Category: Africa

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.

Money Flows

Hot money flows will not save the bankrupt status quo.

This week two news stories pointed to an issue that, wish it were otherwise, demonstrate the need for fundamental system change. The first story regards the fortune amassed by the Mubarak family during their rule of Egypt and the second concerns the massive scale of the corruption afflicting Indian society. Read the comments after the Indian article to get a real grasp of how this kind of corruption affects the core of a society down to the smallest neighbourhood, and this story that reveals the extent of the theft of public property in Egypt.

Where do these trillions of ‘hot’ currency go? They go into banks in the Western industrialized nations and their lackey tax havens – these three components form a coherent whole, interdependent on each other. This is colonialism by corruption, and the citizens of the beneficiary societies are as guilty of complicity today as they were 100 years ago. If you live in the West, don’t feel bad about it: you’re as much a victim as the citizens of the new ‘colonies’, because the same institutionalized theft is robbing your neighbourhood of resources just as much, through tax avoidance.

Why is this tolerated? Well it’s not tolerated by those who can’t do anything about it, in Egypt and India; they are just in a state of powerless despair. It is tolerated by those of us who can do something about it, because we have been unwitting clients of the system. The availability and use of debt to finance our distracted acquiescence has been the magician’s move that has drawn our attention away from the true play that is being made. In this trick there is a fine balance that the magician must strike, wherein the audience feels like it is getting more than it deserves, without actually getting real benefits. Like any sidewalk hussler, when the opportunity comes along to really cream a willing punter, the escape requires all parties to feel sufficiently guilty that no one feels entitled to recompense. This where the citizenry of the West is: asleep at the table, engorged on the fake food served up by the chefs in the kitchen while they resell the real food out of the back door of the restaurant to their buddies on the black market.

What can be done about it? The complete reorganization of the banking system. Preferably a coordinated reorganization encompassing the US, the EU, the UK and Japan; but even a principled stand by one of those financial centers would put the cat amongst the pigeons enough to disrupt the system and lead to change over the medium term.

What are the consequences? Without the hot, secret money Western banks will not be able to generate the profits they do today, nor would they be able to support the same level of employment. The fall off in tax revenues and employment in the client states would have to be offset, requiring a fundamental reorganization of commercial and social infrastructure. The net effect on tax revenues to Western states might even be positive, as banks pay a smaller percentage of their profits in taxes than the individuals and corporations who use the banks to avoid tax would have to pay on their incomes if they were properly declared. Potential benefits to non-haven states would be massive improvements in social wellfair, but would only accrue if accompanied by a significant democratization of their political systems – that democratization would be much easier to achieve without banking system support for corruption.

When will this happen? When the balance of benefits to the citizens of the haven states falls below even. The citizens of those haven states have already assumed the burden of the 2008 bank bailouts, but they have accounted for that with debt, so the full reality of those costs have not yet been bourn. The “plan” is to meet those debts over the coming decade by leveraging the same financial colonialism and conjuring (the failures of which created the debts in the first place) so that the massive increase in the money supply (aka ‘printing money’) that was used to account for the debts can be matched to grown wealth. This plan relies on the perpetuation of the existing banking system, complete with inflows of hot, corrupt money from all over the world. This is why today’s Western leaders will connive, lie and obstruct as much as they think they need to to protect the status quo, because they do not know how to plan for or adjust to a fundamentally reorganized society – they are not evil, they are just clueless.

The troubles with the “plan” are already becoming obvious. First is that the wealth that is being created is being confined to very small slither of the populations of the haven states, and, in a superb irony, they are using the same financial corruption to avoid adding to the wealth of states they inhabit. Second is that the debts cannot be satisfied with the growth that is available, and must be supplemented by sucking more wealth out of compliant tax payers through ‘austerity measures’. Third, none of the first two plans is happening fast enough to stop the excess money causing inflation, further exacerbated by real increases in the costs of raw materials. These problems mean that the haven states will start, this year, to raise interest rates to combat inflation, and in so doing push the balance of benefits for their average citizen firmly into negative territory. 20% youth unemployment, rising basic living costs and a kleptocratic ruling elite are the perfect ingredients for a revolution – witness North Africa, January 2011.

