A commentator who uses the name Vinnie on this blog asked this question this morning:
I just wondered if I could put forward a suggestion for a future “Question of The Day”?
If we were to create an economy from scratch, what would it look like?
Would we have CBRs, broad money, private banks (or even nationalised ones), Treasury bonds, direct BoE financing of the Treasury. Sovereign money (Positive Money style) etc etc?
What bits of the present system would we keep (and why)?
Is the future aim a sustainable economy and if so, what would that actually mean and look like?
Big topic, I know, but would be good to see (and understand) some of the ideas that are out there.
A big topic indeed, but what does anyone think?
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
Good question, but the starting place to an answer I think is what sort of society do we want, for an economy is a means of achieving and facilitating that society as a place for human flourishing in the broad context of a flourishing social and ecological environment. I’d suggest that we might include the themes from the ‘donut economics’, but my priorities (In no particular order) would be:
Environmentally sustainable (essential)
Reducing social economic inequality
Locally & Democratically accountable in all areas
Caring for the most vulnerable, including support for those who care,
Equality of opportunity in education/training in all years (from infants to life-long), in arts and culture, as well as technology
Supportive provision for basic necessities (housing, utilities, healthy food, public space for recreation)
Reducing unproductive financial speculation and uncertainty
Fostering of diversity, and overcoming of socially divisive prejudicial attitudes
Return of the commons.
Cooperative business models owned by local communities.
Local seasonal food and commodity production distributed by federated networks.
Production for necessity and not for consumptions sake.
Reward for contribution ie health social conservation roles being more rewarded than frontier usage.
Free healthcare for all.
No tax exemptions avoidance or evasion in any form all to contribute equally from income.
A standard Land Tax with all owners registered to pay for infrastructure and Green Energy.
The polluter pays.
Promotion and funding from community of arts music creativity to enrich all society.
A standard basic income for all .
Return of the commons.
Cooperative business models owned by local communities.
Local seasonal food and commodity production distributed by federated networks.
Production for necessity and not for consumptions sake.
Reward for contribution ie health social conservation roles being more rewarded than rentier usage.
Free healthcare for all.
No tax exemptions avoidance or evasion in any form all to contribute equally from income.
A standard Land Tax with all owners registered to pay for infrastructure and Green Energy.
The polluter pays.
Promotion and funding from community of arts music creativity to enrich all society.
A standard basic income for all .
A community (~1000 people) based one.
Mainly self-sufficient.
Only activities that are necessary, and not done by choice are defined as work
Prestige in the community is based on peoples contribution, not on their income, wealth or what they wear or have.
Universal free access to the worlds knowledge and intellectual reserves (e.g. Arts).
The ability to leave
Like the one I am seeking to create in Norfolk
I think the aim must be in that, arbitrarily, 20 years the UK must be self-supportive so that it can support itself from any future shocks. This does not suggest a ‘nationalist’ agenda but that she can generate the supplies needed at a time like this. I appreciate that there will still need to be global trade just because there are certain resources that the UK does not have (such as raw metals).
The economy then needs to be set up to support that by ensuring:
– There is sufficient capacity for electricity generation (whether nuclear, solar, wind etc)
– There is sufficient food and farming
– There is full employment of those who want to work
– There are robust public services to support these, whether rail, local government, education, health etc
– There is sufficient affordable housing for all who need
– The banking sector works to achieve the above
Personally, I don’t think its important whether the above is provided by public or private entities as long as they are available to ALL at ALL times.
An economy which knows (i.e. recognizes, accepts and regards itself as such) that it is a part, an aspect, of the community and society that we all live in and form part of; and that its purpose is to provide for, and enhance the common wealth of, all of us, now and in the future; and that community/society means not only the small group in which we live, but also the greater regional, national and global group of which it forms a part.
Not, as now, something that is essentially self serving.
In order to create an economy from scratch you have to know why you want one.
I’d suggest that would be in order to enhance the well-being of everyone enabling them to live full and interesting lives and to maximize leisure – all by using resources in common, whilst ensuring environmental sustainability.
