The power to create a better world is already ours
With the world in the grip of financial crisis and a deepening economic slump, those of us who've long been concerned about global warming, looming energy shortages and other global issues will no doubt be feeling even more despondent than before. To ordinary citizens all over the world, the ability to gain any traction on these issues seems inadequate and our efforts to get politicians to do anything substantive likewise seem somewhat futile. And yet the power to reverse this is, I contend, already in our hands if only we realise it. We - at least those of us in democratic countries - already have the necessary power to drive our politicians to implement substantive global solutions.
To fully realise our power, however, first requires that we take stock of the various misconceptions that prevent us from seeing it. We are limited not so much by corrupt or blind politicians, nor by greedy corporations, nor by the "money masters" - the private banks. We are limited only by the false walls of misconception we've constructed in our own hearts and minds.
The first of these is our assumption that politicians have the power to make the substantive changes needed to put the world on a just and sustainable path. There can be no doubt we believe politicians have this power because if we didn't, we'd hardly spend so much time lobbying them or taking direct action to persuade them to change their policies. We lobby them and protest because we think they have power - but they don't, at least not nearly as much as we think they do, and certainly far less than they'd need if they're to really solve global problems.
How can this be? Their lack of power stems from the fact that, today, capital and corporations can move fairly easily and instantaneously across national borders, so determining which country gains investment and employment and which loses it. Since politicians have no choice but to implement policies designed to attract or retain capital so as to maintain employment and competitiveness, it's not hard to see why they're constrained to implementing only market- and business-friendly policies which favour the rich, the corporations and the bankers and thus disfavour greater social justice and the environment. So, to lobby politicians in the way we do now is rather illogical. Because for any nation, implementing our demands unilaterally would risk making its economy uncompetitive, leading to capital flight, unemployment and so on. Implementing our demands, in short, would not be in the national interest. So, why do we persist in demanding substantive change from people - in this case our politicians - when they don't have the power to deliver? Clearly there must be something wrong with our thinking; with our conception.
Our second major misconception is that the above problem must be the fault of the rich or the corporations who move their capital around. While no one should condone poor or greedy corporate behaviour, we have to realise that on the whole corporations do what they do because not doing it would mean losing out to others. For corporations, acting ethically or refraining from taking advantage of countries with lower regulations and taxes would by and large mean losing out to their less scrupulous competitors, so it's not difficult to see why they so often fail to behave as we'd like. So while it's right we should highlight poor corporate behaviour when we see it, why do we persist in blaming corporations when it's clear that their behaviour is only the natural consequence of the lack of a level playing field of globally binding regulations? Again, there must be something wrong with our conception.
What's more, these misconceptions only lead us into contradictory thinking, such as identifying free trade as our enemy. At a recent Trade Justice strategy event, for example, delegates were disappointed that a survey carried out during the Make Poverty History campaign showed that supporters could not say what trade justice actually meant. Following that, a delegate from one major NGO gave his own answer, proclaiming that "We are against free trade and we're for protectionism, but only in certain circumstances". But he failed to see the inherent contradiction that if you are for protectionism only in certain exceptional circumstances, you must logically be for free trade in all other circumstances! What that delegate and most of his colleagues are missing, then, is that their real enemy is not free trade itself but the fact that free trade occurs without adequate global social and environmental regulations, without any redistribution of wealth across national borders, and without any adequate transnational enforcement. In short, it's not free trade that is our enemy; it is the lack of effective global regulations and governance. And if the leaders of our movement cannot accurately identify the real enemy, surely we shouldn't be surprised if the public cannot define trade justice.
But lying deep beneath these misconceptions are the false walls we build in our hearts. We build them on the above misconceptions and hold to them dearly because they allow us to blame, shame and complain about others and that makes us feel self-righteous; it makes us feel good - like campaigning warriors, boldly speaking out for the good of the world! But while raising public awareness of global abuses is certainly necessary, how can blaming people who are not really responsible possibly be good for the world? How can it be right to blame politicians or businessmen when it's not really their fault and when change is not in their power and when, moreover, if we were in their shoes, global economic forces would demand that we behaved pretty much as they do? This, perhaps, is why Gandhi asserted that "It is quite proper to resist and attack a system, but to resist or attack its author is tantamount to resisting and attacking oneself. For we are all tarred with the same b rush, and are children of one and the same Creator, and as such the divine powers within us are infinite. To slight a single human being is to slight those divine powers, and thus to harm not only that being but with him the whole world."[i]
If we want to help and heal the world, then, it is the largely unregulated global market system that we must recognise as our real enemy - that we must resist and attack - and not any person or corporation or mode of trade that operates within it. We must realise that we are all caught, at one level or another, in that system and are thus all "tarred with the same brush". And from that it follows that while none of us is really to blame, all of us must hold ourselves jointly responsible for changing the system itself - for doing something about it. When we stop blaming each other, then, we realise that we are all prisoners of the system and all in the same planetary boat. If we take down the false walls of misconception in our hearts, we open them to the truth that those who we fondly believed to be at fault are not, and so our hearts open to each other without discrimination or reserve and so to the whole world. For how else could we be permitted to do good for the world? How else could we possibly build a non-judgemental space that is open to all; the vital open and forgiving space that is needed to begin our joint search for a genuine global solution? None of this means we should stop our present campaigns, of course; it means only that we must recognise their limitations, and so realise that an additional, more global, thoroughly non-judgemental, more truthful, more inclusive approach is also needed.
