THE NEW ECONOMY ... For The Simpler Way.

18.4.12

(34 pp.)

                                      Summary;

There is no possibility of achieving a sustainable and just society unless there is huge and radical change from the present economy.  In the present economy we all compete against each other to take as much wealth as possible.  A very few end up getting most of the wealth, and the power to decide what will be produced.  They decide this solely in terms of what will most enrich themselves.  Thus many urgent needs are ignored.  There is pursuit of limitless increase in wealth; i.e., economic growth is the supreme goal.(For the detail see  The Economic System: A Radical Critique. 1. Growth,2. Market, 3. Money, 4. Theory.)  

In a satisfactory economy we would apply the available productive capacity to giving to all the highest possible quality of life in ecologically sustainable ways.  This means economies must be mostly small, localised, basically cooperative, and under social control  ---  and there must be no growth.

           The principles.

What do we want from an economic system?

-      It should provide all with sufficient basic goods and services for a comfortable and pleasant material, social and cultural lifestyle.

-       There must be no economic growth. We are already beyond sustainable levels of production and consumption.  Global ecological sustainability is not possible unless there is dramatic reduction in the present levels of production and consumption going on.

-       So lifestyles must be very frugal and self-sufficient. The goal cannot be affluent or luxurious lifestyles.  The planet cannot sustain anything like the present lifestyles taken for granted in rich countries.

-      There must be economic justice; i.e., a reasonable level of equality with no one deprived of necessities for a good life.

-      The basic unit must be the small, highly self-sufficient localised economy.  There can be a role for (much reduced) national and international economies, but for ecological and resource reasons there cannot be a globalised economy.  All sectors, household, suburban, town, regional and national must be highly self-sufficient.    Thus there must be much social regulation and planning of economic affairs, infringing as little as possible on important freedoms.  Market forces cannot be important determinants of economic activity.

-      The social control can and should be exercised via participatory local assemblies, not via a centralised, authoritarian and bureaucratic state.

-      The criteria determining economic processes and decisions must include all factors which affect the quality of life and eco-systems; i.e., justice, morality, ecological sustainability and social cohesion.   They must therefore to include far more than what will maximise business profits, incomes and GDP.

-       There must be a high level of cooperation, collectivism and mutuality.  The basic philosophy cannot be Liberalism.  It is not acceptable that the most energetic and gifted can be free to get as rich as possible without limit, taking wealth others need. (However there can also be much individual freedom, including private firms.)

-      We would go directly to appropriate development.  The indiscriminate, eventual trickle down approach is not acceptable.  It allows productive capacity to go into producing mostly things that are not very important and which mostly enrich the rich.  We would focus first on what most needs doing.

-       None of this is possible without enormous value change.  People must want to be collectivist, to give, to see their community thrive and to live in materially simple ways.  The economy of The Simper Way cannot work without active, responsible citizens.   The situation will encourage and reward good citizenship.

       The slow transition

The following ways are very different to those we have today so it is important to see them as long term goals to which we might move fairly slowly and in small steps.  The main concern in this document is not how we might get there, but where we have to try to eventually be. (For a discussion of the transition process…)

__________________________________________________

Contents:

1.     FAR LESS PRODUCTION AND CONSUMPTION AND NO GROWTH.

2.  MOSTLY SMALL, LOCAL, HIGHLY SELF-SUFFICIENT ECONOMIES.

3.  SOCIAL CONTROL OF THE ECONOMY;  NOT DRIVEN BY MARKET  FORCES.

4.  MOSTLY COOPERATIVE SYSTEMS

5.  THE LARGE MONEY-LESS DOMAIN; FREE GOODS

6.   THE REMAINDER OF THE ECONOMY.

7.   THE LONG TERM FUTURE?

 8.   MONITORING, MEASURES

9. MONEY, FINANCE, CAPITAL

10.  SOME OTHER ISSUES

11.  ECONOMIC THEORY

1.  FAR LESS PRODUCTION AND CONSUMPTION AND NO GROWTH.

The most important fault in the present society is the fact that levels of production, consumption, affluent living standards economic output are far beyond sustainable levels (For the detail see The Limits to Growth.)  This is the major cause of the big global problems and a sustainable society is not possible unless we cut the resulting levels of resource use and environmental impact to perhaps 10% of the present rates.  Most people fail to grasp the magnitude of the overshoot.  A number of very important implications follow from an understanding of this basic point, especially the fact that a sustainable society cannot have affluent living standards and it cannot have economic growth.

Living standards cannot be affluent.

In view of the limits to growth analysis  a sustainable society cannot possibly be an affluent or consumer society.  We might have to live on per capita resource use rates that are around 10% of today's rich world levels.  This does not mean hardship or deprivation.  It means being content with what is sufficient for a high quality of life, deriving life satisfaction from other things than consuming, e.g., from community activities, arts and crafts, gardening and personal development.  Many sources of satisfaction can be found in living more simply, communally and self-sufficiently and indeed the quality of life can be higher than in consumer society. (See TSW: Benefits.)

We will move from the maximiser – taker mentality with its focus on efficiency and having the best, to a concern with effectiveness and sufficiency, where we will be content with products and services that are good enough.  We will not expect the best or the most expensive or luxurious things. However most of our goods and services will probably be of much higher quality than we get from the supermarket.  They will be well-made by people we know and who enjoy doing good work.  They will be designed to last and to be repairable.  Today almost no goods are made to last or to be repaired.  For instance furniture is usually flimsy and shoddy, the buttons and cases on electronic items break down, cars have no bumper bars.  Our new local firms will therefore mostly produce goods with lower lifetime dollar costs, as well as very low resource and ecological costs.

Far less work and production will take place.

In consumer society there is a vast amount of more or less unnecessary production going into things like advertising, packaging, transport, construction, cosmetics, waste disposal, sewage disposal, shipping, insurance, junking shoddy goods that don't last and can't be repaired, roads and freeways, unemployment agencies, TV and other trivial entertainment, and provision of welfare for people who crack up and become mentally ill or take to alcohol or drugs.  We will eliminate much of this. We will need far less professional/artificial aged care, financial advice, paid entertainment, professional government, health care, professionals and car repairs.  We will save billions by not having to produce arms any more! (…because there will not be resource struggles.)

In addition many of the things we do need will be produced in far less resource-expensive ways, for example we will not need to produce trucks to bring food to cities.  There will be far less government.  There will be much less crime and therefore less need for courts and prisons. Far fewer people will break down so we will need far less counselling, medical treatment and welfare .

Many shops would open only two or three days a week.  If you need a pair of shoes you might get them on Tuesday or Saturday.  In familiar neighbourhoods some shops and local firms might operate without shop assistants, via stalls where you serve yourself, further reducing the amount of work that needs doing.

All this means that at present we work about three times too hard.  In the new economy the GDP will be a small fraction of the present size. Deciding what not to produce anymore might be difficult but will be worked out via participatory community discussions (see below.) Remember that people will understand that sustainability requires large reductions in production and consumption, and they will have other sources of satisfaction than consuming, so reducing the economy will not be as difficult as it might seem at first.

The average monetary income per person would be much lower than it is now, people would be far less wealthy in conventional dollar terms, but the quality of life of all could be far higher than the average now.  One will need very little money to live well in The Simpler Way.

Reducing the GDP does not mean that the living standards of the poorest must sink even lower than they are now.  The quality of life people experience does not have to be connected to their income or to the GDP.  The solution is not primarily to do with redistribution of income.  There would not have to be a high level of equality in income or monetary terms, because these would not affect the quality of life much.  The goal must be to give all people access to all the things that make a high quality of life possible regardless of income, such as community workshops, festivals, free fruit from the commons, a livelihood involving worthwhile work, great concerts, skilled artists, a caring community and a leisure-rich environment.

Fewer models.

In many fields we would work out what is the minimum number of models that makes sense, e.g., for cars.  (Why is there any need for more than two kinds of soap, a block and liquid, and one kind of sock for men?!) However at the level of small firms within the town there could be a very wide range of items produced by family businesses, for example as our  locals enjoys creating up many different jam recipes.

No advertising or marketing!

We will save astronomical amounts of money, energy and time by having the sense to eliminate marketing.  That is, no effort will be made to persuade anyone to buy anything.  There will of course be an important place for providing information on goods that are available, and especially on new items.  All of this can be done much more effectively than the present $550 billion global marketing industry does it, simply by the use of computers.  If you want to buy a new fridge you should be able to look up comprehensive, accurate, succinct and critical information on the types available.  There could be useful segments within news publications introducing valuable new products recently developed.

As we move towards The Simpler Way the need for firms to compete via advertising will diminish.  We will in time get to the situation where our town or region has just enough bakeries etc. to meet its needs and they are kept effective by means other than deadly and wasteful competition for limited sales (below.)

Only one or two days a week working for money!

When we eliminate all that unnecessary production, and shift much of the remainder to backyards, local small business and cooperatives, and into the non-cash sector of the economy, most of us will have little need to go to work for money in an office or a mass production factory.  In other words it will become possible to live well on a very low cash income earned by only one or two days paid work per week.  We could spend the other five or six days working/playing around the neighbourhood doing many varied and interesting and useful things everyday.  You could choose to work for money five days a week, if for instance you were a specialist doctor.  You would earn more money, but you would need to buy more whereas others would be getting more things in exchanges that did not involve money.

No growth!

A zero-growth or steady-state economy is absolutely crucial for a sustainable world.  .  (See The Limits to Growth.)  There must be no economic growth.  The amount being produced is already far beyond sustainable levels.  We would produce only as much as was needed to provide all with a good quality of life, and we would always be looking for ways of reducing the amount of work and resource use.

Few big firms or transnational corporations would be needed.

The general principle will be to make productive units as small as we can and to locate them in as many small areas as possible, to minimise transport distances, travel to work, and distribution systems.  Most things can be made very efficiently on a small scale, especially when we take into account the increase in morale that can come in small cooperative firms mostly serving their locality.

