THE NEW ECONOMY REQUIRED.

(Shorter version; 12 pages.)

 

Ted Trainer

15.7.2019

 

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, despite the fact that there is the amount of producing and consuming going on is already grossly unsustainable. (For the detail see  TSW: The Economic System: A Radical Critique. ) 

In a satisfactory economy we would apply the available productive capacity to providing to everyone the highest possible quality of life in ecologically sustainable ways, i.e., with minimal resource use.  This means economies must be mostly small, localised, basically cooperative, and under social control  ---  so there would be materially simple lifestyles and no growth.

The context.

Our present society is grossly unsustainable; we have far exceeded levels of resource use and ecological impact that could be kept up for long or spread to all people. The big global problems now threating us cannot be solved unless these rates are dramatically reduced, possibly by 90%. (TSW: The Limits to Growth.) The only way this can be done is by transition to a “Simpler Way” society.  This document sketches the kind economy it must have.

           The principles.

What do we want from an economic system?

Far less work and production will take place.

In the new society levels of consumption will be far lower. As has been explained the limits to growth situation means that production and consumption must be reduced to small fractions of present levels. We will have eliminated the huge amount of more or less unnecessary production going into things like advertising, packaging transport, construction, cosmetics, fashion, waste disposal, sewage treatment, shipping, insurance, shoddy goods that don’t last and can’t be repaired, roads and freeways, unemployment agencies, and provision for people who crack up and become mentally ill or take to alcohol or drugs. We will need far less aged care, financial advice, paid entertainment, health care, professionals, car repairs etc. We will save billions by not having to produce arms anymore, because most armed conflict is about trying to take more than a fair share of the word’s resources.

In addition, many of the things we will need will be produced far less resource-expensive ways, for example we will not need to produce trucks to bring food to our towns. There will be far less government, crime, police, illness and need for a “welfare” industry. Consequently, there would be far less need for prisons, courts, hospitals, and welfare agencies. The savings in dollars and resources would be enormous, not to mention the effects on quality of life. Disabled and older people will have many important things to do and to contribute, which will reduce the need for tax and professionals to care for them. People will have far more interesting things to do than go shopping, so acquiring and consuming will not be important life purposes. Large numbers of people will not be stressed, depressed, over-worked, worried about mortgages, bored or lacking purpose.

The GDP would be a small fraction of its present value, because we would be producing and consuming relatively little, and most of that would not be within the monetary economy. No one will calculate or attend to the GDP as it would not tell us anything that matters. There would be no economic growth; a sustainable economy has to be a zero-growth economy. We would produce only as much as is needed to provide all with a high quality of life. In fact, we would always be looking for ways of reducing the amount of work, production and resource use. It should be obvious that this does not mean there cannot be improvement and innovation.

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.

Reducing the GDP does not mean that the living standards of the poorest must sink even lower than they are now. We would make sure everyone had access to all the things that make a high quality of life possible regardless of income, such as community workshops, festivals, free fruit, a humble house, a livelihood, a caring community and a leisure rich environment. The average dollar income and GDP per person would be far lower than they are now, people would be far less wealthy in conventional dollar terms, but the quality of life of all could be far higher than the rich world average now. One would need very little money to live well, and one’s monetary income or wealth would not influence one’s quality of life. That would derive primarily from one’s public and social context, including the landscape, supportive community, festivals and social activities to participate in. Therefore, inequality of monetary income would not be important, and the solution to problems such as poverty would not be via redistribution of income. Those on the lowest monetary incomes would have as much access to all these things as anyone else.

Because there can be no economic growth there will not be any interest paid on loans. This means most of the present financial industry will cease to exist. Very different arrangements will have to be made to provide for retirement. Town banks will hold our savings for security, and their elected boards will organise loans for purposes the community decides are worthwhile.

This zero-growth situation is a longer-term goal, to be moved to gradually. What is easily overlooked is that it means that eventually the value put on gain must be completely abandoned. Logically there cannot be a zero-growth economy if there remains any interest in getting richer, on the part of individuals, firms or nations.

The recent emergence of a global degrowth movement means many are waking up to these themes.

Mostly small, highly self-sufficient local economies.

In a world of scarce resources shared among all, most of the goods and services we use will have to come from close to where we live. Economic self-sufficiency should be seen in terms of concentric circles. In the centre is the most important economic and social unit, the household. This will be more important in most people’s lives than their career. Outside the household will be the neighbourhood, then the suburb or town where less frequently needed goods and services will be available, such as doctors. Then the town’s surrounding region will contain a dairy, timber plantations, grain and grazing lands, and some of the factories that would supply into the surrounding region, e.g., for 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 some high tech medical or computer equipment.