If you’re agreed on that then you have to do something about fairness because as far as I can see, the laws of chance mean that wealth always concentrates – automatically – in a few hands
https://www.scientificamerican.com/article/is-inequality-inevitable/
and
http://www.progressivepulse.org/economics/wealth-always-trickles-up-its-all-more-maths
So if there is acknowledgement that the workings of any basic economy will increase inequality then there needs to be a recognition that essential to government is the requirement to counterbalance those inequalities based, as they otherwise would be, on luck.
As a start this, it seems to me, means you require not only the rule of law but tax…
More an tax and wealth later, I hope
I don’t think I can add much to the answers given so far. Comrades all. Regaining the commons, cooperative business, ending pointless consumerism, learning to respect and care for the biosphere, direct democracy, sortition or whatever systems we can devise to allow people to lead while minimising the opportunity for abuse of power.
We should organise society so that everyone has what they need to survive including shelter, food, clothing, health services (the motto might be – From each according to their ability, to each according to their need… Dunno, something off the top of my head haha). It would be smart to also do what we can to provide an education system that valued individuals and their differences and trusted children’s innate ability and desire to learn rather than to generate grade-chasing activities which teach no one anything apart from thoughtless obedience.
At the top of it all should be learning how to conduct ourselves so we really minimise damage to the environment, that we learn that we are all part of the same ecosystem. Rapid degrowth is required. A lot less meat and no more flying are part of this. Not going to be very popular. Most people can’t even digest the idea.
Nothing will change meaningfully until a sufficient number of people realise our current system is doomed and is dooming us with it. How this realisation will come about? I don’t know. I am thoroughly pessimistic but the information on blogs like this will hopefully nudge things in the right direction.
… Of course the problem with self-sufficiency is access to the stuff we can’t source or make. Simple trade can sort the former, But many machines and IT are more problematic. We can probably make and service MOST of the mechanical side, Relying on locally generated electricity and 3D printing. Maybe we could do SOME chemical and some pharmaceuticals. But the IT side – the infrastructure needed to make and service is massive.
…that is where we need an economy.
Is it possible that Vinnie has the question the wrong way round?
We don’t try to create an economy. The economy creates us.
well, we are the economy, the economy consists of everything we choose to do.
If we were to start from zero I’d have thought questions about the ownership of land would be paramount.
I don’t know what the answer is but I put the question high on the list.
the idea of ownership of land is rather bizarre,
surely being granted custodianship of some land, not vast tracts, and the custodianship coming with various obligations to care for, maintain and improve in terms of fertility and diversity,
for inspiration I recommend the Code of Hammurabi.
Decentralised with local responsibility and authority for housing, schools, power, health, social care, most roads, policing. Local tax collection makes up bulk of taxation. Political parties elected through PR, with all funding for them raised locally (no central party funding allowed). All votes by secret ballot (including all political assemblies). Outsourcing of any service to be subject to local review, with maximum 5 year contract. Emphasis on human rights within written constitution.
Local taxation to fund local society will be highly regressive. It simply means that the poorest localities will have either the worst social services or the highest tax rates whilst the richest localities have either the best social services or the lowest taxes. We need a progressive tax system for the country as a whole to withdraw money from the economy and funding provided on a progressive basis to local authorities for them to fund local society and by doing so, inject money into the economy.
Agreed George
That’s the problem, in a nutshell
I lived in Wandsworth when it had no council tax….it could afford not to change it
The opportunity to provide resources to the community is equal everywhere! That resource is TIME!
The people of Wandsworth can contribute 25% of their time to community activities, just as well as those living in Beverley in Yorkshire.
It is the use of £s as a proxy for contribution that causes the poverty in Wandsworth!
This may be too simplistic, but I would start by redefining what we mean by wealth. Everyone seems to accept that wealth amounts to cash/money/shares/GDP etc yet wealth only becomes meaningful, when it is converted into something we want – car, house, free health care, free parking, longer life expectancy. I’m not aware of many billionaires who live in one bedroomed flats in Acton, looking at their bank statments going “yep all good”. They generally convert their wealth into things more meaningful to them, whatever they be.
