Social Policy – Page 4 – Standards of LIFE

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.

The essential dilemma of the “new left”

Capitalism and communism have failed differently but equally.

Why is it that, even when supported by a majority, the “new left” parties of today’s democracies seem so powerless and ineffective? These failings have gathered more significance now that their implications extend beyond the philosophical musings of academia to threaten the trajectory of our species.

If an effective and practical alternative to the “history ending” construct of post-Soviet capitalist democracy cannot be found, articulated and formulated… we will be “left” in the hands of fiddling tinkerers or patently failing but readily presentable nationalchismo and egocentrism that is so familiar it feels “right”.

The problem is rooted in the context of the “new left”. After the obvious failure of communism crystallized by the fall of the Berlin wall, the void in alternative thinking caused by half a century of war was deafening. The space was empty, and was promptly filled the “ideas lying around” at that time. The last two decades of the 20th century saw the sublimation of democracies into dependent clients of corporate capitalism. This context became the assumptive base on which all subsequent democratic rationales were built. Our politicians in the early 21st century grew out of this context, and inherited it as the de facto state of the world. All that remains to distinguish between today’s “new” political philosophies is whether or not to tinker with the details at the edges of the “established” wisdom. The “left” became self-described as missioned with the broadening of “opportunity” and the protection of “dignity”. The “right” became the guardians of the purity of the great manna machine that was the raison d’être of the system and without which all else was naught. And so was cast the mould from which our modern politics emerged.

The essential dilemma of this construct is that the “new left” cannot deliver on promises for change, because at its root it accepts the de facto model of democracy as a gift of capitalism. Only aspirations for a friendlier face on the head of capitalism is honestly deliverable, once you adopt capitalism (an economic, not a political, concept) as the core of your political philosophy. To offer to deliver an alternative reality from within the confines of this established hegemony is at worst bare faced lies or at best vainly naïve. Indeed a combination of those lies and thin promises are regularly offered up at election time by every shade of politician, short of the brazenly fascist. And we eat it up, at least we have until now.

At some point, one would assume, we will tire of the disrespect, the shallow illusions and the failed and broken promises. But will we do so in time? I believe we will. The percentage of the population of most democracies that are willing to suck it up one more time, to risk suffering the humiliation of disappointment garnished with a dressing of pompous ignore-ance, is waning. The number who have lost their forbearance for disrespect has climbed steadily this century, and in recent years has reached upwards of 20% of the voting constituency and a majority of the population below the median age. The time will come, and that time will come soon, when a sufficiently large majority of the voters in today’s democracies will have had enough of being lied to, had enough of going in what is obviously the wrong direction. At that time we will once again be grasping for the best ideas lying around. Without good ideas we all risk being seduced by the crude appeals of savage instincts, special natures, chosen myths and other aspects of the illusion of our disconnected selves – all of which would presage our demise and descent.

The best good ideas will not be bound by the strictures of 20th-century constraints on the limits of available models. Alternative frameworks that can actually deliver sustainable prosperity will be big ideas, they will start with what is and aspire to something completely different. A whole new framework that redraws the big picture is what will deliver the change we need.

Capitalism and communism have failed differently but equally. Not because either is without merit or devoid of place, but rather because there are only aspects of a whole. They are nascent ideas springing from the well of possibilities and were dressed in suits before they were rightfully out of diapers. A century of gestation allows us to develop a new model for our societies, our economies and our democracies that includes and values each aspect, in its proper position in the constellation of our natural natures.

The “new center” starts with the premise that the big picture needs to change. That’s what distinguishes it from both the left and the right of old politics.

There is an alternative!

There’s some really fantastic analysis of our current situation out there. Take James Galbraith’s analysis of the current US financial system, or George Monbiot’s analysis of the relationship between economic stimulus and the environment. Listen to Robert Frisk’s analysis of Middle East problems, the decay of journalism and the fundamental disconnect between voters and their representatives. In all of these you will find expert testimony to the flaws in the construct of today’s social, political and economic frameworks. And in every case they will end with the recognition that the most basic flaw resides in the political system. In the end, it is up to us to choose political leaders that make different choices than the ones we have today.