Let us now go further to see what such an approach might actually look like. What might its design criteria be?
If the free movement of capital and corporations is a global phenomenon, our first deduction must be that only a truly global solution could possibly fit the bill. And since the nature of governments' failure to act is their fear of losing jobs and investment to other countries, it follows, secondly, that any solution must be implemented simultaneously by nations to avoid that fear. If all or sufficient nations act simultaneously, no nation, corporation or citizens need lose out to any other: global and simultaneous - everybody wins. But since dominant nations may not see global cooperation as in their interests and would seek to free-ride and undermine global cooperation, our solution must give citizens the power to compel their governments to cooperate. So our solution must not just be global and simultaneous but also be driven by citizens. And if citizens are to drive the process and be capable of compelling their politicians to cooperate globally, the solution must enable them to operate on politicians in a way that is democratic, legal and binding. It must, in short, operate through existing electoral systems but do so in a way that is completely new, has trans-national coverage and yet transcends party-politics.
For a few years, now, a relatively small number of citizens, primarily in the UK, have been test-running a global solution which meets all the above design criteria. Over the course of two general elections, in 2001 and 2005, they succeeded in getting 27 Members of the UK parliament and countless electoral candidates from all the main political parties to pledge to implement the campaign's global policy package simultaneously alongside other governments. In some UK electoral constituencies, more than one candidate signed the pledge, meaning the campaign gained a seat in parliament regardless which of those candidates won the seat. This showed that the campaign was capable of transcending party-political divides and was global in scope, leading one supporting MP, Lembit Opik, to recognise that, "We live together at once, on the same small planet. There are some things we should do together, at once, on this same small planet."
But how could a relatively small number of citizens achieve such big results in such a short time? The answer lies in their discovery of a new and powerful way to use their votes. They do this by making it clear to all politicians that they'll be voting in all future national elections for ANY politician or party - within reason - that pledges to implement the campaign's policy package simultaneously alongside other governments. Or, if they have a party preference, they encourage their favourite politician or party to sign that pledge. In that way, campaign supporters still retain the ultimate right to vote as they please but they also make it clear to all politicians that they'll be giving very strong preference to candidates that have signed the Pledge, to the exclusion of those who haven't. So politicians who sign the Pledge attract those votes and yet they risk nothing because the policy package only gets implemented if and when sufficient governments around the world hav e signed up to it too. But if politicians fail to sign the Pledge they risk losing votes to their political competitors who do, and so could risk losing their seats. With many parliamentary seats and even entire elections around the world often hanging on a relatively small number of votes, it's not difficult to see that only relatively few campaign supporters will be needed to make it in the vital survival interests of all politicians to sign up. And therein lies the power that citizens already have, even in dominant countries such as the USA, to ensure that their governments sign up and cooperate.
Thanks to this novel way of voting, not only have many UK MPs signed up, some Members of the European, Australian and other parliaments have too. The campaign has supporters in over 70 countries and they are self-organising to take the project forward and roll it out internationally. In 2005 they started a global process by which they - potentially with the help of chosen independent experts - gradually develop the global policies to be included in the campaign's overall policy package. This ensures that the policies to be implemented are democratically developed, globally inclusive, tailored to the needs of each country and yet that the process still remains open and flexible over time. Many non-governmental and campaigning organisations already have well thought out global policies to deal with climate change, oil depletion and other problems but what they don't have is a viable political means for getting them implemented in a globalised world. That's why they're increasin gly seeing this novel campaign as a vehicle for driving politicians and nations towards cooperatively implementing them. They're increasingly recognising that if politicians don't have the unilateral power to deal substantively with global problems, then citizens must logically take the lead both in designing the necessary policies, and in using their collective voting power to drive politicians to implement them simultaneously. So, the power to create a better world is already in our hands - we only have to use it; we only have to realise it.
The campaign we're talking about is called the Simultaneous Policy (or Simpol, for short). As Lembit Opik went on to say, "The compelling logic of Simultaneous Policy is really collective common sense - it's a campaign to find out how common sense really is!"
With global problems now mounting steeply around us, isn't it time more of us found out and played our parts? Isn't it time you let go your misconceptions and opened your heart to all the world? Isn't it time we all jointly discovered, as Gandhi said, that the "divine powers within us are infinite"?
Joining the Simpol campaign is free. Please go now to
http://www.simpol.org/en/main/Concept_FS.htm
Seasons greetings and happy New Year!
John Bunzl
Founder, International Simultaneous Policy Organisation (ISPO)
December, 2008. http://www.simpol.org
----------------------------------------------------------
[i] M.K. Gandhi, An Autobiography, Navajivan Publishing House, Ahmedabad, 1927, 1929.
December 31, 2008
December 12, 2008
Nuclear disarmament synergies
Once you’ve spent a bit of time browsing the proposals put forward for inclusion in the Simultaneous Policy, you see the synergies. This is brought out in some of the policy supplements to the newsletter too, such as that on ‘Turning weapons into windmills’ on the impact on climate change of redirecting weapons spending to renewable energy production.
