The Viable Economy serialised – About investment, money, credit and debt.

We continue the serialisation of our intervention, The Viable Economy, this time with just one section, on investment, money, credit and debt. You can download the whole pamphlet as a pdf file, here.
If you like it, why not make a donation towards our work. Our costs are modest, but we are unfunded.

7) About investment, money, credit and debt.

The problem

Investment is crucial to the way economies develop over time; we invest funds today in order to build up the sources of future prosperity.

The way in which investment functions, to which enterprises it goes and what activities it supports, determines the type of economy we will have.

Currently, dominant thinking about investment neither reflects the realities of the money system nor the use of the surplus produced by the economy. This has some practical consequences.

1) In order to attract external investment into both the national and regional economies: whilst wages are driven down ‘to compete with cheap labour economies’, there is an effort to increase the skills of the workforce. The first contributes to declining real incomes and thereby to the increase in personal debt while the second instrumentalises and narrows education so it solely serves economic interests, thereby destroying it.

2) Meanwhile, the real, productive economy is unattractive to investors, and profits are misdirected to speculative, unproductive activities such as betting on the financial markets or property price inflation both in the UK and internationally.

3) And both government and the banks ignore the potential that the creation of money (“out of thin air”) has for sourcing investment in socially and ecologically desirable programmes that could also, if properly controlled, maintain prosperity in a post-growth economy. Indeed, “Modern Money Theory”, which we draw on here, suggests that austerity is unnecessary1.

Investment in the unviable economy, then, is a process which fails to address the costs we are imposing on the future and thus undermines future prosperity rather than nurturing it. The unviable financial investment infrastructure is a de-personalised system of profit maximization which results overwhelmingly in the transfer of wealth to financiers and the wealthy through the uneconomic processes of rent extraction and ecological asset liquidation. It fails on the three criteria of economic, social and ecological viability.

The viable alternative

In the viable economy, investment comes predominantly from the following internal or endogenous2 sources:

  • surplus generated in non-exploitative ways by the local economy, including savings

  • fiat money created by public and private banks, under strict rules and regulation3

  • government-created money, as in the proposals from the New Green Deal Group for strategic, or “green quantitative easing”4. Although our view is that this needs to be within the “envelope” of the permissible size of economy dictated by ecological reality.

  • a share of the profits of industries operating in the economy, that rather than seeping out is, by agreement, utilised locally as what colleagues at CRESC call the ‘social franchise’5, a pay-back to the community that hosts and pays for the enterprise.

  • Tax revenues, or related funding streams, such as that envisaged under the ‘cap and share’ proposals6.

The viable economy will require financial intermediaries for savings and investments which do not starve communities of the affordable finance they need to invest in their futures. The monolithic and brittle ‘too big to fail’ banking system needs to be radically diversified for a resilient and viable economy. Public municipal banks with a regional remit to support their areas can help direct investment towards the basis of social and ecological prosperity.

In an ecologically viable economy returns to investors must be more modest and the cost of credit fair and reasonable.

Some viable policy ideas

  • Greater diversity in the banking system with an emphasis on locally responsive and responsible institutions that provide local vehicles for savings and investment.

  • Adoption of the principle of endogenous development to guide investment seeking and decisions.

  • Public investment in the local economy and in energy transition.

  • Private firms to be ‘called in’ to negotiate social franchise deals as a condition for favourable environment for their operations locally.

  • Attraction of foreign investment should not trump local interests.

  • The development of local currencies such as energy-backed currency as part and parcel of the ‘plugging the leaks’ and endogenous investment strategies.

  • Campaign for revenue raising powers for local/regional government.

1e.g. Cato, M. S. (2014). Can’t Pay, Won’t Pay: Debt, the Myth of Austerity and the Failure of Green Investment. In J. Blewitt & R. Cunningham (Eds.), “The Post-Growth Project: How the End of Economic Growth Could Bring a Fairer and Happier Society.” London: London Publishing Partnership. http://bit.ly/1B0dIb4 and Guinan, J. (2014). Modern money and the escape from austerity. Renewal, 22(3-4), 6–21. http://bit.ly/1xGKVm5 . While such creation of money could lead to other problems such as inflation, there are other levers available to government to manage that risk. See Lawn, P. (2010). Facilitating the transition to a steady-state economy: Some macroeconomic fundamentals. Ecological Economics, 69(5), 931–936. doi:10.1016/j.ecolecon.2009.12.013

  • 3The control over the creation of fiat (bank-created) money is essentially a public utility with a transformative potential. It could be a powerful tool in the transition to an ecologically viable economy. Some campaigners and commentators (e.g. Positive Money) suggest that private banks should be required to hold full reserves i.e. lend on the basis of deposits only, and the central bank can control the money supply directly, printing new money and granting it to public revenue for the elected government to spend in accordance with democratically elected priorities, that is social use value. We are agnostic on this idea, which has been criticised as not reflecting the reality of bank-money since its inception, unlikely to be implemented and potentially stifling of the stimulus needed for necessary investment for social and ecological benefit.

Building economic resilience in Buxton

Now out is the  BUXTON ECONOMIC RESILIENCE STUDYSteady State Manchester contributed to the initial workshop that launched this work, and we are delighted to see the publication of the report.  It is well researched and data-based.  It also makes use of our Viable Economy formulation.
Transition Buxton, the publishers of the report say:
“The Economic Resilience Study was a follow on from the Alternative Economics Seminar in November 2013, and took most of 2014 to research and produce. It is an in-depth analysis of our local economy, based on a combination of publicly available statistical information, private data and surveys of residents, visitors and local businesses. It identifies a range of actions that will enable us to build a more resilient community that respects the environment, on which we all depend.

