Economics – Page 4 – Standards of LIFE

Next Left

“It is clear that centre-left thinking is in need of radical reappraisal”, to quote from an Institute for Public Policy Research (ippr) paper entitled “Where Next?“, and which I recommend you read. The paper, subtitled “The challenge for centre-left politics”, is the outcome of a series of events on the subject and includes a summary by Tony Wright, Professor of Government and Public Policy at University College London.

The reality is that centre-left politics has been in dire need of new thinking since the 1970s when the oil shock put paid to the illusion of the imperial-welfare-social-democracy that was born out of post War social ambitions in those nations that were still riding on the subsidies of colonial pasts. When the resource origin nations suddenly demanded their price for their resource the industrial-welfare states had to reconfigure their economies to survive; and thence was born the modern capitalist-democracy in which the welfare of all was dependent on the abilities of their capital-finance agents to revive the same imperial exploitation, but this time in the name of capital instead of their Capitals.

What about the nascent rise of neo-socialist governments in South America, is that the next left? Unfortunately, while heartening in their self-determination, these examples are based on the same flawed socio-economic thinking that has just crashed neo-socialist governments in the old industrial world: a faustian bargain with the “masters of the universe” to bring the riches of resource exploitation and financial alchemy home to support their political ambitions. Not only do the New World resource-socialists risk being taken for a ride by the master manipulators, they also face the certain arrival of curbs on the very resources they hope to exploit, as the realities of atmospheric balance (to which they are most susceptible) start to bite.

It is clear that center-left thinking is in urgent need of radical reshaping, not only in the old industrialized nations but also in the New World and in the two great land powers without whose cooperation any such reshaping will be meaningless: China and Russia. A task indeed! But let’s follow the points raised by the ippr paper to see if we can’t see a way through to what’s next. At the core of the questions raised in the ippr paper is a reboot of the relationship between citizen and state in which the power that people have over their own lives is enhanced so that they can access the means of civilization for themselves, while the statecraft of government is reformed to provide core public functions and underwrite the results with its guarantee. This recognition of the legitimacy of the individual, along with the role of active government to deliver what individuals cannot, is the ground on which the centre-left must stake it’s camp. It is a citizen/service orientation, distinct from the worker/capital or market/government orientations of yesteryear.

A fundamental point raised in the paper is that now is precisely the right time to promote politics, in the face of widespread civic disengagement, as the means by which citizens confront common problems without recourse to violence. To do this effectively and credibly we will have to be open to institutional reform and even some constitutional reform. Enhancing our democracies to enhance the citizen-government relationship requires us to develop and implement better systems of representation, greater localism and a more transparent connection between voter and voted. The difficulties of delivering effective democratic control over the necessarily different levels required for differing purposes is a challenge that has not yet been met. The Next Left must come to bat with proposals, and open minds, to resolve the local through supra-national influence expectations of citizens. A system of multi-layer democracy that incorporates the principle of subsidiarity is the goal, and it can be developed by extending and enhancing what we have today, but not without some reform of our constitutional structures. We have to be prepared to bring this reality with us, develop solutions based on values and be willing to explain ourselves. When we know that local decisions are not well made in national assemblies and that national decisions cannot be made locally, we must embrace those facts in the adoption of a multi-layer structure that seats political power at the level appropriate for decision making. Citizens are not afraid of voting and they would rather vote for multiple assemblies than be disconnected from their right to influence. And when we know that a single transferrable vote in a multi-member constituency is the fairest way to vote, we must have the courage to lead with that as our banner for representation.

A new economic model is also vital. Governments need markets and markets need governments, that debate is done – what still remains is to establish is the basis for our future economy. We now understand that capital exists in relation to environment, regulation, people, society and unprofitable but vital needs: the new capitalism is a component of the total picture, not its foundation. In the Next Left the foundation of society, embodied in the vital service requirements of the people, is the responsibility of the people themselves and forms a foundation on which capitalism operates as a client system. Tackling the “poverty trap” and “incentive” problems inherent in the old welfare models remains critical because there must still be an infrastructure of support services in place that protect against insecurity and expand opportunity. The model that works here is that of Universal Services, whereby the cash-based welfare state is replaced by the delivery of the services themselves at the most local level, financed by taxes collected at the highest level.

Everyone has a stake in Universal Services and they fulfill the promise that links every citizen with the reason for having a state. But equally important is the effect that Universal Services have on the economy, on the ability of every person to participate and contribute to the society as a valid and valuable economic entity. It is at the local level that this effect is most pronounced as microeconomic activity is unleashed, complementing our capital-intensive industries. The economy becomes a client of the society and in so doing it develops a broader, more sustainable and less growth dependent nature. The guaranteed service levels implicit in Universal Services provide real accountability for local government, while directly linking citizens with the obligation to define priorities and accept that doing more of one thing will often mean doing less of something else.

So a framework emerges which combines the enhancement of democracy with a multi-level structure, the replacement of welfare with universal services and the placement of economic activity within the context of the society, not the other way around. This Next Left is grounded in principles and based on standards that provide a coherent narrative, placing the standard of life above the standard of living.

The Next Left must lose its predecessor’s reticence to tell its story, and paint a clear picture of a society that has intentionally moved beyond the democratic-capitalist model, that unashamedly takes responsibility for delivering the core public functions it is best placed to do, and which embraces the natural enterprise of the human spirit.

It’s time to stop asking what’s next, and to start answering that question. The Next Left is what’s next, and we’re all the ones who’ll do it.

Fundamental Rethinking Required

Why we won’t make it out of all of this without more fundamental rethinking.

If we think our economies, and particularly our government budgets, are in trouble now, just wait until we wake up to the true costs coming our way in the next decade or two. Balancing our budgets, using our existing system of economics, is about to go from difficult to impossible.

If the only problem the developed economies had to worry about was repaying their massive debts after correcting their budget deficits during a recession, then one could argue that a way forward can be found. However the challenge we face is greater, and we are going to have to fundamentally reform our thinking before we can turn our economics around.

There are clues to why our situation is more complicated in three factors that underlie our already obvious economic dilemmas: infrastructure underinvestment, social support bankruptcy and global resource constraints.

Infrastructure underinvestment
Even without providing for investment in climate mitigation, the WEF estimates that we are running more than a $2 trillion annual deficit in infrastructure investments and replacement. It is likely that the USA, India and China will need to spend $2 trillion a year on infrastructure by themselves, the unfunded deficit across the globe is probably around 2 to 3 times that number.

Social support bankruptcy
Never mind that we aren’t meeting the basic sustenance needs of millions of children every year in the developed countries, the global targets that the UN set itself for “Millennium Goals” are being missed at every turn. On top of all the social support we are failing to provide and haven’t accounted for, we have a massive overhang of known social support costs that we have accounting for. The unfunded pension obligations of developed nations are over $100 trillion and those pension shortfalls will start to materialize in less than 10 years from now – half a dozen states in the USA will have bankrupt pension schemes by 2020, and that’s before the US federal system runs out of money between 2030 and 2040. The published deficits in existing social security systems and pension schemes are not a complete picture of the gap in funding for social security worldwide – that’s probably 10 to 20 times as large again.