Similar synergies occurred for me yesterday. The proposal for Nuclear Disarmament did well in the recently concluded voting on policy proposals, gaining 60% approval for its further development. Mark Horler has taken up the challenge and posted a ‘work in progress’ expanding on the initial proposal to reference a proposed Nuclear Weapons Convention. He is looking for seconders for this to go forward. You can add your name at:
http://www.simpol.org.uk/forum/index.php?topic=90.0
At the same time, I saw a news report of a new international organisation called Global Zero, which launched a campaign this week on exactly the same issue.
According to the International Business Times:
http://www.ibtimes.com/prnews/20081211/dc-global-zero-nukes.htm
---
Global Zero released a poll of 21 countries that found global public opinion overwhelmingly favors an international agreement for eliminating all nuclear weapons according to a timetable -- 76 percent of respondents across all countries polled favor such an agreement. The question specified that "all countries would be monitored to ensure they follow the agreement." In the five nations with large nuclear arsenals and advanced delivery systems, large majorities favor the plan -- Russia (69%), the United States (77%), China(83%), France (86%), and Great Britain (81%). In nations that do not have nuclear weapons, similarly large majorities favor it.
---
This week too I wrote of the financial crisis and how re-thinking how we calculate GDP would prompt very different policy action from that we are seeing from our leaders, who encouraging people to take on more debt and consume more to get the world out of recession. Putting arms money into factors that boost health, environmental and social issues would make the ‘Beyond GDP’ figure improve. I wasn’t initially sympathetic to the ‘Beyond GDP’ proposal – which gained 64% approval – but with the prominence given to GDP figures in policy making now see the point. Also highly relevant is the proposal that ‘weapons spending be excluded from GDP’ - which gained 60% approval (though the proposer has today insisted that this proposal be withdrawn - the Policy Committee shortly to be elected will need to face in the new year how to handle this situation given it received the backing of Adopters).
You can sign up in support of the Global Zero campaign on their website at:
http://www.globalzero.org/
But I would suggest also sending them a message to back the disarmament proposals within the context of the Simultaneous Policy and giving the Nuclear Weapons Convention your support at:
http://www.simpol.org.uk/forum/index.php?topic=90.0
The Simultaneous Policy leads us to think of a coherent package of measures, addressing the major issues facing our planet, not each in isolation. If we can harness some of the Global Zero energy to the broader Simultaneous Policy campaign and vice versa it will be mutually beneficial.
Similar synergies occurred for me yesterday. The proposal for Nuclear Disarmament did well in the recently concluded voting on policy proposals, gaining 60% approval for its further development. Mark Horler has taken up the challenge and posted a ‘work in progress’ expanding on the initial proposal to reference a proposed Nuclear Weapons Convention. He is looking for seconders for this to go forward. You can add your name at:
http://www.simpol.org.uk/forum/index.php?topic=90.0
At the same time, I saw a news report of a new international organisation called Global Zero, which launched a campaign this week on exactly the same issue.
According to the International Business Times:
http://www.ibtimes.com/prnews/20081211/dc-global-zero-nukes.htm
---
Global Zero released a poll of 21 countries that found global public opinion overwhelmingly favors an international agreement for eliminating all nuclear weapons according to a timetable -- 76 percent of respondents across all countries polled favor such an agreement. The question specified that "all countries would be monitored to ensure they follow the agreement." In the five nations with large nuclear arsenals and advanced delivery systems, large majorities favor the plan -- Russia (69%), the United States (77%), China(83%), France (86%), and Great Britain (81%). In nations that do not have nuclear weapons, similarly large majorities favor it.
---
This week too I wrote of the financial crisis and how re-thinking how we calculate GDP would prompt very different policy action from that we are seeing from our leaders, who encouraging people to take on more debt and consume more to get the world out of recession. Putting arms money into factors that boost health, environmental and social issues would make the ‘Beyond GDP’ figure improve. I wasn’t initially sympathetic to the ‘Beyond GDP’ proposal – which gained 64% approval – but with the prominence given to GDP figures in policy making now see the point. Also highly relevant is the proposal that ‘weapons spending be excluded from GDP’ - which gained 60% approval (though the proposer has today insisted that this proposal be withdrawn - the Policy Committee shortly to be elected will need to face in the new year how to handle this situation given it received the backing of Adopters).
You can sign up in support of the Global Zero campaign on their website at:
http://www.globalzero.org/
But I would suggest also sending them a message to back the disarmament proposals within the context of the Simultaneous Policy and giving the Nuclear Weapons Convention your support at:
http://www.simpol.org.uk/forum/index.php?topic=90.0
The Simultaneous Policy leads us to think of a coherent package of measures, addressing the major issues facing our planet, not each in isolation. If we can harness some of the Global Zero energy to the broader Simultaneous Policy campaign and vice versa it will be mutually beneficial.
December 9, 2008
Reforming the financial markets - part 2
In part one of this article I examined the credit crunch and how this has brought the world to the brink of financial collapse and began to look at proposals for recovering the situation.
Bad news continues to arrive. Today there are worrying figures for the UK economy, suggesting that industrial output has fallen by 5.2% compared to a year ago. The television news is tracking how many thousands of jobs are being lost every week. The country is officially in recession as the Gross Domestic Product (GDP) is falling. There is also the fear of deflation - that is goods becoming cheaper. This is bad news because if the new HD TV I've been planning to buy is likely to be cheaper in 3 months time, I'll wait to buy it. If people put off purchases, the economy will contract even more.
