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Combining Emerging Economic Policy into Political Ideology

You know that stage every young child goes through when their response to anything said to them is ‘why?’ Well, I got stuck at that stage. From my earliest years I always wanted to know, always wanted to experience, always wanted to understand the reason. I have always been curious, adventurous, and irreverent of academic, cultural or other authority. I’ve always wanted to know for myself.

I spent a Tom Sawyer childhood leading teams of small boys on various adventures and projects involving rafts, treehouses, tunnels and mountains. My father called me an “instigator”. I read voraciously, travelled regularly from a young age, and conversed seriously and intensely into the night with many fine minds. Five year of economics, psychology and intellectual exploration at a Canadian university led to a year teaching in China and a ringside view of the popular student uprising that ended at Tiananmen Square. Back in Canada, four years as a university instructor of academic English followed, until one day I’d had enough and applied to almost every university English department in Africa, accepting a position as a lecturer at the University of Sierra Leone, West Africa.

In 1992, the year I moved from Canada to Sierra Leone, the United Nation’s annual UNDP Development Report placed Canada at the peak of human development, and Sierra Leone at the bottom. After decades of corrupt, incompetent kleptocracy, Sierra Leone was in ruins, was in the middle of a deteriorating civil war, and was governed by a small group of poorly-equipped army officers who had found themselves in power after an accidental coup. There was no electricity, little communication with the outside world, and the sounds of AK-47s and anti-aircraft guns regularly punctuated the dark, tropical nights. I threw myself into this new and exciting environment, engaging with my students, making good friends and exploring the country. In particular I spent my lengthy university holidays travelling in what was patronisingly called ‘the interior’, ‘upcountry’ or even ‘the bush’.

I soaked it all up – the ideas, the feelings, the spirit – until I became overwhelmed and experienced what could be described either as a breakdown or a spiritual awakening, depending on your point of view. Remember, while I existed in great privilege compared to those around me, I was exposed daily to some of the most heart-breaking human pain, waste and unfairness that the planet had to offer. My heart had opened to this suffering, so whatever my inner journey was, it was extremely emotional.

At the core of this emotional, mental, inner experience was an essentially philosophical conversion. In my efforts to understand I’ve always tried to be rational and to face and accept difficult truths that, while they may be unpleasant, are true nevertheless. I read philosophy, I read physics, I spent many days and nights in intense, testing and enlightening conversation, and I was what is known in this area as a ‘determinist’. I believed in the Big Bang, I believed in cause and effect, I believed in quantum indeterminacy. Conversely, at heart and deep down, I did not believe that we – and that I – had free will. Essentially I believed in fate.

But in Sierra Leone, surrounded by senseless suffering, I essentially had a damascene conversion. It might sound silly, especially considering that I’d always been a free spirit, but that was the first moment in my adult life that I genuinely and deeply believed myself and others to be free. I had been a cold, calculating and detached determinist until I saw the light of a belief in freedom. For the first time in my life I believed that free will existed. And I recognised that freedom came with responsibility, and that they were one and the same thing. Until Sierra Leone I had coasted through life, treating it essentially as an interesting experience. Now, for the first time, I became driven with a need to do something, and had acquired a purpose outside of myself.

The rebels got closer, I fled to my childhood home in Ireland, spent a year sorting myself out, and then threw myself into saving the world. I became intensely involved in my community, leading and contributing to an arts centre, youth groups, a save-the-beach campaign and more. Being rational, I knew that if our environmental challenges were not solved then nothing else would make much difference in the long run, and so I threw myself into Green politics, supporting parliamentary and MEP candidates, engaging in national discussion, and knocking on doors. It was the very early years of the internet, and I quickly saw it’s potential in dissolving informational bottlenecks and bringing people together, and so I learned how to use it and tried to spread that knowledge to the groups that I had joined. I set up email lists, online groups, websites and more for groups that had never used these tools before. I threw everything I had into the fight, across dozens of groups and organisations focused on many causes.

I knocked on doors, handed out leaflets, marched in demonstrations, crafted letters, attended meetings, participated in workshops, built campaigns, led groups, joined others, emailed, argued and discussed. I wrote press releases, told stories, built relationships with journalists, spoke on radio, and played with the dark arts of spinning perspective. I felt the nervousness of meeting senior government ministers in an attempt to persuade them of something or other. I felt the searing heat of burning armoured police carriers in the teargas saturated streets of Genoa during the last of what were called the ‘Anti-Globalisation’ protests. Until one day, standing in the rain outside the American embassy protesting the U.S. withdrawal from the Kyoto climate agreement, it began to dawn on me that, whatever it was I thought I was doing, it wasn’t working. I’d done it all and, from what I could see from the daily papers, it didn’t seem to be making a blind bit of difference.

This realisation was informed by my other life, in the corporate world of work and money. I’d been an early adopter of the internet and quickly understood that this was a vast revolution. I lived on the internet, at 26 bps. To learn more I studied, and then got a job on the phones, helping support the 20,000 customers of Ireland’s second largest internet service provider. That job led to other jobs – setting up a tech support department, quality control, network administrator. Until I cashed in my stock options and founded my own internet start-up.

My investors were the senior executives of a German-Austrian-Swiss consulting firm focusing on the pharma, nuclear and chemical industries. The key figures were former executives from Raytheon and Fluor. Their turnover was in the hundreds of millions, and they put about €300,000 into me. I burned through it during a frenetic two years with a team of eight, then watched my intended market evaporate as tens of thousands of mom-and-pop ISPs consolidated into a handful of big companies overnight. My startup had failed, and I bought back the shares I’d sold for €250,000 for only €1. It was better than any Harvard Business School education.