Global resource constraints
The third leg of this upside down stool is the inevitable rise in the cost of resources as the supply of raw materials becomes constrained due to increased demand and higher production costs. This will add another $2 trillion or so to the burden of the global economy every year for at least the next 30 years, probably more likely it will be 50 to 100 years. A $65 increase in the price of oil (putting it back at 2008 prices) would add $2 trillion a year to the cost base of the global economy all by itself.

Just fixing the current budget and debt problems of developed nations will mean correcting an annual $3 trillion imbalance, and then attempting to pay back $30 trillion of debt over 30 years. Assuming costs remain stagnant and growth could be accelerated to 3% plus, these seemingly enormous problems could be coped with. But when you add $6 trillion or more of annual cost on top of these numbers, the global economy would have to achieve never before seen (and completely unsustainable) rates of economic growth to make the numbers work out. It just ain’t going to happen–something’s got to give.

What could “give” to correct this impending imbalance of economic mathematics? One or more of the following will have to give: peace and freedom, the global economy and “sound” money or our current, traditional perspective. Indeed, all of these will have to give if we don’t rearrange our relationship between society and economy. Without a reorientation of perspective we can only have one of the first two, and even then only for a short time.

As we think about and plan our societies, we have to carry this understanding with us: if we try and pay for all of our welfare and social services with money, we are trying to satisfy the non-wealth portion of our society with our wealth. Not only isn’t there enough wealth to perform this feat, we’re actually abusing the role of money in our society. It’s like trying to make water out of milk… it’s possible, but you’ll run out of milk before you have watered the cow.

We have become blinded by the amazing rise of the capitalist economy, and in so doing we have dropped the notion of “in-kind” exchange from our thinking and our imaginations; even though we know intellectually and emotionally that “the best things in life are free”. In the real world, the in-kind transfer of social support is a necessary and vital complement to the capital economy.

What we are missing is the very nature and meaning of money. Money is a means of representing wealth. Wealth is material value accumulated greater than material need. You would not hesitate for a moment to profess that the total real value of your life, your family and your community is greater than the sum of your money, and therein lies the truth about why our attempts to value everything in money is doomed to fail the basic test of mathematics. The total value of every society is greater than its total wealth, and any attempt to contain its value within its wealth will wreck on the rocks of reason, sanity and economics. And yet this is what we are trying to do when we provide money in lieu of the social support we intend to supply.

The “traditional” perspective, although it is actually very modern, is that everything has to be valued in currency. The shift we have to make is to revert to a more fundamental understanding that currency is a method of transferring wealth is part of an economic transaction, and not every transaction needs to be, or should be, valued in currency. There are quite obviously enough people to provide all of the required social support services, to build the bridges and to modify our infrastructures for sustainability; it’s just that we can’t afford to pay everyone to do all of these things. Why should we pay each other, in currency, to do these things? Are these activities wealth creating?

The reason we are running out of money is because we, rightly, understand and practice the science of preserving the wealth symbolized by our money, otherwise we’d just print all the money we needed to pay for everything. But we cannot maintain the value of money and at the same time value everything with money, money can only be a symbol of wealth. That portion of human activity that is not wealth creating cannot be paid for with wealth and still preserve the value of money. I do not feed myself with wealth, wealth is what I have left after I have fed myself. The fundamentally distorting spell we have all fallen under is that our society will fit inside our economy. We are so used to using money every day to pay for everything we buy, that we forget to notice all the things we do for others, and receive from others, every day without pay. Our society is bigger than our economy and believing that we can pay for society out of the proceeds of the economy is borderline insanity.

Before we get too heavy, let’s recognize that there is plenty that we should value with money, everything that represents a transfer of wealth, and that’s many things. But there’s a large portion of society that we must learn to value differently, almost like a separate, parallel currency, only without numerical denomination. That portion of society that is what we must have before we can consider ourselves to have wealth, must be paid for in kind, otherwise we will destroy our wealth. The basic necessities of life, without which wealth is meaningless, must be removed from the accounting system we call our economy. The way to do this is to establish a system of universal services that satisfy the most basic universal needs we all have, and without which we cannot consider ourselves to have wealth. When we provide these for ourselves and each other without payment, we integrate the cost of our social needs into our lives, liberate money for its intended purpose and can actually build functioning, sustainable economies that can balance their money books.

Eventually we will have to change our perspective, it’s our choice as to whether we decide to do it now or later. The longer we wait, the greater the pain; but I suspect we haven’t felt quite enough pain yet to entertain such a change in thinking. After all, letting go of our attachment to a concept that we believe makes the world understandable, is one of the hardest things to do. But once we do, the world will make infinitely more sense.

The Clarity Deficit

Why deficit spending is more populist than practical.

Deficit spending. It’s all the rage in the US, from progressive politicians to populist economists the call goes out for “greater spending to offset the recession”. Money’s cheap, the need is great and history shows it can work, or so they say. But is it that true, and is that really going to help?

The basic theory of maintaining demand in our economies is sound, but the proposal to spend borrowed money to maintain it has limited applicability (Jeffrey Sachs, Financial Times, June 2010). To misquote the master of fiscal interdiction, the economy can stay rational longer than policy can remain illiquid. We cannot at the same time profess belief in monetary economics and propose to subvert it. In other words, we cannot propose to inject more liquidity, more demand, into the economy without also proposing how to pay for it and what kind of demand we expect to stimulate. The debate must be about what to do in our specific context now, not about competing theories of economic policy. Our reality is that we are carrying structural budget and trade deficits into it a period that requires very significant investment.

The rationales for deficit spending today rely on appeals to empathy and historical precedent, rarely is there rational analysis of how the imbalance that they propose to create would be corrected. While the desire to do something to alleviate the plight and suffering of those victimized by the recession is both honorable and understandable, the proposed solutions must have a stronger foundation in the reality of our predicament and the practical possibilities available to us.

Let’s look at the arguments proffered to support the case for further deficit spending at this time. They boil down to two assertions: one, that the spending will stimulate future growth and that that growth (along with a little inflation) will make today’s borrowing affordable in the future; and, second, that the historical lesson of the Great Depression is that fiscal rectitude robbed us of an early exit, only rectified by the splurge of deficit spending that accompanied the Second World War.

First, the idea that growth and inflation will make our debts affordable in the future assumes that we grow our wealth and that inflation is controlled. The anticipation is that growth will exceed 3% and inflation will be constrained to single digits.

Just how much growth can our current economies sustainably achieve? Our modern economies are basically tooled for 20th-century style industrial growth, fed by an unsustainable power infrastructure. Any increases in demand today necessarily feed fuel into an unsustainable, waste generating economic system dependent on limited supplies of fossil fuels. The real need in our economies is for investment in re-infrastructuring to support sustainable growth, but that is not where anything but a vanity veneer of the proposed deficit spending would be directed. The principle supporting argument advanced by the proponents of deficit spending is that it will stimulate demand today, and we have to ask ourselves if that is not simply sacrificing our grandchildren to feed our comfort now, while wasting the opportunity to actually invest in our futures.

