This article is reprinted from Issue 5 of Nervemeter, a magazine for the homeless. Vendors receive all the money for selling the magazine, unlike Big Issue. All the money raised from donations is used to print more copies. You can download the latest copy of the magazine from here: http://www.nervemeter.co.uk/issue.pdf
The economic system has evolved over centuries to satisfy vested interests which derive their power from it and exercise their will through it.
The foundations of inequality, conflict and environmental waste were laid centuries ago by the introduction of three systemic flaws. These flaws are embedded in the view of what a modern economy should look like even though widespread poverty, inequality, environmental devastation, conflict and loss of individual freedom show the economic system only works for the benefit of the few, not for all.
The system demands exponential economic growth (rather like a bicycle
which will fall over when it stops, if unsupported). GDP growth of 3% per annum, means the economy doubles every 24 years – that's twice as much production and waste. Clearly, in a world of finite resources such a future is unsustainable. In addition, the system relies on money created as debt from nothing by banks incentivised to create exponential debt which is also unsustainable. According to Positive Money, 97% of the money in the UK is created by banks rather than the Bank of England.
Rolling economic crises are indicative of impending economic collapse which will lead to bloody revolution and/or world war. Both previous world wars erupted following deep economic depression.
Or we could think differently.
The deep structural flaws in the current economic system are well understood by a minority but vested interests have suppressed three fundamental truths.
Henry George wrote in Progress and Poverty (1879) how vibrant economic progress in America was always accompanied by abject poverty. Many years study showed the underlying cause was the private appropriation of land and resources which are gifts from nature and whose value is created by the community but captured by parasitical landowners. He proposed a 100% land value tax, an idea adopted by Lloyd George and Winston Churchill which would remove the necessity to tax employment and enterprise. But the idea was quashed and suppressed, from public and academic discourse, by vested interests, ie. Landowners.
More recently, Fred Harrison, who has spent 40 years studying and promoting the work of Henry George, wrote The Traumatised Society in which he describes how progressive dispossession from our land birthright has eliminated our ability to think clearly. He explains how the process of dispossession began five centuries ago when Henry VIII confiscated the monasteries, prior to which virtually 100% of the surpluses from the land were available for the common good. Following the enclosures of common land, by the early 19th century, only 4% was levied from the land for the public purse.
In the early 1990s, Harrison urged Boris Yeltsin to retain land in common ownership but banking interests prevailed, allowing Russia's land and resources to be appropriated and exploited by global corporations and former public servants who became oligarchs.
If the value of land and resources was to be shared for the common good, as natural law intended, homelessness would evaporate.
The second fundamental flaw has been understood for millennia. It is no accident that the major religions prohibited usury - lending money at interest. The establishment of the privately owned Bank of England in 1694 created our interest based money system which prevails today. It allows private banks to create money from nothing and charge us interest for the privilege of using it.
Margrit Kennedy wrote Interest and Inflation Free Money in 1995 and drew on data for West Germany over previous decades. She found everyone pays interest. When you buy a railway ticket, within the cost is the interest element levied on the capital investment to provide stations, track and rolling stock. Similarly, when you buy food, the cost includes interest on the investment in buildings, plant, machinery and transport. Kennedy also found that interest treats people differently. She divided the West German population by income and analysed the interest they paid and received. She found the bottom 80% of the population paid twice as much interest as they received but the top 10% received twice as much interest as they paid. ie. The lowest four fifths of the population paid all their interest to the top 10%. And the top 0.01% received 2,000 times what the top 10% received on average. The interest system drives inequality; it is unavoidable.
Kennedy also found that the ability to pay the interest diminishes over time. Over the period 1968 to 1989, West German wages and national income rose by less than 400% but interest on national debt rose by a whopping 1,360%. ie. Debt interest rose much faster than the income to pay it.
Interest on money discounts the future which is why we're depleting our resources and damaging the environment at an accelerating rate. Future returns are calculated with reference to (interest based) Discounted Cash Flow (DCF) which means for example, a forest is worth more as logged timber today than left standing for future generations. Environmental destruction is an inevitable consequence of the interest based money system because we demand a “time value” for money.
The other major flaw stems from the industrial revolution and the Protestant ethic, that paid employment is a prerequisite for the means to life. Once people had been dispossessed of the land and the means to house, clothe and feed themselves, they were driven into factories in order to survive. Landowners and parasitical collectors of interest gain an extraordinary share of the total wealth by exploiting those who create it. Since the industrial revolution, productivity has rendered full employment undesirable, unachievable and unnecessary. We are now in the position of having to create jobs that are destructive, without real purpose or just bureaucracy gone mad.
The progressive monetisation and bureaucratic control over the lives of individuals, combined with having to work long hours to survive, has limited the opportunities to think, congregate and discuss how to create a better world for us all and future generations. Increasing distraction by media, which is controlled by the few, ensures we don't question the way things are too deeply. Information is suppressed or corrupted to fit the narrative of vested interests. We are seduced into thinking that changes of government will make a difference but both sides are working within the framework of the dominant economic system, controlled by the few. Politics is reduced to puppet theatre.
So what is to be done?
The Critical Thinking project, which emerged from Occupy London in January 2012, has been exploring these issues and the above summary is the result of extensive analysis. We are now developing a blueprint for a New Economy, which fosters greater equality, cooperation and fairness while working for the interests of all and a sustainable future. The New Economy is founded on three fundamental principles:
- 100% of surpluses (before labour or capital are applied) from land and resources are to be shared for the common good
- Complete prohibition of interest
- Unconditional citizens income to provide the means for a comfortable life for all
An economic system, founded on these principles will eliminate homelessness because interest free money would be created centrally to fund public housing and infrastructure. Everyone will receive a citizens income which means that survival is no longer a preoccupation. Paid employment becomes a choice rather than an obligation, balancing the power between employer and employee – no need for unions to protect workers rights, they can vote with their feet.
Critics will be quick to question affordability but they are thinking in terms of the current unfair distribution of wealth. Applying these principles will make it affordable. These ideas have been in existence for over a century. It's about time we applied them to begin to eliminate many of the problems in the world which are symptoms of a broken economic system.
A paper, based on the Blueprint for the New Economy (.pdf), has been submitted to the People's Assembly.