We have undertaken this work with the aim of enabling and supporting local individuals, businesses and organisations to take actions that strengthen our economic resilience and wellbeing.

The report identifies opportunities to create more jobs, grow new enterprises and help existing businesses to thrive in a more resilient and buoyant community.

Findings in the report include:

  • Buxton households spend over £30m each year on food and drink, but only 1% of this is spent in local independent shops. Just a 10% increase in local food sourcing would result in an increase of over £800,000 flowing into the local economy per annum.
  • Buxton households spend around £12m each year on energy in their homes. Investing in improving the energy efficiency of just 1% of the domestic buildings in the town each year would result in an increase of £300,000 flowing into the local economy annually and would also reduce our energy needs by around £60,000 per annum.
  • The introduction of renewable energy generation into just 35 houses in Buxton each year would contribute a further £250,000 to local businesses per annum and benefit householders through savings and income by £65,000 a year. In addition a community renewable energy hydro project could generate £35,000 p.a. through the feed-in-tariff and generate enough electricity for 50 homes.

Please download, read, share and use the data in the report and appendices, all freely available on our website at this link: http://transitionbuxton.co.uk/node/577

The Viable Economy serialised – About Space, Democracy and Ownership

We continue the serialisation of our intervention, The Viable Economy with the sections on Space and on Democracy and Ownership.  But you can download the whole pamphlet as a pdf file, here.
If you like it, why not make a donation towards our work. Our costs are modest, but we are unfunded.

Chorlton Water Park - a Manchester 'rurban' space
Chorlton Water Park – a Manchester ‘rurban’ space © Mark H Burton

5) About space

The problem

The unviable economy is organised globally. Weaker economies suffer as the stronger ones raid their assets and concentrate wealth, while encouraging a race to the bottom. Resources are wasted in transporting goods across the globe in the endless search for cheaper labour, materials and new markets. Our local economy is unbalanced, producing little but chasing the chimeras of competition in the global market or obtaining a portion of China’s boom. This means an economy that has to keep expanding, the simultaneous increase of extremes of wealth and poverty, locally and globally, and the wrecking of the ecosystems we rely on. Meanwhile, local space is controlled and owned by powerful sectional interests, with less and less of it available for use by the public.

The viable alternative

The viable economy uses the concept of strategic localism1 which means that things that can be sourced locally should be. An example: there are over 3,000 varieties of English apple, that with appropriate storage, can provide fruit for some nine months of the year. Yet most apples are imported, from as far away as Chile and New Zealand. Or take clothes. It seems bizarre that in the former textile capital of the world, our clothes are imported at great environmental cost, from low wage economies, while our economy has no place for thousands of semi-skilled workers. This means not just playing to the strengths of local economies but actively building those strengths. It does not mean turning our back on the world, but playing a responsible part in the world while becoming locally more sufficient. Finally it means living in greater knowledge of our own bio-region, its strengths, its delights and its vulnerabilities2.

Some viable policy ideas

  • Develop a plan to transform Greater Manchester into a new kind of garden city3 where everyone is within easy reach of productive, recreational and living spaces, while improving the eco-efficiency of this large settlement, integrating land use under a comprehensive spatial strategy.

  • Support calls for greater devolution of powers to the City Region, but at the same time campaign for a redefinition of the city region in bio-regional terms. This would include the countryside around the more built up areas and should link to a planning system which supports conservation and local supply chains.

  • Improve transport infrastructure within the city region while reducing or stopping investment in those elements that act as resource drains and big emissions generators.

  • Focus on the relatively resilient ‘foundational economy4: essential goods and services such as infrastructure, utilities, food processing, retailing and distribution, and health, education and welfare, reducing emphasis on those development projects that bring little benefit to the economy or society while incurring significant ecological costs.

  • Develop locally and regionally based financial institutions that support saving, credit and investment locally, with clear ethical priorities for strengthening the green and social economy.

  • Support community-led renewable energy production along the lines of the Danish and German models5.

  • Assert the value of public space and the commons by increasing the area that is open for non-commercial use by the public and reforming land-ownership with a view to redistribution to small owners and not-for profit enterprises and where possible bringing assets into community ownership and stewardship where possible. Make available unused public space for use by small businesses and cooperatives on a ‘usufruct6‘ basis.

6) About democracy and ownership

The problem

The dominance of current economic thinking has succeeded in de-politicising economic policy so it became not a political choice, facilitated and administered by legislatures and international governance arrangements, but an unshakeable ‘market reality’. This situation has increased the gap between the architects of social policy and those in ‘poor’ communities who are the object of those policies.

The Great Financial Crash of 2008 exposed the contradictory patterns of ownership and the lack of democratic control; the bank bailouts involved huge privatization of profits but the socialization of losses. Despite the State holding a majority share in the Royal Bank of Scotland, it has missed the opportunity to turn it into an institution that can invigorate local sustainable economies7.

Just as economics and social policy become the preserve of “experts”, so politics becomes the preserve of a professionalised class, a political elite, with revolving doors to the media, the financial sector, and the (mostly neo-liberally inclined) think tanks.

However, the problem is not solely one of neoliberalism: the post-war economic model of managed capitalism, although more benign, is also unviable as a model for social, economic and ecological well-being in a world of global super-exploitation and ecological collapse.