Even if we put aside concerns about sustainability, the cost of primary inputs into our economies today, from foods to oil and just about everything in between, are rising and forecast to increase by 50% to 100% within a decade (Sir David King, The Guardian, June 2010). Increases in demand today automatically trigger rises in the price of raw materials that are primary determinants of the costs basis of our economy; for instance, the price of oil is directly related to the prospects for growth in the US, and as soon as there is a predicted rise in US demand the price of oil goes up. These cost increases suck wealth out of the US economy in most cases.

Inflation is dramatically more likely than growth, to a point of near assuredness, if there is no real growth in wealth. Monetary economic systems are completely dependent and finely balanced on the concurrence of money supply and real wealth, the former without the latter necessarily results in inflation. None of the proponents are arguing that deficit spending today will directly result in real increases in wealth, the proposal is simply to maintain demand on the grounds that real wealth growth will be stimulated by the demand. This has some limited validity, but it is important to note that the vast majority of the proposed spending would be consumed immediately by the social needs of the society, leaving increases in wealth substantially lagging behind the increase in money supply. This is a recipe for inflation and would be spotted by the would-be lenders way before it becomes a fact, resulting in increased borrowing costs that would sap any increase in wealth achieved.

So if the assertion is that we will be able to grow and inflate our way out of the debts we create, we are wrong on both counts. We are unlikely to generate net growth and we are very likely to create inflation. And the inflation will not mitigate our debts because the markets will spot the risk and inflate the cost of our debts to compensate.

Turning our attention to the historical narrative offered to support the importance of spending our way out of depression, we need to look at the circumstances of that history and ask ourselves if we are in the same context today. The example is that the Western economies only truly emerged from the Great Depression when deficit spending dramatically accelerated with the advent of a concerted war effort in the 1940s. That history is true, but is deeply flawed as an example of what we could follow to emerge from this recession. The number and variety of reasons why the history does not apply to us are great but let’s have a go at a few of the obvious ones.

Firstly, World War II left only one industrialized economy effectively untouched: the USA. As a result of this preeminent advantage the US was able to grow its wealth very dramatically in the years following the war and thus easily afford to repay the debts. The years following WWII were effectively a free-for-all for the Americans, and to a lesser extent the British, because they had little or no economic competition. That is most assuredly and evidently not the case today. The world has many strong economies today and growth in US demand today will result in the accumulation of wealth over a much more distributed geography than was the case in the 1950s. In fact, deficit spending in the US today is most likely to result in greater increases in wealth abroad than it is at home, while the debt will be entirely American.

Second, the spending in the 40s was focused on production capacity, not demand enhancement. The equivalent today would be to spend all the money on greening our infrastructure, something we should do, but not the intention of the proponents of deficit spending. It is possible to invest without borrowing, as I explain later.

Third, the deficit in the 40s was funded from a basically domestic debt market when global fluidity was almost nonexistent. Today’s deficit must be funded in a highly fluid global money market, using international sources for at least half of the debts. This means that borrowers today are subject to the inspection and opinion of economic observers across the globe, who have a myriad of options for what to do with their money. Thirty, and even ten, year debt today is substantially more expensive than it was in the offered historical example.

Fourth, material input costs today are substantially more volatile than they were in the 40s. In the 40s and 50s the cost of many raw material inputs was still falling in real terms, as the effects of advances in the sciences of discovery and extraction increased available supplies, at the same time that speed to market and cost of production were reduced. This is most certainly not the case today; the cost of primary inputs into our economies today are only going to rise, especially energy costs.

Fifth, the demographics of the modern societies that host the economies of which we speak have almost exactly the reverse characteristics of the historical example. Today we have aging populations with high demands for social support within reproductively stable demographic profiles. Our futures promise greater social infrastructure burdens, not the larger contributing workforces of the 40s and 50s.

So, compared to the historical example: we have more competition for the benefits, greater constraints on activity and higher costs of borrowing, within a more globally fluid economy, with a completely different demographic profile.

The 21st century is not the 20th century, and we are not in the same position as our grandparents. The idea that we can spend our way out of this recession, like our grandparents spent their way out of their Great Depression, is both false and a disservice to the great pain inflicted on them by the worldwide war that created their circumstances. We must face our challenges with a clear understanding of the world we live in, and we must develop solutions in the context of our situation and with the objective of developing a sustainable future for ourselves, our grandchildren and the planet we inhabit.

Given the constraints on both the source and use of funds that we face today, it becomes apparent that rather than running up debts to fuel demand, we must invest in re-infrastructuring our economy while reducing our dependence on borrowing – a mighty challenge indeed! Which brings us back around to one of the motives for proposing the deficit spending: empathy for our fellow citizens and an understanding that our peace and freedom are dependent on a more balanced distribution of material security across our society. How can we reduce borrowing, increase investment and maintain our social cohesion simultaneously? That is what we need to do, and I doubt there’s a single proponent of deficit spending that would disagree, it’s just that they assume it’s not possible to do all three at the same time, and so they propose a remedy for one or two out of the three. In reality our social cohesion is doomed if we don’t do all three: debts, inflation and failure to adjust to climate changes are the three most common causes of social collapse.

In order to do all three there is one key factor that must be achieved: a reduction in real (aka monetary) costs. As we have just examined, this will not be a reduction in the cost of material inputs, nor a reduction in the cost of capital, so it must be a reduction in the remaining element in the cost of production: labor. The key to understanding how the cost of labor can be reduced is to remember that the “cost” we are talking about is monetary cost, measured in Dollars or Pounds or Yen. Monetary costs are significant of wealth, and costs paid in money are necessarily significant of the transfer of wealth. If costs can be met without money, then wealth does not get used to satisfy them, and wealth does not need to be borrowed to fund them.

There is a significant portion of labor costs that do not need to be satisfied with wealth transfer, these are the cost of satisfying what Maslow termed as “hygiene factors” in his Hierarchy Of Needs. That portion of labor costs that are made up of hygiene factors and can be satisfied with the transfer of labor instead of money, can be removed from the monetary cost equation. Those costs do not need to be funded with money, instead they can be “funded” by the transfer of labor within a social system. For instance, if transport is free to me, that reduces my need for monetary compensation commensurate to my need for that transport. Of course transport is not free, because there are material inputs to its provisioning and operation, but if that portion of the cost of transport that is represented by the hygiene needs of the workers within the transport system was satisfied in-kind, the monetary cost of the transport service presented to me would be similarly reduced. There is a cyclical and repetitive reduction in the cost of labor the more the hygiene needs of the workforce are met without monetary transfer. Because hygiene factors are nearly universal across the population, the exchange of labor as a replacement for currency has universal value and similarly reductionist effects on the cost of labor across the economy and society.

Even just the availability of hygiene services at reduced cost has the effect of reducing labor costs, even if many do not avail themselves of the actual services. Establishing the universal availability of basic services that satisfy the hygiene needs of the workforce at little or no monetary cost reduces the cost of labor in the economy significantly. The size of the cost reduction can be measured in that portion of income it is necessary to pay the labor component of satisfying hygiene needs; in most economies an easy indicator of this cost is some portion of the mandated minimum wage.