On weekends I would plot with passionate socialists, greens and anarchists, and then on Monday get my spreadsheets together for a meeting with rich and powerful men in fine suits who flew only business class. I drank with both, ate with both, got to know both, and had a foot in two worlds that rarely meet. On my corporate desk my penholder was a tear gas canister, picked up in the aftermath of a street battle. In a way I was embedded on both sides of the struggle, whatever that struggle was.

But one thing stood out. The market was powerful because it made things happen. The market was better organised than the protestors, more united, better equipped, more focused, and much more effective. Although my own market idea had failed, it was clear to me that the market could turn ideas into reality far more efficiently than the usual socialists, greens and anarchists marching up and down outside Dublin’s central bank for the nth time. Whatever its imperfections (and there were many), the market actually worked.

But, of course, it hadn’t worked for me – not this time. I had other internet ventures, other ideas, other projects, but my heart was elsewhere. In the ruins of my startup dream, and recognising the limitations of the campaigns to which I had devoted myself, I watched as the ice continued to melt, friends and neighbours continued to struggle, and one of the most spectacular housing bubbles in the history of the world continued to inflate. I became despairing, confused and burnt out. And so I ran away to sea.

During a maritime Greenpeace protest against plutonium being transported to a nuclear reprocessing plant in the UK I got a taste for the sea, and after that I wanted nothing else. I dropped commitment after commitment, did the minimum of paid work, and devoted my time and attention to learning the knowledge, getting the experience and adopting the attitudes necessary to make long sea voyages in small boats. A few years later I became a professional yacht delivery skipper, and spent many long nights under the stars thinking, feeling and finding myself again. Until, after a final year driving boats servicing offshore wind farms, I returned to land in the rubble of the 2008 banking crisis with a clear head, a confident heart, and a renewed commitment to changing the world for the better. I was determined not to fall into the scattergun approach of before. This time I was more focused, more targeted, much deeper, and more strategic than I was before.

Another year sorting myself out and exploring a few dead ends and I was focused on three core problems: (1) climate and the environment, (2) work and incomes, and (3) our system of banking and money. To be honest, this focus wasn’t difficult to find. After years in the trenches I was familiar of the nuances of environmental issues and politics. I was surrounded by friends and family struggling to match increasingly insecure incomes to absolutely necessary costs. And I was living in Ireland in the financial rubble of the 2008 debacle. Climate, incomes, debt. The environment, society, finance. Nature, ordinary people, and the Masters of the Universe. Three areas of our most significant dysfunction. I examined each of them through the eyes of economics.

Academia – the world of universities, journals, conferences and degree-granting authority – is somewhat frightening to many people, but it wasn’t for me. Remember, I’d spent a decade both studying and teaching at universities, deeply engaging all the while. I knew these people and, after six years teaching Academic English, I knew the language of academia better than most academics.

I also wasn’t intimidated by economics. I’d studied it formally at secondary school and university, and found it relatively easy. The concepts came naturally to me and I found it normal to think about the mass behaviour codified on charts and graphs. Although I drifted on into psychology (behavioural economics hadn’t been accepted yet), I maintained a strong interest, following economic and political affairs in the same compulsive and obsessive way that my friends followed sports. I was skilled in internet research and had all the data and ideas in the world at my fingertips. In these and many other ways, I felt that I had the tools for this inquiry. And this is what I found:

Problems

The economics of climate change is all about the price of carbon. The economic problem is that the real, actual costs of rising sea levels, droughts, floods and so on aren’t included in the real, actual price of the carbon you buy to heat your home, fuel your car, or turn on your lights. In economic-speak, the external costs of carbon are not internalised into its price, and so the market cannot even see those costs. As far as market forces are concerned, the environmental degradation of our planet may as well be happening on Neptune. Basically the problem is that the market can’t see climate change and all the other environmental damage.

The economics of incomes concerns the connection between work and incomes, and the changing nature of both work and incomes in the face of accelerating technology and globalisation. The core, unavoidable, costs of living are rising while incomes remain stagnant and increasingly insecure. Globalisation is a function of technology, and technology disrupts labour, and as technological development accelerates all around us the number of actual, feeling, voting human beings who are losing from these developments is outweighing the number of winners. Basically, machines and complex global supply chains are replacing us, so what are we going to do and how are we going to live? A lifetime of stressful drudgery at $11.35 an hour is not enough.

Finally, the economics of debt concerns money, and especially where it comes from – the money supply. This is the neglected, overlooked but vitally important realm of monetary policy, banking, and the structure of our financial system. Right now, in the system we have, almost all money is created from bank debt. Some of that debt is good debt, used for investment. But most of it is bad debt – debt for consumption and, worse, for speculation. Our monetary system doesn’t care where the debt comes from, as long as there’s debt. The events of 2008 were a very public illustration of the limits to this approach, yet this remains our system.

To me, crouched in front of my computer long into many nights, these three problems represented much of what was wrong with our world today. Each of these problems caused many other problems, and so I began to think of them as ‘meta-problems’ – overarching, systemic flaws from which many other individual human and environmental problems flowed. Climate. Incomes. Debt. Three core, fundamental, structural, systemic, deep, vast problems. Three economic problems. Three important problems. Three very specific problems. Amidst mounting and increasingly alarming evidence of the urgency of these three core problems I immediately began looking for solutions. And I quickly found them.