In the next few years, as real social disruption develops in Western states, a serious debate will emerge around whether completely reorganizing our economic and social frameworks is actually any less disruptive that attempting to maintain the old status quo. If we desire a constructive process of change we need to start thinking now about how that reorganization can manifest positively – that’s the reason to read and contribute to alternative thinking like the Standards of LIFE.

Self association addresses key issues at their root causes

The fundamental challenge in the development of human society is to leverage peace for the benefit of all.

Self Association: the legal right of social groups to freely associate themselves within larger groups, as described in the Standards of LIFE for multilayer representation and variable law.

When we look around the world at places where there is conflict and violence, even war, we can distill the root causes into two basic struggles:

  • the right of self-determination
  • control over natural resources

In most ways these two struggles boil down the same issue: the rights of communities to govern themselves. Why is such a basically obvious matter the cause of so much strife? Because the monolithic structures of our outdated political systems have no framework or mechanisms within which local autonomy can be accommodated.

We live in a world where the predominant guiding principles of government have more in common with benevolent imperial dictatorship than with modern democracy. Our nationstates are based on borders defined by cartography more than geography and by control more than empowerment. Having created unnatural and artificial boundaries, it becomes necessary to invoke the appeal of false identities crudely fashioned from a mix of projected ideals, fostered fears and caricatured qualities in order to create any national unity or social cohesion. Because these nationalist identities are so invented, they actually represent no one and are fertile ground for those who would abuse power to satiate their personal foibles.

As rigid, brittle entities our nationstates feel threatened by unique or differentiated identities within their limits and are drawn to suppress their expression lest they lead to separatist intentions. Yet in the very act of suppressing separatism they encourage it by demonizing the separatists while they eviscerate the freedoms of the whole population. The direct negative consequences flowing from these retarded, legacy constructs include: border insecurity, terrorism, migration instability, environmental degradation, inefficient resource utilization and, most significantly, low quality of life for everyone.

Let’s look at these in turn to understand how they go wrong today and how allowing self association would result in better outcomes.

Borders
The current attachments of nationstates to cartographic definitions of their borders is only natural given that those borders are the primary defining characteristic of their identity. The result is a disproportionately muscular attention to border security and, in many cases, actual wars fought over the cartographic definition of the borderline. (Let’s call this “borderline insanity”: the maniacal attachment of ruling elites to remote survey points.)

Now imagine two neighbor nationstates that adopt MLR constitutions and you will see that the two large blocks of color on a flat map will be replaced by a multitude of tiny fragments covering the areas inhabited by both states — each fragment representing a community. The communities will freely self associate into regions and those regions into states. Initially a map that only showed the new states may well look very similar to the nationstates they replaced, but there will be one crucial difference. The borders between the states are now defined by the self association of the communities in those locations, and they are free to change their association from one region to another, and in so doing the border between the states changes by that one small fragment represented by that community. No international treaties required, no wars, no fuss and no one’s business save the citizens of that community.

Now imagine that scenario played out in your conflict area of choice: Israel/Palestine, Kosovo/Serbia, India/Pakistan, UK/Ireland or Russia/Chechnya?

Terrorism
The futility and frustration that spawns the cultures from which terrorism leaps out to thrust insane violence on the innocent are nurtured by the rigid nationstates’ incapacity to accommodate differentiated identities.

Freely associated communities would never harbor the decrepit mentality of terror and anyone disposed to such perspectives would be stifled at their emergence by the lack of shelter, succor and support.

Individual terror is a hazard of the human condition, “terrorism” is the progeny of unnatural social orders resulting from suppressed freedoms.

Migration
Centrally controlled, monolithic societies with rigid borders have a bipolar relationship with migration: they encourage it in good times and demonize it in hard times. Furthermore, the sublimation of community authority makes their migration policies crude at precisely the point where refined and nuanced practice is required.

When migration is managed by the communities that must accommodate it, it assumes the very human dimension that it autonomically has and which larger entities cannot provide. Migration is the movement of individuals between communities and it is at that level but it must be managed. When communities have authority over, and responsibility for, their own configuration migration is rendered moot at any higher level of social structure.

Environment
The control of resources, be it water, minerals, land or energy, is often the driving force behind conflicts between nationstates. The justification used is that the inclusion of these resources within the boundaries of that state will be of benefit to all their citizens.