Analyzing the hygiene services in the modern economy (housing, food, health and elder care, education, transport and information access) suggests that 80% of the cost is attributable to labor, and of that about one third is the equivalent of minimum wage. If 50% of that is provided by in-kind services, the reduction in the cost of providing the hygiene services themselves is around 13%, a factor that is at least repeated throughout the private sector as well. If the cost of labor across the economy was reduced by half the minimum wage, sufficient monetary value would be liberated to invest in infrastructure without borrowing, and the cohesion of society would be enhanced. The impact on taxation revenues would be minimal because the hygiene portion of incomes is not usually tax burdened, and the hygiene services themselves are not typically subject to consumption taxes.

The move to universal hygiene services has the potential to negate the annual budget deficit of most industrialized countries at the same time as it enables development of a sustainable microeconomic fabric that generates real wealth across a broader spectrum of society, and enhances resilience against the turbulence of climate instability. Instead of increasing debts to increase demand which results in accelerated climate change, we can reduce debts to increase sustainable development that begins to mitigate our impact on the climate. If we were to implement universal services within existing budget constraints, reduce costs and invest in infrastructure, that would be a more relevant narrative for our current predicament than deficit spending to maintain unsustainable demand!

The 21st century is the birth of the global age and we must put away our 20th-century toys if we are to successfully navigate the waters of our modern world. Borrowing is a 20th-century tool that requires segregations and imbalances that are no longer sustainable, in the 21st century we must learn to live sustainably without borrowing from each other or from the planet. By definition a self-sustaining system prospers from its inputs such that its balance sheet is in equilibrium at the end of each cycle – that is the nature of the planet that hosts us, and it is a process we are obliged to align ourselves with.

Our Story

A proposal for a new, progressive, common narrative.

In response to Amitai Etzioni’s call in action in The Nation magazine for progressives to find a common narrative that tells the story behind our intentions, we offer the following as a starting point.

~ ~ ~ ~ ~ ~~ ~ ~~ ~ ~~ ~ ~~ ~ ~~ ~ ~~ ~ ~~ ~

The combination of science and enterprise over the last century has created a potent force for good, but which has lost its context within human society.

This has resulted in an unbalanced relationship, a disintegrated society, in which the engine of growth has become disconnected from the passenger cabin that it is supposed to transport.

Reintegrating our economy with our society will allow us to improve our standard of life and balance our relationships with each other and the planet we live on.

An Analogy
The engine belongs in the body of the car, controlled by the pedals at the drivers’ feet and steered by the wheel in their hands. The car cannot move forward without the engine, so the driver and the passengers must take care of the engine, ensure it has fuel and vital lubricants, as well undertaking any necessary maintenance to keep it running smoothly, cleanly and efficiently. The passengers decide who amongst them will drive and steer, and the drivers have responsibility for keeping the passengers free of unnecessary dangers.

~ ~ ~ ~ ~ ~~ ~ ~~ ~ ~~ ~ ~~ ~ ~~ ~ ~~ ~ ~~ ~

Through the fusion of science and enterprise, we have created the most powerful force in the history of the planet: the force of business and commercial enterprise. This force has the power to destroy the planet and human society, to obliterate species and make vast swathes of the planet uninhabitable for humans and others. The same force has the power to deliver a higher standard of life for every human, an achievement not even conceived of as possible a century ago.
At this time the pros and cons are pretty much equal. The damage done thus far has been in proportion to the benefits delivered; but to reap greater benefits using the current construct, we would have to damage our societies and our planet even further, and that ways lies self-destruction.
To bring the force of enterprise into service we have to reorientate our relationship with it, so that we care for it and nurture it in harmony and in balance with ourselves, and the pursuit of a decent standard of life for all on this planet. Unifying our individual liberty, our collective societies, our knowledge of science and our entrepreneurial drive will allow us to reap the rewards of life on this beautiful planet.

~ ~ ~ ~ ~ ~~ ~ ~~ ~ ~~ ~ ~~ ~ ~~ ~ ~~ ~ ~~ ~ ~

Integrating the force of enterprise into our societies means respecting it for what it delivers by taking responsibility for our social needs independently. To do this we must deliver basic universal services, paid for exclusively out of income taxes – this removes the constraints of minimum wages and makes taxation of enterprise a discretionary activity. In so doing we liberate the tremendous force of micro economics and instantly “green” our economy.
In order to achieve this reorientation and integration we need to devolve power down through a fabric of communities, regions and states so that decisions can be taken at the most appropriate level, because delivering basic universal services requires local delivery systems, managed and staffed by local providers, and controlled by local democracy.

Reimagining our options

Why borrowing, taxing, printing and cutting are not our only options.

Why we don’t have to tax, borrow, print or cut.

Has it occurred to anyone that these are not our only options?

The prevailing logic (we won’t call it wisdom) goes something like this, and I’m sure you’ll find this very familiar.

We understand the need for a social safety net, especially important in urbanized societies where the poor cannot “return to the farm” in bad times, and the value of certain investments in our social infrastructure that sustain our economy and our social fabric, but we cannot afford to pay for them – meaning that our government does not raise enough in taxes to be able to pay for the services.

Here, below, are the reasons and rationales offered for why this problem is only resolvable through austerity measures, meaning reductions in social services and investments.

1) We cannot raise taxes to create more revenue because those taxes will destimulate our economy, resulting eventually in lower tax revenues. In other words, raising taxes is a self defeating strategy that will only require yet higher taxes in the future, until the economy is so deteriorated that it cannot create sufficient wealth to support the burden of the social infrastructure at any taxation rate.

2) We cannot borrow any more because we have already tried that and now carry so much debt that simply servicing the debt we have is the best we can do.

3) We cannot print money, or at least we cannot be seen to be printing money for very long, because that will devalue our currency and create inflationary pressures in our economy. We all know what happened in Germany before the Second World War.

4) We have no choice but to cut our expenditures, and that means reducing our social services and investment in our social infrastructure.

Now, before we go any further, let’s deal with the objections that have already arisen in your mind.

1) “Taxes can be raised.”
It is true, we could be more effective in our tax collection practices and we could probably tax certain activities more than we are. In most countries, that have income tax rates at or above one third and sales taxes of between ten and twenty percent, there is actually relatively little room to raise taxes without deflating economic activity. However, the most important point here is that it would take really high rates of taxation, high enough that almost everyone would agree they were too high, to raise sufficient revenues to cover an even moderately ambitious social investment program. When you do the math you realize that you cannot tax your way out of this problem. If anyone tells you that you can tax your way out and that there are examples of countries that are, you can safely tell them that those examples, and that math, is dependent on borrowing demand from another society, i.e. unbalanced trade. There is no sustainable taxation solution to the problem of affordable social infrastructure.

2) “We can still borrow more.”
As I write, in the Spring of 2010, this only true for an increasingly small number of countries, rapidly dwindling to only one, and soon to be none. There are counties with vast (unsustainably) exploitable natural resources who can borrow, but they don’t need to.

3) “We can print more money, it’s not the bogey man many say it is. We’ve done it before, we can do it again now. We now have sophisticated financial control mechanisms that allow us to control inflationary pressures. A little inflation is not such a bad thing – it will help to reduce our debt in real terms.”
You can take your pick from those arguments but ask any central banker charged with controlling inflation and you’ll hear a real expert tell you otherwise. Liquidity in a modern economy is a difficult beast to control and playing fast and loose with it will get you in trouble, nine times out of ten. You might be able to increase liquidity inside the banking system for a while, but if that gets out into the general economy (which is where social spending has to occur) you’re going to get inflation.