Nobel laureate for economics, Paul Krugman, puts the necessary action in simple terms: "Policy-makers around the world need to do two things: get credit flowing again and prop up spending."
This has seen governments take shares in banks to improve their financial position and to put pressure on them to lend. Central bank interest rates have been cut to make loans, and particularly mortgages, cheaper so people have more money to spend. Various governments are trying 'fiscal stimulus' packages - tax cuts, again to put more money in people's pockets in the hope they will spend it, so boosting the economy. In the UK, the government is trying to make homeowners feel more secure - and so able to spend - by promising help with paying mortgages if they become unemployed or suffer a drop in income.
At the same time governments are planning public works. Plans are not yet announced, but there is talk of investment in green infrastructure projects to reduce carbon emissions. In the US, car manufacturers who are all but bankrupt are being offered funds to re-tool to produce energy efficient green vehicles.
To fund the investment and the tax cuts, governments are having to borrow money. They do this by issuing bonds. These are offered to investors. They do not pay the highest interest, but are supposed to be attractive because they are safe : governments don't default on loans. There is a problem, however, with many governments trying to attract investment as they may have to offer higher returns to be sure to raise what they need. If these rates go up, it will feed through to the mortgage rates. There is an analysis of this situation in The Guardian at:
http://www.guardian.co.uk/money/2008/dec/04/government-bonds-investments
Now the Monetary Reform proposals put forward for inclusion in the Simultaneous Policy suggested that instead of borrowing money in this way, governments should simply receive the money from the central bank, which creates it out of nothing for spending into circulation. This has an attraction for governments and tax payers, but what would the wider implications be? I imagine that if a government was creating money in a way economist thought was diluting its value, then the currency would fall against others. That is already happening to the pound with the increased borrowing. Perhaps other policies put forward for inclusion in the Simultaneous Policy would prevent this, such as the Tobin Tax on currency exchanges (aimed to dampen speculation) or the International Clearing Union, as proposed by Keynes to ensure companies balanced their imports and exports. It would be great to hear from Monetary Reformers how their proposals would work in the current situation and why this would be better than the methods being followed.
The methods that are being followed are geared to getting people spending, to get the GDP figure up and to ensure there is sufficient demand for goods and services to stop prices deflating. The strategy is to get back to business as usual in the shortest possible time, which the most optimistic analysts seem to say will take a least a year.
But what if we look at the crisis as an opportunity for restructuring how the economy works? The Simultaneous Policy approach allows us to think radically about what we might do.
So here is a possible set of policies that could be implemented. They are offered not so much as a manifesto to be pursued, but more to show that if we remove the old boundaries set around policy making, we can address a wide range of apparently intractable problems. I hope others who are more knowledgeable than me will be inspired to put together something more sensible.
For me there is something terribly wrong that the response to the credit crunch is to try to get people to borrow more money and spend it to keep the GDP figures up. Isn't this what got us into the mess in the first place?
Let's question the basic assumption here that increasing GDP should be the aim of policy makers. The human race is already using more resources than the Earth can provide - a UN study suggests we need 1.2 Earths for current consumption patterns, and because we only have one Earth, it is suffering irrepairable damage and non-renewable resources are being exhausted.
The third most popular policy proposal in recent voting was 'Beyond GDP' - which calls for "health, social and environmental statistics" to complement wealth statistics in providing the measure of the economic well being of the country.
I didn't initially see the point of this proposal, because there is no explanation as to what difference it would make to policy making or why policy makers would look to this figure rather than the conventional GDP figure. But recent events have shown the great weight that is put on these numbers.
The calculation of such influential numbers is controversial. A thread in the discussion forum suggests that the US government has cooked the books to improve GDP figures and that on a proper measure, the US economy has been in recession since 2000. This chimes with an analysis of the US economy by journalist Larry Elliot, who describes how the US economy was been held up by cheap money coming from countries that had taken over much of the US manufacturing base and fuelling the credit boom. See:
http://www.guardian.co.uk/business/2008/nov/21/us-economy-recession
Well, let's try cooking the number another way to include the 'Beyond GDP' factors. While the economic slow-down will reduce this number, less consumption and less travel will actually benefit the environment, so that will improve the number.
Policy makers can look at boosting the 'Beyond GDP' elements in addition or instead of the economic part. Investing in green infrastructure would be good for both - and the 'Beyond GDP' figure should perhaps be suffering a major reduction while the economy is based on unsustainable energy use and harmful greenhouse gas emissions. Anything to counter this will start to make things look much better.
All the same, the economy is slowing down and people are being made redundant. A war has been a way to turn this around in the past, so it is perhaps a sensible precaution to remove weapons spending from the GDP calculation, as has been proposed and supported by Simultaneous Policy Adopters in voting.
To ensure full employment, policy makers could take the step of cutting the working week to 30 hours or 4 days, as a permanent change. This would mean for every 4 employees, a business would take on an extra worker. If people were paid for the hours they worked, then the costs to business would be the same.
What about employees, forced to cut working hours and pay? Well, firstly in parallel to the restructuring of the working week, investment could be made in community projects to provide activities for the free day. For example, parents could easily form a rota for walking kids to school, cutting out the school run. Those that volunteer for say 6 months, could be eligible for coordinator roles, with payments attached.
