Category: crisis

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crisis debt economics environment Key Article politics problems society taxes

Can we afford for Britain not to lead?

Britain, partly on account of its preeminent financial center in the City, may be the only advanced country positioned to move to a new socio-economic model.

Any country proposing to make an even moderately radical break from the status quo will face deep scepticism from the establishment, and the establishment today is embodied in the international financier and the global corporation, on whom the peace of our societies and the satisfactions of the great majority are now dependent.

Our current system already rides a razor-thin line between plausibility and fantasy with never-seen-before levels of debt and monetary adventurism, the credibility of which are predicated on long term projections of growth and stability that beggar the imagination.

Any new ideas for how to structure our political economy must either promise to conform to the tightrope we are on, or provide a credible alternative. Any plan that increases spending or investment but does not raise new revenues must necessarily be dependent on some combination of growth, debt, or monetary expansion. Given the already stretched boundaries of the current construct, notions of higher levels of growth, debt, or monetary expansion can only be dependent on justifications that amount to postulation. What seems certain, and to which Greek politicians can attest, is that no country without control of its own currency and direct access to an international financial centre would be able to entertain deviating from the path of the status quo.

It is the very precariousness of the status quo that lends weight to the admonitions of the establishment, embodied in the advice doled out by Germany (through the Eurogroup) and the world’s financial überinstitutions. They are, rightly, deeply sceptical of novel approaches that refuse to adhere to the established limits of fiscal and economic boundaries, because the precious commodity of confidence that underpins the entire system is not within their direct control and rests on a generalised acceptance of models that use historical basis as their justification.

Thrust thus into the seemingly concrete confines of fiscal and economic rules that prescribe that “there is no alternative” (TNA), there are some that divine an escape route through the use of the very tools that support the status quo, and favourite amongst those is monetary adventurism, mostly in some form of “quantitive easing”. Primarily a despondent and confused left, but also an angry and careless right, are gravitating to justifications for their expansionist promises that rely on the use of the same growth, debt, and monetary adventurism that their nemeses already deploy. Irrespective of the quality of their arguments, what is evident is that their ideas are dependent for practical application on the existing financialisation of the economy. This new gloss on old ideas betrays their plans as contradictory to the analysis that they use to substantiate their intentions. If the current malaise is substantially explained by the financialisation of the political economy over the last 30 years, how can the remedy be to lean further on that same system to justify investment? If we are destroying the planet with our growth based models for advancement, how can it be a solution to devise new systems that are ever more dependent on further growth? If expanded debt has substituted for fiscal rectitude, how can more debt, justified by more growth, help to retrieve balance in our affairs?

This then is the root corruption at the base of the supposedly new models we are offered today: that they are at once a critique of the status quo, and they then lean on the established structures to enable their proposed remedies. They cannot stand, and they will face the same fate as Greece: to be subjugated to the established structures, or face penury and exclusion, lest they unbalance the precarious justifications used in the rest of the system by the rest of the world. This is not cruel punishment, this is simply self preservation by the majority.

No model that will not simultaneously increase public revenues and balance that burden with an increase in the quality of life of the great majority can walk away from the established constructs. If the model depends on the existing structures but refuses to accept the strictures of that regime it will be, and must be, frozen out when it comes to implementation.

Moving on from the vanities of the shallow philosophies of the new left and the new right, what of the possibilities for proper change? What of the fate of a properly constructed new political economy, wherein the fiscal logic is not dependent on infinite growth, debt, or monetary adventurism? Such a concept would also have to face the realities of the status quo, and navigate a future in which the rest of the world remained to be convinced of such a path. This could only be achieved in a society which had control of its own currency and direct access to a domestic financial market with sufficient depth and strength to weather the early phase of establishment. Otherwise the maintenance of the inherited debt would quickly overwhelm the nascent reconstruction. This substantial hurdle would be insurmountable in all except a very few countries, and amongst those possibly only the UK has the demos and the institutional fabric strong enough to make it happen.

Britain could lead the way and do what others want to do, but cannot do, because we host the institutional fabric necessary to enable change independently. There is a world of difference between proposing a fiscally balanced future that only needs to maintain the existing debt load, and a proposal to exacerbate the existing paradigm as a means of reaching a promised future. The sanctity of government bonds rests in the ultimate power of a state to raise taxes, which is the resorting guarantee behind the economic projections of any particular administration. If the financial markets have convinced themselves that the current debts are sustainable on the current projections then any new plan that incorporates raising the revenues to pay for its proposals leaves the current status unruffled. There would remain any number of underlying assumptions that a new plan would have to leave undisturbed, and that is where a strong domestic financial market becomes important. The critical impact of a judgement to sustain continued credibility, versus the costs of concluding otherwise, is only likely in a country that has monetary independence and a deeply integrated financial system. For those reasons Britain is uniquely placed to make the move to a more sustainable and joyful political economy, and to benefit from the first mover advantages.