Unfortunately, it appears that a comprehensive and realistic alternative to the status quo is missing. The people cannot see it, so they are not demanding it. Politicians cannot see it, so they are not enacting it. Our great thinkers and analysts can see what’s wrong, but they cannot see what to do about it. We are faced, in this time, with the greatest challenge that Homo Sapiens has ever had to face: the limit of our ability to act without constraints. To meet this challenge, and to adapt to living within self-imposed constraints, requires a new paradigm for the frameworks of our social, political and economic systems. This is a big challenge indeed, but it is not out with the wit of mankind to figure out a way forward.

We are children of our planet, and we are as natural to it as the birds and the trees. We have within us the intuitive understanding, and the natural inclination, to be a compatible element of our environment. The solutions that will allow us to meet our challenges are not sophisticated mental constructs that are out there somewhere, their origins can be found within us. If we can pause for just long enough to seat ourselves in our centers, we will find the confidence of our intuition will serve us better than intellectual escapades.

There is an alternative! An alternative construct for our societies, for our political system and for our economies. It is not an ideology, it is not a perspective and it has no belief system. It is as natural as you are real, and based on nothing more complicated than observation. Built from fundamental building blocks of natural principles, that extend beyond the passage of time, any cultural dimension, or any location on the Earth.

The alternative is that we first guarantee each other the bare necessities of life; we add to that respect for freedom and truly representative social organization; finally we allow natural enterprise to reap our harvest in the space that remains. The details of how to implement that alternative, in today’s society, is the purpose and intention of the Standards of LIFE.

We do have an alternative. There is an answer. There is a plan for how to get from where we are to where we want to be. Find out about it, read about it and start asking for it like your life depended on it; because all of ours surely does!

www.StandardsofLIFE.com

Universal Social Services Make Economic Sense

How cash benefits distort the monetary system, increase our deficits and discourage investment.

When we pay cash benefits we distort calculations of cost, wealth and money supply. If we provide basic social services universally, free at the point of need, we would reduce costs across the private and public sectors, improve the flexibility of businesses and enable more accurate money supply management.

The premise of this argument is that the activities that satisfy the basic human necessities of life are not wealth generating; and that paying cash benefits leads to the inclusion of their purchase price, instead of their output cost, in economic calculations, which distorts the results.

Services delivered between citizens in support of the basic welfare of society are not wealth generating transactions in a monetary sense. To understand this, we must evaluate the content of services such subsistence shelter, sustenance and healthcare. There are three distinct contents for each service: generic labor, value adding labor and capital. Generic labor is that portion of the service that requires no special skills to deliver, and can generally be categorized as ‘manual labor’. Value adding labor is the portion of the labor necessary to deliver the service that commands a premium in the market place, on account of special skills or experience. Finally, the capital portion refers to the content of the service which has to be manufactured or purchased from a external agency. In reality, nearly all labor has some value adding element; but it is important to recognize that in the lowest skilled activities command a very small premium over subsistence wages, and therefore the value added is often less than 20% of the total labor cost. The value added labor and capital portions of the service are truly wealth creating, but the generic labor portion is not. The generic labor used to deliver subsistence services does not generate a return; its value is consumed at the point of expenditure.

This is already recognized in current economic models by separating out the charity and nonprofit sectors. In these cases, it is recognized that the services delivered are not generating wealth; and therefore they are only counted on the basis of the contributions made to the sectors, not the output generated by them. This implicitly recognizes that housing the homeless, clothing the freezing and feeding the starving are not wealth generating transactions that should be included in measures used to measure economic wealth. They are services that undoubtedly contribute to the value of our societies, and they have very similar characteristics to infrastructure investments, in that they establish the basis and groundwork for the development of future wealth, but they are not themselves wealth generating transactions. This is represented in the discussion about the value to the economy of homemakers; the consensus of economists is that including the value of the output of homemakers in economic calculations would fundamentally corrupt calculations of GDP and economic wealth.