The viable alternative

In the viable economy, economic and political levers are in the hands of the people, not the elite. So economics and national economic policy are re-politicised and democratised, with technical experts supporting meaningful processes of public participation rather than short-circuiting them. Some idea of what this might look like can be seen in experiments in Brazil and elsewhere on participatory budgeting8, but the change needs to go further than that. Hand in hand with this is the need for political and economic education, breaking the monopoly of knowledge, and facilitating critical thinking.

The viable economy is democratic, ending the private control of the strategic sectors of the economy, including the utilities and banks. Democracy extends not just to the public sector, but also to the private economic realm.

Underpinning all this is a re-affirmation of the “public good”, not as some abstract idea, used to legitimate domination9, but as a common sense basis for democratically arrived policy, close to notions of “common weal(th)” or “right livelihood”. And closely linked to this is the reaffirmation of the “Public Realm”, rather than the market or the (paternalist) State, as central to a good society.

Some viable policy ideas

  • Democratise corporations, with reforms to legislation on governance so that there is a required community and worker bloc. 10

  • Re-define (fiduciary) duty to shareholders to include environmental and social governance issues.

  • Establish programmes of economic and financial education and training, for example with proven models like Large Group Capacitation11 and the Organisational Workshop12.

  • Develop and support co-operatives and other forms of mutual and common ownership and not-for-profit enterprise.

  • Invest in public (social) housing, ending the risky wager on excessive borrowing and asset price inflation as the route to prosperity and life satisfaction.

5See http://www.theguardian.com/world/2010/aug/10/denmark-renewable-wind-farm-energy and http://bit.ly/1pM0sSF and for an analysis of the UK’s dysfunctional energy market this IPPR report http://bit.ly/10PSj3u

6Right to continue using the land while certain conditions – e.g. ecological stewardship and productivity, are met. See https://solutions.thischangeseverything.org/#module/usufruct

8Souza, C. (2001). Participatory budgeting in Brazilian cities: limits and possibilities in building democratic institutions. Environment and Urbanization, 13(1), 159–184. http://preview.tinyurl.com/pwly5oe

9Roy, A (1999) The Greater Common Good. http://www.narmada.org/gcg/gcg.html

10See Massey, D and Rustin, M (2014) Whose Economy? Reframing the Debate. Kilburn Manifesto, Chapter 8. http://www.lwbooks.co.uk/journals/soundings/pdfs/Manifesto_the_economy.pdf

12See http://www.seriti.org.za/index.php/organisational-learning/ow-methodology note that this is distinct from individualistic, victim-blaming ‘financial literacy’ as a response to the increase in personal and household debt, created by a malevolent finance industry.

A reason to be cheerful? Universal healthcare: the affordable dream.

Yesterday morning’s Guardian article Universal healthcare: the affordable dream cheered me up. I was delighted to hear about  developments in health care free at the point of delivery in Thailand, Rwanda and Bangladesh as well as Cuba and Kerala in India. Suggesting that  something like the British National Health Service is universally affordable.
Indeed, as Mehrota and Delaminoica showed some years ago, investing in the basic health of the population has benefits for the economy more generally, although they do use the GDP as a measure of this as noted in this review by SSM’s Mark Burton (Journal of Health Management, 11, 2 (2009): 431–435).

Does Sen’s article in the Guardian ignore the importance of wider public health measures?  For example, Kerala’s impressive health statistics (comparable with the USA while incomes are massively lower) may have more to do with land reform, education, position of women and small family size than clinical services; this is not explored.  Universal health care needs to address the wider determinants of health as well as preventive and clinical services.

Nevertheless, it is great news!

The Viable Economy serialised – About Growth and Resilience

We continue the serialisation of our intervention, The Viable Economy with the sections on Growth and Resilience.  But you can download the whole pamphlet as a pdf file, here.
If you like it, why not make a donation towards our work. Our costs are modest, but we are unfunded.

3) About growth

The problem

The way our economy is organised at present is unviable because it is dependent upon growing in size endlessly to sustain itself and maintain a semblance of social stability. This growth, at a preferred three percent per year is exponential, growing like compound interest. Three per cent per year would mean an economy that doubles in size every 27 years, or increases eight-fold in an average Western lifetime. It is not surprising that critics of economic growth liken it to the pathological growth of a tumour, rather than healthy growth that reaches a natural limit.

This requirement for infinite growth is ecologically unviable because there is not evidence that it is possible for economic activity to be separated (decoupled) from the amount of physical material moving through the global economy1. It is therefore incompatible with the finite nature of the planet and the environmental resources which support human life, depending on the destruction of ecological abundance and the capture of value from regions of the majority world2.

The viable alternative

A viable economy requires that we re-design the economy to ensure economic activity is based on what is socially useful and restoring and maintaining ecological assets. Measures and projects of ‘good growth’ and ‘green growth’ are not sufficient; the viable economy is only ecologically viable when it is able to function without growing in overall size.

The viable alternative is socially preferable. Real increases in productivity and technological improvements must be better shared with society as real improvements in quality of life. This includes reductions in working time and increasing opportunities to undertake activities that need not make a profit but have value for individuals and communities.

Some viable policy ideas

Many aspects of the unviable economy require radical reform at the national and international level: campaigning on those fronts is essential to change the context in which the local economy operates. But there are policy options for regions such as Greater Manchester to pursue a more viable economic path, and in doing so to both prefigure the change required and develop resilience to likely future economic shocks and energy scarcity. These are covered in the following sections where we review each key aspect of the viable economy in turn.