Those large enterprises that are appropriate, such as steel works, railway equipment and buses would best be owned and run by society as a whole, to provide basic materials and services to society.  Fifty years ago railways, power, telecommunications, water etc., were publicly owned. The operations of the  bigger enterprises would be fully open to public observation and control, with their major policies set by referenda.

Much craft production

Many things would be produced in very small firms, in craft ways. The main reason for this is that craft production is enjoyable.  Remember that the volume of production in a frugal steady-state economy would be much lower than it is now, so people who love making pottery, furniture, clothing, toys etc. might provide all we need via hobby-produced, hand-made items.  Production of things like crockery and furniture would have to do little more than replace breakages and wear. Of course it would make sense for some things to be mass-produced in factories.

The greatly reduced economy

The total amount of producing and consuming going on in the new economy will be a small fraction of the amount in the present economy.  Many luxurious, wasteful and avoidable things will not be produced; some whole industries will be eliminated, e.g., sports car production and motor racing.  Some essentials will be produced in much less resource-intensive ways, e.g., food.  This will mean that the amount of resources available for important things such as medical research and cultural activities could actually be much greater than at present.

2.     MOSTLY SMALL, LOCAL, HIGHY SELF-SUFFICIENT ECONOMIES.

In a world of scarce resources, especially fuel for transport, we will have no choice but to produce most of the things we need in and around our towns and neighbourhoods.  Relatively few goods will travel significant distances, because there will not be the energy and resources to transport them.  This means the end of globalisation.  A sustainable economy for all the world's people cannot be a globalised economy.

Economic self-sufficiency should be seen in terms of concentric circles.  In the centre will be the most important economic and social unit of all, the highly productive and self-sufficient household. This will be more important in most people's lives than their career .  Outside this will be the neighbourhood, then the suburb or town where less frequently needed goods and services will be available, e.g., doctors.  Then the town's surrounding area will contain a dairy, timber plantations, grain and grazing lands, and some of the factories that would supply into the surrounding region, e.g., producing fridges and radios.  Some of these items would be exported out of the region. Much less will come from the state and national economic sectors, and very little from overseas, perhaps things like some high tech medical or computer equipment.

So the basic economic unit will be the local economy, the suburb or town.  Most of the things we need in our everyday life will come from at most a few kilometres around where we live.  Most of us will get to work on foot or on a bike, although a few will go a little further, in buses or trains.  Because we will need very little transport many roads will be dug up increasing space in cities for local gardens, orchards and forests.

Sectors of the new Economy

One of the (overlapping) sectors of the new economy would still use money.  In another market forces might be allowed to operate (although in the long term future we would not need the market; see below.)  One sector would be fully planned and under participatory social controlled (e.g., for provision of water and power).  One would involve community cooperativeslf . .  One large sector would not involve money.  It would include household production, barter arrangements, mutual aid, working bees, cooperatives, gifts, i.e., just giving away surpluses, and the totally free goods from the commons, e.g., public orchards, clay pits, herb patches and woodlots.  As many of these as possible would be crammed into neighbourhoods and towns and just outside them, run by working bees and committees, to provide a wide range of important goods and services, including fruit, nuts, timber, herbs, reeds, meadows, honey, premises for little businesses, store sheds, meeting places, libraries, and especially neighbourhood workshops.

Many of our firms will produce at higher dollar cost than we would have to pay at the supermarket.  They could not beat the transnational corporations which have mass production economies of scale, can import the cheapest goods and can exploit cheap third world labour.  But the resource and ecological costs of supermarket goods are extremely high and will not be affordable in a sustainable world.  For example it will not be possible to have food items travelling on average 2000 km.  We will have to pay much more for some things but this will not be important because we will not need to earn or spend much money and we will understand why it is desirable to pay the higher cost.  That hand-made table will last a lifetime, and purchasing it helps to keep the town's carpenters in their livelihoods.  If some of them leave town there will be fewer people for working bees and concerts.

Taxes.

The main form of tax payment would be giving time to the working bees which build and maintain town infrastructures and provide our services.  Only a little tax in the form of money would be needed to pay for maintenance of  town systems.

Most tax would be levied and spent locally, i.e., not via the national government, (which will have far fewer functions to pay for) Towns would work out their own arrangements whereby individuals might pay some or all their tax through extra contributions to working bees.  Some communities would also have voluntary taxes, i.e., those who think a proposed project would be desirable contribute to it and others might support some other project some other time.

3.  SOCIAL CONTROL OF THE ECONOMY;

NOT DRIVEN BY MARKET FORCES.

We cannot have a satisfactory economy unless we make sure that what is produced is what should be produced, that people have their needs met, that social cohesion and morale are kept in excellent condition, that the environment is cared for, and that the right things are developed. A free enterprise or capitalist economy will not do these things. Markets ignore need.  They allocate scarce things to the rich and do not develop the most needed industries.  Desirable outcomes are not possible unless there is much social control over the economy, i.e., careful discussion, deliberate, rational decision making and regulation.

Obviously these assertions contradict currently taken for granted conventional economic doctrine which asserts that as much as possible should be left to the free market.  (The problems the market system generates are central in the critique of the present economy; see The Case Against the Market, http://socialsciences.arts.unsw.edu.au/tsw/MARKET.htm.) In the past we have not been very good at running economies without market forces but we must now master the process.  It will be argued that the control and planning must be exercised through our open and participatory local assemblies, not state bureaucracies, and that the task will be made much simpler by the fact that the economy will be much less complex and will not be growing.

All relevant factors will therefore be taken into account.

Some of the worst aspects of the present economy are due to the fact that only one factor is taken into account in economic issues and decisions, i.e., whatever will maximise monetary benefits.  This is totally unacceptable.  Millions of people die every year because the provision of food and water is determined not by whether or not they need these things but by what will maximise the profits of those who supply them.  In a satisfactory economy whether or not something should be produced and who is to get it should take into account considerations of morality, social cohesion, justice, rights, needs and ecological sustainability, and all of these considerations should take precedence over whether profit can be made.   By allowing market forces and profit maximisation to settle issues, this economy allows producers to completely ignore all these other important factors, and therefore to ignore many of the costs of production.  The cost of the noise from the factory therefore has to be paid by someone else. What's more, the most relevant considerations (e.g., effects on the environment and social cohesion) cannot be measured in dollars, so weighing costs and benefits and providing the right trade-offs can be only be done by deliberate, messy, social decision making.

How will we exercise the control?

Few if any of us would want the social control and regulation of the economy to be exercised by big, authoritarian, centralised state bureaucracies, but that is avoidable.  A sustainable and satisfactory society in a world of very limited resources will have to be made up of many small and highly self-sufficient community economies.  These will have to be run by participatory democracies – they can't be run effectively any other way.  They will not make viable decisions unless the people familiar with that situation, and who will have to make the decisions work, are the ones who make them.  There will be few paid bureaucrats or councils, because in a world of scarce resources we will not be able to afford much paid government.  Most policy formation and management of public works will (have to) be carried out by local citizens, committees and town assemblies, and via voluntary working bees.  Fortunately the situation we will be in (smaller, zero-growth, localised economies) will make it easier for the social control to be exercised via participatory democratic processes such as town assemblies.

Many and possibly most of the economic activity would not need any formal control.  Informal discussion would sort out, for instance, whether we planted too any tomatoes last year.

It is important to distinguish between the near and long term future.  Eventually we will probably have a fully planned and socially controlled economy that will function to provide well for all routinely and with little attention, without wages, profits or private firms…because we will have developed ways of easily producing what is needed via rationally organised systems.  (This is of course how the economy within the household runs now.)  But in the short-term future there will probably still be a considerable role for market forces, profits, private firms and different wages, but within limits and conditions we set. 

So, in the near future  we will seek to organise and control only the most important basic activities we all need, (i.e., we will set up Economy B within the old economy; see below) and many private firms will continue to operate according to market principles, within the remnant and diminishing old Economy A.  For example the kinds of bicycles on sale might be left entirely to the market.  Local market days might enable individuals and families to sell small amounts of garden and craft produce. In other words market forces might even continue to make most of the economic decisions – but none of the important ones!  We would obviously not let it determine whether some people were unemployed.

We would have the capacity, and the intention, to intervene whenever undesirable things were starting to happen in this market sphere.  Market forces would never be allowed to settle the distribution of income or the access to livelihood or town development (although they might be allowed to have considerable influence.) The people of the town would have ultimate control over these issues through their political system, especially town meetings.  For instance if it became clear that there were too many bakeries they would have to work out the best solution for all concerned.  This might include helping to shift some people into other ventures the town needs.  (The town will have its own banks and panels of experienced advisers and working bees to help its firms run well; see below, and see Mondragon.)  The town would not tolerate any of its members being dumped into unemployment or bankruptcy by market forces, nor the establishment of a Wal-mart that threatened to ruin the town's many small businesses.  (We would refuse to buy from it.)

Even if satisfactory ways of exercising this social control are not easy to find, we must work them out because the welfare of our town and its people is at stake here.  It's our town, it must work well or we will all be sorry, a failing business is a waste of resources, we must look after each other, including the person running that bakery.  Even if it is a private firm, it's our town and we need a good baker.  The basic orientation would therefore be friendly and helpful.  Above all we will make the decisions and determine our fate, not leave it to the market (i.e., the wishes and effective demand of richer people.)

This means we will be in a position to retain or establish some firms that are important for the town even though they would not survive in a free market situation. These actions sometimes protect and subsidise, and therefore impose costs.  Goods would be cheaper if purchased from a transnational corporation which can minimise prices by importing from China. But these are among the costs we will be willing to pay in order to maintain a good town.

Obviously these actions will not be possible unless people become much more socially aware and collectivist in their outlook than they are now, and prioritise the town's welfare over low prices. 

Our many small private firms would not be part of a capitalist economy because they would best be regarded as the tools people work with to gain a modest, stable income and thus a secure livelihood.  These little firms would not involve investing capital in order to accumulate capital in order to constantly increase investments and wealth. 

