Talk for Dangerous Ideas Southampton on Economic reform

Friday, 3 October 2014 at 16:43
Earlier this week, the Dangerous Ideas Southampton group held an event to explore the concept of money and various projects in place around the country aiming either to make it work in a more socially progressive way, or do without it altogether. Graham Woodruff, the technical directory of the Bristol Pound and Frank van Lerven, a researcher from Positive Money spoke on how local currencies and non-debt created currency, respectively, helps significantly in that progressive aim.

I was delighted to also be one of the speakers. I wanted to share some ideas on the inherent trait of markets to concentrate power, and start some conversations around that and its implications, together with briefly presenting some measures besides monetary reform to make markets less collectively damaging while opening space for broad social development. Here is my talk:

Here is the transcript:

"Rather than ask what is the problem with our money system, I'll start by asking what is the problem with our economic system and how might our progressive values be more truly and fruitfully reflected.

Broadly speaking what do I mean by progressive values? I mean valuing equality of opportunity, and the view that it's in everyone's interests to collaborate with and support each other, in our communities and in society as a whole, and that by doing that, quality of life, scientific and cultural development and sustainability all improve.

Regarding our economic system, my premise is that determining access to and control of resources through a market and the exchange of property is at the heart of the problems we face, because a market economy inherently dis-empowers the large majority and obstructs free collaboration.

Of course there are people who claim the issue is that markets are corrupted by government connections and big subsidies, and just need to be set free for a better society. On the other hand there are those who claim there is insufficient regulation to make markets work for everyone rather than just the few, that if excesses were better controlled and markets were perhaps a bit less globalized then markets as they are, are a reasonable way to organize an economy.

I'd like to briefly challenge both those views and offer some ways of steering us towards a better system.

If markets are set completely 'free' then the state is reduced to its core function of protecting private property, and the process of cumulative competitive advantage takes over. Essentially, small differences in wealth and circumstances get amplified by exchanging property for profit. If you have control over a bit more resources than most of the people you trade with you'll tend to be in a slightly stronger bargaining position. You can better take advantage of economies of scale, you can afford to take more risk for better potential returns, but you also have a bit more flexibility to pick when, how and with whom you trade to reduce your risk. Conversely if you have less control of resources you'll be in a weaker bargaining position because you have less flexibility, choice and scale. Left unchecked the disparity compounds and this 'free market', for-profit trading process inherently ends with a wealthy few effectively controlling everyone else, economically, politically and socially.

But what about keeping the economy (the management of resources) organized around markets, but with regulation focused on protecting its growth and continuation in a more sustainable way, perhaps as they were before the 1980's and the financial 'big bang'?

While this kind or protective regulation of markets necessitates some restraint and provision of social safety nets (inc benefits, labour rights and minimum wages, together with tighter control of what can be traded), it does nothing to alter the inherent growth of large economic and social inequality (from which social classes form). It's for that reason of large power disparity, that the kinds of corruption between business and government that we see are inevitable. In other words if we want rid of the corruption and injustice we must massively reduce the inequality of economic and social means, that a market economy brings.

So then what kinds of reforms or regulations could help bring the most robust progressive change and reduce the destructive power concentration of a market economy?

Besides monetary reform and reducing debt burden and the exploitation that comes from that, which is extremely important, here are two more reforms that are gathering popular support and which connect with values that everyone can relate to, as well as integrating in a progressive way with the existing market paradigm.

First up, Unconditional Basic Income, or UBI. This takes the progressive value of caring for each other for the benefit of all to a logical conclusion and makes a dignified existence unconditional on accepting market determined wage labour. Everyone, regardless, of status and wealth, receives the same basic amount, which allows a healthy standard of living. In this way we would have our many intrinsic motivations for learning, making, contributing and collaborating freed from the narrow and corrosive filter of what can be used to concentrate wealth and so justify the existence of a paid job. Nevertheless the market and wage labour would still exist, but the scope for exploitation and wholesale wastage of human potential would be substantially reduced.

Funding for UBI can be sourced through streamlining existing social safety net schemes, combined with monetary reform and potentially tax reform. The question of how certain jobs get done can be answered simply through a) market mechanisms which find the price at which people are willing to do them, and b) there being more scope for automation since menial wage labour is not depended on for a livelihood. UBI has been tested very successfully in many parts of the world.

The second innovation I'd like to introduce is tax reform. Currently our tax system is a complete birds nest, riddled with loop holes and large bureaucratic overhead. With income tax bands and inheritance tax it also sets up ideological conflicts which obstruct progressive social development. A far simpler, more effective and just form of tax, which Thomas Piketty has recently helped to gather support for is a flat rate* net financial worth tax. In other words all private property, from savings, to land, to materials and other resources would be taxed, per annum at a flat rate, for everyone. By linking in with insurance provision it would be much harder to evade, and since everyone pays the same rate, much harder to complain about. By making the tax revenue redistributed for the large part evenly (making up all or part of a UBI), inequality is effectively reduced. Also by making ownership of property only worthwhile where it is being put to productive use, money and land hoarding would be largely diminished and markets could find a more socially tenable place in our society – until we're ready to move beyond them."

* Actually it seems Piketty proposes a variable rather than flat rate. I currently think that providing distribution of most of the revenue was evenly spread, a flat rate would be more achievable and perfectly sufficient.



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