4) About resilience

The problem

Our unviable economy with its monopolies, just in time supply chains and reliance on oil inputs, is not resilient. Economically, it goes in cycles of boom and bust, most recently in the form of unsustainable credit and property bubbles. We rely on long and vulnerable supply chains for our food, energy and other goods. Socially, it simultaneously over-works and over-rewards some while rendering others ‘surplus to requirements’ and condemning them to a life of poverty and desperation; this damages everyone’s mental and physical health. Ecologically, it requires ever increasing resources and production of waste, making the planet an unsafe place to live. Taken together this means we have limited ability to withstand and recover from various kinds of systemic shocks. The shocks could be ecological – for example from slowly or rapidly changing climate affecting our food sources; economic - for example from sudden ‘melt-downs’ of the global financial system that enables international trade; political – for example from wars, industrial action or actions by energy- exporting countries3). We believe that, as a result of these “geopolitical risks”, our population is far more vulnerable than it appears from its apparent prosperity4.

The viable alternative

A viable economy places the values and practices of stewardship at its core. This means treating the earth’s resources not as something to be extracted and consumed, but as something to be looked after while borrowed. The same goes for human resources – people are not born to be exploited, nor to consume but to live meaningful and satisfying lives in social harmony and solidarity. In rebuilding our social and economic systems the viable alternative seeks to use the principles of ecological resilience.

Ecological principles of resilience

Resilience is defined as the capacity of a system, community or individual to absorb disturbance and reorganise while undergoing change, so as to still retain essentially the same function, structure, identity and feedbacks5. This depends on at least four dimensions including:

Diversity – the variation within the system. A field of one crop is more vulnerable to pest attack than a field of mixed crops.

Modularity – the extent to which the system is broken up into relatively autonomous subsystems. The size and interdependence of financial institutions intensified the impact of the banking crash of 2008

Tightness and damping of feedbacks – the speed with which the system can respond to disturbance without over-compensating.

Redundancy – the extent to which the system has duplication of elements. If you are growing one lettuce and the slugs get it, you have no lettuce. If you have several plants you can afford to lose one.

However, the resilience of human settlements and their economies also depends on their social relations, which cannot be reduced to the economic. It is the values and practices of mutuality, cooperation and solidarity that make for an economically resilient society.

Some viable policy ideas

  • Reduce our demand for food, energy and other resource use through cutting out waste, increasing product life, re-using and recycling, developing incentives and sanctions to support all these things.

  • Shorten supply chains by producing more of our food, energy, clothes and other requirements more locally.

  • Radically increase the rate of retrofitting of buildings to reduce fuel demand.

  • Devise collective energy purchase schemes that incentivise lower unit levels of energy use.

  • Work to help people identify less in terms of material possessions and more in terms of a culture where conviviality is central.

  • Teach, demonstrate and incentivise the practices of stewardship – for example the repair of clothes and electrical equipment, and food growing.

  • Support (technically, politically, economically) local communities to plan and manage their own regeneration, increasing people’s stake while shortening the chain from the emergence of problems to their solution.

  • Incentivise cooperation – for example in the award of grants for community amenity improvements and business development.

  • Promote practical research on increasing the diversity of our food resources6.

___________________________________________________________________________

Notes:

1 Steady State Manchester (2012) In Place of Growth, http://bit.ly/1bTiASu pp. 18-20. and Jackson, T. (2009). Prosperity Without Growth: the transition to a sustainable economy. London: Sustainable Development Commission. http://bit.ly/1tXp35t

2 See Smith, J. (2007) The GDP Illusion: Value Added versus Value Capture Monthly Review, http://bit.ly/1tXpblt

3 As happened in the 1970s with the OPEC oil price shock.

4 Sims, A. (2008). Nine meals from anarchy : oil dependence, climate change and the transition to resilience. London: New Economics Foundation. http://bit.ly/1slclfw

5 Walker, B, Hollinger, C.S., Carpenter, S.R. and Kinzig, A. (2004) ‘Resilience, Adaptability and Transformability in Social-ecological Systems’, Ecology and Society 9 (2) p.5.

6 “There are over 20,000 species of edible plants in the world yet fewer than 20 species now provide 90% of our food.” http://www.pfaf.org/user/AboutUs.aspx

The Viable Economy serialised – the first two sections

We will be serialising our intervention, The Viable Economy here.  But you can download the whole pamphlet as a pdf file, here.
If you like it, why not make a donation towards our work. Our costs are modest, but we are unfunded.

Here are the first two sections which explain what the Viable Economy is, and why we need it.

image

1) Introduction: Why the Viable Economy?

We want to live in a world that is viable, rather than one that risks tipping into decline or crisis: that means an economy that is resilient and dynamic, providing enough for all, while supporting social well-being. And it must be ecologically viable, not causing further damage to the earth’s fragile systems without which life is not possible.

We are using this title, Viable Economy, to both give a positive message (rather than the negative, but necessary steady-state one) and to emphasise the need to align the economic, the social and
the ecological. No economy can survive that is not viable in all three domains.

As we will see, the economy we have is not viable in any sense, and so we set out the principles for a viable local and regional economy and suggest some positive policies that could be implemented to take us in the right direction.