Solutions

Before I tell you what I found, let me be first clear about what I was looking for. I knew why I was doing what I was doing (I just had to look around me). And I knew more or less what we had to do (put a real price on carbon, get more money to more people, and remove at least some control of the money supply from private bankers). The question I was trying to answer now was ‘how exactly are we going to do that?’ Many hours on Google presented the answer in the form of three policy ideas, each with campaigning activists, groups and organisations behind them.

The first idea is that of carbon tax and dividend. The problem is that we need a price on carbon, carbon is embedded in everything, and so putting a serious price on carbon raises the price of everything. How do you tax carbon without forcing poor people to freeze in the dark? Without collapsing the economy? The answer is, you give them back their money. Basically, you tax carbon and then share the proceeds of that tax with everyone equally. Everybody’s costs go up, but everybody also gets a cheque in the post, and for most people that cheque will be bigger than their increased costs. Carbon tax and dividend is an economic policy that directly addresses the core economic issue involved in internalising the cost of climate change into the price of carbon, making it visible to the infinitely innovative and powerful market. Most importantly, by taking from heavy polluters to give to light polluters, it is also inherently fair. The fact that most people gain from this arrangement makes it politically realistic as well.

The policy of carbon tax and dividend has been partly implemented in British Columbia, Canada, has been endorsed by the state legislature of California, and is the preferred policy of veteran climate scientist and activist James Hansen. It is formally supported by 56 members of the US House of Representatives (28 of them Republicans and 28 Democrat), and that number is growing rapidly. This is the climate and carbon policy of both the U.S. Green Party and of the US oil industry. The group that I support and of which I am a member is the Citizen’s Climate Lobby. If you’re new to all this, their website is a great place to start. You could also follow Ted Halstead and the Climate Leadership Council. I encourage you to learn, join and participate. This is a policy thats time has come.

The second idea I found in my search for solutions was that of a basic income. This is the simple idea that every single person is paid a basic income, unattached to any work or wealth or other conditions. Essentially, everybody gets equal benefits, whether rich or poor, skilled or unskilled, urban or rural, driven or lazy. It’s a universal benefit that essentially turns the increasingly threadbare social safety net into a solid and safe floor, releasing effort, energy and enterprise and allowing risk without fear of destitution.

I could go on and on about the people and groups and organisations supporting this policy. I could tell you about the arguments for and against. I could outline the results of previous tests and point to ongoing and planned tests around the world. But there’s no point, because this idea is exploding so rapidly it’s hard to keep up. A good start would be to follow Scott Santens, Guy Standing or the Basic Income Earth Network.

The third idea is far less popular, far less understood, and yet just as important. This is the idea of monetary financing – of removing at least some of the power to create the money supply away from private banks, and to bring that power under independent central bank control for public benefit. It is called many things and there are many versions of it – Sovereign Money, QE for People, 100% reserve banking, helicopter money and more. But the core idea is that we adopt a permanent form of quantitative easing, with the benefits going to a shared, public purpose. If you don’t understand what that means, don’t worry about it – this kind of economics is not everybody’s cup of tea. Basically, we need money, banks create money via loans, and this causes problems. Carefully ‘printing’ more of that money directly allows much greater control and stability. And spending that money into the economy for some form of public good is only fair. After all, the money may not belong to us all, but the monetary system does.

The most dynamic and effective group politically campaigning for monetary reform is the UK’s Positive Money. They are joined by the EU sister group QE for People, by the self-consciously-named American Monetary Institute, and by about 30 other national and related groups around the world. But as much as these groups campaign to raise awareness, the real discussion is held by a small number of central bankers and monetary policy nerds. Everybody thinks about money, but few people think about what money is. But some do, and some is enough.

The point is that I now had my solutions. I had identified three problems – three deep, structural, systemic problems with the environment, with incomes and with debt. And now I had identified my three solutions – a carbon Tax & Dividend, a Basic Income and Monetary Financing. Each of the problems was vast, serious, destructive, worsening, unsustainable and potentially catastrophic. And each of the solutions was simple, focused, elegant, evidence-based, politically balanced, radical enough to effect systemic change, yet institutionally realistic as well.

I immediately threw myself into reading about these policies, writing about these policies, arguing these policies, and generally exploring these policies and the organisations, people and ideas behind them. Night after night, day after day, I soaking up the ever-expanding body of information and opinion behind these policy solutions until I was convinced. At some point in any career, any venture, any project, there comes a time where you have to stop studying and start applying. At some point you have to accept that the evidence in front of you will always be imperfect and you have to make a decision. Tax & Dividend, Basic Income, Monetary Financing. These were now my policies. I begain to believe.

And then something wonderful happened. I had an idea.

Integration

I called the idea ‘Equitable Capitalism’, and I threw myself into it. The concept was simple: I would integrate the three evidence-based, functional and specific economic policy solutions in which I now believed into one single, coherent whole. I would take three existing and important ideas and combine them in some way into one cause, harnessing and focusing the people, resources and energy behind each them into one focused purpose that would be greater and more effective than the sum of its parts. From three stories I would tell one story – a new story and a radical story I accept, but at least a possible story, which was more than I was getting elsewhere. In my mind and heart I was about to save the world in the most dramatic way – with one single idea.