If we were to provide universal access to basic social services, free at the point of need, it would have a transforming impact on public finances and the enterprise economy. In an economy where the fundamental social services that make up the bare necessities of life are delivered free of monetary value to everyone, the immediate impact is that the “cost” of labor is dramatically reduced. When everyone in the society has shelter, sustenance and the other basics of life guaranteed to them, they are freed to work in whatever manner they can, for whatever wage that someone else is willing to pay. It is in the nature of humans that they will have desires beyond those satisfied by the subsistence services, and so will be keen to earn some discretionary income that they can use to satisfy their other needs. Because all of the resources in the labor market are guaranteed comprehensive social services, the labor market is freed to price labor using accurate demand and supply criteria, negating the need for a minimum wage.

The minimum wage becomes unnecessary because the basic survival of individuals is not dependant on the market for labor. The primary purpose of minimum wage regulation is to ensure that workers are not exploited in their desire for basic subsistence by ensuring that they are at least paid a living wage. In effect minimum wage regulations are an abstention of social responsibility, and they distort labor markets with clumsy attempts to compensate for that lack of responsibility. Society is infinitely better off simply providing the services that ensure all workers are guaranteed subsistence, and then freeing the market to define labor rates. Workers are freed to take the jobs they want, to work as hard or as little as they want, and employers are similarly liberated – all without damaging the fabric of society. If employers do not offer sufficient reward to attract the labor they need, or if they provide unacceptable working conditions, they will not be able to hire the labor they need.

Universal social services and liberated labor markets allow labor to be accurately priced according to the actually wealth-generating portion of their output, measured as the delta between the subsistence value and the market value. The net result is lower labor rates across the entire economy; proportionally more significant, the lower the skill level or less value added.

Reducing the cost of labor, in cash terms, has obvious effects in the enterprise business market by not only the reduction in cost basis, but also in the improvement of flexibility in the workforce. A workforce that is not dependent for its basic sustenance on specific employment, can react much more rapidly and flexibly to changes in the marketplace. Employers are able to react much more quickly to changes in their markets because they can easily change work patterns without being encumbered with mountains of regulation. This flexibility enables all participants in the economy to be less risk averse and more inventive.

The lower cost of labor also has a significant impact on public finances. Principally the impact is felt in the reduced tax burden of providing the social services themselves, but also in the reduced price assigned to infrastructure investments. Both of these reductions stem from the removal of the subsistence portion of labor cost from labor pricing. The subsistence portion of labor costs is removed from the economic calculations and absorbed by the social fabric, in the form of citizen-to-citizen support services delivered free of monetary value in exchange for the same. The labor is still provided, but the subsistence portion of its value is not monetized.

The monetary cost of providing social services is reduced; because the labor rates for the people who are delivering the services is lowered. This cyclical reinforcement reduces the overall tax burden, and increases the capital proportion of the cost that remains. Because the labor required to deliver the bulk of subsistence social services is low skilled work, the value added portion of the labor cost is a small fraction of today’s total labor charge. Only the value added portion of the labor needs to be paid for from tax receipts and that reduces the tax burden. The labor content of services such as education and healthcare includes a higher percentage of value added, and so the reduction in the costs for those social services is less. Nevertheless, removing the subsistence portion of labor from the overall cost of delivering basic social services will reduce both total cost and the percentage of cost assigned to labor. The result is that a higher percentage of taxes spent on providing social services will be spent on capital investments. Given a stable population, the increased capital allocation will result in a substantial long-term reduction in the cost of social service provision.

Taxes and wealth are expressed in monetary terms; and, in a progressive tax regime, more taxes are levied from the highest wealth generators. So transferring the subsistence portion of social services costs on to the social fabric of the society, reduces the tax burden most significantly for the wealth generating members of the society. In other words, providing free basic social services is in the best interests of the wealthiest members of the society.

If labor rates are substantially reduced, this will also impact the ability of the society to raise tax revenues from income taxes. Income taxes will only apply to the value adding portion of labor, because that is what is expressed in monetary terms. There are two modifying effects that mollify the apparently negative consequences for tax receipts. First, the majority of income taxes are raised from the highest earners, so removing the subsistence portion of income from tax calculations will have a relatively minor impact on overall receipts. In fact, so long as the reduction of total social service provisioning costs contributed by lower labor rates, is greater than the effective income tax rate on subsistence wages, the net result will be a reduction in the tax burden compared to current systems. Secondly, tax revenues could be raised by a comprehensive income tax that is levied on all income, without personal allowances. This will be more politically acceptable because all subsistence needs have already been taken care of by the social services provided.