In what follows our focus moves from level to level, from the local tothe global. This is inevitable given the issues we are discussing, that have local manifestations and global interconnections and causes. However, we have written from the perspective of the Greater Manchester region – often described as a City Region. The economy, society, and indeed ecology of this region is, as elsewhere, a historical product of human activity. It has changed over the years from a largely rural one, to an industrial urban one, to a de-industrialised and still urban one. And just as our city and region has changed over the years, it needs to change again to secure a viable economy, society and ecology. And again it can change as a result of human activity, consciously directed to ecological, social and economic well-being, not just for our people, but for the whole planet.

Finally, it should be clear that unlike standard approaches that emphasise competition in the global economy, we are not pursuing regional self interest, forgetting people in other regions and lands.

All regions need to adopt a relatively more self reliant approach, collaborating with each other to achieve that, to reduce the unhealthy type of interdependence that comes with globalisation.

This pamphlet is not the end of the story. Steady State Manchester will be working on the implications of the model we present for various sectors of our society and economy, collaborating with others in that ambitious task.

The mess we’re in

We really are in an economic, social and ecological mess. Some aspects of this are particularly bad in our city and in the UK, but many of the dimensions are found worldwide, a result of the domination – the colonisation – of people and planet by the capitalist system.

The economic mess

We have an economy that is subject to the shocks that arise from its dependence on endless growth, its continual accumulation. Thatmakes it unsustainable, in its own economic terms: a system whose ‘design’ is to continually increase capital meets contradictions that are then addressed by a series of ‘fixes’ (of which both Keynesian demand-management and the neoliberal curtailment of hard won social dividends1 are examples) that only postpone further contradictions leading to further crashes. Indeed, stagnation has haunted the economy since the 1970s. However the belief that growth is essential makes it difficult for us to imagine that we can live well without it. Economic justice (let alone economic democracy2)  is forever postponed, marginalised or reduced in the futile attempt to stoke up the accumulative process as we can see
with current austerity policies. In the period from 1945 until the
1970’s, a State-moderated capitalism succeeded in raising the
standard of living of a relatively large proportion of people,
especially in Western countries. But real incomes have declined in
the West since then, and while many in the majority world have
escaped poverty, others have become increasingly poor. However
promoters of economic growth continue to believe that where there
is growth, prosperity will trickle down, as crumbs from the table of
the advantaged. The consequences include increasing inequality,
instability and repeated crises, the increasing difficulty of controlling
corporate actions, and while the division of labour accelerates,
there is with no benefit in terms of reduced working hours. And just
as Margaret Thatcher advocated, the ‘economic’ comes to dominate
social thinking and decision-making, with politics, and even culture,
reduced to economic activity, with the emphasis on profit and the
free market.

The social mess
The social mess stems from the economic mess. Some of Its
signature characteristics include social exclusion, both of social
groups and whole geographical areas3
, the dissatisfaction with
everyday life (that according to some studies ceased improving in
the richer countries in the mid 1960s4
, and is higher in the UK than
in places with far lower material prosperity), the disengagement of
people from the political process, and the shift over the last few
decades from identities that were more collective, interconnected
and co-operative to ones that are more individual, fragmented and
apolitical. This is manifest apparent in both personal and collective
‘ill-being’, with widespread feelings of pointlessness and insecurity,
and high levels of stress, anxiety disorders, depression and
addictions. Rising inequality in turn creates rising levels of
insecurity and most worrying, a lack of social solidarity – the very
basis for our shared life. Indeed it is perhaps no surprise that words
such as ‘conviviality’, ‘solidarity’ or ‘stewardship’ can sound quaint,
of another time and place.

The ecological mess

Finally, but ultimately even more distressing, is the state of extreme ecological malaise. By ‘ecological’ we mean not just the living systems of the earth but also its geophysical dimensions of water, atmosphere and minerals and the systems that connect them to one another with the mediation of the earth’s life-forms (hence carbon, water, phosphorous and other cycles). It is all these systems that are being progressively destroyed, as a direct consequence of human ‘economic’ activity, whereby our ecological footprint by far exceeds the available carrying capacity of the planet: that’s the real deficit. As the Intergovernmental Panel on Climate Change’s (IPCC) most recent report has shown, it is ‘good old’ economic growth that is responsible for the most immediately threatening increases in greenhouse gas emissions that threaten runaway global warming5. And climate change is just one of the ‘planetary boundaries’ that humanity is crossing, or approaching6.

That then is the nature of the problem. Our conception of the viable economy is not something we have just dreamed up, but a way of bringing together a number of streams of thinking7 and practice into a coherent framework.

2) What is the Viable Economy?

While our title is The Viable Economy, we are just as concerned with the cultural and political sphere. Indeed we promote not just an alternative economics but a critique of ‘economic rationality’ 8, the dominance of the economy and of the domination of economic criteria in determining government policy and law, as well as the practices and policies of more local actors. For this reason we do indeed use terms like solidarity, conviviality and stewardship to identify and promote an alternative set of values and principles for a seamless economic, social, political, cultural and ecological framework, which we call here the Viable Economy.

Key features of the Viable Economy:

Economically viable

An economy that is resilient in the face of bubbles, crashes, supply chain interruptions and the whim of National governments.
More money staying local and more democratic and local control over savings and investment.
An economy that delivers (and measures) what we need rather than growth for growth’s sake.
A balanced economy without the hyper-development of some sectors (e.g. financial speculation, armaments).
An economy that does not have to keep expanding, although where some sectors will grow,(e.g. renewable energy) and some must shrink (e.g. fossil fuels).
Where needed investment comes from within rather than from exploitation of other peoples or as profit-seeking from external investors.