So if we redefined wealth as living in a society with, no homeless, no poverty, fresh air, no crime, no conflict, it would mandate many of the things suggested above, without the desire to hoard. It would mean that society could report how well it is doing, by how society functions for all. A sort of civic pride?
Warren Buffet is an example of a Billionaire still living in a modest home.
Indeed, he only has the 5 bedroom bungalow now, since he sold his beach house for $7.5 million.
Still kept the private jet though.
He does donate billions to good causes, suggesting he realises that wealth only has value when converted
I would start with three principles:
Plant, nurture and prune.
I appreciate the sentiment but we should see the economic system as an enabler, or intermediary element for something higher or, a question that must come after deeper, more challenging ones.
As in:
‘What sort of life do we want to lead?’
‘What sort of society or country do we want?’
‘What standards should we expect and what would be unacceptable?’
I think you tried to do this Richard in your book ‘The Courageous State’ and I still think that as Stafford Beer said (cybernetics) we still need to ‘Think before Think’ when it come to questions like this.
The reason? Why? – because it begins with using our imagination first, that’s why and using our imagination is the first act of throwing aside the cages of orthodoxy of that which we know does not work.
Thanks PSR
Businesses larger than 300 employees should be publicly owned to protect small producers and to encourage staff skills specialisms.
Free trade with huge numbers of unskilled workers isn’t free at all and finally more people are gaining insight into how we might all find a working way forward from yesterday, through today and into a future that is safe.
Slow down, move at the speed of trust.
Make local currencies,
Communities can control their local and trade visas not nationally.
National Health Service should be roots up (supported in time devoted by all to health) not emergency down (only serving in critical diseases).
No porn, safe internet, caring language and body language, designated war zones people can choose to go to that are not near towns or near families. Cease weapon and drug trading. Begin healing of addictions of all kinds.
Work from home, four day working week (not excessive), no commute, no traffic, routine car free street days, more bulk deliveries coordinated appropriately.
Show the poorer nations we are taking our inherited wisdom seriously and putting it into practice ie developing without exploitation of our brothers and sisters.
Become the stewards of our own backyards and keep our gate system true, safe and secure.
Just a flat income tax. 15% or something. No expenditure etc allowed. Oh i would salivate at that prospect – just pay up the same % each year and be done with it.
Flat taxes are a recipe for tax abuse by the rich
I spent ages working on this at one time
I must admit, not sure what the definition being rich is!
I was thinking in line with the flat rate VAT scheme. At one time, i was on that. And the admin was so much easier. It was around 7.5% i think around that time, and to my knowledge, other business people like it as it is so simple to administer ie. based on turnover. I don’t know if it is abused though.
But, i can see how see how the rich, with access to an army of tax specialist, would soon fiind holes in that too. Saw the article in the guardian btw, about needing to open up the discussing on how to tax wealth instead of income. maybe this is part of this too. will look up how flat rate can be abused by the rich.
No problem re VAT on small businesses….totally different for income
Thanks for posting the question Richard.
I’ve been surprisingly busy today!? So have just got up to speed with the debate.
I agree with most of the comments on the type of society we should be aiming for.
The question (which I could of probably worded better) was more about the actual mechanics of money creation in the economy rather than broader philosophical societal questions. (Though I understand that they are related)
Should the relationship between CBRs and broad money still exist?
Should private banking sector be nationalised or even scrapped all together?
Should there only be BoE money? Sovereign Money.
Should government be the money lender to the public, or should that still be private banking that does this?
Or something completely different?
We need bankscapart from the central bank: the skills are entirely different and it is not the central banks job to advance credit to anyone but government
So, we need CBRs
And if credit us to be advanced we have none central bank money
That’s it
Thanks Richard.
Do you see the non central bank money being provided by private or public banks?
If private, then I’m guessing bank regulation would need to be more robust than now?