Few big firms or transnational corporations would be needed. Those that were appropriate, such as steel works, would best be owned and run by society, to serve society. Their elected boards would be visible and accountable to all, and they would be bound by publicly set policy guidelines.

Market forces and the profit motive.

In an acceptable alternative economy market forces could not be allowed to continue as major determinants of economic affairs. The market is a major cause of global problems, mainly because it cannot yield just or ecologically acceptable outcomes. (See TSW: The Case Against The Market.) In addition the fundamental motivation within markets is not acceptable. Prices are set as high as possible, which means that the driving principle is to maximise self-interest, i.e., it is greed. Price is not set by reference to the cost of production, or the capacity of the seller to make a sufficient income, etc. Markets are about buyers and sellers trying to get as rich as possible, and that is not a satisfactory motive in an ideal society. (Again, it is explained below that a satisfactory society is not possible unless there is profound value change, e.g., away from concern with maximising or gain.)

In the distant future what is produced, how it is distributed, and what is to be developed will be relatively unimportant problems decided without fuss by routine rational decision making processes which focus on what is needed to give all people a high quality of life. Humans will preoccupy themselves with more important things. However, at present we are far from being capable of organising things that way, so in the near future we will probably have an interim arrangement which still uses the market for some purposes but begins to subject it to greater social control and shifts important production and supply processes out of it.

So, much of the economy might remain as a (carefully monitored) form of private enterprise carried on by small firms, households and cooperatives. Market forces might operate in some regulated sectors. For example, the kinds of bicycles on sale probably could be left entirely to the market. Local market days could enable individuals and families to sell small amounts of garden and craft produce. However, the market must not be allowed to determine important issues, especially whether people have jobs or what developments take place in the town. In other words, market forces might be allowed to make most of the economic decisions – but none of the important ones! The sector we will develop whereby we will ensure provision of basic necessities, Economy B (below), will be run via deliberate, collective rational decisions about what we need.

Note that an economy containing these small private firms would not be a capitalist economy because these small firms would best be regarded as the tools people possess and work with to earn a modest, stable income and thus a secure livelihood. They do not involve investing capital in order to accumulate capital in order to constantly increase investments and wealth, without having to do any work. Market forces would never be allowed to settle the distribution of income or the access to a livelihood.

In the present economy the idea of having firms under social control is assumed to mean big, authoritarian, centralised bureaucracies and states which make and enforce all the economic decisions. This is not desirable or necessary and will be avoided by having the control in the hands of the small localities where citizens can deal with a greatly reduced economic agenda through direct, open and participatory procedures. Again, because local conditions, resources, skills and traditions will be the important factors determining how local economies can best function, local people are the ones who know these and are in the best position to make the decisions most likely to satisfy local needs. It will make no sense for distant governments to decide what is best for your town to plant when another parking lot has been dug up. Thus, the form of social control here has nothing to do with “big-state socialism”, as socialism is usually conceived and has mostly been practised.

In making these decisions communities will consider all relevant moral, social and ecological considerations, not just dollar costs and benefits to capitalists or purchasers. If a firm was struggling or becoming inefficient, we would not let market forces dump those workers or owners into unemployment. We would make community decisions about what to do. We might work out whether assistance, including loans and grants from the town bank, would be appropriate, or whether technical advice is needed. A community might decide to keep a small bakery or boot repairer from going bankrupt because that is best for the town and for the family running it. Or it might decide that it has too many bakers and that it needs to work out how best those resources might be reorganised via adjustments which were good for all concerned. Similarly, the community might decide not to buy from a firm that was behaving in an unacceptable way, such as sacking people unnecessarily, or threatening to take over other little firms that are viable, depriving people of their livelihoods.

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 protect and subsidise, and therefore involve costs. Goods would be cheaper if purchased from a transnational corporation which can minimise prices. But these costs are among those we will be willing to pay in order to make sure the town runs well.

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 make sure the town gets the basic goods and services it needs and to make sure it provides its people with livelihoods. So, if a transnational corporation came into the town intending to drive our bakery bankrupt and take its business, we could make sure it couldn’t succeed – simply by telling it we would refuse to buy from it. Obviously, things like this cannot be done without vigilant, caring, public-spirited citizens. Note how the new economic system cannot be thought of separately from the new political system, and neither can function without new ideas and values, that is, a new culture.

Provision of livelihood.

Above all, these strategies will enable us to ensure that all people have a livelihood. This is very important. The conventional economy sees no problem in allowing those who are most rich and powerful to take or destroy the business, markets and livelihoods of others, and thus accumulate to a few the opportunities to earn that were spread among many. Its fundamental competitive design constantly worsens this problem. Globalisation eliminates the livelihoods of millions of people and enables a few giant corporations to get the business and the resources little people once had access to. A satisfactory society will not let this happen. One of its supreme priorities will be to ensure that everyone has a livelihood, and clearly this is only possible if local communities have control of their own local economic development and can operate contrary to market forces.

