. investment conundrum we are facing. The Western capitalist models cannot balance their books without forever pushing their debts out to the next generation. The Eastern capitalist models are mired in inefficiencies, corruption and environmental degredation that do not deliver sustainability, while also being dependent on the suppression of freedom and dignity.  Neither of these offers a model worthy of adoption.

The new, sustainable economics seats the economy firmly within the context of society and generates growth out of untapped micro-economic capacity. The new economics provides the wellfair necessary to support aging populations, enables affordable infrastructure to create a new energy platform and delivers vibrant growth for coming generations.

New Economics is the result of a three step process that yields sustainable prosperity, affordable investment and sound monetary management:

  1. Understand the economy as a client of human society
  2. Take responsibility for society by delivering social value through Universal Services instead of welfare
  3. Unleash the total potential for growth using modern communications to enable micro-enterprise

To preserve the peace we have, and move forward to sustainable prosperity, we all have to take the first step. Ask yourself: “Am I a human being, or an economic asset, first and foremost?”. I think you will agree that you are a human first; and so it follows that your economic value and activity is a subset of your humanity. That too is the valid order and construction for human society. The economy is a subset of our humanity and it is an illogical and impossible task to try and value all human activity in monetary terms. When we assimilate this understanding and stop trying to “pay” for our social needs, we can liberate our economy to fill its natural role in the firmament of human existence.

The structure of New Economics is laid out at www.standardsoflife.org in full. The principles that reconcile the seemingly intractable problems of today’s economic systems are also discussed extensively in this blog – select the Economics category to see a full list of articles.

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