The impact on the public financing of infrastructure investment is to bring the “cost” of those investments down and, at the same time, more closely match the interest burden on any such investments funded from budget deficits. Because budget deficits are necessarily funded with borrowing, it is important that those funds are spent on performing assets that can deliver a return, to support the interest burden on the debt. By removing the subsistence portion of the labor costs from the price tag of the infrastructure, the amount of borrowing can be reduced. The rate of return on the investment is improved, so repayment schedules can be shorter, and the return rate of the infrastructure investment can be more easily supported without unnecessary expansions of the money supply.

Finally, a beneficial side effect of using input cost pricing for basic social services is that their recognition within GDP calculations at their cost, makes GDP a more accurate measure by which to gage wealth, and therefore manage the money supply. The trouble with a benefits system is that it prices the value of the services at their acquisition cost, because the recipient uses cash to buy services. We pay unemployment benefits as cash, we pay pensions as cash; but what we are really trying to do is deliver services such as housing, sustenance, shelter and healthcare. Instead of actually delivering the services, we find it easier to send cash. This substitution of services with cash is the basis for miscalculating wealth and GDP, because the purchase price of social services is used instead of the provisioning cost.

Changing from cash benefits to universal services reduces labor costs, lowers taxes, makes infrastructure investment more affordable, increases business flexibility and improves money supply management. What more reasons do we need to start owning up to our responsibilities and living up to the social contract we implicitly rely on for a peaceful life?

The Obama Opportunity?

If it is possible to right the good ship “Human Society” from the inside, without fundamental structural change, then Obama would appear to be the test of that.

Massive investment focused on greening the infrastructure, the pursuit of peace from a position of power and the development of a sufficiently holistic social support system that it liberates the true production capacity of the macro and micro economy are hallmarks of Obama’s proposed agenda. While not undertaken with the same reforming and restructuring zeal at the Standards of LIFE proposes as necessary, the goals are sufficiently closely aligned that it tests the premise that fundamental reform of our basic social, political and economic structures are necessary.

The dilemma intrinsic to the Standards of LIFE is that the changes it proposes are both necessary and seemingly impossible. It is difficult for some to imagine being able to overcome the inertia in the present time based on consequences in the future. To some the changes proposed in the Standards of LIFE seem to be beyond the attainable reach of our generation, at exactly the same time that the outcomes and goals are understood to be vital to the survival of this and the next generation.

If a path to a sustainable future is available by working “within the system” then surely the Obama administration is the embodiment of that option. Formulated within the context of the legacy political process, staffed by the quintessential inside players and blessed by the traditional power centers, the Obama administration appears to offer a road to salvation without upsetting any of the existing norms or disturbing any of the current structures. If it can be done in this way, from the inside, then surely this charismatic leader and his insider team are the ones to do it.

If so, we can rent a villa in Marbella and retire to the sunny beaches of Unnecessario. We’ll see.

Continue reading “The Obama Opportunity?”

G20: coordinate, stimulate, regulate?

Leaders of 20 nations meet this weekend in Washington, united in their discomfort with their position in the world, their victim status and their common sense that something else is possible.

Together they represent:

100% of the responsibility
90% of world industry
80% of world economic output
70% of the world’s population
60% of the world’s land mass
50% of the world’s resources
40% of the world’s ethno-bio-diversity
30% of the world’s AIDS population
20% of the world’s good intentions
10% of the world’s good ideas

Together, they will produce 0% of the answers and actions capable of leading us all to a sustainable, peaceful prosperity.

On the surface their desires are simple, they want to live long and prosper. They understand in their guts that it would be fair if they could just chop wood and carry water to make ends meet, and have a decent chance at pursuing happiness. Underneath, their goals and ambitions are complicated by a vision tinted by separateness, hearing muffled by unholistic understanding and feeling anesthetized by their knowledge of their own unrepresentativeness.