The overwhelmingly dominant neo-liberal ideology insists that the best way to run an economy is to leave everything to market forces and not to try to cooperatively control economic affairs – that's socialism and we all know it doesn't work .  The issue of how we could organise a good economy independent of market forces is discussed at length below but it is appropriate to note here that for bigger enterprises a highly satisfactory model is the mutual or cooperative, whereby those who want a product or service simply form an organisation to provide this to all without making any profit.  There were many of these twenty years ago, e.g., for roadside repair of cars, and for home building loans.

What about the criticism that having everyone making the decisions risks populism and that good government must involve selection of leaders who don't blindly follow popular opinion but ask themselves what would be best for society? We are talking about a situation in which everyone is acutely aware that the decision to be made is usually about what would be the technically correct option for them all, e.g., how many bakeries do we need, and what can we do about it?  Strong disagreements will still occur from time to time, but the direct connection between your vote and your welfare will tend to make you behave sensibly.  We will quickly learn that it is not a good idea to be hot headed or to engage in personal abuse.  The situation will force us to think collectively; the question will be, given our scarce resources and our need to deploy them well, and given the wishes of the present bakers who are our friends and neighbours, how should bread supply best be organised?  Thus the chances of irrational mob rule etc. are likely to be low.  (For more detail see The New form of Government.)

Provision of livelihoods.

One of our top priorities will be to ensure that everyone has a livelihood.  This is very important.  The conventional economy sees no problem in allowing those who have most wealth and power to take or destroy the business, markets and livelihoods of others, and thus accumulate to a few the wealth that was spread among many.  Its fundamental mechanism, the market, constantly and inevitably worsens this problem.  Globalisation is essentially about the elimination of the livelihoods of millions of people and the take over of their business by a few giant corporations. As a result inequality is rapidly increasing.  A satisfactory society will not let this happen.  One of its supreme priorities will be to ensure that all have a livelihood, and clearly this is only possible if local communities have control of (at least the essentials of) their own local economic development and can operate contrary to market forces.

It would be possible and desirable for many and possibly most enterprises to be to be privately owned and run by families and cooperatives.  People in these firms would be able to enjoy running their own venture just how they wished, but this would be within the formal (and moral) limits that would both prevent them from doing things we didn't want and that would help them to thrive.  These private firms would be seen as part of the local machinery that routinely helps to supply that relatively small and constant volume of products and services we all need while providing workers, managers and owners with a stable income and a satisfying livelihood and a sense of making a worthwhile contribution.

These private enterprises would not be elements of capitalism.  They would best be thought of as the tools which people used to make their social contribution and draw a constant, sufficient income.  They would not involve investment of capital by those who need do no work, to make money, to invest again, and so would not be remnant elements of a capitalist economy.

Although most firms might be privately owned, we would regard the economy as ours; i.e., as arrangements and institutions which the town owns and runs in order to provide itself with the goods and services it needs and to provide its people with livelihoods.  The more we move in this direction the more collectivist our society could become.  (It should be stressed that this term does not imply coercion by Big Brother; in The Simpler Way vision it means strong desire to maximise the welfare of all.).

There would be no poverty or unemployment.

It should not need to be said that there will be no poverty and unemployment.  These are inexcusable and easily eliminated -- if that's what we want to do.  They are not found in civilised societies.  They do not occur in the Israeli Kibbutz settlements.  We would have neighbourhood work coordination committees which would make sure that all who wanted work had a share of the work that needed doing.  Far less work would need to be done than at present.  (In consumer society we probably work three times too hard!)  The warped economics of consumer-capitalist society generates a desperate need to create more jobs, but central to The Simpler Way is eliminating most present jobs!  That is, when we stop producing unnecessary things there will be far less work that needs doing.

 In the present economy the only conceivable ways to reduce poverty and unemployment is to increase production and consumption and therefore jobs and incomes, or to redistribute wealth.  These are obviously incompatible with the need to dramatically reduce production and consumption to solve ecological and resource problems. The Simpler Way solution is not to redistribute wealth, but to organise things so that significant inequalities do not arise in the first place and so that the poorest have abundant access to the many (mostly non-monetary) things that generate a high quality of life. In other words the solution is to redistribute productive opportunity.

No work-leisure distinction.

We will have eliminated the work-leisure distinction.  Much of our time will be spent in useful productive activity, which we will enjoy and would have chosen as a leisure activity anyway.  Working bees will mostly be playing bees .  Much leisure activity will be highly productive, such as gardening, visiting older people, and crafts.

The importance of the handy-man, the Jack-of-all-trades .

Most people will probably choose to do many different productive activities most of the time, while practising a speciality or profession only part of the time.  The handy man will be the backbone of the new economy, able to make and fix most things around the house, farm and neighbourhood.  There would still be an important place for highly trained specialists, but today most of them work on tasks that will not need doing so we will not need that many of them.

Who does the unpleasant jobs?

One of the injustices built into the present economy is the fact that some people are forced to do unpleasant jobs.  This is never seen as a fault.  In addition the people who have to do the worst jobs get paid the least!  The educational system legitimises job placement; people who do not do well at school are judged not to deserve access to nice or high paying jobs.  (See Education; The Radical Critique.)

Ideally our town assemblies would give a lot of thought to the just allocation of jobs and of fair remuneration.  (Centuries ago people thought in terms of a just wage.)  As on the Israeli Kibbutz settlements, it would not be difficult to arrange for job rotation, so that people only do unpleasant tasks for a short period. Work coordination committees could organise the rosters.  Again the fact that it would be an economy producing far less than at present, and that much production would be in the form of craft would greatly reduce the difficulty of the problem. 

Many of the unpleasant jobs could be carried out by working bees, enabling all of us do our fair share.  In our present economy, which heaps wealth and privilege on a few, professional people do not have to do a share of the boring, and unpleasant jobs.  In our new villages all will be expected to come to the working bees.  If we all benefit from some job such as cleaning out a garbage gas tank then why shouldn't we all do our share of such work?  Working bees turn many hum-drum tasks into enjoyable, morale boosting festivities.  If you had to paint windmills every day for a wage you would surely find it boring, but when it is an occasional event for the town working bee, with tea, scones, witty comments and musicians on hand, it isn't drudgery.

Our extensive monitoring and feedback systems would also deal with the problem of work justice by experimenting with measures of work satisfaction and difficulty and unpleasantness.  If surveys find that some jobs are experienced as more distasteful then we would have to think out what to do about this.

Wages.

Another undesirable aspect of the present economy is the fact that people work for wages .   That is they take part in production only to get an income, they are forced to do this in order to survive, they must go to owners of capital seeking a job and might not be given one, they have no say in the organisation of the work, they do not own the things they produce and they cannot participate in their distribution or see them benefiting others.  These are not desirable conditions and in a good society we would replace them. 

But in the near future we will probably retain many private firms where people work for wages, although as the town takes more control over its firms workers will increasingly be involved in decisions about how to organise the work process. The many cooperatives in the town will of course be managed by their workers. In the long term future it will become clear whether it makes sense to retain private firms.

What about the rate of pay?  In time we would probably want to move to a standard, equal rate of pay per hour for all, regardless of skill. (That's how we are paid for work in the household economy now, its how we will be happy to be paid for contributions to cooperatives and working bees, and it is the way many communes and organisations organise payment.)  This is not essential for The Simpler Way to work, but it is a desirable way of organising payment among cooperating comrades, especially because it contributes to the spirit of equality we should foster.   In a good society those who were more skilled and intelligent would be happy to work one hour and be paid enough to live well, knowing that those who were less able were also working just as conscientiously and being paid the same amount. In other words, shouldn't the measure be how you try to contribute, not how lucky you are to be stronger or brighter and thus more able to produce more?

 However an important assumption here is that we will provide properly for the time it takes for highly skilled workers to learn their trade or profession. The suggestion is that all training and skill development for socially useful work would be counted as work time and be paid at the normal rate.  In other words you should be paid by your community for the work you do to acquire the skills your community will benefit from.  When they graduate professionals and tradespeople would earn at this rate; i.e., there is a set hourly payment regardless of skill and regardless of whether the time is spent learning or practising the skill.  There is therefore no sacrifice or loss of income while studying.  Learning complex skills is then seen as a way of becoming able to do the kind of work one wishes to do, and to make an important contribution.  (This would also make sure that no one chose to become a doctor because of the prospect of making a lot of money.)

Would there be insufficient incentive for initiative, effort and conscientiousness, without sharply differing income rewards?   It is being assumed that people would work well, keep up to date and be conscientious for non monetary reasons, especially because they enjoy their doctoring or baking  and want to be good at it, and because they want to be regarded as being good at their trade, by their customers and their colleagues..

4.  MOSTLY COOPERATIVE SYSTEMS.

The right way for humans to interact is cooperatively.  Competition should be avoided wherever possible.  Contrary to the dominant neo-liberal ideology competition is a very inefficient way to organise most things.  It makes schools and firms run badly, it generates astronomical levels of waste, and it is not morally acceptable. (For much empirical evidence on its inefficiency see No Contest, by A. Kohn.)  It certainly appears to be effective because it does stimulate much effort to be efficient and innovative, and it works very well for richer people, especially for the rich countries in the global economy!  They win the competition for most of the wealth available in the world.

In a satisfactory economy many firms would be cooperatives, simply organised by local people to use local resources to produce to meet local needs.  Cooperatives are enjoyable to work in, and are very efficient; typically much more so than private firms.  People who run the enterprises they staff tend to be conscientious and not to strike, and to be thinking about better systems, and no profits are siphoned off to shareholders..  Many public services would be provided by cooperatives. Many private firms would in the near future probably become community cooperatives.   The town will run its own bank and business incubator, with elected boards, for the benefit of the community (as distinct from being run only for the benefit of shareholders.)  The town would set up many little firms and institutions it finds it needs, e.g., youth clubs, shoe repair, bee keeping, aged care, insurance.  Often it will make sense for a number of struggling competing bakeries or fruit shops to come together to form one cooperative to provide for the town via secure jobs. (If we don't need all the bakers we would work out how to provide for all somehow, maybe help some to move into some other coop.)  Overall control of the local economy will be exercised through the town assemblies, where the primary concern will (have to) be what is best for all. This situation we will be in, for instance one of scarcity and obvious mutual dependence, will give us very strong incentive to think and act cooperatively.