Completing the next phase of the post 1945 settlement by extending the same principles embodied in the NHS to a complete range of basic life supporting services is well within our grasp, with recent research from UCL suggesting such an extension would need only a 2.3% GDP rise in taxes. The effect would be transformative and lay the foundation of a new age of innovation, social cohesion, and rebalanced labour relations.  By shifting the responsibility for a satisfied demos from material consumption to a more relational basis, dependence on finance is reduced at the same time that costs are reduced through social wage substitutions. Until other societies replicate the model, the first movers benefit from substantial competitive advantage.

If human societies are to break the current mould that seems to lead inexorably to never-seen-before destructions, then it can only happen if a new model is established free from the implausible justifications of infinite growth on a finite planet, unrepayable debt, and magic money. Few countries have the present time luxury to consider these long term problems, less have the predisposition to question their own orthodoxies, and even fewer have the capacity and strength to embark on such a journey. Can anyone other than Britain take the lead? Can anyone afford for Britain not to take the lead?

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change crisis Key Article legacy parties politics problems society

Floundering on the Rocks of Policy

While it is increasingly obvious that what we are doing isn’t going to work, what to replace it with is an even bigger unknown.

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crisis debt Democracy legacy parties politics

2015: The Last “Feel Good” Election

The General Election in May will be the last “feel good” election in the UK for a considerable time. This year the politicians are fighting to reassure people that their delusions of sustainability are in fact possible, and that they each have the most assured path to that illusion.

Who will soothe us to sleep with the sweetest lullaby?

We are living unsustainably. That means it cannot be sustained, it will not carry on, that there is an end to much of what we take for granted today. This is not just an ecological-environmental fact, this is a financial-economic and a human-social fact. To believe otherwise requires an almost super-human capacity for self deception.

After the next financial crisis, and the break down of “middle class” expectations, it will seem incredible that we did not see it coming. Unprecedented levels of financial debt, never balanced budgets, massively unbalanced trade, and millions of humans consigned to the margins of society: these are well known and completely visible facts about our society. We are living in a house of cards, and this house will fall before the following general election.

The UK’s general election could be tame compared to what happens in Europe in the coming half-decade, where populist movements from the left and right will dis-integrate what we currently call the EU into a shadow of its current state. (Of course there’s also the very real possibility that the UK will break up or leave the EU after this election.) A combination of pressures related to energy, trade, immigration, solvency, and demographics will transform the cozy into the crazy.

Debt increases 2007-2014Shifting trade and monetary winds around the world will make much of the current debt loads obviously unsustainable in the coming five years. Economic growth will not regain it’s pre-Crisis levels, and combined with generalised deflation, the debts of all but the most secure will crumble into default. There is not enough safety on earth to provide havens for the all the liquid cash in the world, and it is too late to regulate the flow of capital or shore up the weak.

By the next time the UK goes to a general election we will have double or treble the unemployment, a hole in the budget the size of the NHS that we cannot fund through more borrowing, and the reality, that is already obvious now, will have become inescapable.

So enjoy this little charade through May. Worry about the little things, and agree not to discuss the bigger things. Latch on to the good news, and ignore the facts. This will be your last chance to do so, and seeing as pretty much everyone is on board with the story, you may as well enjoy the ride.

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competition crisis Key Article society

A devastating critique

Nearly every facet of modern western civilisation is based on a simple premise: that the individual makes better decisions than a group. What if that is untrue?

The entire neoliberal construct (limited government, free enterprise, and personal freedom) is predicated on the notion of the individual as ascendant to the group. The dominant feature of this philosophy is this distain for the group as a quality. Government should be limited because groups make poorer decisions than individuals, private markets excel because they rely on the decisions of brilliant individuals, and personal freedom is phrased in the format of freeing the individual from limits imposed by the group.

Yet what we know of ourselves, what we can see around us, and what we know about evolution, all attest to this as fallacy. We need our groups, our families, our communities, our markets, for our individual sanity and happiness. We evolved as groups, that is our foundational and inescapable inheritance. We cannot think ourselves into solitary individuality, we know we are individual members of groups.

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budget crisis economics WellFair

Service, not material, is the basis of human groups

Human society, as it is currently configured, is unaffordable.

Why?

Because service, not material, is the true basis of human groups.