I launched a blog, began a book, tweeted, posted and experimented with social media and memes. I engaged, I discussed, I reached out. I argued in support of my three polices, and strategically tried to introduce people supporting one of the three policies into the ideas behind the others. I tried to connect Right and Left, Libertarians and Authoritarians, Socialists and Capitalists. These ideas could save the world and give each faction what they wanted, I argued. From three policies, one cause. Solidarity, together.

I was encouraged in my quixotic endeavour by synchronicities between each of my three adopted policy solutions. The introduction of a carbon tax and dividend system would contribute not only reducing carbon emissions and ameliorating climate change, but would also introduce the mechanism and establish the seed of what could become a basic income. Monetary financing would create ‘fiscal space’ (i.e. money) for public investment into the transition to clean energy, and would relieve pressure on the housing costs faced by those on stagnant incomes. And so on.

I was even more encouraged by some of the people involved in campaigning for each of the three policies on which I was focused, and in particular by the connections between the issues that they themselves could plainly see. Fran Boait, executive director of Positive Money, came to monetary reform from climate science. Stanislas Jourdan, of the related group QE for People, was a lead organiser in the European basic income movement. Scott Santens, the leading U.S. basic income communicator, is a strong supporter of carbon tax and dividend. Guy Standing, one of the leading figures of the Basic Income movement, talks about tax and dividend and monetary reform too. Among the campaigns for each of the three policy solutions, there were others starting to connect the dots.

I was sure that I was on the right track, and every day the news and analysis websites confirmed it. The seas rose, the arctic melted, Brexit happened, Trump happened, Sanders and Le Pen and Corbyn happened, interest rates remained stuck near zero, the mountain of debt grew. The political centre seemed to be discredited and collapsing and, in the absence of any credible alternative, the resulting vacuum was often filled with those eager to use division to gain power and attention. In the absence of the best, we got the worst. In the absence of inspiring ideas we got fear of the bond markets. In the absence of a positive vision of a prosperous, sustainable and progressive future we got warning after warning of the environmental and social dystopia that awaits. The world seemed both terrified of an approaching nightmare and pregnant waiting for a new idea. Surely Equitable Capitalism was that idea – a synthesis of three specific and coherent economic policies into one new and evidence-based alternative, attractive across the political divide. Surely it was obvious? Surely, even if there was only a small chance it might work, surely we were was obligated to try? Perhaps this was the idea to save the world?

Needless to say, very little happened. A little correspondence, a few followers, a few engagements, some small, fleeting flashes of attention, but nothing substantial. I had identified the three core, specific economic problems behind humanity’s most important challenges. I had found three credible and increasingly popular solutions to these challenges. If I could just get people to recognise the potential connections between these ideas, I thought, we might have a chance.

But sitting at home, alone, like a million other keyboard warriors, I found little purchase for my new perspective. I might have combined three smart, progressive economic policies into one general, somewhat vague idea. I might have drawn connections between disparate economic campaigns pointing in the same direction. I might even have given it all a name. But no matter how hard I promoted my world-saving idea, very little came back.

And for over a year, that is how it was. Three problems, three policies, one Equitable Capitalism. I read, I thought, I wrote, I worked on my book, I tweeted and I posted. I walked the beach and fed the dogs and spent time on my computer trying to introduce the world to a concept, an organising idea and a direction that I believed could be vastly beneficial to us all. Make no mistake, I believed that this was an idea that might save the entire world, not metaphorically, but literally. Not one small bit at a time but all together, instantly. Not far in the future but now, and over the next few years.

My new and laser-focused purpose was to bring Equitable Capitalism to the world. But the world, it seemed, wasn’t listening. Until one day last week, when the phone rang.

Connection

The call was from Rachel Oliver, lead organiser for Positive Money, the UK group campaigning for monetary reform. The invitation was to a retreat of people with a passion and interest in monetary reform being held at the Centre for Sustainability and Leadership at the Ambleside campus of the University of Cumbria.  Ambleside lies on the shore of Lake Windermere, in the breathtakingly beautiful English Lake District. It was a wonderful weekend and I will tell you about it, but first let me outline where I was in my project to save the world.

In my eyes, Equitable Capitalism (the idea that global free market capitalism might be reformed through three specific and distinct economic policies) was now common sense. Everywhere I looked in the media I could see increasingly alarming evidence of the three core problems. Every time I checked in on the campaigns for my solutions I was encouraged by their explosive expansion. But nobody else seemed to connect the dots, as I did.

But what did I actually have? Sure, I was conversing with (and being taken seriously by) some of the top minds engaged in changing economics and economic policy for the better. Sure, there were economic connections between the ideas and solutions I was engaging with and championing. Sure, some of the people focused on one of these ideas were also often focused on others. There were connections – there were possibilities. But at the end of the day, all I really had was a list of three very different policy ideas and a vague, undefined notion that these ideas might somehow be organised and presented into a coherent whole. No wonder it wasn’t catching on.

In my explorations into how I might combine three stories into one, two things stood out. The first was the concept of ‘the commons’. This is the idea that all of us – every last one of us – are the shared legal and moral owners of some things. Our planet’s atmosphere is a commons. The seas are a commons. The resources of the earth and the sun are a commons. Most of the most important intellectual property in the history of humanity is commonly owned. Our public institutions and infrastructure is commonly owned. Our monetary system is commonly owned.