4) “We can cut other expenses, such as defense, instead.”
A favorite of the passionately well intentioned, but unfortunately deeply flawed. The horrible truth is that the necessary social costs greatly exceed any savings that could be wrangled from waste and militarism. This is not to say that waste and militarism should not be targets for reductions in expenditures, just that even if you’re wildly successful in reducing these expenses you simply won’t be saving enough to pay for the social infrastructure required to make your intentions a reality.

And so we are returned to the matter of cutting expenses. It would seem, and indeed it is true, that we have no choice but to cut our expenses. We can only spend what we can raise from reasonable taxes, and the options to borrow or print our way out of our problems are but short term tactics for delay.

Stumped? Did I take you all the way here just to show you that we have no other options? No, I didn’t. We have to cut expenses but we don’t have to cut our social services. In fact we can increase our services and our rate of investment with the same or less money that we use now. How? Let me show you.

Social services aren’t, can’t, won’t and must not be measured in monetary terms. You aren’t paid in money to help an old lady get off a bus, to change your children’s diapers, pick up a piece of litter or care for an elderly parent. So long as you are secure in your own personal welfare you do these things for free. Well, not actually for free, just free of monetary compensation. You do these things because they are part of your social fabric, and you are rewarded in kind by a cohesive and supporting social fabric around you. Inside the appreciation of this simple mechanism lies the key to unlocking the door that leads to the solution to our problem.

As long as our basic social welfare is secure we make spontaneous and voluntary contributions without monetary compensation. Even those who think of themselves as selfish animals are unavoidably and instinctually engaged by this natural mechanism. We do not have to pay ourselves to deliver our social services, we just have to create the basic security that unlocks our potential for social contribution, by guaranteeing that basic services will be available for anyone who needs them.

The solution that we have not considered yet as an option is revealed to us through simple observation of ourselves in action.

There are still costs that must be paid for with money, but the remaining costs are within reach of a reasonable tax on the economic activity of a sustainable economy. To paraphrase a wiser man than I: pay in money what must be paid in money, and pay in kind what can be paid in kind.

The math adds up, I’ve done it, try it for yourself. Take a reasonable tax on people’s incomes and spend it exclusively on social infrastructure that will guarantee every citizen the bare necessities of life. We can afford to guarantee everyone basic shelter, sustenance, education, healthcare, public transport, access to information and legal services. Not everyone will want them all, most will only use some, and a few will use none at all. But a reasonable tax on economic incomes will generate sufficient monetary revenues to pay for the monetary components of a guaranteed basic social infrastructure for all. The enablement of this basic infrastructure removes the monetary cost of its own delivery through the liberation of natural human tendencies.

The mechanisms to enable this solution are already in place: democracy, tax collection and service delivery. All we have to do is subtly reorient our priorities and activities to dedicate income tax revenues to guarantee a basic standard of life. It would take less than three years to be fully implemented in most nations today, and would not require any dramatic upheavals to any of the basic economic systems already in operation. It will require us to reimagine the possible, but that is well within our grasp.

Here’s how it works. I, and you, are guaranteed by our compatriots at least the bare essentials for a reasonable life: a roof over my head, some healthy food, access to a doctor, education, local public transport and the Internet. Understanding that these basic services are available, I am free to seek whatever work I can find to supplement these services with cash, that I can use for discretionary activities like entertainment and comfort. There is no minimum wage because my basic life sustaining needs are guaranteed, and also I am not forced to accept any job just to keep body and soul together. In fact, I only have to work for as many hours as I need to meet my needs for discretionary income; I am free to spend the rest of my time at leisure or helping out in my community, should I choose to do so. “But what about those who choose to neither work nor contribute?” They would have no discretionary income, and everyone has discretionary desires – in time desire will lead to work and contribution. In this situation the monetary cost of our time is reduced and this same reduction makes the provision of the social services affordable from a reasonable tax. In fact, the more I help out voluntarily in my local community the lower the cost of those services and therefore the lower the rate of tax on my income.

Within three years just about any community could build a community center with a canteen and build or acquire sufficient public housing to fulfill the fundamental elements of the required basic social services. This effort is easily within the grasp of most communities in the industrialized countries. While those are being built nothing else needs to change, and when they are completed and in operation the minimum wage can be abolished. Everyone is freed to work in whatever way they can and want to to earn monetary income. For many life will not have changed at all, they still have their job, go to work every day and earn similar incomes and pay similar taxes. For our governments the cost of delivering social services will have been transformed with plenty of workers delivering the services either completely voluntarily or at substantially lower montary cost, enabling them to balance their budgets while still supporting a vibrant and cohesive social structure.

The square can be circled. This is the option right in front of us that we have not seen. This is the solution, an alternative to socially destructive and ultimately self defeating cuts, that does not require unreasonable taxation, unsustainable borrowing or inflationary printing.

Rinse and repeat, until it sinks in.

After that, to find out more go to Standards of LIFE.

Tell me again, how is this all going to work?

The rationales for austerity and expansion fly in the face of the facts. We need solutions, not reasons to carry on doing the same things all over again.

We’re going to cut expenditures so that we can use more of our tax revenues to repay debts, that were based on projections of future growth we are not, and probably cannot sustainably, achieve? We need to do this because we cannot possibly repay our massive debts because they are equal to the total output of our society for about a year?

If we don’t repay the interest and this year’s maturing debt, we won’t be able to borrow more to repay next year’s maturing debt? The only way out is if, by some miracle, we manage to produce and consume more with a less healthy, worse educated, less transported and less informed populace? And even that assumes we can actually grow without causing a global environmental crisis – which would only be possible if we were to invest heavily in retooling our industry and energy infrastructure for a low or zero carbon future?

So, tell me how this works again?

We borrowed so much to buy the house we’re living in that we can’t afford to pay the mortgage without canceling our health insurance? On top of that, the roof is leaking and we’re burning the doors to stay warm. If we all pull together and work really hard for the next month, we will be able to make next month’s payment. Is that it?

“No! No!”, you say?
“It’s really not that bad because you own the mortgage on your neighbour’s home, and so long as everyone just keeps paying their mortgages, it’ll all work out in the end.”
What!?
“You should even consider printing some money and giving to the banks, so you can borrow some more to buy a car. That will stimulate the economy!”

Now wait a minute! Tell me how this is going to work, again!?

… It doesn’t look like this is going to work out at all, if we keep doing what we’re doing now. Everyone has borrowed more than they can repay. The growth that would theoretically make repayment possible is either unachievable or unsustainable or, most likely, both. Forget what the money was spent on, it’s gone now and whether we gave it to bankers, spent it on war or funneled it into the pockets of those who already had too much is irrelevant – this is everyone’s problem now.

Carrying on down the path we’re on now will simply lead to the disorderly and bloody breakdown of the current system, causing misery and chaos to most of us. Most likely the expenditures will get cut further and further, resulting in social unrest and without engendering further economic growth. The debts will eventually be defaulted on or inflated away. In the meantime environmental degradation will accelerate, and the necessary investments for a clean energy future will not be made. Is this where anyone wants to go?

So if that won’t work, what will?

Two moves. Socialize the social infrastructure and price in the environmental costs.

