Friday, 2 September 2011

Irradicating the "Economics of Exploitation"

A great blog from the Renegade Economist ... which makes the case for a new economics ...

"While unearned wealth is both a symptom and a driver of economic injustice, the objective of transformative social change is not to soak the rich, but to create an environment in which economic opportunities are more widely distributed among the population ...

The recent riots and looting in London and other English cities are symptomatic of deep economic dysfunction. The social fabric is straining under the weight of an economics unable to offer any possibility of a different, better future.  The social contract is under greater pressure than at any time since the 1930s. But there is a crucial difference between the world then and the world today: a transformation in our collective moral aspirations that offers a spark of hope for the future, the kind of spark that in the dark days of the mid-20th century it took a world war, and the horrors of the holocaust, to ignite.

A just economy will not emerge from the tired debate between left and right, or endless arguments over whether free markets or state control of the economy deliver the best outcome. Justice requires that we transcend these stale and failed dialectics. Neither the contemporary vision of a free-market economy, nor a state-socialist or Keynes-inspired social democratic model can deliver a just economy; each is too riven by conflicts and compromises to get anywhere close.

Nothing short of fundamental reforms to the three pivotal institutions of the modern economy will do. Without substantial changes to the tax system; the financial system and the monetary system, a just economy will remain beyond reach.

Foundations of a New Social Contract

While a smaller, less expensive, state is perfectly achievable once everyone is permitted a viable stake in the economy, the state will still have an important function for which it will need to raise revenue through taxation. But it should tax the use of land and natural resources, things that are limited supply, rather than wages and profits. Taxing the output of economic activity discourages entrepreneurship and penalises hard work.

Financial markets must be reformed so that their sole purpose becomes the channelling of investment capital to the real, productive economy; activities that create the goods, services and experiences that people need to live decent lives, and the extras that promise the possibility of fulfilment and happiness.

Alongside these changes we need a new system of money creation; one that ensures stability in the money supply and that sufficient credit is available to fund every viable new business start up, or sustainable plan for expansion. Money should no longer be created as debt, as this places an unnecessary and counterproductive burden on both business and the economy as a whole.

Economic Renaissance for the Majority

These measures would curtail the minority enjoyment of unearned wealth and bring the benefits of a dynamic, opportunity-rich economy within reach of many more people. It’s perhaps not easy to imagine such a future economy, and it’s probably impossible to model the precise impact of these changes in terms that conventional economics demands, but such modelling is not necessary. These reforms would have to be implemented gradually so they can be fine-tuned as their impact becomes evident. And a great deal more research is required, especially into the impact that changes in each of these spheres will have on the other two: the mechanisms of the tax, financial and monetary systems are complex and interdependent.

If such changes are to be successfully implemented, they will have to be coordinated internationally. This may seem an impossible goal, but it’s not so very different in scale or complexity to the changes unleashed by the process of economic globalisation over the last thirty or so years; it’s just better motivated.

Over to You…

But none of this can happen without the commitment of a critical mass of people. Where that tipping point lies is impossible to know but it is out there. What we need now is the most successful marketing campaign in history. Central to that campaign should be the message that transformative change to economic structures and institutions is possible, and if such change were achieved, the life experience of the vast majority of human beings would be dramatically improved.

Next week, in the final article in this series, I shall look at the prospects for this campaign, and at the importance of established democratic structures in the process of revolutionary economic change"

"Nothing in the world... not all the armies... is as powerful as an idea whose time has come." Victor Hugo 

... This is a great article. IMHO the current form of 'economics' is a mixture of Poweromics (the 'economics' of exploitation, self interest and greed) and little will change until Ignoromics reduces (as suggested in the last paragraph ... 'over to you').

For instance over the last few days the banks have made a conserted and co-ordinated effort (with the CBI - the "Voice of Banks" - not the "Voice of Business" - as they are most bankrolled by the Banks) to strike fear in the public and threaten the Government not to split retail banking away from investment banking (nb which is being brought in to stop taxpayers having to bailout reckless bankers again). Creating fear is a common tactic used by those in Power (remember the Iraq war and those 'weapons of mass destruction'?) ... and the banks are using the 'destruction of the economy' as their 'weapon of choice' (even though it is they that destroyed the economy in the first place)! 

The Liberal Democrats say the want to press ahead with reform, but David Cameron and George Osborne are taking the opportunity (i.e. comments about the threats to the economy) to say they would like to 'park the reforms in the long grass' until the economy is stronger (anything to do with the 'backhanders', lobbying and their ultra-rich friends perhaps?) Just have a guess where these guys are likely to go after they leave Politics ... and I am sure it will be, just like Tony Blair before them, to lucrative jobs in the City!

The problem with the current economics is that it is not just the financial system that is corrupt, but it is all the other essential pillars of society too ... such as Government, the Media (remember Murdoch and the News of the World) and the Judiciary.

The move away from taxing jobs/profit to taxing unearned income/wealth (e.g. land values, gambling, financial transactions etc) is IMHO a 'no brainer' ... as is taxing the extraction of limited natural resources ... and making illegal the electronic counterfeiting of money (which the legal system allows the banks to do every day - i.e. creating money out of thin air, loaning it out and charging interest on it!) as well as the reckless and deliberate destabilising activities of banks (e.g. shorting, and the creation of 'toxic products' such as credit default swaps).

Current economics is unfortunately proving itself to be more about the movement of money/resources to wherever Governments allow them to exploit/profit from people the most ... a form of 'economics' contrary to 'growth' and 'well-being' ... and more about the "Economics of Exploitation".