To get the next economic system we need to find the assumptions of this one

Banks Peninsula fires after drought Feb 2017

Many are asking if we have to sit around waiting for the current system to collapse. If we have only 3 years to turn around the emissions pattern as the UN has said, we had better get on with designing the next system.

The current system assumes:

  1. There will be only one currency for a country.
  2. The majority of the country’s money will be created and controlled by private banks.
  3. The money will be created as interest-bearing debt.
  4. All land, all natural resources and natural monopolies can be privately owned, and this means people can profit from buying and selling it.
  5. All major decisions will be made by national or international governments or agencies.

This all adds up to a system with a growth imperative built in.(For years I thought it was just the money system but I believe now after a conversation with Steve Keen it is a combination of that and the land tenure system) The consequences are regular booms and busts, regular monetary crises, banking crises and sovereign debt crises and ever widening wealth inequality.

Edgecumbe floods 2017

The growth imperative also means that it is inevitable that we consume our natural and social capital.  Perpetual growth is not natural. There is no entity in nature which is designed to grow forever, unless, as Margrit Kennedy pointed out, you count cancer. And now we are paying for our blindness with floods, droughts, coastal erosion and food shortages.

Therefore the phrases ‘doughnut economy’, ‘stable state economy’, ‘no-growth economy’, ‘regenerative or resilient economy’ are good descriptive words, but they don’t change the current economy’s DNA. We have been inventing more and more names for this since the publication of The Limits to Growth and arrival of the NZ Values Party in the seventies. They all sound good but we can’t go on and on pretending there isn’t a growth imperative built into the design of our mono-currency economy.

It is like saying I would like this rose to be white and scented but in fact it is red and unscented. The redness and unscented is built into its DNA and no amount of nice new language or great new writing will alter it. We just can’t go on creating more and more names for a good economy.

The Growth Imperative is in the DNZ

I am sure economists like Kate Raworth are contributing to raising awareness but honestly, give or take a few years of dormancy, people in the advanced economies have been at it since the 1970s. The Greens talked about it for a few years but dropped it like a hot cake quite a while ago.

Now I don’t expect too much new thinking will come out of universities. It is tricky for a university economist to breach the parameters of what they can say without losing their salary. Professor Steve Keen is having to crowdfund his salary now.

It is now time to acknowledge that we need to leave the new system alone and invent an entirely new model. We can’t solve climate change within the current model.  Within the old system you can’t put on a hefty carbon tax and expect a different political result from Australia. (Yes you can plant trees and do other things, sure.)

Supposing therefore we allow:

  1. There to be more than one currency
  2. It must be publicly created and controlled for inflation.
  3. The currency will be spent into existence not lent into existence.
  4. The currency will be designed to decay (Silvio Gesell’s quote is “Only money that goes out of date like a newspaper, rots like potatoes, rusts like iron and evaporates like ether can be capable of standing the test as an instrument for the exchange of newspapers, potatoes, iron and ether.”)
  5. The commons must be publicly owned and rent for their monopoly use must replace income tax and sales tax.

I realise that these are all huge jumps in thinking and the last point means there have to be very strong leasehold contracts to protect the occupier of the property together with no rent on land used for conservation or historic purposes.

Naomi Klein has spelt out this challenge for a new economic system in her book This Changes Everything.

Though The Next System Project is grappling with the challenge of finding it in Washington DC it would be great to have a special platform somewhere in NZ to work on it ourselves.

Oh, and by the way, my book The Big Shift – Reinventing Money, Tax, Welfare and Governance for the Next Economic System is available from Living Economies bookshop. It is the result of a four-year think tank of what was the New Economics Party and is the source of the above ideas. We may be right we don’t know, but we tried.



Summary of The Big Shift: Rethinking Money, Tax, Welfare and Governance for the Next Economic System

The Big Shift: Rethinking Money, Tax, Welfare and Governance for the Next Economic System by Deirdre Kent

This important little book is a very dense read. The current growth-dependent economic system is not only broken must be completely replaced with a new paradigm.

This is now critical. Conventional oil peaked in 2005 and unconventional oil peaked in 2015. It takes energy to extract energy so the global net energy is inexorable decline. Therefore the economy can’t grow with less energy from fossil fuels to drive it. Therefore the economy can’t grow without more and more debt.

Based on the discussions of the New Economics Party of 2011-2015 to develop policy, the author argues that neither monetary reform nor tax reform are possible at central government level as the banks are too powerful these days. A change from an intrusive welfare system to a basic income should come from sharing the rents from land, natural resources and natural monopolies.

To design an economic system to serve the planet in a post fossil fuel age requires new thinking on money design, land tenure and governance. Examples from history are used as evidence of stable and prosperous societies using these principles.

This leads to the conclusion that very local government should assume powers of money creation, land purchase and rule-making about taxes for trades in that new currency.


Off to the Living Economies Expo

This next weekend I will be presenting at the Lyttelton Living Economies Expo. I have a 35 min powerpoint to illustrate and summarise my book.

I am taking down books where there will be a special Expo price. From then on the book will be sold by Helen Dew.  It will  available from the Living Economies website