            The commons.

Many basic goods would come free from the many commons, including those planted where roads have been dug up, and the community workshops, business premises, store sheds, workshops, meeting places, craft rooms, recycling systems, water catchments and pumps, windmills and machinery.  These will be public assets, operated and managed by working bees and committees.  All might be obliged to give a set minimum amount of time to working bees that maintain commons.

The town bank and the business incubator.            

The local bank and business incubator will be crucial in giving us control over our own local economic development.  Because we will then have control over our own savings via our town bank, the town will be able to set up the firms it want.  Business incubators would provide small firms with advice, secretarial assistance, accountants, tax advice, etc. We would also have panels of people with expertise in running enterprises, to advise on how firms can be made as efficient as possible.  (See the Mondragon cooperatives system and bank.)

            Consider the mutuals , the cooperatives.

The fact that large, cooperative not-for-profit firms can function very satisfactorily, totally independent of market forces, and contrary to the principles of capitalism, is driven home by a glance at the many mutual and cooperative organizations that were prevalent a generation ago.  There were many credit unions whose members pooled their savings and hired managers to lend these at low interest to members for home building.  Over time funds would accumulate enabling very valuable assistance to be extended to increasing numbers of new participants.  The Australian National Roads and Motorists Association was a mutual organization providing emergency roadside service to member motorists this way.  An excellent example today is the Australian radio station 2MBSFM.  Its members work voluntarily to run a radio station that broadcasts classical music, accessible to non-subscribers as well.  Consider the characteristics of this organization:

-      It is set up and run by people who want the service.

-      It is not run for profit; profit motivation is therefore not necessary to make this kind of organisation work well.

-      It is very efficient .  lt achieves its set goals very effectively, especially in saving its subscribers the cost of paying out 10%+ of income to shareholders!

-      It draws heavily on willing volunteers, thereby reinforcing a sense of mutual assistance and giving.

-      It does not pay ridiculous salaries to CEO's.

-      It does not have CEOs in a position to rig operations to their own benefit, e.g., by setting up bonus payment arrangements.

-      It is not open to gutting by CEOs who can see that profits can be raised by dumping socially valuable operations that don't maximise dividends to shareholders.

-      It is highly democratic, not ruled by a dictatorial board as normal firms are, and open to all workers to have a say in operations.

-      It is not driven by income-maximisation; other goals can be taken into account and can take precedence over mere money making. For instance it can help unknown composers to be heard, or subsidise struggling orchestras, or support socially valuable ventures that would not make much if any money…i.e., it can cross-subsidise .

-      It provides and excellent/perfect product!

Clearly the existence of this organization ridicules the assumption that the best/only way to do things is according to profit motivation and market forces.  Indeed it is obvious that if it was privatised its admirable characteristics would be more or less eliminated.  (It could of course be made to generate far more income, so the conventional economist would say it is very inefficient .)  These mutuals are so admirable, efficient, and publicly valuable precisely because they are not private firms, driven by profit for the few who own them.

This could be the general model for most if not all our middle to large enterprises, i.e., as mutuals run by and serving the needs of their members, or as public firms serving all (e.g., railways, steel works)…providing their control was not centralised and bureaucratised but kept under open, participatory arrangements.  Yet the neo-liberal push has convinced everyone that its best to leave everything to private firms competing for profits in the market!

If the mutuals are so good, how come they have died out?  The point is that they were so good that they were captured, butchered and plundered!  Organisations like the NRMA had slowly built up large assets, in resources, skill, experience, fleets, premises, reputation, users, and funds.  These assets were contributed by users over decades and belonged to the organization, and were given in order to build an organization that could go on providing mutual assistance at no profit.  At any point in time the current members or shareholders were not owners but trustees of the accumulated resources and organization; their role was to manage them while benefiting from them but to then pass them on so they could go on benefiting future members.  The members at any point in time had not created or lent or given the assets to the organization.

Then along came the neo-liberal globalisers with their sharp eye for unexploited profit-maximising opportunities, and saw that there was an opportunity for a killing here.  All they had to do was convince the members to privatise the organization; i.e., sell it off to a private firm to run for profit.

Note again that the discussion here is mostly concerned with the development of Economy B.  The remnant and dwindling old Economy A would continue to exist throughout the possibly two decade transition period, and it will become clearer as time goes by whether we want to completely eliminate it or retain it as a minor sector in which private firms compete for sales in a market.  One would hope that as we move to more cooperative ways geared to maximising the public good and the welfare of all a very different culture will develop in which we choose not to retain the market and its selfish, predatory, maximising and anti-social values.  But we might decide to retain the scope for people who want to set up a firm to sell something via market forces to do so. Economy B will be focused on necessities so if someone wants to try selling stylish hats or perfumes or garden ornaments or meditation lessons maybe we will think it is important to preserve the freedom to do so, within limits set by resource availability and social welfare considerations.

Note that for most of us most of the economic phenomena that concern us would occur within the town Economy B.  Very little that most of us would need would have to be imported into the town.

5.  THE LARGE MONEY-LESS DOMAIN; FREE GOODS

It is likely that most of our goods and services will come free from close to where we live, from the two extremely important sectors of the economy which will use little if any money.

Sector 1.  The household.

Much production will come from the household/subsistence sector, including home gardens, poultry, making things, preserving and bottling, home workshops, hobby production, craft, wearing things out, sewing, repairing, entertaining … items for direct use, swapping, barter and giving away.  The multi-skilled handyman will be highly productive in the house and garden and in the neighbourhood, enjoying making, growing, fixing things much of the time..  There is nothing remarkable here.  These are the kinds of things grandma did, and they can make a big contribution to meeting everyday needs and can cut huge amounts off supermarket bills and the energy they involve.

Sector 2.  The Cooperative Sector: Community owned commons, cooperative firms and working bees.

Many basic necessities, such as energy and water, timber, craft materials, and many basic foods (fruit and nuts from orchards, dairy, timber, fish…), and many services (e.g., health care, aged care, libraries, education, fire brigades, entertainment…), would be largely provided from the commons and the community cooperative factories , institutions and events.  Committees and working bees would do the decision making, management and work, and the output would be made available to all totally free to be taken from the fields, orchards and stores as people need (like going to school or to the doctor on a Kibbutz.)  All would be expected to put in at least a set number of hours per week (thereby paying some of their tax) and there would be rules governing access to these free products and services.

Participating in working bees would be enjoyable and attractive, but if an honour system didn't work out too well then token wages might be necessary to record inputs and thereby determine shares of produce earned .  In general in small, familiar communities people would know if you were unreliable so concern for reputation would probably get most people to pull their weight. Similarly, eventually it should not be necessary to record who consumed what, because people would not be likely to take more jumpers, fruit, mud bricks, herbs or water than they needed.

Many of these new enterprises would function like the chicken group on a commune.  These people take on the task of looking after the poultry, doing the necessary work and monitoring, and supplying the community with eggs, without needing any payment.  They do these things because they are valued contributions, they are enjoyable, and they provide the workers with eggs etc. too.  Meanwhile other groups would be looking after the production of other things these people then get free .   Membership of different groups would be voluntary and could be changed as people wish.  Serving on these cooperatives would reinforce familiarity, community and the sense of collectivism.

The household and local cooperatives/commons sectors involve subsistence production, i.e., they involve people in producing to meet their own needs directly, without selling produce.  Subsistence production has always been crucial, and in the coming era of intense scarcity it will be very important.  (It is not confined to within a family; a town can share subsistence production, and it can involve selling as a means of exchange, but not in order to accumulate profits and wealth.) Yet conventional economists despise subsistence, regard it as at best a relic of primitive economies, and they work hard to eliminate it…because it is axiomatic to them that real economics has to be about selling produce in a market, getting money and purchasing.  Real economics is not about producing to meet your own needs.  Real development for the third World therefore can't be about people producing for themselves much of what they need independent of the global economy.  Central to Simpler Way thinking is providing for yourself as much as you reasonably can as a household, a community, region or nation.  This cuts resource costs and importing, makes you more independent of distant economic forces and therefore more secure, and reinforces your sense of competence, solidarity and power.

The household and cooperative/commons sectors would provide maybe 3/4 of the goods and services the average person would need.  Some people would have just about all their needs met from these two sectors, but others, such as those professionals who do specialist work all the time might choose to buy more than most from the present case economy, because they would not have time to give to working bees etc.

            The inevitable tendency!

It is very likely that soon we will rather automatically and inevitably come under great incentive to   build these household/subsistence and commons sectors --  when petrol becomes scarce.  We will have to do this if we are to cope adequately.  People will probably realise that they must get together to organise the provision of basic needs from their locality, and that they cannot leave this to market forces.   This will focus attention sharply on basic necessities such as food and energy, and on collective strategies.  Things will not be organised well unless communities manage to discuss and work out what's best for the whole, and take control over the re-development of their neighbourhoods. They will have to focus on the common good and ask themselves questions like, What productive ventures do we most urgently need in this locality? Do we need a baker, a bee keeper, a fish farmer…?   What sites could be turned into gardens?   How can we recycle nutrients to our gardens?   What energy forms can we collect here and how?   The solutions will mostly be public, not arrived at by private individual households. Neighbourhoods will take the initiative away from councils, although these will have to go with the surge, dropping the rules presently inhibiting local productivity, such as prohibiting poultry in cities.  Councils would have no chance of planning and administering all our little neighbourhoods, especially in an era of scarcity, and when we will have to cut the amount of professional government dramatically.

However it is by no means inevitable that the desirable new local economies will emerge just because the old systems increasingly fail to deliver.  It is in fact more likely that there will be descent into chaotic breakdown and thus fascist rule as the rich endorse state repression to restore order.  (See The Window...)  We must work hard to make sure these incentives for local development are turned into satisfactory outcomes.

6.  THE ECONOMY BEYOND THE TOWN OR SUBURB.

The foregoing discussion has been about the development of a new town or suburb economy, Economy B, within the old one.  At first and for a long time it would only be able to provide a limited range of goods and services, but eventually we would have established participatory control over the town's internal capacity to meet several crucial needs.   But how will the many firms and systems outside the town have to be organised, and how might this be done?