Socially viable

Control over the economy rather than the economy controlling us.
An economy that relies on and builds equality, solidarity and cooperation among people, here and elsewhere.
An economy that rather than increasing inequality, progressively becomes more equitable.
Less exploitation of the majority world while keeping open channels for communication and learning globally.
An economy founded on stewardship of human and social capital, that does not waste people’s energies and talents, that includes everyone.
With an increased space for non-commercial transactions: the collaborative or solidarity economy.

Ecologically viable

Radically reducing both the exploitation of finite resources and the emission of pollutants, including greenhouse gases: a one-planet economy.
Based on production and consumption for need: a frugal abundance.
More security for us all because the environment is protected from further destruction.
Resilient to climactic and other ecological shocks.
An economy that practices stewardship of the natural world that we depend.

____________________________________________________________________________________

Notes:
1 Davies, W. (2012) The making of neoliberalism. Renewal: a journal of social democracy http://bit.ly/1gLcgjH

2 Economic democracy places economic decision-making, not solely with property owner, shareholders and managers but with a wider group of people with stakes in the economy including workers, custom-ers, suppliers and citizens, for example through workers co-ops, employee ownership, participatory budgeting, and consultation on strategic economic policies.

3 Lone, A., & Silver, D. (2014). White Working Class Communities in Manchester. New York: Open Society Foundations. http://bit.ly/1xoRafl

4 New Economics Foundation. (2004). Chasing Progress: Beyond measuring economic growth. nef. http://bit.ly/1wewa7

5 IPCC http://report.mitigation2014.org/spm/ipcc_wg3_ar5_summary-for
policymakers_approved.pdf page 8

6 Rockström, J., Steffen, W., Noone, K., Persson, Å., Chapin, F. S., Lambin, E. F., Lenton, T. M., et al. (2009). A safe operating space for humanity. Nature, 461(7263), 472–475.
doi:10.1038/461472a

7 These strands include Ecological Economics, Keynesian economic theory, the post-Marxist critique of political economy, decolonial and liberation theory, critical social policy, cultural studies and permacultural thinking. However we also use more orthodox approaches, for example those from welfare economics and law to support our analyses.

8 Gorz, A. (2010). Critique of Economic Reason. London: Verso. Before the widespread adoption of the label “neoliberalism”, “economic rationalism” was term used in Australia to refer to that intellectual and policy framework.

Debating the alternative to austerity in Spain and the UK

Debating the alternative to austerity in Spain and the UK

Contents of this longer than usual post

The Austerity Scam

Podemos

Yes we can do away with growth

The Viable Economy and the Paradox of Green Keynesianism

A Green Keynes?

A Green Keynes?

The Austerity Scam

Austerity is a scam, there is no need for it. We have made this point before: the idea that the national economy is like a household budget is mistaken. Governments and their central banks have the prerogative of creating money, or spending it into existence, and this means that there need not be a shortage. To be sure, flooding the economy with too much liquidity could produce other problems (inflation, worsening trade balance, increasing emissions) but these can be controlled by applying other macroeconomic levers, principally taxation (see Richard Murphy on the role of taxation: HERE and Frances Coppola on money creation and its consequences HERE).

It is unclear why all the three main parties persist with the economically illiterate pretence that running a deficit is a problem, and that cuts to public spending are necessary to achieve this. The historical record refutes this notion. It seems that the right are running an ultra-Thatcherite political campaign in economic dress, of rolling back the State, and particularly the Social or Welfare State. It is less clear why the centre left should also play along with this (as “austerity lite”, slower and less deep, but cuts nevertheless). In discussions with protagonists it seems that the main reason is fear of the press, but this represents a retreat from the responsibility of educating the voting public – how far we have descended from the times of Atlee and Bevan.

Having noted the mainstream consensus on fantasist economics, we will not go further into an analysis of party politics in the UK: this is not Steady State Manchester’s role. Instead we will turn to the question of what policies are needed to counter austerity. And here we return to “the paradox of Green Keynesianism. We will do this with the help of a piece written by Giorgos Kallis and colleagues in the Research and Degrowth collective at the Autonomous University of Barcelona.

Podemos

First some context. Podemos is a new political party in Spain that recent opinion polls have put ahead of Spain’s PSOE Labour equivalent and neck and neck with the governing right wing PP. It arose out of the protests against austerity by the Indignados movement of 15 May (Movimiento 15M). Podemos eschews the right-left label, but most of its support does come from left of centre part of the electorate. The Citizens’ Council of Podemos, its leadership, was elected electronically be over 100,000 people and it includes activists, academics and some former politicians. It is partly the communication skills of its leadership, notably of its effective leader Pablo Iglesias (even when on right-wing t.v. programmes), that explains appeal. But Podemos is also deeply rooted in the wider social movement, organised through circles of supporters in the various towns and city neighbourhoods. The policy formulation process is based on these circles. As such Podemos would seem to owe something to the inspiration of the so called “pink tide” of new Latin American democratic leftism (for example in Bolivia where the ruling MAS party was established explicitly as the political instrument of the social movements, although there has been something of a drift from that vision in power).

Returning to the economy, while Podemos rests on its circles, it has also commissioned input from some noteworthy intellectuals. Vicenç Navarro and Juan Torres López who are well known on the Spanish left as critics of neoliberal economics. Navarro was an advisor to Chilean President Salvador Allende’s Popular Unity government whose bloody suppression in the Pinochet coup of 1973 heralded the beginning of applied neoliberalism, while Torres has advised Venezuela’s late socialist President Hugo Chávez whose 1999 election marked the beginning of Latin America’s leftward turn.