It seemed reasonable to me to view this commons as a wide array of very valuable capital assets, and to expect that we, the legal, moral and actual owners of these valuable assets, might expect at least a share of the considerable returns from them. Framed in this way, it was easy for me to see that focusing on ‘the commons’ offered a justification for the economic policy solutions I was advocating. Simply put, I own part of the atmosphere, and if you want to use that atmosphere to dispose of your waste Co2, then the least you can do is to pay me. Similarly I, along with everybody else in my currency jurisdiction, am a part owner of the monetary system and thus am entitled to at least a share of the considerable advantages that come from an ability to create money. In other words, the atmosphere and monetary system are valuable parts of the commons, and a basic income would be a fine mechanism to distribute some of the returns from these assets to you, to me, and to everybody else. In other words, my three policy solutions all seemed to derive their moral justification from the idea of common ownership.

The second idea was actually an image – of a doughnut. Conceived and popularised by Oxford economist Kate Raworth, this is the idea that the economic space within which we can safely operated is squeezed between the requirement for basic human needs on one side, and global, planetary environmental limits on the other. It’s basically a conceptualisation of the environmental and human space between what we need and what our planet can tolerate, expressed as a doughnut. Kate Raworth has many other positive, important, and urgent ideas in her book ‘Doughnut Economics’. But that one diagram, expressing our human social and environmental predicament in a such a clear, simple, understandable way, was a ground-breaking way of looking at ourselves and the world.

And so, obsessed with the problems and policies that I had made my own, convinced that there was at least the possibility of great value from my direction of thought, and armed with the idea of the commons and a copy of ‘Doughnut Economics’, I took the night ferry across the Irish Sea to England and to Windermere. And it was incredible.

There were about thirty of us, six from Positive Money and about two dozen supporters from various backgrounds, mostly money-related. Our focus was on how to understand, explain and communicate the ideas underlying our monetary system and the case for reform. These were rarefied, focused and extremely important subjects. These people had recognised that and had attached themselves to a group focused on organising and promoting this perspective and this platform – they were self-selecting. They were also open, passionate, friendly, focused and very, very smart.

The buzz was incredible, the connections immediate, and the conversation continuous. There was plenty of free and unstructured time for walks, pints, introductions and discussion, while in the structured sessions we focused on deep storytelling for collective action, and were introduced into the ideas of Marshall Ganz. Ganz believes that it is emotion that drives political action, and that emotion is transferred through deep attachment to shared values. These emotional values are best communicated through narrative – through shared stories. And that starts with an open, honest and authentic Story of Self. It is these techniques that I am now using as I write these words. I am no longer arguing a disparate bunch of economic policy points backed by statistical evidence and academic theories. Now I’m simply telling you my story.

Possibility

And that is how I got from there to here. Let me tell you where I am now, and what I think we should do.

Our climate is in serious trouble and we’re getting close to destabilising it irreparably. Despite the Paris Agreement and the spectacular success of renewables, our carbon emissions trajectory is still on the wrong track, and the damage and danger is increasing by the day. Around the world, millions of now surplus people scramble for low-paid work, living in the fear of being one pregnancy, car-breakdown or rent increase away from destitution. Meanwhile vast sums of taxpayer’s money have gone to prop up a grossly unfair and dysfunctional monetary, financial and banking system.

Under the onslaught of such systemic pressures, our political system is breaking down. The state-controlling socialist Left is discredited. The free-market, neoliberal Centre is discredited. And much of the Right seems to have drifted off into the insularity of protectionism, borders and other controls on movement. There’s nothing left – no ideas, no vision, no leadership, no direction, no path to a better tomorrow. For many people, our biggest idea is to build a wall. Trump, the Brexiteers, Sanders, Corbyn, and all the other ‘populist’ challengers from both Right and Left are political symptoms of very real, very deep structural economic problems. Politics is broken because economics is broken.

We need a new idea. The old, stale economic ideas and stories from the 19th and 20th centuries no longer apply in a 21st Century world of online shopping, Facebook and competition from Vietnam. Marx is dead. Keynes is dead. Hayek is dead. Friedman is dead. None of them understood the internet or thought realistically about artificial intelligence or 3-D printing. We clearly and unambiguously need a new economic and political story to orientate us towards a fairer, more civilised and more sustainable order in the world we are actually living in. We need a new organising idea.

I believe that the core economic policies of carbon tax and dividend, a basic income, and monetary reform must represent the key policy ingredients of such a new idea. I believe that the perspective of the commons and the visualisation of the doughnut are key to how that story might be formed, framed, justified and communicated. Essentially, I believe that it may be possible to consciously, deliberately and strategically create a new economic and political story fit for the technological realities of the 21st Century, and to open up a new path to a positive, prosperous and progressive future for us all.

The time to do something is now. We are in a crisis, and an emergency. Climate change is with us and accelerating. Every day countless millions of real, emotional human beings live ugly, desperate lives, trapped between absolute obligations and limitations on one hand, and the rapidly changing dynamics of the labour market on the other. Financial eyes watch property bubbles in Australia, Canada and elsewhere, wondering where the next global debt crisis will begin. In the absence of an overarching political and economic story to understand and counteract these forces, we are left without vision, without purpose and without hope. The gap is filled with useless cynicism, despair and apathy, and with lowest-common-denominator appeals to the worst of our nature.

This is happening now, while you read these words. The arctic is melting, the seas are rising, Trump is in the White House, the UK is leaving the EU and interest rates remain stuck near zero. Four in ten French voters wanted Marine Le Pen to lead, govern and represent them. Authoritarians are on the rise. The traditional Left-Right divide is fragmenting. The out-of-touch establishment seems useless. The barbarians are overwhelming the barriers. Almost every election throws up a once unimaginable surprise. The centre is not holding.