This aligns with the old Catholic principle of “Distributivism”. It recognises that it is not satisfactory to allow some to get very rich and then redistribute (a little of) their wealth to the poor; the sensible approach is to make sure opportunities to produce and earn are well distributed, and this means curbs must be put on the capacity of the rich and energetic to take more than they need, even if they can produce more “efficiently”.

The town bank and the business incubator.

Towns will set up and run their own bank, and experienced people will be advisers for the business incubator that helps new co-ops or firms to start up safely. These will enable us to devote our savings to setting up the kinds of firms we want. (The success of Mondragon is due in part to use of these two institutions.)

No unemployment or poverty.

Unemployment and poverty could be and will easily be eliminated. There are none in many kinds of society, such as the early Israeli Kibbutz settlements. We would have neighbourhood work coordination committees who 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.) It is most annoying that unemployment is not seen as an appalling and easily eliminated fault in this society. It suits the owners of capital for labour to be treated as a mere commodity to be used only if profit can be made from employing it, and otherwise left to rot.

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 every day.

In the Simpler Way there will be far less emphasis on work and production and economic activity, and therefore, much less stress and worry, and human attention will shift to much more important things.

The large money-less domain.

Many and possibly most goods and services will come from the household sector (which at present is where most of the work and producing actually takes place), from the give–away and swap networks, local commons and co-operatives. Most of these will not involve any money, wages, prices or payments. Many goods will be ‘free’, e.g., from the community orchards. Many people might live almost entirely within this money-less realm, paying their taxes by extra working bee contributions.

It is very likely that as the coming era of severe scarcity impacts, especially regarding petroleum, we will quickly, automatically and inevitably build up this moneyless sector – because we will have to.

                The short-term vs the long-term future.

As we increase the size of Economy B and its money-less sector in the near future there will still be many normal firms operating within the continuing market Economy A. However, these firms will be running into increasingly serious difficulties as scarcity intensifies, especially scarcity of petroleum. At best there is likely to be a slow descent into deep and lasting depression, but more likely will be sudden crashes, especially within the financial world.

Let's proceed as if the troubles will come upon us in a relatively gradual and non-chaotic way. Two important things will happen at the same time; the town will recognise a vital need for important businesses to function effectively, and those firms will recognise their utter dependence on the town. These two forces will push us to organise cooperatively and rationally, i.e., to intervene and act to make sure that we keep those vital firms going well. Local small businesses will realise how important our assistance is and they will understand that if they don't do what the town needs we will not buy from them. We will need them so we will help them to work well, e.g., by organising working bees and loans.

The town or suburb will therefore remake its economy, because it will see that it has to do so if it is to survive. The forces at work in the new situation of scarcity will inevitably push us in the right direction, i.e., towards much social control, participatory processes and towards a cooperative and collectivist outlook. If we don't take this control over our fate, but leave it to the market, we will quickly descend at best into stagnation, as in the Great Depression, where market forces cannot make the right things happen and will trap us in the ridiculous situation where huge productive capacity sits idle while the many needs it could be meeting fester on.

In the short-term future, the sector involving the remaining privately-owned firms will continue to operate partly according to market forces. These firms will include those seeking to make a living selling non-necessities, and the town might opt to assist some of these, because they cater to leisure or semi-luxury interests some people enjoy. The town’s core concern is only to ensure that its economy provides basic necessities for all, so it need not interfere with those who want to produce or sell other things, so long as that does not unduly impact on town resources etc.

As time goes by it will become clearer to all whether to retain a market sector, and if so what to allow it to do. Eventually it will probably become apparent that it is best to organise all economic activity via rational collective decision making. Again, this does not have to mean there can be no privately owned firms. In my firm view it is desirable that families and cooperatives should be able to own and operate their own small farms and businesses, but this would have to be within an overall plan that ensured that everyone was contributing to meeting town needs, including cultural and leisure needs. This would enable the small farmer or carpentry business to enjoy the freedom to do things the way they prefer.

The new simpler economic conditions will make it easier.

Our capacity to make the new economy work satisfactorily will be greatly increased by the fact that the situation will be very different from the present one. Economies will be far simpler, with far less needing to be produced. They will be mostly local, meaning far less trade and transport to organise. Most firms will be very small. There will be little infrastructure development; no gigantic airport, freeway or nuclear reactor construction. There will be no interest payments, and this will sweep away most of the finance industry with its destructive speculation. There will be no growth, so economies will be mostly about managing stable systems. Above all there will be clear recognition of mutual dependence; we will all realise that if we don’t make our local economy work well we will all be in a lot of trouble. These conditions will make it much easier for us to cooperate in getting the new economies going.

R and D.