Remember that the total economy will involve no growth and a far lower amount of producing and consuming than there is now.  It is difficult to see how this could possibly be a capitalist economy.   Capitalism is in trouble if the rate of increase in producing and consuming slows, let alone is zero, let alone if GDP must be 90% below what it is now. Remember there would be little trade, globalisation or finance industry.  Leaving aside the very difficult question as to how a relatively smooth transition to such an economy might be made it would seem obvious that the biggest enterprises and functions, e.g., railways, steel, telecommunications, hospitals, drug companies, prisons etc. would be publicly owned and run to provide basic goods and services we all need.   This is not that radical a proposal because it was the situation until about 1970 in Australia, before the neo-liberal takeover, although in future we would want far more open and accountable managerial arrangements enabling direct public control.

Now, how best to organise the remaining firms, the many small and medium privately owned firms employing workers?   (These are different from the very small enterprises, such as family businesses, and cooperatives which can be large, that are owned by the people who work in them.)  This is the gigantic problem that has faced all people interested in how socialism might best be organised, and it would seem insoluble unless there is a powerful and ruthless state willing to expropriate, kill off firms and reallocate.  But this is another area where the coming and novel era of scarcity is a game changer, completely upsetting previous thinking.  The point here is that we are going to have an economy which has only a small fraction of the present amount of producing and consuming going on...either because we have the wit to see that we have to set this kind of economy up for sustainability, or because the coming scarcity will cut us down to it whether we like it or not.  When the resource crunches hit, accompanied by the financial collapses, very many and probably most firms will be automatically eliminated, starting with those producing the least necessary goods. The biggest problem will be whether we can organise relatively smooth transfer of the large numbers of people from the dying firms to the new crucial local ventures.

It is conceivable that the remaining medium sized privately owned firms could go on being privately owned, employing workers for wages, and delivering profits to shareholders who need do no work in these firms, but this would not seem to make much sense and it is not likely that this would be accepted in a situation where scarcity, cooperation and frugality were recognised as paramount.  At some stage people would probably see the sense of converting these firms to public ownership by the town, to be run to meet needs and not to produce what owners will think maximises their income.   It is possible that most transfers from private to public ownership would be voluntary, as was often the case during the Anarchist period in Spain in the 1930s. 

It will be very important for all towns, suburbs, regions to have sufficient export capacity, i.e., firms, to produce (a relatively few) things to sell to other towns and regions or into the national economy in order to earn the money to import necessities from them.  It will probably be desirable to have two currencies to facilitate the accounting, one for use within the town and one to enable tracking of whether the town is paying for its imports.  (Keynes stressed that trade between nations should be balanced so that neither excess earnings of debts accumulate, and that a special unit of account should be used to track the situation clearly.  The crisis in Europe in 2008-12, and concerning Greece in particular, is largely due to the failure to follow Keynes on this issue...some win and take all and others cannot compete and pay their way.)  This task of distributing the export earning capacity properly across the nation would be a major function for the remnant state and national governments.  Some towns and regions could easily specialise where necessary, e.g., mining in desert regions and not producing much for themselves but paying for their increased imports from the nation using national currency earned from their mineral exports to it.

                        7. QUESTIONS, PROBLEMS?

           But what about work motivation, efficiency, and innovation?

The most difficult challenges for the design of a new economy are found where the old one seems to be most powerful, i.e., in the market system's capacity to adjust supply to demand, and to provide incentives for work, efficiency in production, and innovation.  In the present system where all must compete in the market, where you can be trashed for failing and many are, where many get their income from investing, and where there are lucrative rewards for those few who do win, it is not surprising that people work hard, constantly strive to cut costs and to produce cheaper products, and are always looking for new ways to make money.  All this is very effective in providing cheaper goods for purchasers, and new products.  It would be difficult to exaggerate the ferocity here, the unrelenting effort these forces get out of people, to work, climb the company ladder, build corporations, take huge risks and innovate boldly.  The conventional economist insists that the market cannot be replaced as the efficient driver of all this.

The first important point to make is that there is at present far too much work, effort, production and innovation!  It is causing most of the world's problems. We need an economy in which only a fraction of the present turnover occurs, many good models are kept in production without change, and in which there is only sufficient effort, innovation and efficiency.  So it is a major mistake to see the problem in terms of replacing work motivation by non-market mechanisms that will have the same effect, i.e., drive the present manic consumer economy.

But we do have to make sure there is incentive for producing, making things efficient, and developing new ways and products.  How might we do this in the long term future when we have got rid of markets and profits?

Again it is important to keep in mind the new conditions that will help us.  The situation will require and reward more cooperative behaviour and simpler lifestyles.  In addition the new economies will be small and much less complex, and without growth and therefore the economic task will be far less difficult than it is now.

Let's look at the sub-problems one at a time.

a)  Adjusting supply to demand

The great merit claimed for the market is that its hidden hand quickly, effectively and automatically adjusts supply, demand and price, and that it would be impossible for planners to try to make the millions of decisions involved.  But this is misleading and largely incorrect.  In the present economy supply is in fact adjusted to demand by millions of deliberate, rational decisions, taken by shop keepers and corporation production managers, responding to inquiries by consumers.  The problem is not that rational systems could not process the millions of signals…because that's what happens now.

Where planned economies have failed in the past is at the level of the response of the production managers and of the factories that have been told by central planning agencies what to produce, or not given enough resources by those agencies, or have had no incentive to be efficient and sensible in production. In the USSR the nail factory would be told by the central planners to produce x tonnes of nails next year, so they would produce X tonnes of tacks if that was the easiest option for them. It is not obvious why these problems cannot be solved by a) computerised systems which provide precise, quick, detailed information on what is asked for by people who come to shop counters, b) completely visible systems whereby all people can see what information managers have and whether they are proceeding sensibly, c) control of policy and decision making by participatory systems, not bureaucracies, so that the people have the power to observe and intervene if their local fridge factory or bakery is not functioning well.  (These conditions, especially the advent of computers seems to eliminate the problem Nove focussed on in The Economics of Feasible Socialism; i.e., difficulties in communicating information re millions of demands.)

In any case it is likely that workers and mangers would want to run a good regional fridge factory, given that they can see how this directly benefits their community. The smallness of scale has synergistic effects, via the morale that comes with small cooperatives and communities.   Conventional economics fails to grasp any of this since it only attends to the dollar value of inputs and outputs.

b)  Work motivation.

This should not be a significant problem.  Firstly consider the household and commons, Sectors 1 and 2.  At present there is not a problem getting people to work in households (where at present more than half of all the work in our economy takes place.)  In general people will want to do what is necessary to run their household economies well, and they will enjoy this, because these economies will be more complex and interesting than they are now (poultry, vegetable gardens, preserving, crafts, more people around all day…)

Similarly at the local community level  people would turn up for the (maybe entirely voluntary) working bees well because a) they knew their welfare depended on keeping the windmills and orchards in good shape, and b) they would like doing those things, because they would be enjoyable and would  bring the feeling of making a socially worthwhile contribution.

When it comes to working in firms in bigger firms, e.g., the railways, it would seem to make no difference to motivation whether the firm is publicly owned or privately owned…because in the present economy it makes no difference.   But in the new economy there would be the added force of knowing you were contributing importantly to your locality's welfare.

The work people did in factories would be under conditions that would be far more pleasant than at present.  A high priority would be to organise the work place to make time spent there a satisfying part of peoples' lives.  The pace would be relaxed, the hours short, and the workers would participate in running the place.  There would be no pressure from bosses to maximise output and no threat of getting sacked.  (Of course there would have to be procedures for dealing with workers who were lazy or incompetent.)  People would have a sense of making a valued contribution.  None would feel they are wasting their time and talents producing frivolous products.

Efficiency and effort would firstly be the responsibility of the workers through their informal and formal procedures for running the placeIn general it is likely that the team would take a pride in these functions, being aware of how important it is to make work places pleasant and to provide products their communities need.  These forces typically make cooperatives very efficient.  In addition the operations of their factories would be open to observation by outsiders, informally and formally via monitoring by the local committees which would be watching things such as the way firms and other local institutions and systems were working (below).

c.  Efficiency.

 The above discussion largely covers the important issue of the efficiency of enterprises, and of systems, and institutions such as the cooperatives recycling our waste water. 

In general people running their own little firms serving their community are going to want to do the job well.  Their performance will be highly visible and their contribution will be a source of respect and appreciation.  They will get satisfaction from providing things that enrich the lives of their friends and acquaintances.  If they became a bit sloppy people would politely tell them, or ask if there are problems they could help with.  In all these cases the very small-scale means people would be working mostly for the benefit of their own communities.  This is quite different from being a tiny cog in a gigantic, bureaucratised water system that serves millions of people you never see.

Hence the economic significance of comradeship!  Conventional economists, who have no interest in anything but dollars, totally fail to grasp the immense economic significance of morale.  How well anything works is 95% dependent, not on pay rates or CEOs, but on how enthusiastic people are about what they are doing.  Consider the cafes or bakeries run by people who just love their little enterprises, the beekeepers and spinners and potters who want nothing more than to practice their craft, the mother who works furiously to help a sick family member, the peasants who enable impoverished guerrilla armies to defeat great imperial powers…or the footballer who works about as hard as possible.  Think about how much could be produced in the 28 hours a week that the Average American is watching TV each week, if people were mad keen gardeners or carpenters or artists.

The new villages of The Simpler Way will be crammed with people who are enthusiastic about producing vegetables, goods, plays, events, landscapes, feelings of solidarity.  They will not work because they have to.  They will not have to work at jobs they do not like.  They will work in pleasant conditions.  They will do things they like doing and that are valued.  They will work with comrades on interesting and valued cooperative tasks.  They will know their input is important, they will see their work benefiting others.  They will know they are part of a social system that one can be proud of.  This situation would surely more or less double the productivity of the average worker today, and of the average firm!  People will be inclined to work hard when that's appropriate and they will conserve materials, look after machinery, think about better ways, run good meetings, do more than the minimum required, and help their co-workers.

            d.  Product innovation and setting up new firms?