Extra staff could be taken on at schools to provide adult education and sports for parents on their extra day off. With the olympics coming up in the UK in 2012, there could be a national programme for a people's games to take place after the international event, where amateurs winning local heats will compete on a national stage.
There could be a new national allotment scheme, with community workers helping people use their extra free day to grow food locally.
Indeed, local life will be promoted, to build up the sense of community and volunteering once more. Grants can be made available for communities that want to organize refurbishing or constructing local amenities. If more adults are around during the day, this will have a positive impact on anti-social behaviour and crime. This will all reflect well in the 'Beyond GDP' figures.
Some people would find it hard to manage with a 20% cut in income. But in some respects life will be cheaper. If polluter-pays taxes are included on transport, for example, people will switch from weekend mini-breaks in cities across Europe to local trips, so saving money and carbon emissions. That particular party has to come to an end.
But there are steps that could be taken for managing a transition. People who need to maintain income levels could work overtime on their 5th day. The cost to the business will be higher - time and a half, for example - which could be offset in the short term by tax cuts. But these would gradually be phased out, so in the longer term staff will adjust to the four-day week.
So we come through the recession with less consumption, more time with family and strengthened communities, progress towards sustainable energy use, full employment, populations eating and exercising more healthily and a measure of the economy that values more than money.
Investors will look to the rising 'Beyond GDP' figure for the UK and see it is a country with a bright future.
There are no doubt other implications of this approach and perhaps better action that could be taken. We need to talk about them.
The conventional approach of getting people to take on more debt to continue consuming more than they need and more than the planet can provide is surely not a better option.
Bad news continues to arrive. Today there are worrying figures for the UK economy, suggesting that industrial output has fallen by 5.2% compared to a year ago. The television news is tracking how many thousands of jobs are being lost every week. The country is officially in recession as the Gross Domestic Product (GDP) is falling. There is also the fear of deflation - that is goods becoming cheaper. This is bad news because if the new HD TV I've been planning to buy is likely to be cheaper in 3 months time, I'll wait to buy it. If people put off purchases, the economy will contract even more.
Nobel laureate for economics, Paul Krugman, puts the necessary action in simple terms: "Policy-makers around the world need to do two things: get credit flowing again and prop up spending."
This has seen governments take shares in banks to improve their financial position and to put pressure on them to lend. Central bank interest rates have been cut to make loans, and particularly mortgages, cheaper so people have more money to spend. Various governments are trying 'fiscal stimulus' packages - tax cuts, again to put more money in people's pockets in the hope they will spend it, so boosting the economy. In the UK, the government is trying to make homeowners feel more secure - and so able to spend - by promising help with paying mortgages if they become unemployed or suffer a drop in income.
At the same time governments are planning public works. Plans are not yet announced, but there is talk of investment in green infrastructure projects to reduce carbon emissions. In the US, car manufacturers who are all but bankrupt are being offered funds to re-tool to produce energy efficient green vehicles.
To fund the investment and the tax cuts, governments are having to borrow money. They do this by issuing bonds. These are offered to investors. They do not pay the highest interest, but are supposed to be attractive because they are safe : governments don't default on loans. There is a problem, however, with many governments trying to attract investment as they may have to offer higher returns to be sure to raise what they need. If these rates go up, it will feed through to the mortgage rates. There is an analysis of this situation in The Guardian at:
http://www.guardian.co.uk/money/2008/dec/04/government-bonds-investments
Now the Monetary Reform proposals put forward for inclusion in the Simultaneous Policy suggested that instead of borrowing money in this way, governments should simply receive the money from the central bank, which creates it out of nothing for spending into circulation. This has an attraction for governments and tax payers, but what would the wider implications be? I imagine that if a government was creating money in a way economist thought was diluting its value, then the currency would fall against others. That is already happening to the pound with the increased borrowing. Perhaps other policies put forward for inclusion in the Simultaneous Policy would prevent this, such as the Tobin Tax on currency exchanges (aimed to dampen speculation) or the International Clearing Union, as proposed by Keynes to ensure companies balanced their imports and exports. It would be great to hear from Monetary Reformers how their proposals would work in the current situation and why this would be better than the methods being followed.
The methods that are being followed are geared to getting people spending, to get the GDP figure up and to ensure there is sufficient demand for goods and services to stop prices deflating. The strategy is to get back to business as usual in the shortest possible time, which the most optimistic analysts seem to say will take a least a year.
But what if we look at the crisis as an opportunity for restructuring how the economy works? The Simultaneous Policy approach allows us to think radically about what we might do.
So here is a possible set of policies that could be implemented. They are offered not so much as a manifesto to be pursued, but more to show that if we remove the old boundaries set around policy making, we can address a wide range of apparently intractable problems. I hope others who are more knowledgeable than me will be inspired to put together something more sensible.
For me there is something terribly wrong that the response to the credit crunch is to try to get people to borrow more money and spend it to keep the GDP figures up. Isn't this what got us into the mess in the first place?
Let's question the basic assumption here that increasing GDP should be the aim of policy makers. The human race is already using more resources than the Earth can provide - a UN study suggests we need 1.2 Earths for current consumption patterns, and because we only have one Earth, it is suffering irrepairable damage and non-renewable resources are being exhausted.