If public, then in effect, would the government have total control of all the money creation in the economy?
Would you still use Treasury bonds as the mechanism for getting CBRs into the economy or would you go for direct BoE to Treasury funding. Or a combination of both?
Do you see bonds as having stabilising effect in the market? Also a useful tool for temporarily removing money out of circulation and giving people somewhere to save?
I’ve seen suggested elsewhere, (Modernising Money) that we all hold accounts at the BoE.
(No broad money). Private banks would then compete to manage our accounts and run the payments system. It could lend out money (I’m guessing with 100% reserve only. Not creating credit out of thin air). The risk being totally with the private banks and the saver. Is this viable, desirable?
I can live with p[rivate banks
I have no problem with them taking risk
I think the bank payment platform has to be nationalised though – to eliminate risk
And if a bank fails its accounts then continue – this is like rail franchising
I think I have already answered the rest already this morning
I am not at all sure that you are not over compliucating issues
And the idea that we all hold money with the central bank is simply bizarre – because they cannot create credit for us all so where does credit money come from central government? This proposal shows monetary illiteracy in my opinion. Those who propose it are completely off the economic planet of reality
It often helps to forget completely about money. Just ask ‘would we (as a society) be better if X happened?’ and totally ignore the monetary cost. Do we need more doctors? Yes, but we don’t want everyone to be a doctor. Do we need more houses? Yes, but we don’t want the whole country concreted over. We are constrained by resources (but not money) and there can be “too much of a good thing”. However, from where we are today, one more doctor trained or one more house built would clearly be “a good thing”…… so JUST DO IT. We, as a whole, would be better as a result. What is stopping us? Unfortunately it is selfishness. We know that the Government can pay (and then taxes/borrows/creates money to do it). People who ask “where does the money come from?” are usually being wilfully ignorant in order to hang on to what they have. No apologies for quoting JK Galbraith again “The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness”.
Finally, my new economy WOULD have bankers and bond traders! Money and credit have been central to the huge economic gains made over the last 500 years and our current system is excellent at allowing entrepreneurialism and innovation. BUT we need a few tweaks (quite big tweaks).
Money transmission is a utility. Banks do this now but this function should be in public ownership. When (and is always “when” not if) we have a banking crisis the core function of the system for most people would always operate properly. We used to have Girobank…. we should bring it back and everyone should have an account there.
Credit creation is important and I am not sure nationalising this would be a good idea. But currently the lending decision is all about risk and reward – with NO thought about “is it useful?”. So we have banks packed with loans backed by assets (mortgages) and few loans to “real” businesses. There should be privately run banks but there should be credit controls that force banks to build a more diverse and productive loan book.
Central Banking would continue as it is but with a bit more imagination (yes, Mr. Bailey, I am talking about you!!). The major change I would make is to bring it under closer Government control. Monetary policy and fiscal policy should be closely intertwined (MMT etc..) so the whole lot should be coordinated in one place without the charade that is “CB independence”.
There is a lot more to say…. but the weather is good and the newly planted trees need watering. A much more productive activity than sat in front of a screen!
Your desire cor banking is largely akin to mine
Clive
Thanks for the reply.
If you have the time….. Could you please elaborate ont the ideas in the paragraph beginning “money transition is a utility. The banks do this now but this function should be in public ownership”.
Richard has suggested a similar proposal in nationalising the the payment platform. (I’m guessing you mean the same thing Richard?)
How would this be structured and how would it differ from what happy now.
Are you talking about how banks make payments between different current accounts? We all have GiroBank accounts rather than hold our money in NatWest, Lloyds etc?
Enjoy the sun!
I am basically saying that the underpinning architecture of the bank payment process needs to be state-run and that private banks can then operate accounts on top of this – but that if they fail the accounts then revert to a state structure such as a Girobank
A licensing operation then
Would you still see CBRs used for payments between private banks?
Sorry for the questions. I need to know the actual mechanics of it all. (Following the £s) to get a full understanding.
Yes