Posted on by Art Powell

To say we face an economic crisis is hardly controversial but the crisis is so severe that the reforms needed make Karl Marx look a part of the establishment. The changes needed are radical beyond the comprehension of many people as they require more than just tweaking what we already have.

The basic problem is that we have used up most of the easily accessible energy and mineral resources. Those that are left require so much energy to extract that they are almost useless. There have been other times in economic history when humans have had to cope with resource shortages but these were temporary as more resources were waiting to be discovered. This time the problem is not knowing where the resources are located but the cost/energy required to extract them.

The three basic changes are a basic universal income, the way in which we create money and overcoming the work ethic. To accomplish anything all three reforms will be needed at the same time. As there are so many conflicting vested interests this will be an impossibility. Prove me wrong. While these appear to be radical ideas, this writer did a degree in conventional economics at the University of British Columbia and has a strong commitment to a market economy. The radical comes from wanting a market economy when a major feature of the current economy is that competition is restricted by government legislation.

The basis for an income scheme is the agricultural surplus resulting from all the technology which has developed at least since a farmer discovered he could produce more by using a collar on a horse rather than a harness on an ox. Through the centuries the elite have confiscated most of the surplus with the use of force. Since the industrial revolution psychological tactics such as legal restrictions on competition,patents, copyright and the work ethic have been less messy. The need for labour to man the empires has allowed workers to claim a share of the surplus. As robots replace workers it will be interesting to see what happens to the agricultural surplus – and workers.

This writer would like to see the agricultural surplus treated as an inheritance to be shared equally by all the people of the world. The way to distribute this inheritance is with a basic income scheme. Some ideas as to how to do this are in the free e-book, Funny Money: Adapting to a Down economy, available from this weblog.

One of the advantages of an income scheme is that individuals would be able to take action on social and environmental issues related to their employment. Workers would no longer have to work for exploitive employers and people who disagreed with a firm’s social or environmental policies would not have to bite their tongues for the sake of a pay check.

There is an old saying that money is the root of all evil. When I studied the economics of money and banking I decided it was the lack of money that is the root of all evil. I now think the way in which we create money is the root of all evil.

In most of the world’s economies money is created when the banks make loans and because banks are generally required to keep a fraction of their deposits on reserve most loans become additional deposits in the banking system. This is called fractional reserve money. It is a problem because loans that have to be written off reduce the amount of money available, with a multiplier, and because interest is charged on the loans. A sudden reduction in the money supply is the most difficult of all economic crises. If all the loans outstanding had to be repaid at the same time there would not be enough money to repay the principle and the interest. We would recognize the problem as a financial crisis. This is why I titled my book Funny Money. I encourage you to get a free copy from Smashwords for an explanation of this problem.

Money is useful because it is a tool which facilitates the exchange of goods and services especially when a lot of our exchanges are with strangers. We have traditionally used gold or other material items as a basis for money. Some people still talk about the gold standard although fractional reserve money is based on faith rather than gold.

A few small groups around the world have established what they call Local Exchange Trading Systems. These people base their exchanges on credits. You get a credit when you sell a good or service to another member and use credits when you purchase something. I like this system because the credits are a form of money without the problems of fractional reserve and interest. In my book I propose we adopt a national exchange trading system and combine it with credits from a guaranteed income scheme. This would be using money as a tool rather than a commodity. See the book for more details.

Adopting this system would be revolutionary because it would be a transfer of decision making power from bankers to individuals. Under fractional reserve bankers get to make decisions about what projects get funded and who gets to do them. A National Exchange Trading System would allow individuals to make these decisions as they decided what to do with their share of the agricultural surplus. Some of us would use our share to vote for zero economic growth and more leisure activities.

Many people feel guilty if they do not work continuously. The work ethic and a distribution of the agricultural surplus via employment are the main motivators that keep our economy going. But the truth is that we do not need everyone to work full-time to provide foods, shelter and entertainment to everyone. Most of the work people do is work for the sake of work and to maintain the empires of the one per cent.

The bushmen of the Kalahari desert in Africa are/were known for not being interested in material things and for not working hard. But as hunters and gatherers they had no need to store food. Any day of the year they could go out and collect the food they needed for that day. When our ancestors moved to agricultural pursuits, they had to store food and this meant working at least at some times of the year. We have now taken this need to an extreme.

One of the reasons work is so important is that most of us get our self-identity from our employment. To save our resource base and to preserve the environment we will have to get our self-identity from other activities. How about a leisure ethic which encourages people to perform operas, write poetry, write economic weblogs or many other useless things.

This blogger keeps by his computer a little statue of the Laughing Buddha to remind him not to take life too seriously. Most of the time it works but when thinking about the current economic outlook it is hard to laugh. Most of us think and act in our own short-term interests as opposed to the long-term in interests of our selves or our communities. So long as that holds true the outlook is for a lot of human suffering. But what does it matter. To quote a famous economist, in the long term we will all be dead.

Share this: Facebook

LinkedIn

Twitter

Email

Print

Reddit

Tumblr

Pinterest

Pocket

Telegram

WhatsApp

Skype

Like this: Like Loading... Related

Filed under: Economics | Tagged: agricultural surplus, basic income, conventional economics, Economics, energy, Karl Marx, LETS, local exchange trading system, market economics, minerals, money, reform, resources, self identity, technology, work ethic, worl ethic |