These are the crucial problems.  The present economy is very powerful here, ensuring a constant blizzard of change and innovation, motivated by the prospect of huge profits for the successful innovator, or bankruptcy if a competitor gets there first.  How can we make sure sufficient incentive remains as we reduce the market elements of the economy?

Firstly we should recognise again that at present there is far too much innovation!  The business world is in a constant frenzy of desperate competitive search for new products that might enable some firm to take the sales others had.  Most of the innovation taking place today is unnecessary, trivial and wasteful…and socially undesirable, e.g., fashion change, new advertising campaigns, new models, phones that can take pictures.  And there is too much change; we need more stability and certainty.   But what about valuable new ideas and how might they be put into production?

The problem is not innovation in the sense of invention or coming up with new ideas.  People who are keen on electronics for instance, both within firms and as hobbyists, are always tinkering; they love innovating.  Corporations don't innovate; the scientists and technicians they employ do it, and they do it just as enthusiastically within public as private institutions.  Most and the best innovators work for a set, and relatively low wage; i.e., they are academics.  In the new economy there would be more time and resources for innovation than at present, within our firms, within our special R and D institutions and among the many expert lay persons within the town who would have the time to think and experiment.  So coming up with the innovations would not be a problem in an economy without any elements of the market mechanism.  So what is the problem?

The problem is to do with the investment decisions, e.g., to set up a firm to produce the new product.  Who would take the risk involved in starting a new venture and why would they go to the trouble?

Firstow let's cut the risk issue down to size.  We will not need venture capitalists to take on big risks for big rewards, thereby doing us the heroic service of bringing new products that no one else was brave enough to create.  Risk will either be eliminated or spread across everyone.  For instance, if the town could see that a lot of effort would be needed by one of its firms to get some promising but uncertain new idea to the tryout stage then the town could decide whether the risk, the investment of funds, resources and working bees, was worth the probable social benefit.  No single entrepreneur needs to take on this risk. (Note that when entrepreneurs fail they do not just waste their capital; they waste our resources, energy and time and these could have been put into other projects.)

The approach being discussed is similar to the astoundingly successful Mondragon cooperative project in Spain.  In that city anyone who thinks of a new product can go to the town bank and business incubator and discuss the proposal with a panel of the town's experienced business people.  If they think the venture is viable they go to the town bank to arrange credit, loans or grants to get it going. One big advantage in our new economy is that the bank would ask more than, Will this maximise profits for us? . The innovator is not dependent on whether some bank or venture capitalist thinks the idea will yield big profits.  It is possible that a socially valuable venture that might not make much if any profit will still be funded. It is clearly much better that the town bank (and townassembly with difficult cases) has the final say on whether a potential firm will be funded than that some private bank has the sole power to decide this.

The setting up of new firms in this way is most easily envisaged at the town level where the people might realise that they need a shoe repairer and simply use their own bank, business incubator an working bees to get one going, but it is no less plausible that a region might establish large factories such as for fridge production in the same basic way.  If a need becomes apparent, or a new product is thought of, public discussion and decision making processes could determine whether it is to be produced.

This is also one of the important functions for the remnant state ; i.e., contributing to the planning needed to ensure that the very scarce resources available are invested mostly in setting up essential industries and locating them so that all towns have a share.  Again such proposals should be decided on by votes within all the towns, not by power given to central bureaucracies or representative government.. (Planning is not the problem; almost everything needs to be thoroughly and carefully planned.  The main problem has been that a few central bureaucrats have the power to do it and enforce it, as in the Soviet Union...or that it is all done within corporations.)

e.  What about sophisticated R and D?

The Australian Commonwealth Scientific and Industrial Research Organisation and the Commonwealth Serum Laboratories were  excellent examples where salaried government scientists worked very effectively on socially valuable R and D for agriculture, industry and medicine. There was no problem getting very conscientious and first rate effort out of these people, researching in their pet fields and coming up with valuable ideas.

There is no good reason to think that high tech research is done more effectively by private corporations.  It is better to have it done by public institutions because then we can make sure that the right projects are worked on, whereas corporations will only work on the most profitable possibilities. This is glaringly evident with respect to drug research and innovation.  Less than 1% of new drugs developed are for Third World diseases, while the giant and fabulously profitable drug companies bring out an endless stream of trivial products like cough syrup and wrinkle creams for rich world consumers.  For instance Malaria is a disease which kills millions in the Third World every year, but hardly anyone in rich countries.  Therefore drug companies have ignored researching it.  So in general we would get more socially desirable R and D if the institutions were publicly owned and run.

We would need fairly elaborate planning and coordinating agencies and systems to constantly study proposed innovations and developments.  These would consider what various regions need and how best to spread factories around, and what revisions to existing arrangements seem to be appropriate. They would have the responsibility of constantly watching how things were working out. We have these kinds of institutions now, e.g., in deciding Commonwealth Research Grants.  (See below on monitoring and feedback systems.).

Remember again the crucial point that we would make sure that all these deliberations would be completely open to observation and input from the public.  Ideas and critical feedback from the many ordinary citizens eager to help think out the best technical ways would be welcomed.  Again it is important to recognise that the climate will be cooperative.  There will not be competition between regions trying to beat each other to get the steel works etc. There will not be fierce competition between firms to take sales from each other.  Everyone will understand that the economic problem is how to organise our combined productive capacity to produce those things we need for a good life, efficiently, sustainably and enjoyably. All regions would know that the point of the game was to share the location of such things so as to maximise the overall welfare.  All would be able to observe and contribute to the deliberations, and all would know that they were highly dependent on each other and so they could not prosper unless all others were doing so.  They will not get the steel they need or the buses unless the towns near those factories are working well.

This climate of mutual dependence, assistance, openness and cooperation would also greatly assist the functioning of our institutions.  In the present adversarial situation bureaucracies are open to attack by parties who do not get what they want (at the expense of other parties), and therefore they have strong incentive to be secretive, authoritarian and not to admit mistakes.  The new situation would take this pressure off administrative agencies, along with the fact that they will only be the administrative and planning agencies, not the ones who make the decisions and are then open to criticism if things do not work out well.  Again all the town assemblies will make the decisions, sometimes via national referenda on national issues.  (In some regions such as Virginia and Switzerland people frequently vote on long lists of specific and separate proposals.)_.

But isn't this an almost fully planned economy?  

Unfortunately the dominant neo-liberal ideology has convinced everyone that …economic planning is seriously mistaken, and everything is best left to free markets…Isn't that what the collapse of the Soviet Union showed?   It is important to recognise firstly that the present economy involves a huge amount of planning.  Markets do not adjust supply and demand automatically, via a hidden hand.   People within corporations do it, rationally and deliberately and meticulously; i.e., they plan changes in production in view of their incoming information on demand, costs, etc.  They carefully adjust inventories, deal with complaints and faults, and bottlenecks, and note suggestions for new products. As Galbraith pointed out long ago (The New Industrial State) nowhere is more elaborate and thorough planning of production and change to be found than within corporations.  So to start with it is not obvious why it is in order to have these rational, deliberate processes take place within private corporations but not in order to have them carried out by public agencies (…that are open and participatory, and not large or centralised, or authoritarian bureaucracies, and that can use elaborate computerised information systems.)

Consider government owned rail services at present.  These are run by boards which more or less adequately maintain efficiency and innovate now and then, and are (to some extent) open to public feedback. Why can't the supply of nuts and bolts, steel and fridges and radios be effectively organised through similar processes?  This is the way we did many important things a few decades ago (e.g. governments ran airlines, shipping, telecommunications, arms factories…), effectively enough, and in the new economy we will have much better procedures, more open to public scrutiny, and a much simpler overall economic task.

8. MONITORING, MEASURES.

In a satisfactory society there must be constant effort on the part of all citizens to observe and think critically about how things are going.  At the level of the town people will always be chatting about how well things are functioning and what changes should be tried.  But we will also have extensive formal systems for collecting, digesting and making information available. We will monitor all sorts of issues, including resource consumption, the state of ecosystems, the situation of the aged and of youth, the quality of life, and our resource and ecological footprint. We would have important committees from town to national levels, most of them made up of volunteers collecting and sieving this information, and reviewing its significance.  Most of the auditing etc. would be computerised and therefore elaborate statements would be immediately accessible to all, and would be constantly be consulted by committees and ordinary people.

One very important focus for this process would be the efficiency of our firms.  In addition to the powerful role of informal feedback here, ( A bit too much cinnamon in the Easter buns this year I thought, Jack ), we would develop procedures for monitoring efficiency, supply and demand, and possible and required innovations.  If our baker was much less efficient than those in other towns we would suffer so we would have an interest in knowing how well he is performing compared with others and in helping him lift his game if necessary.  The spirit would be positive and helpful, not punitive.  The goal is to help our firms perform well enough and this might require loans from the town bank, courses, or working bees to improve the shop.

Especially important would be indices of the quality of life.  Some of these would be objective measures, such as rates of illness, crime and depression, and some would be subjective, such as how contented old people were.  We would experiment with indices of social cohesion and solidarity and the general quality of our civilization .  There would probably be no sense in trying to combine these into a single overall index. We would not give much attention to monetary measures, because income and dollar costs would not be important determinants of much that mattered, especially the experienced quality of life.   Real welfare would be a function of local organisation, collectivism and spiritual energy, not monetary wealth. No attention would be paid to any measures of GDP.

There would also be elaborate global communication networks focused on this task of monitoring practices and performances at many other sites around the world and enabling us all to be well informed on how well different approaches worked out, and how well our firms and organisations were performing compared with others.  One of the most important domains would process information on plant varieties enabling selection of those most likely to perform well in particular local conditions and provide inputs to food, chemicals and materials production.  Another would watch different procedures for measuring ecological footprints, and report on reductions achieved in different regions.  We would also be able to see how well political, social and quality of life goals were achieved in different regions and countries, and to quickly share new ideas and ways.