Membership of a group costs every individual member of the group a little something, an intangible, and not the same thing from every person, but something from everyone.

The group returns something to every individual member, an intangible, a feeling of belonging, and a sense of safety, and a contribution towards their individual happiness.

You cannot pay people to be a member of a group, people agree to be a member of the group knowing that they will make a contribution in return for their membership.

If you pay someone to be a member of the group, you automatically introduce the notion that their intrinsic value is not sufficient for group membership, you instantly degrade the very groupness of that group, and undermine the individual’s worthiness. The group can provide a service, a kindness, without the intrinsic value of the member coming into question.

Think about being asked around to a friend’s house for dinner: if, when you arrive at the front door, your host gives you £20 with a smile on their face, what would run through your mind?

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budget crisis WellFair

Crisis of Living Cost

It’s not unreasonable to define the crisis we are in as a ‘cost of living crisis’. It costs too much to live an ordinary life: it costs too much money, it costs too much freedom, and it costs too much planet.

  1. One solution to something costing too much is to earn more to cover those costs. So we could try and pay ourselves more money, grant ourselves more freedom, and find some more planet.
  2. The alternative would be to reduce the cost of living. To make ordinary life cost less money, include more freedom, and take less planet.
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budget change crisis debt Democracy problems

Common sense for Proper Change

It may not feel like it right now, but we are in desperate straits, and in need of radical change if we are to maintain the society that we have built over the last 300 years.How Bad Is It graph

Britons deserve the right to choose a proper solution at the next general election, and that is why we have formed the LIFE Party.

Slashing at our social fabric, or paying ourselves more, cannot be the only two alternatives on offer in the nation that used democracy and freedom to spawn the greatest advances in human accomplishment. In a time where balance is so desperately needed, between man and planet and between ambition and compassion, simply loading one side of the scales is a betrayal of our proud history and our potential future.

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change crisis debt economics problems

Synthesis

You know something’s wrong, that we have not sorted out a decent way to live together, yet. And you know that there is a better way, that we are not this stupid and blind, that we can do a better job of living together in peace with prosperity. Well, you’re right… here is why and how.

The tension in money

The search for a truly functional economic system is still going on – we haven’t got there yet. The richest societies are swimming in wealth and debt at the same time, the fastest growing countries are destroying their living environments, and the failing countries are mired in restrictive cultures. Capitalism may be the “least worst” system, but it is not good enough to sustain human life on this planet.

Marx’s critique of capitalism (that the working classes would eventually revolt against those who accumulated the capital) has turned out to be misplaced. It is more true that we are evolutionarily predisposed to the acceptance of hierarchy, even when it is dispensed from no more meritorious source than random genetics. The real failure of capitalism as a system for organising human societies is no less foundational than the failure in Marxist theory, its failure is the absurdity of placing a system of capital at the root of a system for organising humans.

Capitalism is an economic system, and not a political system. Moreover it is an economic system specifically focused on capital, and its kissing-cousin ‘money’. When capitalism is purloined to become a social system, it faces an inevitable tension that must exist in a system that recognises money as the only representation of value. In a “capitalist society” money is used in two different ways:

  • a medium for transactions (including those that do not create any wealth),
  • a store of wealth. 

These two roles pull in fundamentally opposing directions, and corrupt the very foundation of capital as an economic element.

In its transactional role the impetus is always to create more money, to represent a higher and higher proportion of the total activity in the system. Because if capitalism is to be the social system, then it is necessarily forced to embrace the notion that all activity can and should be represented by money.
In its role as a store of wealth, on the other hand, it is necessary to constrain the supply of money to only that amount that represents the remaining capital after transactions have been completed.

The tension between these opposing roles that money must play in a purely capitalist society, is its ultimate downfall – not the class revolution imagined by Marx.

The only thing that can be everything and special at the same time, is nothing.

21st century enlightened economics recognises a third, or middle way. It recognises capitalism as a perfectly valid mechanism for representing economic activity, and at the same time recognises that economic activity is only a subset of the total society, because the economy is a child of the society.
Once we relinquish the enslavement of capital as the sole representative of all transactions, we are freed to recognise that there are many transactions in the social sphere that are bartered for social value, and which are much better not recognised as having monetary value. 