The features of a group that could deliver solutions would be

wholesome representation (integration)
common purpose, process and practice (intention)
holistic world view (inspiration)

This is a good test run because it represents exactly the kind of coordinated decision-making and action planning that is going to be necessary if we are going to change course from the fate looming over the world in the coming decades, towards our destiny of sustainable peace and prosperity. Achieving the challenging changes that will be required to avert environmental and social degradation, will require inspiration integrated with intention, that stimulates action across the world.

What the G20 leaders could do to start in the right direction:

agree to form trans territorial alliances that will allow representatives at the next meeting to represent 100% of the worlds population
recognize that national currencies are no longer useful in a globalized economy and yet we are not ready to adopt a global currency, so there must be consolidation towards trans territorial currency units, each managed by an independent central bank
define the role of a central bank as an apolitical organization charged with responsibility for management of the money supply, and therefore banking regulation, interest rates and value stability
resolve to prioritize their own humanitarian support systems so that coordinated action in the future is about moving forward, not rescuing from past miss steps
stimulate microeconomic activity by reforming their tax systems, establishing micro marketplaces, deploying information access networks and implementing basic social security systems
advance the Doha round of trade talks by focusing on these two factors:
- establish the right to food sovereignty
  - remove international recognition of biogenetic patents
  - promote sustainable self-sufficiency
  - ban the export of subsidized agricultural products to stop rich subsidizing blocks contorting the real market for food; if the need is humantarian then give it away
- establish a carbon tax framework
  - establish unified rates of taxation
  - agree standards governing the use of funds raised from carbon taxes

If Barack Obama was a LIFE Supporter, his agenda would look like this…

The broad agenda is no different that that adopted by the Obama team: stabilize the economy, restore the rule of law and the balance of justice to the people.
To see how the policies and strategies below align with these goals, go to the bottom of this post.

The first thing he would do would be to establish five commissions, each tasked with the development of detailed implementation plans for major policy areas:

energy
BASE
taxes
democracy
digital identity

The Energy commission
This commission is tasked with the introduction of initial carbon loading taxes starting in January 2010. Commissioners with expertise in the mechanisms of fuel markets, efficiency and environmental impact will have only a few months to determine the initial fuels that will attract a carbon tax and the mechanism by which carbon load will be calculated.
However rudimentary the initial implementation is, it is important that this is started as soon as possible.
All revenues from the carbon tax will be dedicated to the development of renewable energy industries.

The BASE commission
Charged with the assessment costs for the provisioning of all BASE services to all citizens, starting on 1 January 2011. The first task for this commission will be to assess a Shelter Equivalent value that can be used in the housing acquisition program (see below). Mechanisms for the distribution of funds to cover the costs of BASE services are also part of this commission’s responsibilities.

The Tax commission
This commission is responsible for reforming the IRS to allow it to effectively provide income tax collection services on behalf of all constituencies starting on January 1, 2011. Part of this work will be assessing the costs associated with those elements of government that do not fall under the purview of BASE, and will therefore have to be funded from corporate or sales taxes. Using these assessments and the results of assessments by the BASE commission, they will be able to determine the required rates of taxation necessary to cover the existing government budget.

This commission will also be responsible for the establishment of processes by which the tax revenues allocated to BASE services are distributed to the lowest layer constituency appropriate for the delivery of the service. In many, if not most, cases this will mean distribution to the States until lower layer constituencies are established in 2011 and later.

The Democracy commission
This commission is tasked with reform of the electoral process for federal assemblies (Senate & House) effective 2013, and developing the processes and frameworks that will allow for the development of multilayer representation starting at the community level. Included in the remit for this commission will be the establishment of boundary commission standards and the development of a framework for the election of a world assembly.

The xID commission
Responsible for developing the standards for a xID digital identity system that will be introduced at the beginning of 2012. Experts in technology infrastructure, digital security and constitutional matters will develop technical, operational and legal standards for the system in compliance with the standards for distributed storage and privacy defined in the xID specification.