The third most popular policy proposal in recent voting was 'Beyond GDP' - which calls for "health, social and environmental statistics" to complement wealth statistics in providing the measure of the economic well being of the country.
I didn't initially see the point of this proposal, because there is no explanation as to what difference it would make to policy making or why policy makers would look to this figure rather than the conventional GDP figure. But recent events have shown the great weight that is put on these numbers.
The calculation of such influential numbers is controversial. A thread in the discussion forum suggests that the US government has cooked the books to improve GDP figures and that on a proper measure, the US economy has been in recession since 2000. This chimes with an analysis of the US economy by journalist Larry Elliot, who describes how the US economy was been held up by cheap money coming from countries that had taken over much of the US manufacturing base and fuelling the credit boom. See:
http://www.guardian.co.uk/business/2008/nov/21/us-economy-recession
Well, let's try cooking the number another way to include the 'Beyond GDP' factors. While the economic slow-down will reduce this number, less consumption and less travel will actually benefit the environment, so that will improve the number.
Policy makers can look at boosting the 'Beyond GDP' elements in addition or instead of the economic part. Investing in green infrastructure would be good for both - and the 'Beyond GDP' figure should perhaps be suffering a major reduction while the economy is based on unsustainable energy use and harmful greenhouse gas emissions. Anything to counter this will start to make things look much better.
All the same, the economy is slowing down and people are being made redundant. A war has been a way to turn this around in the past, so it is perhaps a sensible precaution to remove weapons spending from the GDP calculation, as has been proposed and supported by Simultaneous Policy Adopters in voting.
To ensure full employment, policy makers could take the step of cutting the working week to 30 hours or 4 days, as a permanent change. This would mean for every 4 employees, a business would take on an extra worker. If people were paid for the hours they worked, then the costs to business would be the same.
What about employees, forced to cut working hours and pay? Well, firstly in parallel to the restructuring of the working week, investment could be made in community projects to provide activities for the free day. For example, parents could easily form a rota for walking kids to school, cutting out the school run. Those that volunteer for say 6 months, could be eligible for coordinator roles, with payments attached.
Extra staff could be taken on at schools to provide adult education and sports for parents on their extra day off. With the olympics coming up in the UK in 2012, there could be a national programme for a people's games to take place after the international event, where amateurs winning local heats will compete on a national stage.
There could be a new national allotment scheme, with community workers helping people use their extra free day to grow food locally.
Indeed, local life will be promoted, to build up the sense of community and volunteering once more. Grants can be made available for communities that want to organize refurbishing or constructing local amenities. If more adults are around during the day, this will have a positive impact on anti-social behaviour and crime. This will all reflect well in the 'Beyond GDP' figures.
Some people would find it hard to manage with a 20% cut in income. But in some respects life will be cheaper. If polluter-pays taxes are included on transport, for example, people will switch from weekend mini-breaks in cities across Europe to local trips, so saving money and carbon emissions. That particular party has to come to an end.
But there are steps that could be taken for managing a transition. People who need to maintain income levels could work overtime on their 5th day. The cost to the business will be higher - time and a half, for example - which could be offset in the short term by tax cuts. But these would gradually be phased out, so in the longer term staff will adjust to the four-day week.
So we come through the recession with less consumption, more time with family and strengthened communities, progress towards sustainable energy use, full employment, populations eating and exercising more healthily and a measure of the economy that values more than money.
Investors will look to the rising 'Beyond GDP' figure for the UK and see it is a country with a bright future.
There are no doubt other implications of this approach and perhaps better action that could be taken. We need to talk about them.
The conventional approach of getting people to take on more debt to continue consuming more than they need and more than the planet can provide is surely not a better option.
December 8, 2008
Reforming the financial markets - part 1
Why is the financial system on the brink of collapse, what is being done about it and what better alternatives could be brought in through the Simultaneous Policy campaign? Those are three questions which I aim to answer over the course of these two articles.
There is an in-depth article on the credit crunch on The Guardian website from Paul Krugman, new Nobel laureate for economics, which provides valuable insight. I'm not going to attempt to reproduce his argument, but will put some of it in terms that I can understand and fill in some of the gaps. For his article see:
http://www.guardian.co.uk/books/2008/dec/06/paul-krugman-financial-crisis-2008
Those who have followed proposals put forward for inclusion in the Simultaneous Policy will be familiar that for Monetary Reform, originating from James Robertson. This claims that commercial banks create money out of nothing as interest-bearing loans and demands that this role be taken over by central banks. Commercial banks would then be "linking potential lenders to potential borrowers as many people wrongly assume they are now." The proposals failed to gain large support in the recently-completed voting round and are on the way out. Why? I think because people thought it cannot be true that banks create money out of nothing, otherwise credit would not have dried up.
The fact is that commercial banks do need lenders. This is why banks and building societies offer interest to savers to have a capital base from which to lend. If you want a loan, they can give you some of this money, which you repay with interest. Some of the interest goes to the lender, some goes to the bank - as profits and to cover liabilities because some borrowers will default. Banks are required to keep a certain level of stocks of money to maintain confidence in case savers decide to withdraw their deposits - if the bank told savers their money was not available no-one would trust the bank, everyone would try to remove their money and it would collapse.