Navarro and Torrres have put together a proposed programme. Its key strategic objectives are:

1) Guarantee sufficient funding at an acceptable cost for companies and families given that this is the life-blood of any economy and what the Spanish economy currently lacks.

2) Generate effective demand, that is, sufficient income for families, investors and government are able to spend resources that allow firms to create sufficient and decent employment.

3) Make the public debt sustainable, so it does not absorb more absolutely necessary resources as it does now, squeezing the economy with the excuse of paying back the debt, while actually increasing it (as bank interest) rather than reducing it.

4) Redeem those who have lost their income, their homes or other social, labour, civil and political rights, expanding such rights to all the population to reach a level of social security and protection that befits Spain’s level of economic wealth.

It will be noted that these are far more radical than anything on offer from the British Centre Left and in the main this is the kind of thing that anyone with an eye to social justice should be demanding and promoting here. But there is one small problem. This can be seen from the Keynesian thinking that underpins the authors’ previous 2011 ebook, “Hay Alternativas: Propuestas para crear empleo y bienestar social en España” (There are Alternatives: Proposals to create employment and well-being in Spain), on which they clearly draw for the Podemos strategy.

45. Establish well targeted economic plans that will stimulate the growth of new sustainable activity, generating of social prosperity, decent employment and equality and that are respectful of the environment.

50. An economic stimulus plan orientated to set in motion new activities and forms of production and consumption.

62. Model of growth orientated to the internal market based on high salaries and increased public spending.

This is fairly standard demand-stimulation stuff. Navarro himself appears not to know a lot about the more recent developments of ecological economics, steady state, post-growth and de-growth approaches, relying on the Commoner-Ehrlich debate of the 1970s. In this context the following contribution from the Barcelona Research and Degrowth Collective is of great interest. It does not reject the Podemos/Navarro-Torres approach, but rather builds on it, correcting its growthism. Here is my translation of their piece (presented here with their agreement).

Yes we can do away with growth

 The Research and Degrowth Collective (Barcelona) presents in this article 10 proposals to obtain prosperity without economic growth.

These proposals are relevant for Podemos but also for other parties in Spain, Catalonia (ERC, ICV, CUP), and other territories such as Greece, Italy, France and Portugal [and the UK and its nations – MB]

In this newspaper eldiario.es there has been an interesting debate concerning whether Podemos [literally “We Can”, the new Spanish radical popular party that grew out of the anti-austerity protests – MB] can promote a political agenda of de-growth in its economic programme. De-growth is not the same thing as recession, but the hypothesis that we can achieve prosperity without economic growth. The acceptance that the society of growth could have arrived at its end, or that if not then it ought to, is converted into a potent argument in favour of redistribution, one of the key proposals made by Podemos. De-growth challenges the spirit of capitalism itself: expansion. But escape from growth is not an easy task. Almost no political party has attempted it so far.

Recently (in vocabulary.degrowth.org) we have collected concrete political proposals that can facilitate a transition to de-growth. In what follows we present 10 proposals that are relevant for Podemos, but also for other parties in Spain, Catalonia (ERC, ICV, CUP), and other territories such as Greece, Italy, France and Portugal [and the UK and its nations – MB]. The programme that follows does not pretend to be exhaustive since it does not include proposals on crucial issues (pensions, health and education, public banks and the ending of the evictions, [following mortgage default – particularly severe in Spain since people still have to repay the total debt after being made homeless] – MB etc.) that are already in the programmes of progressive parties like Podemos and that we support.

 1) Abolish the use of GDP as indicator of economic progress. If GDP is a misleading indicator, we should stop using it and look for other indicators of prosperity. Monetary and fiscal national accounts statistics can be collected and used but economic policy shouldn’t be expressed in terms of GDP objectives. A debate needs to be started about the nature of well-being, focussing on what to measure rather than how to measure it.

2) Establish environmental limits. Establish absolute and diminishing caps on the total of CO2 that Spain can emit and the total quality of material resources that it uses, many of those imported from the global South. These caps would be in CO2, materials, water footprint and the surface area under cultivation that embedded in imported products. These measures already exist; they must become politically relevant and publicly promoted. Other similar limits should be established such as the extraction of water, the total built-up area and the number of licences for tourism services in zones dedicated to mas tourism.

 3) Restructure and eliminate debt. An economy cannot be forced to grow to resolve accumulated debts that have contributed to fictitious growth in the past. It is essential not only to restructure but also to eliminate part of the debt with a people’s debt audit, part of a new, really democratic culture. Such elimination shouldn’t be realised at the expense of savers and those with modest pensions whether in Spain of elsewhere. Once the debt is reduced, the caps on carbon and resources will guarantee that this will not be used as an opportunity for more growth and consumption.

4) Reduce and share the work. Reduce the working week to 32 hours and develop programmes that support firms and organisations that want to facilitate job-sharing. This should be orchestrated such that the loss of salary only affects the 10% with the highest salaries. Complemented by environmental limits and the tax reform proposed below, it will be more difficult that this liberation of time can be used for material consumption.

5) Minimum and maximum income. Establish a minimum income for all for all Spain’s residents of between 400 and 600 Euros per month, paid without any requirement or stipulation. Design this policy in conjunction with others that increase the income of the poorer 50% of the population while decreasing that of the top 10%, to finance the change. The maximum income for any person – from work as well as from capital – shouldn’t be more than 30 times the basic income (12,000 – 18,000 Euros monthly).