Another important domain for research, reporting, experimentation and debate would be how best to run communities on participatory democratic principles.  We will be on a very steep learning curve here, because we have had no experience of this before.  It involves many crucial and mysterious skills and processes, such as how to make sure people express their wishes and reservations well (because if we opt for a project some do not like but didn't say so it will not work so well), how to criticise an idea without giving offence, how to handle conflicts, how to defuse and avoid power relations, how to create solidarity, cohesion and morale?

Crucial would be ways of organising information so that we can quickly get access to the summaries and overviews which enable us to easily form a sound grasp of a situation or public  issue.  The writing up and maintaining of these issue and situation summaries would be a most important function.  It might be handled by laypersons, along the lines of a modified Wikipedia, although it would not be difficult to add oversight by experts and specialists where necessary.  All this should easily be done.   It would be most important in facilitating participatory democracy because it would allow citizens to be very well informed on the state of issues.  (One of the main reasons for apathy now is that it is impossible for the individual to understand issues, especially given the vast Public Relations industry that corporations and governments employ to deliberately obfuscate and spin in order to prevent you from understanding what is going on.)

9. MONEY, FINANCE, CAPITAL

Money.

One of the most absurd and damaging aspects of the present economy is the money supply system.  (See Money.htm.)   Early in the period of transition to The Simpler Way local communities will begin creating their own new money systems and currencies .  This will be important in enabling production and exchange to take place among people who have no official money. This new money is best thought of as IOUs.  We will simply organise people who previously were idle and poor and without money to start producing things and selling them to each other using a form of IOU.  This money just enables us to keep track of the value each person has created and given or received.  It will enable producing and selling by all those who were previously cut out of normal economic activity just because they had little or no normal money.  This is how the new Community Development Cooperatives will get economic activity going around community gardens and workshops.  (See The Transition Process.)

However when The Simpler Way has been established there will be no need to issue new money, because it will be a stable, zero-growth economy with no increase in the need for money to buy increasing quantities of production.  Banks would be little more than secure places to keep savings, although they would be involved in enabling investment in the renewal or restructuring of the more or less fixed amount of capital stock.

It will probably be a good idea to have a separate currency for the relatively small amount of trade the locality engages in, so that it is always quite clear how this is balancing and whether more needs to be supplied to others to pay our way.

There would be no interest paid on loans.

For the reason why a sensible zero-groth economy would not have interest payments see Money.htm.

In the near future all money would be created and issued, not by private banks but by public banks, mostly at the local level. Loans would be repaid plus only a fee to cover administrative costs. 

Debunking capital .

In the present economy capital is overwhelmingly important.  Nothing can be developed or produced unless capital can be borrowed from the few who own or control it, to invest.  In our new local economy the situation will be quite different.  Firstly in a zero-growth economy the only development taking place would be the replacement of the existing stable stock (or revising its composition), and little of it will be high-tech mega-buck projects.  Infrastructures would mostly be simple, for instance all buildings would be made from earth.  More importantly, in general all that will matter is whether the town has the resources that are necessary to develop what it wants, such as the timber, labour, mud, land and skill.  Every town will have plenty of these in its people and its commons.  So if one decided to build a new hall or premises for the shoe repairer, it would use its own materials and labour via working bees, and might thus end up with the development it wants without having to raise any capital at all.  If a few things need to be paid for in advance, the money would come from the town bank. (The town might have to import some inputs from more distant regions.)  Obviously regions and nations are in an even better position to do such things because they have more resources within them to draw on.  Thus the present taken-for-granted dependence on capital can be seen to be a vicious myth, and a bonanza for the rich, since it means that instead of doing many things for ourselves without borrowing capital, we go to them and maybe pay them twice as much as it would cost us for the development even if we had to buy the inputs with money. Thus in the new economy there would be only a small finance industry.

There will be little need for the retirement industry or for financial planners.  Security in old age, a guaranteed income, access to all community activities etc., and a continuing valued role, will be ensured by the community (overseen by the relevant committees).  Old people will continue to work as much or as little as they wished, they would be able to remain in their homes much longer, cared for by family and friends (who would tend to be close because there would be much less mobility.)  We would therefore need few special premises or professional carers, and therefore little professional aged care .  People would be much more secure in old age than they are now, as they would not be dependent on the honesty or skill of their fund managers or the treacherous stock market.

It is evident therefore that development is primarily a problem of organising existing productive capacity.  Going to capitalists for money to buy inputs is one way of getting the process organised, but in general there is a far better way.

                            10.   SOME OTHER ISSUES.

            Economic affairs would cease to be very important. 

After the transition to The Simpler Way is complete becoming rich will not be very important to people.  They will have been liberated from the fierce struggle to work, produce, compete and sell, and acquire wealth.  These will not be necessary for security or a good quality of life, and there will be other more rewarding purposes to devote one's time to.

We will easily organise the production of the goods all people need for a high quality of life in materially simple ways and at a relaxed pace.  We could then spend most of our time engaging in activities such as arts and crafts, gardening, domestic and community activity, cultural pursuits, learning, playing, and enjoying life.  The producing we engage in will be enjoyed because most of it will take place in craft ways, in households and gardens and in cooperatives and on working bees.  In our firms we would have the sense of producing to provide what others in our community need and we would mostly see others benefiting from what we had done, e.g., when we make a table for someone or deliver eggs or drop in to chat with an elderly person.

People would increasingly realise that they could have a high quality of life without needing to strive for high incomes and wealth.  Again the economy will come to be seen as just a system which we all contribute to in order to be routinely supplied with the relatively few things that are sufficient to meet our needs, so that we can then get on with more important activities, such as rehearsing for the next dramatic production.

The implications for Third World Development.

 At present conventional development theory and practice are failing to bring about satisfactory development for billions of Third World people.  This is to be expected when development is conceived only in capitalist terms; i.e., as a process whereby those with capital invest it in order to make as much money as possible.  Good profits can't be made developing what is most needed.  The productive resources of Third World countries are mostly put into developing industries to serve the rich. Most of the country's productive capacity benefits rich countries and their corporations, with little trickle down to benefit the poor majority; in fact tyhe resources under their feet that they could be using are exported. If no corporation can maximise its global profits doing something in a particular country, then there is no development there. Conventional development is therefore a form of plunder. (See Third World Development.)

The tragedy of development is that in any country there is immense productive capacity which only needs organising so that  people can get together to produce for themselves most of the basic things they need for a reasonable quality of life, trading only a few surpluses in order to import a few necessities.

The Simpler Way enables even the poorest countries to work miracles via appropriate development with very little capital, using mostly local land, labour and traditional technologies, preserving traditions and ecosystems, and avoiding dependence on foreign investors, loans, trade or the predatory global market.  This is not possible unless the goal is non-affluent but adequate material living standards, within highly self-sufficient and very cooperative local economies.

The core concept in appropriate development is the application of existing resources and productive capacity directly by the people to meeting their own needs collectively.  Consider workers being paid 15 cents an hour making goods for export, which they then have to spend on food etc. sometimes  imported from rich countries.  Clearly it would be far better for them if they could devote their time to cooperative work in their own households, little farms and firms and community organisations, using local resources to produce basic necessities.  (Four hours work per person per week in well -organised cooperative gardens might feed a family -- 60 cents will not!)  In principle therefore the dreadful problems of Third World poverty and deprivation could be very quickly eliminated, but only if conventional economic theory and practice were scrapped.

Appropriate development would of course be a catastrophe for the rich countries.   Third World resources would be being used by Third World people, not exported to rich countries.  This is why rich countries and their agencies such as the World Bank prevent it from occurring.( For the detailed account see Third World Development, and Our Empire.)

Stability and Security

People will have stability in their lives and work.  They will not have to fear globalisation forcing them to change their jobs and retrain several times, or dumping them into irrelevance before they reach fifty.  People will be able to gain satisfaction and respect from accumulating wisdom through a lifetime.

A local economy involving many relatively low technologies, simple systems, and many handymen is highly secure compared with the fragile dependence of modern society on distant, complex mega systems, distant experts with unintelligible skills, distant investors of capital, and a treacherous distant market that can cease taking your exports at any time.  In the Asian crisis millions of people suddenly had their lives devastated by events in capital markets far away. In consumer society ordinary people can't fix anything.  In the new town economies most people will understand and be able to fix just about any problem in the power supply or the grey water recycling system or the windmills, because these will be technically simple and we will all know about them from our experience on the working bees.  Children will learn how to repair pipes and taps by helping out.  Many people will have accumulated considerable experience in designing, building and maintaining all our local systems.  We will not be dependent on computerised spare parts from some overseas corporation let alone hick-ups on the Hong Kong stock market.  The community will be able to instantly identify a problem, e.g., a dam leak, pest outbreak, storm damage, and quickly fix it through cooperative action.  All can turn out in minutes to deal with emergencies.  Working bees can be quickly organised, or committees be set up to work on a problem. So even catastrophic breakdowns in the global economy or our own region are not likely to cause us much trouble.

            Inequality.

...would not be important.  Redistributing wealth and income is usually seen as crucial in bringing about a better society, but this is another issue on which thinking changes dramatically when the coming conditions of scarcity are kept in mind.  Your quality of life will not depend at all on how wealthy you are.  It will depend entirely on how well your town works, how well it provides you with good food, conversation, great musicians and picnics, access to art teachers...and your reputation as a good contributor.   Eventually people will realise that these are the sources of security and a rich life.  People will be able to live well with very little monetary income, and they will cease caring about wealth. (It is well established that even in our present consumer societies, above a low level of income increased income makes little or no increase in experienced quality of life.)

From getting to giving.

In the present economy all must strive to get.  We work to get money, which we must have to get goods.  Corporations strive to get markets, sales, profits.  Individuals are out to get as much for themselves as they can.  In addition to the fact that such a system results in some getting far more than others, this selfish getting morality is not satisfactory,

In the alternative economy sketched the dominant principle is giving.  This is the situation at present in the household economy where people produce and give to the family, without any thought of payment, because they want to provide for each other.  They know that they will have their needs met by the giving  others engage in.