2009

In addition to the establishment of these commissions, during the first 90 days an independent central bank will be created charged with responsibility for the management of the currency and the regulation of banking system.
Also in the first three months, the Guantánamo prison and all CIA black sites will be closed and any prisoners deemed to be an ongoing threat to the country brought back to the USA to be tried in courts.
Military deployments in Iraq and Afghanistan will start a rapid draw down with the target of returning to a small number of defensible bases within 12 months.
Last but not least, draft a constitutional amendment protecting personal freedom of choice in personal space, targeted for ratification in 2011.

Housing acquisition program
As soon as the independent central bank is established and the BASE commission has derived a Shelter Equivalent value (effectively a replacement value for a standardized housing unit), it will be possible for any citizen to sell their primary residence to the public for a payment equal to the Shelter Equivalent. The citizen will retain a 20 year, inheritable, occupancy right to the property but ownership will belong to the community/public. Until BASE services are fully introduced, the tenant will be responsible for the payment of utilities and the costs of maintenance, failure to pay these costs can result in termination of occupancy.
Any mortgage lender will have to surrender their interest in the property in return for the Shelter Equivalent payment.
This program will be in effect until 2011, or the start of BASE services.

Federal legal review
The Justice Department will review all federal laws and rescind any laws on the books that contravene the proposed amendment regarding personal freedom.
The Justice Department will establish a review process for the case-by-case review of the sentencing of all people currently held in custody, or subject to parole restrictions, based solely on convictions under laws that are now to be rescinded.

2010

BASE services will be started early for all veterans. Meaning that veterans will have free access to all public services, including housing, sustenance, healthcare, transport, education, information and legal services.
Carbon taxes start.
Cessation of all non-defensive missions by military personnel in Iraq and Afghanistan. Future military activity will only be engaged in the support of efforts initiated and led by domestic governments that have been democratically elected by their people.
Establish regional healthcare authorities tasked with the funding of regional healthcare facilities and practitioners starting 2011

2011

New tax regime starts along with the implementation of BASE services for all residents.
Draft constitutional amendments, resulting from the work of the Democracy Commission, presented for the establishment of multilayer representation, variable law, proportional representation elections and the new standards for suffrage, targeted for ratification in 2013.

2012

First xID systems online.
First world assembly election campaign starts.

At the end of 2012 there will be another presidential election which will provide the people an opportunity for a referendum on the changes made to-date, as well as the proposed constitutional amendments to change the representation and election systems in 2013.
By the beginning of 2013 there will have been elections for all federally elected positions since the announcement of the agenda. This provides for representation that expresses the people’s desires regarding the enactment of the chnages proposed.

Policy Alignment

Economic stablity

Containing the collapse of the housing bubble using the housing acquisition program will stabilize communities by keeping people in their homes and liberating income from debt service that will then be redirected into spending that will stimulate the economy.
Establishing a clear path to a balanced budget, through BASE and tax reform that tackles the social security debts and ties expenditure to revenues, as well as the formation of an independent central bank will restore domestic and global confidence in the economy and our currency, allowing us to borrow credibly should the need arise.
Removing the burdens for pensions and healthcare from industry, by introducing BASE services, will allow for a restructuring of primary manufacturing instead of widespread bankruptcies.
Proper pricing of fuels, through the inclusion of carbon loading, will allow the market to move into the appropriate alternative energy options and will create a fund that can be used for transport infrastructure improvements and the retooling of manufacturing to produce “green” products.

Restoring the rule of law

The introduction of an constitutional amendment to protect personal freedom will do much to restore the public confidence in the rule of law and liberate the judiciary from being confused with the moral police.
1. Repeal of laws that intrude on personal freedom will free up resources in the judicial, enforcement and detention systems
Restoration of the principles of human dignity and the pursuit of peace will allow us to again champion the rule of law at home and abroad
The establishment of a path to Variable Law will add credibility to the rule of law in our large and complex society

Restoring social justice

Placing the most basic welfare of all citizens at the heart of government endeavor restores the rightful balance that will allow our great economy to flourish once more
Creating the infrastructures for healthcare, education, transport and information will create the opportunity for many to succeed using their own talents, ingenuity and drive
Bringing democratic power back to the communities through reform of our democracy will restore the natural balance between us at the same time that it gives us the ability to take responsibility for ourselves

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