It is intolerable, in a world of melting glaciers, for one individual taking a private jet on a weekend break, to emit more Co2 than an entire town switching to low energy lightbulbs. It is deeply unfair that all productivity gains go to capital and none to labour, and that workers must engage with employers under threat of destitution. It is unconscionable that the finance and banking industry, which deeply damaged the economy and took many billions from taxpayers and through austerity cuts, remains essentially unrepentant, unaccountable and unchanged. It is tragic that the root causes of these moral outrages remain mostly unexamined in public discussion, while immigrants take the blame for the resulting pain. Our current order is clearly and blatantly unfair, immoral and unjust. This is wrong.

Now is the time for change. Everywhere we see the search for a new perspective. The two big political and economic organising ideas that began in the 19th Century and evolved during the 20th Century are no longer fit for purpose. None of them are relevant in a world of microchips, the internet and AI. Yet we remain without an alternative framework within which to understand and change our world. We have no vision of a bright and positive future, and no map of how to get from here to there. We are lost in the mist, without perspective or direction. We are frightened, unfocused, disconnected and useless. Adrift.

But there is a glimmer. Out there, appearing and disappearing in the shifting fog of current events, there is something. There is a possibility. There is a shimmer of potential, and a fragile gossamer thread of achievable action linking there and here. There is a vision. I have a dream. And I am not alone. Others see it too.

This dream is of our world one hundred years from now, prosperous and at peace. Co2 levels are falling steadily and most environmental indicators are dramatically improving. The economy is stable and boring. This is a world in which the environmental and social limits of market behaviour are taxed to pay for a universal and guaranteed basic income. It is a world in which productive and strategic public investment is funded by independent central bank control of the money supply. In this possible future, the returns from the commons are shared with the owners of the commons. The outside of Kate Raworth’s doughnut is taxed to pay for the inside, while the market remains free within that safe ecological space. This would be a new and better social contract, fit for the new world we are moving into.

The implementation of just three specific policies could make that happen, and help create that future one hundred years from now. Not all at once. Not perfectly. Not right away. But it could happen. Three vast, dangerous and intractable problems that are destroying our world and our future. Three simple, elegant, evidenced-based solutions, already emerging rapidly. We are close. From three important, separate and distinct economic policies it may be possible to construct one intellectually coherent, morally justified and emotionally contagious whole. Can we not just connect the dots?

There is a ‘feel’ to certain times. Sometimes there’s a free-floating energy in the air, just waiting to be grounded and made manifest. It’s like a nervousness – a general feeling that something significant could happen. I experienced this feeling as a young teacher in the People’s Republic of China early in 1989. At the time, China was just opening up and was just beginning its transition from state communism to free markets. For the first time in decades, street trading was allowed, and teenagers selling cigarettes made much more money than university professors. Inflation was rising and the iron rice bowl was shattering. As the first shoots of market freedom sprouted, the air was tense with uncertainty and dissatisfaction, but also pregnant with expectation and hope. It was like an ideological spring.

And what a spring it was! On April 8th popular politburo member and former General Secretary of the Chinese Communist Party Hu Yaobang had a heart attack in the Zhongnanhai government buildings while discussing education reform. He died on April 15th and a small group of students protested at his funeral by breaking bottles on the ground (a reference to a double meaning in the name of premier Deng Xiaoping). On April 22nd fifty thousand students marched to Tiananmen Square to participate in Hu’s memorial service and deliver a letter of petition to Premier Li Peng. By May there were demonstrations throughout China, and tens of millions of people in the streets. The workers joined the students. There were rumours of army rebellion. For one glorious week the state media was absolutely and entirely free. Everywhere was solidarity, expectation and a hope that survived Tiananmen Square on June 4th, and that is still an important part of what China has become.

My point is that our time, now, feels like China did then, back in the spring of 1989 before Hu Yaobang died. It is as if the emotional-political landscape were saturated with petrol or gasoline, just waiting for a spark to ignite it. The tension is there, the stage is set, and the vacuum is waiting to be filled. Then something happens, and then something else happens, and then suddenly everything is different. When old orders are breaking down and everything is unstable, even the smallest things can make a very big difference. A handful of students breaking bottles at a funeral changed China.

China offers not only an example of almost spontaneous mass political movement and engagement, but of dramatic system change itself. The leadership of China, under Deng Xiaoping, recognised and admitted that their precious ideological system wasn’t working, and so they consciously and deliberately changed it. The same thing happened in the last years of the Soviet Union where, in an atmosphere of instability like our own, the entire political and economic system of hundreds of millions of people was changed, involving events ranging from the rise of Mikhail Gorbachev to a misplaced phone call between East German border guards. Vast, systemic economic and political change is perfectly possible.

In 1947, thirty-nine scholars, mostly economists, with some historians and philosophers, were invited by Professor Friedrich Hayek to meet to discuss the state, and possible fate of classical liberalism. From that meeting came the ideas, ideology and organisation that was behind Reagan, Thatcher and what is now called modern, free market neoliberalism. One meeting that changed the world.

In 1962 two men, assisted by a handful of others, leased some land on the coast of California to establish the Esalen Institute and explore, organise and communicate the ideas of the nacent Human Potential Movement. These ideas informed and directed the counter-culture revolution of the later 1960s, and helped form the culture and society we live in today. Just a few people, a little money, and an idea. And they changed the world.