The actual practice of resource management and exploitation at a macro state level reveals two fundamental flaws in the arguments proffered to support state control. Both of these flaws have their origins in the same characteristic: remote decision-making. The cost-benefit analyses computed by even the most well-intentioned remote actors are based on such poor data that the costs are underestimated and the benefits overestimated. With weak and/or selfish state actors the situation deteriorates further into environmental carnage that results only in the aggrandizement of corrupt central politicians and dealmakers.

The devolution of resource responsibility to democratic local communities results in much more accurate cost assessments and much greater disinclination toward environmental destruction. Local resource management also extracts much greater benefit from the resources at the same time that intercommunity trade, interaction and negotiation are stimulated because full value extraction from the resources requires trade. These trading relationships ensure that the benefits are more evenly and deeply integrated into the societies involved in exploiting the full value of the resource, with lower negative environmental impact.

Efficiency
Large-scale, remote, state actors making poor decisions based on poor data tend to underestimate the true costs of exploitation and so sell the resources at below optimal pricing, resulting in distorted markets where undervalued resources are used inefficiently, because of their low price.

Local ownership that insists on environmentally sound practices and understands the full cost of exploitation will price the resulting resources more accurately, leading to more efficient use. Additionally this fair resource exploitation removes any need to spend money (i.e. other resources) suppressing, repressing and corrupting local populations in the originating region who resist unfair exploitation and may even stimulate separatist ambitions, further exacerbating the cycle of inefficiency.

Quality of life
The fundamental challenge in the development of human society is to leverage peace for the benefit of all. Violence can deliver short-term benefits for the few and if that is only matched by peace, then there is a temptation to gamble on the outcome. Either way, if the benefits only accrue to the few the system is inherently unstable and destined to fail, at which point it is likely to be detrimental to all.

The nationstate is such a system, it subjugates the rights of self-determination in the name of resource control that invariably delivers benefits to the few. Peace is the period during which the few build up resource imbalances and war is the period during which resources are used to protect or enhance the imbalances.

To break out of this destructive cycle it is necessary to adopt social structures which allow for self-determination without social fragmentation. The principle of self association within a multilayered organizational structure that protects local rights while encouraging inter-social cooperation provides the framework for the development of human societies that can exploit the peace dividend for the greater good of all in an inherently sustainable way.

The devolution of the primary organizing structure to our fragmented communities, that then freely self associate into larger and larger social groupings is possible, natural and most likely to ensure our survival and prosperity.

Congo’s fate is not its destiny

The ongoing war in the east of the Congo has its roots in the corrupt neglect of the “exploiting world” and the failure to adopt realistic social structures, which is not limited to the Congo but is prevalent across the “emerging world”.

The corrupt neglect of peoples, and their governments, in the parts of the world that industrialized first allows and encourages that chaos, because that gives them competitive advantage in access to the resources they need to feed their industrialized production systems. The failure of consuming countries to regulate the abroad activities of commercial concerns based in their territories is an abrogation of their own standards and principles. As laid out in the External Relations section of the Standards of LIFE, societies should adopt standards to govern their trade with other people, using the same principles they apply to themselves. In the Congo situation, this would mean that European companies would be required by their own domestic law to deal only with sanctioned representatives of the people of the Congo that also adhere to the Standards of LIFE.

The emerging world, sometimes called the developing world, is a group of all those people who are emerging from colonial pasts, and yet still subject to the structures of government and international relations that are cast in the old colonial mold. These structures are beneficial to the exploiting world because they provide a single point of corruption through which to access the resources they want. All this is exacerbated by the emerging world attempting to operate within geographies and boundaries that were defined to reflect colonial divisions of authority, not the natural human landscape on the ground.

If the people of the Congo, and its neighbors, were able to adopt the more natural and flexible structures of the Standards of LIFE they would create a more firmly grounded society that, in turn, would be better able to establish the rule of law, which would contain the poisonous leftovers of the Rwandan massacres of yesterday. The twin objectives of protecting people and nourishing their prosperity can be achieved through the adoption of properly representative and principled government in both the exploiting and the emerging worlds.

The Congo’s destiny is to be a propserous and peaceful region, but until the exploiting world takes responsibility for its own actions and the emerging world adopts new political structures that serve them more naturally, the Congo’s fate is the stuff of nightmares.