Just two moves? Really?

Yes.

The first, stunningly simple, change is to confine the expenditure of income tax to social infrastructure. The only things income tax revenues can be spent on are: shelter, sustenance, education, healthcare, transport, information and legal services. No debt repayments, no incentives, no foreign aid, no military spending – those all have to be paid for out of sales and corporate taxes. And no borrowing to pay for social costs, you have to raise enough income taxes to pay for all the social costs.

Step two: add a carbon or environmental tax to everything that degrades the environment sufficient to mitigate the environmental damage that thing causes. Not a penny more, not a penny less. Spend that money on mitigating the environment.

Not hard, not difficult. All within the existing capabilities of government accounting, taxation systems and market economics.

There’s more, but that will do for just now. Digest those two simple steps, think about how those two changes would impact your life, your society and the world we live in.

Then, when you’re ready for more, go to www.standardsoflife.com.

Whatever happened to the European social model?

“Can the debt and deficit laden European welfare states . . . rescue their public finances and reform their social market economies?” asks Timothy Garton-Ash in a column in the Guardian this week. Can any of the Western democracies work their way out of their sovereign debt while maintaining their social fabric? Including the U.S.!?

Even before the bank debt crisis was transferred to the public purse in 2008, gaping holes had started to open in the public accounts of every developed society that was unable to exploit fortuitously local natural resources. The full development of the “social market economy” had not actually been possible until the latter half of the 20th century, and then only the most industrialized societies were able to give it a try. And give it a try they did, without employing the same cold, hard analytical skills that they used to develop their burgeoning, ravenous and muscular economies.

The reality in those countries that did look like social market economies was that they had split into two internal realities. Cold, clear market economies on the one side and warm, fuzzy political fantasies on the other. So long as the political reality didn’t infringe on the operations of the market reality, each could live in their own space, peering occasionally with bemusement into the other reality. The deal centered around the political reality being able to sustain itself without imposing too great a burden on the market reality.
You could ask anyone on the market side and they’d tell you that the politicians weren’t living in reality, that their math skills stunk, and that that “it” would never work – but heck, so long as vast swathes of society were happy to be deluded, and those delusions didn’t interfere too much with the “natural” market forces that really made the world tick… who were they to try and correct the fallacies, right the wrongs or destroy the fantasy?
On the other side, in the political reality, everyone was agreed, with great frustration, that the inhabitants of the market reality were just one enlightenment short of recognizing the inevitable self-destruction inherent in a market economy model that failed to recognize that it was supposed to serve the needs of the political reality.

The disconnect was pretty universal and early in life most people picked or found themselves in one reality or the other, which then shaped and framed their worldview thence forward. The actual reality, the real shared universe, got little attention and virtually no recognition.
What allowed these two realities to persist for a century, and what has now virtually collapsed in 2010, was the subtly corrupted accounting on which the market economies were based, and which sustained the illusion of self-funding welfare societies.

At the beginning, the social welfare provided was very meagre and was available to only a few. For instance, pensions were only subsistence and only a few lived long enough to collect them. In the middle, the economies that supported (funded) the slightly better welfare programs of their age were unconsciously over-muscular, leveraging unbalanced trade, resource exploitation, uncosted environmental pollution and unfair competition to generate unnatural wealth (profits) that made the welfare states that relied on them look affordable. In fact, they weren’t.
The collapse of the Soviet communist system mid-way through this period just “proved” to everyone that asserting the political reality over the market reality was a road to doom. In actual fact it proved the necessity of allowing natural markets to operate and the fundamental role of freedom in human society, but it did not help to frame the proper and useful placement of market economies – it just proved that we need them.
The the later stages, as social welfare developed more fully and costs rose significantly, the market economies of the West started to run out of resources and face greater competition from the rest of the world. In response to those pressures a complex system of debt was used to replace real wealth. The political reality encouraged the markets to manufacture a debt delusion that was bound to crash when it ran out of bubbles to inflate. This happened in 2008 and the real reality, that the political reality is dependent on the market reality, came home to roost. The first response, the understandable reaction to the shock, was denial; and the remedy was to repair the debt damage in the market reality by transferring it to the political reality, by bailing out the banks.

Now we must face the fusion of our political and market realities, if we are to forge a path forward for cohesive human societies. We must face the reality that we cannot account for our social needs with the same mechanisms that are appropriate for our market economies. If we are to build sustainable market societies we must recognize the social rewards of social work alongside monetary rewards for market success. The reality is that the market economy is a smaller realm of activity than the social services realm, and the market economy simply cannot produce sufficient monetary wealth to pay for the the necessary social activity with money.
Transitioning to this fused reality is not hard, or far away. The future of the “social market economy” is the “market economy society“. A subtle but profound transition of emphasis accomplished by an equally subtle and profound change of our priorities. The market economy remains but the political reality is profoundly altered by accepting responsibility for itself and transitioning from dependent to independent.
The market economy society establishes a framework within which the market can operate without responsibility for society, because society has assumed responsibility for itself and the market operates within a space created and nurtured for it by the society. The mechanisms that create this reality are simple and universal as well as being accessible and immediately effective.
In a market economy society the monetary cost of labor is only its commercial value adding quotient. This is true because the society provides the basic services necessary to sustain a reasonable life (shelter, sustenance, transport, education, healthcare, information and the protection of the law) for free – the majority of the cost of these services is absorbed by the citizens of the society in return for the reward of living in a peaceful, free, market economy society.

This is the only desirable and feasible human society. The debt bubble has burst, the industrial growth train has run out track and steam and the elevation of social awareness is irreversible.
The looming “age of austerity” being offered up by the old disconnected realities is neither necessary nor acceptable, as we shall see. The measure of our skill as a product of Nature will be our ability to reimagein our actual reality, with clarity of practice and intention.

The Unified Theory of People in Action

How do you pay for a peaceful, socially secure and democratic society with a sustainable economy?

There is a blind spot at the center of modern social-economic thinking to which we are almost universally susceptible, and yet it can be quite easily observed to be false. This is an introduction to that conundrum.

We all want to live in peace, with a certain degree of prosperity. Most of us would like this to be at least inter-generationally sustainable. Our general principles of organization are also fairly commonly established, including the rule of law and the freedom to choose our governments by popular election. That’s a pretty good start, and we all pretty much share these principles.

Within this general context, we have two primary schools of thought, the Left and the Right. The Left tends to believe that the quality of any individual’s life is dependent on the quality of the life of their fellow citizens, and that that quality is achieved through a communal effort to support the basic infrastructures of society, such as public services and social security. The Right tends to believe that everyone is primarily responsible for themselves and the consequences of their actions, and that the prosperity of a society is substantially dependent on the freedom to pursue opportunity and engage in enterprise.

On these basic points each school is right. Left and Right are not in conflict as much as they think they are, they just emphasize different priorities. However at the nexus of their disagreements is a mutually held fallacy: that the “economy” can produce sufficient wealth to “pay” for the society they wish to live in. The reality, the elephant in the room holding a giant sledgehammer and standing next to the mirror that they use to sustain their mutual illusion, is that the economy does not, and cannot, produce enough wealth to pay for the society they want.