The 20th century classroom

The 20th century was really the battleground of two 19th-century phenomena: the scientific revolution, and the pressure that revolution placed on the organisation of human societies. Developments in scientific knowledge led first to the industrial revolution, then to the electronic revolution, and lastly, but not finally, to the information revolution. In each revolution the capability to create and recognise increases in wealth grew exponentially. Each revolution also led to exponential increases in our ability to look after ourselves, to feed ourselves and provide for our health, leading to massive increases in the human population.
We stand here in the morning of the 21st century, almost exhausted by the incredible events of the last 150 years, and yet facing, with immediate significance, the challenge of bringing it all together into a sustainable mix. We must now complete the fourth revolution, the sustainability revolution, if we are to go into the afternoon of this century with anything like the population we have today.

If we could see ourselves today, we would see a person standing on the top of the globe, brandishing pieces of paper, and shouting out “This is my worth!”. And in an instant we would recognise the fallacy of ‘economics as society’. The compulsion to bring every activity into the monetary realm is a self-defeating strategy that pits credibility against the wealth it seeks to protect. As more and more of a society’s activity is turned into money, and money is used a store of security, the dragon chases its tail until it has consumed itself. This is where we are now. As our money seeks security, it is the flow of the money that defines the value of the assets, and the connection between wealth and money is loosened, until it is lost. We are there already: the price of nearly every asset is not significant of its real value, instead it is the quality of its ability to provide a secure store of money that defines it’s price.

21st-century enlightened society

21st century enlightened society is one in which a capitalist economy exists alongside, and inside, a sustainable human society. 21st-century enlightenment economics retains and nurtures the perfectly human elements of competitive resource allocation, reward for effort and innovation, and it does so without pretending to be a system for organising human society.

The organisation of large-scale human society is in every way a superior activity to that of economics. 21st-century social organisation must meld the interests of humans, with the preservation of our environment, it must acknowledge our tribal tendencies, accept our natural ambition, recognise our dependence on specialisation, and appeal to our highest callings to follow a path that is inherently sustainable and balanced.

Bad endings

There are two root causes for the failure of every large-scale human society to date: environmental destruction, and specialist denigration. Why are fascism and communism ultimately doomed to failure? Because they both fail to honour and support the specialisation necessary for complex large-scale societies. Why is capitalism doomed to failure? Because it fails to recognise environmental and social values. Why are religious societies doomed to failure? Because they do not provide the freedom necessary to allow specialisation to flourish.

Every human, even a completely solitary human, is dependent on their environment for survival.

And large-scale human societies are equally dependent on their ability to honour and nurture specialisation for their survival. Large numbers of humans require complex infrastructure and sophisticated administration to survive, and both of those are dependent on the availability of, and respect for, a wide range of specialists. Honouring specialisation has a kissing-cousin too: respecting diversity, which inevitably leads to secularism.

By learning from our history and understanding the proper role of economics, we can start to divine the threads we must weave into a path to a sustainable future: we must protect our environment, honour and nurture specialisation, and recognise our economy as a child of society.

If you are destroying your environment, denigrating the contributions of specialists, or promoting money is the only signifier of value, then you should know that you are also sowing the seeds of the destruction of your society. If you restricting individual liberty, you are restraining the unnecessary experimentation that is the heart of innovation. If everything is money, then money cannot be capital, and your capitalist economy is broken. Use a hammer to drive a screw, and you end up with nails.

Happy endings

There is a happy ending. Understanding the proper roles of money, diversity and environment leads us to a new, sustainable social structure; one that must incorporate these essential ingredients:

  1. An economy that uses money for trade and commerce, and does not attempt to put a price on every activity.
  2. A society that values the contribution of specialists, and protects the freedom they need to succeed.
  3. A deep respect for the natural environment on which we depend.

We achieve a sustainable economy by providing the basic necessities of life to each other, without charge or condition. In this way we confine the use of money primarily to commercial transactions, and so we protect the proper role of capital, and allow it to operate usefully inside our economy. We also own our social responsibility, and make ourselves the masters of our economy, because we are not asking money to fill an unnatural role as our social security.

We create a sustainable society by recognising the value to the whole society of diversity, and the essential contribution of specialists of all kinds. Individual liberty is the foundation of successful specialisation.

We protect our environment by incorporating it is a valid priority in all our policies, and by enforcing its recognition in the pricing structures of our economy.

These are the foundations of LIFE’s policies. Grounded in a clear understanding of what is necessary to survive, we can complete the final revolution: to provide a future worth living for our children and their children.

 

Categories
crisis debt economics

It is evident

It is evident that the UK is in a difficult situation. Much of what we consider to be our “way of life” is hanging in the balance, which is why our politicians seem so uncommonly aligned to a very similar course.

The size of our public debt means that we are rightfully concerned about interest rates on Treasuries. As we continue to rack up an additional 5%+ a year of GDP in extra debt, only the anomaly of historically very low interest rates has made it possible to continue without more drastic changes. Pretty much all of the parties in Westminster understand the situation, and are fearful of making any suggestions that UK PLC will deviate from a course of austere spending control.