I myself have sat in the reading room of the British Museum where a passionate and impoverished activist, economist and writer wrote the words that expressed the ideas that dominated the political and economic landscape of the world for much of the 20th Century. One man, with pen and paper, in a safe and quiet place. That was all it took.

This has been done before. It may not be easy, but it is certainly not impossible.

Action

And so, dear friend who has read this far, this is where our stories begin to intertwine. Because if you accept that we have three core problems with the environment, income and debt; And if you even suspect that the three specific and rapidly emerging economic policies of Tax & Dividend, a Basic Income, and Monetary Financing might even possibly be a solution to these problems; And if you see a gigantic, vast and ever more urgent gap in the market for political and economic organising ideas and ideology, and if you can sense huge pent-up demand for such ideas. And if can get past the scale of the issues and catch just glimpse of the possibility that these three economic ideas might be combined into one simple and emotionally-communicable ideology. We’ll then, my friend, the question is, what are you going to do?

Feeling what you feel, about these deepest and most emotional of issues and values, and knowing what you know (including what I have just told you), what are you going to do about it? Our world is dying, our family, friends and neighbours are suffering, our financial system is dysfunctional and unfair. These are facts. The existing movements and campaigns for Tax & Dividend, a Basic Income, and Monetary Reform are already connected by the core concept of ‘the commons’, and are already framed by Kate Raworth’s doughnut. A lot is known about effectively developing and contagiously communicating stories and ideas.

It is not for me to tell you what to do. You are your own person with your own perspective and your own take on it all. You have your own job, your own network, your own platform and your own influence. God knows, you have your own distractions. So you know best what you can do the best from where you are and with what you have. But if you’re not sure of where to start, and for what it’s worth, here are my suggestions:

1. Learn. You probably know a lot about the three ‘meta-problems’ just from following the news. And if you are reading this you probably know a lot about at least one of the movements and campaigns involved, and the ideas behind it. You may even be familiar with two or even all three. But if there are gaps in your knowledge, I suggest that you fill them.

2. Believe. At some stage you’ve to stop studying and apply what you’ve learned. At some point you’ve got to stop reading about it and arguing about it and thinking about it and make a decision about what it is that you actually believe and what, exactly, are you going to do about it. Learning is good, but at some point you have to make up your mind. The information will always be imperfect. When looking at the range of our serious problems and at the array of solutions on offer, at some point you have to decide. In other words, you have to stop questioning and believe.

3. Connect. You’re not the only person thinking this way, feeling these possibilities, scenting the faint, sweet smell of hope in a political and economic desert of hopelessness. There are others too. Join them, follow them, reach out to them, meet them in person. Share your story and your dream with them, as honestly and openly and authentically as you can. All is not lost. There is a way out. There is a possible path to a safe and beautiful future.

4. Support. The idea that it may be possible to construct an ideology that saves the world may be quixotic. The odds of this endeavour succeeding may be small. It may indeed turn out to be “unrealistic”. But the resources required to get it out there and underway – to test it in the world – are relatively small in contrast to the potential benefit if it actually worked. In other words, while high-risk, this venture has a relatively small downside and a potentially unlimited upside. The potential returns are vast compared to the resources needed to test it in the market. For those with extra time, skills, money and organisational structure who want to invest wisely in changing the world for the better, investment in this idea is surely a good deal. Seed money and angel investment would nurture a lot of fragile roots at this early stage, not least my own.

Conclusion

The Positive Money weekend on Windermere, where we discussed telling the story of money and of monetary reform, was structured in the presentation, exercise and worksheet way familiar to the corporate, professional and academic worlds. At the end of that retreat we were each asked to share our dream and vision of the Positive Money campaign six months from now. It seemed a bit twee at the time, as these things often do, but I thought about this question on the train and bus and ferry home. And my dream is this:

Much is the same. I’m back at Ambleside in the beautiful English Lake District, on the same campus and in the same room. But this time, most of the people are different. This time, in my dream, Fran Boait, Ben Dyson and Stanislas Jourdan are there, from the monetary reform movement. Guy Standing and Scott Santens are there from the Basic Income movement, and Ted Halstead, Joseph Robertson and James Baker from the carbon Tax & Dividend movement (yes, that James Baker – it’s my dream!). Marshall Ganz would be there, and Kate Raworth and, for the deep historical perspective of narrative and all-round wisdom, historian Yuval Noah Harari. World Bank economist Paul Romer would be there. There would be others too, but the group would be small – under twenty.

This group would be there for a week – a whole week! – facilitated and structured by Positive Money’s indomitable Rachel Oliver, as before, and with lots of free and loosely-structured time for those spontaneous, intense and stimulating conversations in which the magic happens. As before, there would be homework – ideas and information to be read, watched and understood prior to meeting. Participants would be expected to be prepared. But this time, the topic and the focus would be different.

This time, the goal would essentially be to consciously, deliberately and strategically construct a new economic and political ideology fit for the 21st Century and the challenges we face. With the expertise and experience from each policy area, and guided by the best and wisest storytellers in these matters, we would try to merge three stories into one, and thus tell a new story. A story of survival, of progress, of potential and of hope. A vision of what the world could be. And a specific, explicit and realistic plan to get us there.

That’s my story – or at least an edited, framed part of it. And that’s my dream. Thank you for reading. If this has touched you, and if you want to do more than just read, then please do what you can.

Do it now. We have no time to waste.