The Right believe that a comprehensive social benefit system will result in withering tax rates that will deflate the economy, and that borrowing to pay those benefits is not a viable alternative. They’re right. The Left understand that our modern social civilization depends for its peace and prosperity on a functioning social infrastructure and that poverty undermines the foundations on which we all stand. They’re right, too.

What they are both wrong about is the math. The economy, after all, is just a system of accounting that lubricates the actions of people. The wealth that can be counted in money is the value added output of commercial enterprise, it is not a measure of the total output required to enable and service the whole society.

In developed, democratic, peaceful and prosperous societies children take a long time and a lot of effort to raise and educate into functioning citizens and economic participants. During our lifetimes we need a range of services such as healthcare, transport and access to information in order to participate fully in our society, and we live for a long time passed our age of peak performance and output. In fact, in a modern society, only about one third of the population is gainfully employed in wealth creating (i.e. tax paying) activities — the rest are either young, old or disabled. Yet every citizen at every age is a consumer of, and dependent on, the services and infrastructure of the society, without correlation to their wealth creating capacity or activity at any particular stage.

The elephant in the room is this basic economic math: that we are all greater consumers of social resources than we are contributors of monetary taxes. We do not pay our parents to raise us, nor does anyone else, and nor could any society afford to pay every parent for their services, any more than any society can afford to pay everyone who cares for an elderly person. We understand this intuitively; we know that our families, our communities and our society are dependent on the unpaid contributions of many. We know that to attempt to pay everyone who helps out is a totally impractical idea.

There’s enough expense in simply building and maintaining the infrastructure of a modern society to consume most of any reasonable tax on wealth creation. The naked truth is that every society is completely dependent on the voluntary contributions of its members, in return for rewards that are not measured in monetary terms. What we call “the economy” is not the same as our society, and it only represents and accounts for a minority of all the people’s actions. The economy can never generate enough money to compensate everyone for all of their activities. No society can function without this volunteer action, and yet it is outside the system of accounting that we call our “economy”. Our society is a larger body of action than our economy, and you cannot pay for the larger out of the smaller.

And so the mirror is broken, the elephant having deployed its sledgehammer, shatters the illusions of both Left and Right. We cannot tax our way to equality any more than we can survive as a society without education, transport and healthcare. Yes: corruption, military spending and inefficiencies are terrible wastes of money, but the reality is that even if they all stopped tomorrow we still couldn’t afford to pay for all of the facilities of a functioning, prosperous, democratic society out of taxes on the demand economy. Even if our military spending would pay for universal healthcare, or quality education, or high-speed public transport — it won’t pay for all three. Modern social civilizations require a vast public infrastructure for transport, energy, information and public services, further amplified by climate mitigation needs. And if you don’t provide these facilities you can’t have peace, freedom and security to enjoy whatever prosperity you do have.

The mirages of self-funding, social democracies are often referenced, but do not withstand scrutiny. Those nationstates today that look or claim to be pulling off the trick of tax-funded, socially secure prosperity are taxing so highly that their economies are running below the necessary long-term capacity, unsustainably exploiting finite natural resources or effectively borrowing wealth from another society – all good while they last, but not sustainable. In a sustainable global economy trade must eventually be balanced and local economies substantially self-reliant.

Once the hammer has smashed the mirror, both Left and Right find themselves looking at the same dilemma: how do you fund, account for and maintain a social civilization with a sustainable economy? There are very substantial costs involved and taxes cannot generate sufficient revenues to pay for it all.

One answer is surprisingly simple, cheap and effective. It can be implemented immediately without requiring redistribution of assets and without overly disruptive changes to the basic mechanisms of administration, monetary control or enterprise. Once we accept our volunteer social membership status, the next steps fall easily onto the path in front of us.

The first step is to dedicate all income taxes exclusively to the provision of basic life-sustaining services for all citizens: basic shelters for the homeless, public canteens for the hungry, basic education, healthcare and public transport for all. You make all of these services available to any citizen, on demand at no charge.

Next, you remove any controls on the minimum compensation that anyone can pay or earn for work. Minimum wages are unnecessary because minimum life services are provided instead.

Third, you make income taxes universal and fixed to the cost of providing the services in the first step, and not to exceed a rate of 50%. This creates a cap on the maximum costs of providing the services, and defends the incentives that support a robust enterprise economy.

When implemented in today’s advanced societies and economies, these steps create positive feedback loops that result in full social development, an expansive and resilient economy with average taxation rates on income of around one third. The other activities of government can be funded using local, sales or corporate taxes.

No one gets any cash benefits, everyone is free to take responsibility for themselves and a flourishing economy supports the social fabric of democratic civilization. Not Left, not Right, just unified people in action.

(To see how this all works in more detail go to www.StandardsofLIFE.com)

Oh yes we can (afford it)!

The Economic Effects of Universal Services

In addressing the assumption that providing universal services will (unaffordably) increase the tax burden (compared to the traditional benefits system) it is worthwhile to consider the actual impact on the economy of universal services, because this will reveal that assumption to be false.

Providing universal services actually has the following effects:
– Reduced waste
– Increased efficiency
– Increased output
– Broader tax base
– Reduced unit service costs
– Reduced labor rates
– Reduced pensions burden
– Increased resource efficiency

Let’s look at each of these impacts in a little more detail so that we can understand why it is that universal services are not as unaffordable as may at first appear to be the case.

Reducing Waste
Universal services, as opposed to benefit payments, do not allow for same degree of diversion of social spending to other than intended targets, reducing the wasteful misappropriation of public resources and eliminating the budget back-fill that is inevitably required to replace diverted and wasted funding.

Increased Efficiency
Very significantly, because universal services are not means tested, the administrative overhead, compared to means tested benefits systems, is much lower. This is amplified by removing the need to police the system – an economic efficiency and a social benefit.
Because core and essential services are delivered as public services by public agencies, at least that portion of the costs that would otherwise have been absorbed by the profits of commercial providers are retained to increase the quantity or quality of services for the same budget. For instance a Community Center kitchen can deliver healthy nutrition at cost.

Increased Output
The removal of poverty and benefit traps allow all universal service recipients to work and contribute without penalty, thus increasing production using otherwise immobilized resources. (Current benefits systems effectively force recipients not to work because the marginal benefit of earning small amounts is often negative.)
Further increasing output is the increased provision of marginal services and greater availability of marginal employment opportunities resulting from the reduction in basic labor rates (see below).

Broader Tax Base
Because otherwise non-contributing resources are able to make marginal contributions to output, the monetized value of their output adds to the available income tax base (as well as wealth to the economy).

Reduced Basic Labor Rates
Universal services allow for the socialization of a significant portion of the basic labor charge, because market participants only value, in monetary terms, the marginal value of their contributions. They accept the value of the universal services as socialized income which delivers the same value to them as they would otherwise have had to demand in monetary form. This effect is most pronounced at the unskilled labor level, but continues to have some effect further up the skill ladder as well.

Reduced Unit Costs for Universal Services
The materialized cost of delivering a unit of universal services is reduced by the socialized value of labor inputs into the universal service delivery mechanisms. Because a significant portion of the labor content in universal services is more demanding of social skills, which are already often socialized (e.g. caring), the impact of reduced labor rates on the labor content of the cost profile of universal services is more marked than it is in the commercial sector, where enhanced skills always have, and will continue to, command very large premiums over basic labor rates.
Any necessary extensions of service will be absorbed by the reduction in the unit cost of delivering universal services that result from the reduced materialized cost of labor inputs, negating any need for increases in tax rates.