So banks are acting as brokers between lenders and borrowers. However, because most savers simply leave their money in the bank to earn the interest, the banks are allowed a trick. They are able to lend more money than they really have on deposit. If you sign a contract for a mortgage, the bank can create the money out of nothing, write the amount into your bank account and you can use it to buy the house. This system is regulated by the central bank. It sets a limit on how much money the commercial bank can create.
Part of the solution being followed by central banks in the current crisis is to change the rules so that banks have to have a better ratio of loans to savings - that is, more money on deposit. This is why in the UK people say the banks that have been bailed out by the government are in a bind. Publicly the government is saying the banks should start lending again. But at the same time, the banks are trying to build up their deposits. This also explains why commercial banks feel it hard to pass on the full cut in the bank base rate when the Bank of England makes cuts.
According to Krugman, this issue will resolve itself and is not too serious in isolation.
The bigger problem is the shadow banking system, which is not regulated to the same degree. This is where the sub-prime mortgage problem originates.
An important fact to realise is that the assets of a bank are not the money they have from its savers, it is the loans they have with borrowers. Loans provide income. So a mortgage contract is an asset. What has happened is these have been traded, en masse. Investors have bought them because they provide a return as people repay the mortgage with interest. They were thought to be low risk because if someone couldn't pay, the house would be sold and clear the debt, plus a profit on top for the owner of the debt in default fees. But it all went wrong because house prices stopped going up and people who should never have been given loans in the first place started to default. Even if the house could be sold, the investor would get less than they paid to buy the contract.
So investors with billions of pounds invested in these assets have had to write them off as losses, which, for some, has pushed them to the edge of bankruptcy, or even into bankruptcy, in the case of Lehman Brothers.
Because financial markets have become globalized, these losses have had a devastating effect.
The banks and hedge funds that have made huge losses are trying to recover their positions. So they are sacking people. They are also selling assets they own overseas. I was living in Brazil until recently and the stock market was falling drastically as investors cashed in their assets. The supply of dollars dried up as investors bought up supplies to repatriate the money. Brazilian companies needing dollars to pay for imported materials have found it difficult to obtain dollars and the value of the dollar has soared, making imports more expensive and adding to costs. At the same time, Americans are tightening their belts so there is less of an export market. Annual growth in Brazil, predicted to be above 5% is now likely to be below 3%. Other countries are being tipped into recession.
There is another factor at play identified by Krugman. It is that money lending is now global, where banks or shadow banks find money at cheap interest rates (such as Japanese Yen) and lend it in countries with high interest rates (such as Brazil). This is called carry trade.
Krugman simply states: "And one of the casualties of the latest round of panic was the carry trade. The conduit of funds from Japan and other low-interest nations was cut off."
Personally I need a few more dots joined up to understand why this happened and the implications. Funds have dried up because faith in the organisations that ran the carry trade has evaporated with the collapse of Lehman Brothers, which was unable to honour its contracts.
Prior to this, people with Yen were keen to lend them even if the return was small. With lots of Yen on offer, Yen were cheap to convert into the currency of other countries where the money was to be leant. When the borrower in, say, Brazil, repaid the loan in Brazilian Reais, this was converted back to Yen and the payments made along the chain.
Now with no-one wanting to lend out Yen, for fear they won't be repaid, the exchange rate has gone up. A simple case of supply and demand. In Brazil people are still desperately trying to buy foreign exchange, so the value of the Real has fallen. The result? The conduit organisations receive the same amount of Reais, but they are worth less. At the other end, they get less Yen for them, because Yen are more expensive. So carry trade is not a profitable business.
Krugman says this is the real threat to the global system, because unfreeing this flow of financing is going to be far, far harder than persuading commercial banks to lend to would-be home owners and small businesses. The sums are many times greater, the business is international and regulation barely exists.
His solution is quick to say: "Policy-makers around the world need to do two things: get credit flowing again and prop up spending."
With major industrial nations posting a drop in GDP, the measure of economic growth, and emerging markets slowing, the fear is a global recession, which means job losses and people falling into poverty.
At least in the conventional model of economics that Krugman and others are following.
This is the scenario where it would be great to hear what the Monetary Reform proposals submitted for inclusion in the Simultaneous Policy would contribute. There are other aspects to it, still. Such as what has happened to the insurance that investors have bought in case borrowers default. But this is as much complexity as we need for now, or at least, as much as I can cope with.
In the second article, I'll look again at the Monetary Reform proposal and put forward some others showing how the coherent, policy making approach enabled by the Simultaneous Policy could make a really radical transformation addressing many issues simultaneously.
There is an in-depth article on the credit crunch on The Guardian website from Paul Krugman, new Nobel laureate for economics, which provides valuable insight. I'm not going to attempt to reproduce his argument, but will put some of it in terms that I can understand and fill in some of the gaps. For his article see:
http://www.guardian.co.uk/books/2008/dec/06/paul-krugman-financial-crisis-2008
Those who have followed proposals put forward for inclusion in the Simultaneous Policy will be familiar that for Monetary Reform, originating from James Robertson. This claims that commercial banks create money out of nothing as interest-bearing loans and demands that this role be taken over by central banks. Commercial banks would then be "linking potential lenders to potential borrowers as many people wrongly assume they are now." The proposals failed to gain large support in the recently-completed voting round and are on the way out. Why? I think because people thought it cannot be true that banks create money out of nothing, otherwise credit would not have dried up.