Giving is the principle that drives tribal economies.  In New Guinea food is not produced to eat.  It does end up being eaten but it is produced to give to someone in accord with elaborate rules of obligation among kin.  Exchanging things for money establishes almost no social relations.  You do not feel grateful or indebted or obliged to reciprocate.  The exchange is balanced, finished.  But when things are given there is unfinished business, enduring feelings and obligations to reciprocate.  Giving therefore establishes and reinforces social bonds, cohesion.  Friends do things for each other without tallying who owes what.  They give because they like assisting each other and a long history of relating this way binds people together.  How well our new communities work will depend on how much solidarity there is and the practice of giving will build this, including giving to working bees, to concerts, giving surpluses away, and giving assistance.

Giving has synergistic effects, but selling in a market doesn't.  Giving makes the giver and the receiver feel good and therefore more likely to behave nicely to the next person they meet.  So when you give something away you might actually become richer.  Goodness and generosity multiply goodness and generosity, whereas beating someone in competition is likely to be worse than a zero-sum game.   The beaten party is likely to be grumpy, and the exchange will have reinforced suspicion and predatory attitudes on both sides.

It is probable that some day we will have an economy in which we work and give our products to others via community warehouses, without wages, and then take from those stores all we need.  This is more or less how households work now, and how the Kibbutz economies work.  In some rich countries people work and pay (give) tax and then go to the doctor where care is given to them without paying.  So it might not be very different if all production and consumption was organised in this way. The necessary monitoring and planning would be easily organised; maybe next year we need to produce a few more jumpers and less tomatoes...  This is termed the Gift Economy .

The terms that captures the alternative ethos are generosity and nurturing.  There are heaps of these in any good family or community.  People give generously to each other, without expecting a return and without calculating their trade balance .  We want to do things that enable others to enjoy life, thrive, grow.  Generosity has powerful synergistic effects; it makes you feel good and it makes others generous and happy and therefore likely to stimulate positive chain-reactions with others.  Contrast this with the spirit that permeates the present economy, where individuals most constantly seek to maximise their own self interest and advantage by taking as much as they can, where there is at best zero-sum competition with others, and we have to be constantly suspicious of the predatory behaviour of others.  No wonder there is little regard for the other, for the public good, or those who lose out.

            A note on the transition.

It is important to keep in mind the distinction between the ideal way the economy might eventually be organised in the long distant future, and the kinds of changes we should try to make immediately and over the next perhaps two decades.  TSW approach assumes that the transition could be made slowly and with little or no serious disruption, let alone violence, and that the key mechanism will be the gradual development of the new local Economy B within the old economy.  We will (have to) start in very humble ways, more or less as within the present Transition Town movement, especially developing community gardens.  As the normal consumer-capitalist economy increasingly fails to deliver, and runs into impossible energy, environmental and financial problems, people will come across to our new ways.

Thus, fortunately, we do not have to think in terms of sudden, violent replacement of the old system by the new.  We do not have to try to persuade people to jump suddenly to very different and strange new ways.  The argument has been that the new society cannot work unless it is based on ways that are local, participatory and frugal and these can only come to be via a slow process of learning and development; no dictatorship of the proletariat , or benign Scandanavian state can give or impose them.  So in the economic sphere transition will (have to) be about gradually developing and extending Economy B.  (For more detail on the transition see Transition.) Much of the above discussion has been about the situation we will eventually have got to and it is not being argued that we must suddenly try to implement these ways.

11. ECONOMIC THEORY,

The skills of conventional economists and the theory and measures they use would be of little value in analysing or managing the new economy.  Its principles and dynamics would be almost totally incomprehensible to them.  Conventional theory is only about one particular type of economy, one in which productive capital is privately owned, competition in markets is the chosen mechanism for determining what is produced and who gets it and the monetary value of things is the only factor taken into account.

Here are some of the elements in the new economy that conventional economic theory cannot deal with.

When you give things away you become richer -- many exchanges are not zero-sum; giving can multiply goodness and wealth for you and others  -- development is mostly about organising and harnessing existing productive capacity, not about investing money -- the economy is driven by moral, social and ecological considerations, not monetary values  -- nothing is determined by market forces -- many transactions ignore market forces or contradict them  -- people don't try to maximising income or wealth -- most production is not carried out for money -- the value of few things is measured in dollars -- people do not work for money (although they might be paid some money) -- much work is done for nothing -- there is no clear distinction between work and leisure --the supreme value is collectivism, not self interest -- the GDP is ignored -- the quality of life is the supreme economic criterion -- there is no growth -- there are no interest payments -- some taxes are voluntary --  many goods and services are free -- subsistence is a large sector of the economy –the subsistence sector is the most important one in the entire economy --- effort is made to reduce production, purchasing and sales as much as possible -- the less consumption the better -- an effort is made to keep out of the national and international economies, i.e., to minimise trade -- there is little international trade -- globalisation has been eliminated  -- wealth has nothing to do with money – the individual's wealth depends on how well the community is thriving; if it is in bad shape the concerts, fruit, workshops and conversation will be poor -- there is no unemployment or poverty -- no firms are allowed to go bankrupt --- many shops open only one or two days a week – many have no shop assistacts present, just a tin to put your money in -- inequality does not matter --there are no bosses -- there is no retirement -- there are no advertising or marketing industries -- there is hardly any finance industry – no interest is paid -- in the near future people can create their own money but eventually no new money will ever be created -- human nature is assumed to be mostly altruistic and generous -- by far the most important factor of production is morale -- people don't compete, they cooperate and nurture -- the economy is not motivated by getting, but by giving -- people don't maximise – the basic economic principle is to give, not to get.

The two factors most relevant to the development of a satisfactory economic theory are, a) measures of welfare or quality of life, and b) measures of ecological sustainability.  For instance to try to discuss the wealth of an individual or a nation in terms of dollars is extremely misguided.  It is clearly understood now that increasing the average individual income in rich countries will not improve the quality of life experienced.  In fact it now appears that economic growth is reducing the quality of life (because the growth is being achieved by pushing workers harder, cutting social spending, stripping ecological capital etc.)  Even more important is the fact that your wealth and welfare ultimately depend on the state of your resource and ecosystem accounts.  At present much of the GDP is due to ripping up and selling off of ecological systems and resources, i.e., reducing the ecological wealth or capital on which our fate depends.  One of the major faults in the market system and in conventional economic theory is that they do not make this point evident.  It actually encourages the destruction because it records every sale as a positive contribution, neven those that represent the exploitation, stripping and selling off of natural capital.  However the conventional economist argues that if this leads to a problem, e.g., a shortage of timber, then the marvelous market system will correct the situation by increasing the price of timber, prompting reduced use and replanting, and the use of substitutes. The fault in this argument is that, by the time the market recognises a problem with an ecological resources it can be too late, the resource might have  been destroyed, for ever.  This is the situation with tropical forest, which cannot be regenerated because if the thin soil has been lost the soil turns to laterite. 

Wealth is above all else a function of the condition of our soils, atmosphere, forests and fisheries, and our future wealth will depend on whether these are kept in good condition.  An economic theory that dealt satisfactorily with these factors and enabled us to tell how wealthy we are at a point in time would probably make no reference at all to dollars, monetary wealth or GDP.

As Herman Daly says, the GDP measure is only of flows, and it completely ignores stocks.  It's like thinking you are getting richer by selling the tiles off your roof.

In the The Simpler Way it is not possible to separate economics from politics, sociology, psychology or ecology.  In trying to analyse or manage any issue concerning production etc. we will have to grapple with a messy combination of considerations and implications from all these fields and most of them will not involve money.  Usually the only way to proceed will be via community discussions which bumble towards consensus on the policy that seems most likely to promote ecological sustainability and the long term quality of life for all. 

For a detailed discussion of conventional economic theory see Ec-Sy-Theory.htm.)

WE CANNOT FIX THE ECONOMY UNTIL WE FIX THE CULTURE.

Most people reading the foregoing proposals for a new economy would probably see them as hopelessly utopian and unrealistic.  They would say people will not follow such ways.  This is quite correct.  Many of the ways sketched above would not work in today's society, because they require different attitudes and values to those most people have now. 

Today most people are out to maximise their self-interest, see nothing wrong with competitive systems in which they might be one of the winners and a lot of people end up with less than enough, and would oppose the social regulation needed to ensure satisfactory outcomes for all.  It is essential to realise that a satisfactory society cannot be designed for such people!  They mistakenly assume that a peaceful, sustainable and a just world is possible while they go on living affluently and competitively and continually striving to increase their "living standards" and GDP. But these are the core behaviours that are causing global problems.  In other words the foundations of our unsatisfactory economic system derive from fatally flawed elements deep within Western culture, and it is not possible to get to a sustainable, just and peaceful world unless we change to radically different ideas, ways and values.

A very important feature of The Simpler Way that we will be driven towards by the coming era of scarcity is that it requires and rewards good values.  The conditions we will experience, whereby a satisfactory life in a good community will not be possible unless there is cooperation and willing contribution and concern for the common good, will reinforce good values and behaviour.   (See The Transition.)

The patient said to the doctor, "I desperately need you to solve my obesity problem.  I'm suffering very serious effects now. In fact I'm so over-weight my vital systems are starting to fail.  But let's get one thing straight Doc --- I refuse to stop over-eating -- that's non-negotiable.  Now, what's the cure for my problem?"

Fortunately the required ideas and values are also to be found as (minor) themes in western culture, including concern for the other, for the public good, volunteering, stability, justice and rights, cooperation and helping, and living in harmony with nature.  We just need to restore these to prominence.  Obviously the new economy sketched above cannot come into being until we do this.

If you insist on comnpeting against all others and getting as rich as possible with no limit

then

you will have the economy of consumer-capitalist society, along with all the roboems that wioll probably end in catastrophic breakdown soon.

But if you want an economy in which we do not destroy the environment, deprive the Third World, generate resource wxars,a few do not take more and more of the world's wealth, there is not huge waste, corporationd so not have vawst power, pepe are secure and happy, the GDP does not increase all the time, all have a high quality of life ...

then

people must be content with frugal self sufficiency, there cannot be a growth economy, peopke must cooperate, share and give and value the public good ...