Research and development are always best carried out in public institutions. There is no reason to think that salaried scientists perform better in private corporations. Most importantly, when the agencies are public we can make sure they research important problems, as distinctly from only those that will maximise corporate profits. This is very important; corporations ignore the most urgent human needs, such as drugs for malaria, because they can make more from developing trivial cosmetic etc. for rich countries.

There would be no need to reduce socially-useful R and D or universities providing high-tech training. In fact there will be moreresources for these purposes when we phase out the massive waste of resources producing consumer trivia.

Monitoring and public accounting.

We would also have extensive arrangements and institutions for monitoring performance, problems, needs, possible innovations, for all our firms and other institutions and systems. This information would be quickly available for all to examine. Also available will be analyses of quality of life indices, footprint, resource use etc. These systems would enable us to be aware of performance in other towns and sites around the world. The purpose would be helpful not punitive; i.e., to enable us to see where our local systems and firms can be improved, and what assistance they need. This would be one of the many functions carried out by our voluntary committees. (Monitoring and record keeping were most important elements in the success of the Spanish anarchists in the 1930s.)

Money.

In the period of transition to the Simpler Way small communities will create their own new money systems and currencies (e.g., LETS) to use in their Economy B. This “new money” can be thought of as simple IOU tokens handed over when something is purchased, indicating how much value one has contributed and therefore how much one has the right to take from the produce others have contributed. This will enable People who previously were idle and poor will therefore be able to start producing things for each other and selling them using these tokens. So those who were cut out of economic activity because they had no money will be able to produce and sell, via the new Economy B sector which uses this new money.

There would hardly be any finance industry. Little capital would be needed, because it would not be a growth economy. Construction for example would only replace old buildings, bridges etc. and would mostly be on a very small scale (no freeways or sky scrapers.) Banks would only lend what had been deposited as savings. (There can be no fractional reserve banking in a steady-state economy!) Security in old age, and a continuing valued role, will be provided by the community (overseen by the relevant committee), so there will be little need for the retirement industry and security in old age will not depend on interest from investments. Consequently there will be little need for financial planners. Old people will continue to contribute as they feel able, they would need few special premises or professional carers, and therefore their care would generate much less work and cost than at present.

Again, there would be no interest paid on money lent. The need to constantly pay back more than was borrowed is a major driver of growth in the present economy. Loans from our local bank would be repaid plus a small fee to cover administrative costs. No one would get an income from possessing and lending money. When capital is needed for development it will come from the town banks holding our savings, via decisions made by our elected boards under a charter which prioritises lending to those ventures most likely to benefit the town.

Capital .

It is important to re-think the concept of capital. For most of the important development, none will need to be borrowed. Consider a town which wants to build a community hall, and owns surrounding forests and clay pits and has its own labour via working bees. It would make no sense to borrow a lot of money to hire contractors to supply these inputs and build the hall, then pay them back twice as much as was borrowed, when the townspeople could build the hall themselves using their own timber and mud and working bees.

Obviously larger regions and nations are in an even better position to organise such things as they have more resources to draw on. Thus, the present taken-for-granted dependence on banks, the finance industry and money markets can be seen to be a serious mistake and a bonanza for the rich. It means that instead of organising to do many things for ourselves without borrowing capital, we go to them and pay them maybe twice as much as the dollar cost of the job. To avoid that all a co-op or town or nation has to do is create its own money, in the form of IOUs to be paid back by the income the venture will make when it begins to produce for sale.

 The implications for Third World Development.

Conventional economic theory and practice only conceives of development in capitalist terms; i.e., as a process whereby those with capital invest it in using Third World resources and productive capacity to make as much money as possible for themselves by producing mostly what richer people want to buy. Good profits cannot be made developing what is most needed in a poor country, so the productive resources of any Third World countries are mostly put into developing industries to serve the rich. (For the detail, see TSW: Third World Development.) If those with capital see no opportunity for this there is no development. Governments think they must attract and assist investors to set up industries. At best the rich get most of the benefits, local people get miniscule trickle down, and the country’s resources flow out to the rich world consumers. The debt repayment conditions imposed by the IMF and World Bank force poor countries to conform to this approach, meaning resources have to be devoted to paying off the debt and therefore can’t be devoted to doing what is most importa

Yet 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 goods and simple systems they need for a satisfactory quality of life, trading only a few surpluses in order to import a few necessities. The Simpler Way enables a high quality of life for all via simple technologies such as poultry co-ops, gardening, mud-brick building, cooperatives, leisure committees etc.

Even the poorest countries can work miracles with very little capital, using mostly local land, labour and traditional technologies, preserving traditions and ecosystems, not letting market forces or owners of capital determine what happens, and therefore avoiding dependence on foreign investors, loans, trade or the predatory global market.