What no one wants to deal with is that we really don’t have spending under control, and every pressure we see ahead (ageing population, healthcare costs, energy infrastructure, pensions) looks likely to push spending up, not down. Borrowing an additional 5%+ of GDP a year is not “under control”, especially when you’re already at 90% of GDP. The current government’s budgets don’t even forecast making a dent in total public debt before the end of the decade.

The end of QE is coming, even if the UK and Europe want to continue theirs, the USA’s QE dwarfs them, and as it is retracted over the next two years interest rates on debt around the world will rise. UK 10 Year Treasuries have already gone from 1.7% to 2.3% in the lead up to the announcement that the US Federal Reserve will start “tapering” their QE late this year or early next. Historically the UK has paid a 10 year interest rate on its debt closer to 5%, and that simply means that as debt revolves in the coming years the cost of servicing our debt will rise. This extra cost of debt servicing (minimum +£5B/year, more likely +£20B/yr) will easily eat up any of the ‘savings” being proposed by any of the major political parties today (ConDem headline savings: £11B/yr).

If, as it seems evident we will, we go into 2016 with 100% public debt/GPD, rising interest rates, and no plan to bring the total debt down for another 5 years, most investors will see UK Treasuries as one of many junk bond opportunities, not a safe haven. Nothing the ConDem coalition, or the Labour opposition, proposes suggests that our situation in 2016 will be anything other. Assuming that investors hold fast through the 2015 election, for lack of better options globally and because humans are naturally optimistic, then the next government will have to have a pretty radical budget plan ready to roll, or 2016 is going to see the UK joining the list of “bankrupt European nations that let their social costs run away from their economic realities”.

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LIFE is the only political movement in the UK with a plan to address this potentially catastrophic situation.

LIFE will convert the benefits system into a universal services model, raise taxes, and create significant economic growth. Not because our policies are magic, just because we understand economics. We understand that removing the floor on monetary unit labour costs stimulates very significant micro-economic activity, activity that is currently suppressed by the monetary benefits welfare system.

Delivering social security as universal services also makes it politically possible to broaden the tax base, because the equivalent of a ‘living wage’ is guaranteed. Once the services are up and running they cost no more to deliver than the old benefits system, but they deliver economic advantages that the benefits system cannot: the liberation of micro-economic activity, the abolition of the minimum wage, and the effective socialisation of a significant portion of the cost of delivering real social security (absorption of cost by the population as part of the implicit barter for social security).

When LIFE is elected in 2015, we will have a practical economic plan that constrains public spending, increases revenues, produces sustainable economic growth, and provides a reasonable medium-term path to total debt reduction.

It is evident that the Westminster incumbents, of all shades, do not have a plan, and can’t imagine a plan, that will save the UK from junk status in 2016. This is serious stuff: the future of the British way of life depends on a credible budgetary and economic plan for the 2015 General Election.

To quote Lord Adonis, “Once you have an economic plan, the rest, of course, is ‘detail’, essentially,…”.

 

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crisis debt economics WellFair

Black & White

We have three crises today: an economic crisis, a social crisis and a climate crisis.

In the UK the economic crisis is that we are borrowing £2 an hour, for every hour worked by every man and woman in employment. That’s new borrowing every hour worked by every person in the country – and that is with “austerity”.

The social crisis is that, despite not being able to afford the services we already have, those services are not good enough and not meeting the needs. We are not building the cohesive, educated and participatory citizenry necessary to sustain our complex, modern society.

The climate crisis is that our unaffordable and ineffective society is also borrowing from the natural world around us, when we are ready overdrawn on that account. This debt cannot be “written down” or “forgiven”, it must be paid. We have the technology to solve the climate crisis, and the resources to solve the social crisis, what is missing is an economic model that allows that to become a reality.

The current economic model is preventing us from solving the social and climate crises. The LIFE economic model is the key to unlocking our potential and to solving these crises. BY REPLACING CASH DISTRIBUTIONS WITH WELLFAIR SERVICES WE CAN ENSURE THAT WE DO BUILD A COHESIVE, EDUCATED AND PARTICIPATORY CITIZENRY. Wellfair reduces the cost of delivering social services, and automatically promotes sustainable resource use.

We have three crises and one solution – the choice is ours. The switch to wellfair will require everyone to participate more, and it will not be without its winners and losers. The alternative is a downward spiral of debt, social disintegration and further climate instability.

The choice is yours to make, and now is the only time that you can make it.