Reduced Pensions Burden
Pension recipients accept the value of the universal services in place of their market value without impact to their standard of living. The efficiencies of universal service delivery (see above) allow for the delta between the cost of service provision and the market value of those services to be removed from the tax burden.

Increased Resource Efficiency
The beneficial effects on resource efficiency resulting from the delivery of universal services come from three consequential outcomes:

Increased use of resource efficient mechanisms through the aggregation of demand, driven by the removal of barriers to adoption (pricing) and widespread accessibility, increases the scale, efficiency and penetration of those mechanisms, such as mass transport and efficient public housing.
The extension of manufactured goods’ useful lifetimes and significantly higher rates of reuse resulting from the wider availability, greater accessibility and low monetized costs of micro-services in local markets for repair, restoration and recovery. By reducing the cost of labor to its marginal rates, the repair of goods becomes a much more competitively priced option in the marketplace and the relative cost of material replacement is significantly elevated in comparison.
The wider availability of human energy makes it an attractive replacement for manufactured energy, reducing resource consumption.

Taken together the overall impact of universal services is to socialize some labor costs that would otherwise be monetized, and in so doing to reduce the tax burden of universal service delivery, because the tax burden is expressed in monetary terms. Consequential effects include deeper penetration of services, greater efficiency in service delivery and of resource use.

Astute fiscal observers might wonder what will happen to tax receipts if the basic rate for labor is reduced. The answer is that it will have a negligible, if any at all, impact on tax receipts because revenues from tax payers with incomes at or near today’s basic labor rates (minimum wages) are minimal, due to the current system of “allowances”. In fact the increased output resulting from the motivation of currently immobilized resources will likely result in larger increases in tax revenues than any revenues lost through the reduction of prevailing basic labor rates.

Ultimately the monetized burden (i.e. tax) on the economy of delivering universal services is likely to be similar to that of the benefits system, except with more effective outputs and substantial social and environmental advantages.

BIG problems need small solutions

Effective and successful human societies are based on trust, cooperation and contribution. The balance between trust and cooperation is the key to unlocking our contribution. The social structure must provide sufficient protection of and benefit for the individual, to balance the necessary curtailment of individual liberty in the public space within which cooperation happens.

If I was to tell you that to fix our biggest problems we need only do three things: protect individual rights, devolve political power down to our communities and guarantee everyone the bare necessities of a productive life. What would you say?

Would you say that those three things do not address climate change, immigration, food sovereignty, trade, Middle East peace or some other issue?
Would you say that these changes are impossible, or impractical?
Would you say that changing the structure is futile or irrelevant if we don’t change ourselves first?

You’d be mistaken, if you did. We are faced with a veritable bevy of very serious and very significant problems: climate change, poverty, war, nuclear proliferation, demographics, corruption, water shortages and food insecurity, to name but a few. In seeking solutions to address these problems we are easily aware that we need big changes, but we tend to slip into looking for one or two big solutions for each problem. This is our pitfall, it leads us to see solutions in competition with each other and it does not deliver results.

Big solutions to big problems are easy to describe, to capture in a soundbite and put in a manifesto, but they are not reality. The solution to hunger in Africa is not aid, the solution to climate change is not carbon sequestration nor is it a carbon tax nor any other “magic bullet”. The big news about all of the big solutions we need is that they are made up of thousands of millions of little solutions acting in concert.

The most radical principle we must adopt if we are to solve our problems is devolution: we must empower individuals, communities and affected populations of all sizes to develop the specific solutions that befit their situations. Poverty, food supply, peace and environmental balance will not be fixed from above by beneficent leaders (even if we had any). The problems are too complex and the appropriate solutions too varied by locale to be effectively articulated in a grand plan from above.

The only grand plan we need is to empower people to develop their own solutions.

Such a grand plan of devolution must build the framework that will enable a thousand million solutions. The framework requires first that we trust one another. Next we must harness the value of collective, effective and coordinated decision-making. Finally we must free ourselves to make our maximum contributions. Those are the reasons why we need a new constitution, effective democracy and universal services, and why only this approach will actually result in solutions to our big problems.

Cooperation is as simple and as complex as it looks. We cooperate personally with our family and friends, communally in our neighborhoods, regionally for our utilities, nationally for our standards and internationally for peace; and even that is only a thin slice of the total reality. The only reason to constitutionalize freedom is to enable cooperation, and that makes cooperation to constitutional corollary. We need to be able to describe and incorporate our framework for cooperation just as we describe and incorporate our freedoms and protections.

Constitutionalizing cooperation requires a rationalization of our social framework, contemporaneous with the incorporation of flexibility that acknowledges and accommodates the inevitable inaccuracy of a universal application of that rationalization. The model of multilayered representation (www.standardsoflife.org/MLR) reconciles the needs of rationalization and flexibility by providing for local variability and tempromorphism without threatening the structural integrity of the cooperation that it enables. By using anthropologia as its source, MLR’s structure is universally applicable, concurrent with its malleability to local circumstances.

Having established the basis of trust and cooperation through the instrument of a constitution, the remaining ingredient is facilitating universal contribution. Anthropology reveals a natural human inclination to make contributions, once the threats to survival have been overcome. So the first step to enabling everyone to engage in developing and enacting the many small solutions we need to our big problems, is to do what we can to annul the distractions of personal survival. This requires a social commitment by all to the provision of the bare necessities of life to all. The reorientation of our societies toward more fundamentally democratic principles must be accompanied by a revisioning of the social contract to include not only the freedom and security of members but also their basic survival needs.

Universal services are the embodiment of the social contract and are delivered to all as a right of citizenship. As the foundation stone of our society it is right and proper that our tax revenues are used first to deliver these basic services. Beyond the manifestation of principle, the delivery of universal services fosters a cornucopia of opportunity for contribution from all. The cooperation built on trust will direct contributions to develop and implement the solutions to our biggest problems at the lowest marginal cost, because the revealed market for contributions values everything, however small, but only at its marginal value-added. Every service can find its place in a marketplace relieved of the competition of survival. Transaction volumes, wealth, efficiency, resilience and innovation are all increased dramatically. So are the opportunities for unique and enhancing contributions that can improve our standard of life, open gateways to personal growth and bring fun and joy into our existences. Plainly put, there are many more activities worth doing once your food and shelter are guaranteed for life.

So I say again that there are only three things we need to change to develop the solutions to our biggest problems: adopt a constitution protecting freedom, devolve political power and deliver universal services. Three things that, for different reasons in different countries, will be strongly resisted by the rich and the powerful elites; but their resistance does not for one moment tarnish the necessity or imperative.

The scale of the challenges we face and the universal implications of failing to address those challenges points us most assuredly at the vitality and importance of coordinated, cooperative contributions to meet those challenges. The universal adoption of a universal constitution and the provision of universal services do address our problems, they are practical (if not pragmatic), they are intertwined with the opportunity for personal growth and they are absolutely, unequivocally necessary for our survival.

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