The fact is that commercial banks do need lenders. This is why banks and building societies offer interest to savers to have a capital base from which to lend. If you want a loan, they can give you some of this money, which you repay with interest. Some of the interest goes to the lender, some goes to the bank - as profits and to cover liabilities because some borrowers will default. Banks are required to keep a certain level of stocks of money to maintain confidence in case savers decide to withdraw their deposits - if the bank told savers their money was not available no-one would trust the bank, everyone would try to remove their money and it would collapse.
So banks are acting as brokers between lenders and borrowers. However, because most savers simply leave their money in the bank to earn the interest, the banks are allowed a trick. They are able to lend more money than they really have on deposit. If you sign a contract for a mortgage, the bank can create the money out of nothing, write the amount into your bank account and you can use it to buy the house. This system is regulated by the central bank. It sets a limit on how much money the commercial bank can create.
Part of the solution being followed by central banks in the current crisis is to change the rules so that banks have to have a better ratio of loans to savings - that is, more money on deposit. This is why in the UK people say the banks that have been bailed out by the government are in a bind. Publicly the government is saying the banks should start lending again. But at the same time, the banks are trying to build up their deposits. This also explains why commercial banks feel it hard to pass on the full cut in the bank base rate when the Bank of England makes cuts.
According to Krugman, this issue will resolve itself and is not too serious in isolation.
The bigger problem is the shadow banking system, which is not regulated to the same degree. This is where the sub-prime mortgage problem originates.
An important fact to realise is that the assets of a bank are not the money they have from its savers, it is the loans they have with borrowers. Loans provide income. So a mortgage contract is an asset. What has happened is these have been traded, en masse. Investors have bought them because they provide a return as people repay the mortgage with interest. They were thought to be low risk because if someone couldn't pay, the house would be sold and clear the debt, plus a profit on top for the owner of the debt in default fees. But it all went wrong because house prices stopped going up and people who should never have been given loans in the first place started to default. Even if the house could be sold, the investor would get less than they paid to buy the contract.
So investors with billions of pounds invested in these assets have had to write them off as losses, which, for some, has pushed them to the edge of bankruptcy, or even into bankruptcy, in the case of Lehman Brothers.
Because financial markets have become globalized, these losses have had a devastating effect.
The banks and hedge funds that have made huge losses are trying to recover their positions. So they are sacking people. They are also selling assets they own overseas. I was living in Brazil until recently and the stock market was falling drastically as investors cashed in their assets. The supply of dollars dried up as investors bought up supplies to repatriate the money. Brazilian companies needing dollars to pay for imported materials have found it difficult to obtain dollars and the value of the dollar has soared, making imports more expensive and adding to costs. At the same time, Americans are tightening their belts so there is less of an export market. Annual growth in Brazil, predicted to be above 5% is now likely to be below 3%. Other countries are being tipped into recession.
There is another factor at play identified by Krugman. It is that money lending is now global, where banks or shadow banks find money at cheap interest rates (such as Japanese Yen) and lend it in countries with high interest rates (such as Brazil). This is called carry trade.
Krugman simply states: "And one of the casualties of the latest round of panic was the carry trade. The conduit of funds from Japan and other low-interest nations was cut off."
Personally I need a few more dots joined up to understand why this happened and the implications. Funds have dried up because faith in the organisations that ran the carry trade has evaporated with the collapse of Lehman Brothers, which was unable to honour its contracts.
Prior to this, people with Yen were keen to lend them even if the return was small. With lots of Yen on offer, Yen were cheap to convert into the currency of other countries where the money was to be leant. When the borrower in, say, Brazil, repaid the loan in Brazilian Reais, this was converted back to Yen and the payments made along the chain.
Now with no-one wanting to lend out Yen, for fear they won't be repaid, the exchange rate has gone up. A simple case of supply and demand. In Brazil people are still desperately trying to buy foreign exchange, so the value of the Real has fallen. The result? The conduit organisations receive the same amount of Reais, but they are worth less. At the other end, they get less Yen for them, because Yen are more expensive. So carry trade is not a profitable business.
Krugman says this is the real threat to the global system, because unfreeing this flow of financing is going to be far, far harder than persuading commercial banks to lend to would-be home owners and small businesses. The sums are many times greater, the business is international and regulation barely exists.
His solution is quick to say: "Policy-makers around the world need to do two things: get credit flowing again and prop up spending."
With major industrial nations posting a drop in GDP, the measure of economic growth, and emerging markets slowing, the fear is a global recession, which means job losses and people falling into poverty.
At least in the conventional model of economics that Krugman and others are following.
This is the scenario where it would be great to hear what the Monetary Reform proposals submitted for inclusion in the Simultaneous Policy would contribute. There are other aspects to it, still. Such as what has happened to the insurance that investors have bought in case borrowers default. But this is as much complexity as we need for now, or at least, as much as I can cope with.
In the second article, I'll look again at the Monetary Reform proposal and put forward some others showing how the coherent, policy making approach enabled by the Simultaneous Policy could make a really radical transformation addressing many issues simultaneously.
Subscribe to:
Posts (Atom)