 6) Tax reform. Implement an accounting system to transform, over time, the tax system, from on based principally on work to one based on the use of energy and resources. Taxation on the lowest incomes could be reduced and compensated for with a carbon tax. Establish a 90% tax rate on the highest salaries (such rates were common in the USA in the 1950s). These taxes would be expected to halt consumption and eliminate the incentives for excessive earnings, which feed financial speculation. Also tackle capital wealth through inheritance tax and much higher taxation on property, for example on houses that are bigger than a reasonable size (for example more than 80 sq metres per each adult resident).

7) Optimise the use of buildings. Stop the construction of new houses, rehabilitating the existing housing stock and facilitating the full occupation of houses. In Spain those objective could be met through very high taxes on abandoned, empty and second houses, prioritising the social use of SAREB housing [those falling under the post-crash banking restructuring provisions following the Spanish real estate crisis], and if this is insufficient, the social expropriation of empty housing from private investors. By ‘social use’ we mean policies for the social rented sector, the co-operative economy and the common good.

8) Support the alternative society. Support, with subsidies, tax exemptions and legislation, the not-for-profit co-operative economic sector that includes alternative food networks, cooperatives and networks for basic health care, co-operatives covering shared housing, credit, teaching, and artists and other workers. Facilitate the de-commercialisation of spaces and activities such as mutual support groups, shared childcare and social centres.

9) Stop subsidising activities that are highly polluting, moving those subsidies towards clean production. Reduce to zero the public investment and subsidy for private transport infrastructure (such as new roads and airport expansion) military technology, fossil fuels and big mining projects. Use the funds saved to invest in the improvement of public rural and urban space, such as squares, traffic free pedestrian streets [paseos y ramblas], subsidise public transport and cycle hire schemes. Support the development of small scale decentralised renewable energy under local and democratic control, in stead of concentrated and extensive macro-structures under the control of private business.

10) Reduce advertising. Establish very restrictive criteria for allowing advertising in public spaces: prioritising just public information and reducing greatly any commercial character. Develop policies through taxes and committees to control the quantity and quality of advertising permitted in the communication media.

Last week Podemos published an economic programme prepared by Professors Navarro and Torres López [well established and respected mainstream left economists – MB]. Although the document has the strategic objective of stimulating demand and is neither concerned with nor favourable towards de-growth, many of the proposals such as the application of taxes to financial transactions [the “Tobin tax” – MB], redistributive taxation, the 35 hour day, a moratorium on large infrastructure developments or the turn towards clean investment and caring activities, are very close to the spirit of our own proposals. The programme also mentions the need to stimulate a more sustainable kind of consumption but it does not provide the tools needed to achieve this. Applying taxes on natural resources in place of work, restricting advertising, and establishing clear limits on the use of physical space, materials and CO2 are some of our proposals in this direction. The programme of Podemos also needs more definition and specifics on how it will support the co-operative economy. Nor need it abandon the idea of a universal citizen’s income, that concerns more directly the European policy of Podemos. It is positive that the authors of the report don’t use GDP and recognise that at least in the short term their proposals won’t result in an increase in GDP (we believe that this will also be difficult even over the longer term). If this is so, they need to also insist that GDP ceases to be a politically relevant indicator and specify what new indicators they will substitute to show the improvements that their policies will lead to.

We don’t mind if the right things are done in the name of de-growth or not. Indeed, we want to obtain good policies independently of their effects on growth. And in that way we can [podemos] do away with growth [decrecer]!

 

The Viable Economy and the Paradox of Green Keynesianism

Many of these ideas are close to those we have presented in The Viable Economy, although we emphasise the eco-regional level of Greater Manchester and the Mersey river basin. Many of our other ideas are also present in the Podemos document.

To conclude I will return to the question of what the British Ecological Economist Molly Scott-Cato (and newly elected MEP for the South West) has called the Paradox of Green Keynesianism. This is that by promoting the use of public money via ecologically benign investments such as housing insulation and renewable energy, to create jobs and create economic stimulus multipliers in the economy, the consequence is likely to be an expansion of the economy with a resulting increase in materials throughput, more resource extraction, mining, drilling, water abstraction and more pollution, greenhouse gases, nitrates, ocean acidification and so on. The only way to square the circle is, as Research and Degrowth say, through Establishing

absolute and diminishing caps on the total of CO2 that Spain can emit and the total quality of material resources that it uses, many of those imported from the global South”.

And again we make the same point in our Viable Economy:

Action plans for the reduction of hydrocarbon fuel usage within a bioregional cap. The cap could be set on a shadow basis at first, becoming mandatory over say a five year period. This could be complemented by modelling of the impact of a cap and share scheme.”

This latter idea, developed by the Irish FEASTA group offers a way of linking a basic citizens income to both a redistributive fiscal strategy and to the absolute and diminishing resource cap to de-grow the brown economy. I am told, am not sure with how much authority, that the current Labour Party leader, Ed Miliband, when Secretary of State for Climate Change and Energy, seriously looked at the cap and share concept, but put it in the “too difficult” box. I wonder if he added “for now”.

Mark Burton

Steady State Manchester Collective

Viable Economy reading group

We are going to run a Viable Economy reading group.  This will involve reading part of The Viable Economy plus another related piece each week, and then discussing the issues arising.  Our idea is to help participants to deepen their understanding of the key concepts in our alternative economics and also to become more confident in promoting them.  We will not be promoting a “correct reading” but creating a learning environment where we can all question and explore.  If you are interested, then please send us an email: steadystatemanchester@gmail.com