GOP Climate Change Solution is Best

The new head of the US Environmental Protection Agency, Scott Pruitt, does not believe that carbon dioxide pollution is a major cause of climate change. In an interview with CNBC the Donald Trump’s appointee said “I would not agree that [carbon dioxide] is a primary contributor to the global warming that we see. But we don’t know that yet, we need to continue to debate, continue the review and analysis.” In other words, as we reach 410ppm of Co2 in the earth’s atmosphere, we need to continue to deny, delay and dither.

Scott Pruitt, EPA Administrator
Scott Pruitt doesn’t know what’s going on.

Pruitt is denying the reality that Co2 causes climate change because he cannot imagine a solution that doesn’t involve state control over the market. He’s basically choosing values or ideals over reality and truth, at least strategically, because he sees the situation as zero-sum and either/or. He cannot imagine a perspective on climate change that includes both a free, healthy and prosperous market, and rapid and meaningful reductions in Co2 emissions.

But there is such a solution. It’s being promoted by the likes of former GOP Secretary of State James Baker, former GOP Secretary of State George Shultz, and former GOP Secretary of the Treasury Henry Paulson, as well as by former NASA scientist and early climate activist Dr. James Hansen. This plan puts money into the pockets of nearly two thirds of people, powerfully incentivises the market in the direction of carbon sustainablity, and can be implemented gradually without sudden economic or market shocks, all through existing laws, institutions and structures. It does not increase government, but it does increase economic growth. It provides the nucleus and start of a Basic Income (the Baker-Shultz plan starts at $2,000 per family per year). It encourages and enforces environmental responsibility while expanding real, tangible human freedom.

That solution is revenue neutral carbon Tax and Dividend, in which a large and growing tax is placed on fossil fuels as they come out of the ground or arrive in port, and the proceeds from this tax are then distributed to everyone, equally. Essentially, you pay for your pollution, I pay for my pollution, and we’ll split the proceeds equally. It’s simple, it’s easy, it’s fair, it’s practical, it’s economically realistic and it’s politicaly realistic. And it’s the only chance we have of getting our global carbon emissions under control before we damage our planet for thousands of years (which in real, human, terms means ‘forever’).

Like it or not, Trump and Pruitt are in government and so they have to be sold on this plan. Jim Baker, George Shultz and others within the GOP are pushing carbon Tax and Dividend to Donald Trump. Elon Musk, a member of Trump’s tech advisory group, is pitching the plan. There are currently 13 GOP members of the bi-partisan ‘Climate Solutions Caucus‘ in the US House of Representatives. Rex Tillerson, Trump’s Secretary of State, is the man who turned Exxon’s climate policy from denial and delay to carbon Tax & Dividend. The California State Legislature has passed a resolution supporting carbon Tax & Dividend, as have 43 cities and municipalities, including Philadelphia, San Francisco, Pittsburgh and Portland. There is real political movement in this direction.

Fee and Dividend
These two? Really? Wow! Maybe it’s obvious?

Make no mistake – we NEED a price on carbon as quickly as possible. Cap and Trade is a complex and opaque mess of entitlement, speculation and perverse incentives in which prices rise, and big business takes the money (whether to improve carbon efficiency or not). Straight carbon tax is a government grab in which prices rise, and the government takes the money (whether to invest in renwables or not). With carbon Tax & Dividend though, prices still rise – but YOU get the money. Gas and heating cost more, but you also get a check in the mail. For most people that cheque will more than cover their higher prices – and the more they switch to lower-carbon alternatives, the more extra money they’ll have in their pockets. Distribution would be from heavier polluters to lighter polluters. Sustainable behaviour would pay.

Arctic Sea Ice 2016. Fee and Dividend
Something significant changed in the Arctic last winter. Soon it may be too late.

Democrats, NGOs and others concerned about climate change should be supporting the efforts of Jim Baker, George Shultz, Elon Musk, the members of the ‘Climate Solutions Caucus‘, the Citizen’s Climate Lobby,  and others attempting to turn carbon Tax & Dividend from an idea into a law. The time is late. This is the policy that has the best chance of saving us in the time we have left. It is urgent, it is fair, it is realistic, and it has bi-partisan political support.

Get behind it. We need to do this now.

Only One Policy Can Stop Climate Catastrophe

Markets made this blog possible. Markets allow activists to travel easily and cheaply to Marrakech. Markets give us light and heat. They put food on our tables. It was markets that lifted a billion chinese people from abject poverty, and markets that put mobile phones in the hands of most Africans. Markets have done far, far more to improve the lot of humanity than any government, NGO, or other organisation. Railing against them just illustrates rigid ideology and makes one automatically irrelevant to any serious discussion. In the struggle to solve the biggest and most important problem of our time (or of any time, for that matter), ‘market denial’ is as toxic to progress as climate denial.

economics bollox
The cost of this isn’t included in the price of heating oil, electricity, food, travel…

The market is the ONLY mechanism that can make our entire energy system sustainable in the short time we have left without inflicting horrific misery on billions of human beings. And it only needs one thing – a realistic price on carbon. If the real costs of climate change are included in the price of carbon, then the market will take care of the rest. If the price of carbon reflected its actual cost, then every single product and every single service that used carbon would be much, much more expensive, and every single product and every single service that didn’t use carbon would be, in relative terms, much, much cheaper. Just internalising the real cost of carbon into its price would cause market and human activity to flow from the carbon-based to the non-carbon based.

There are three ways that the cost of carbon can be internalised into its price:

(1) The first is the direct taxation of carbon, with the proceeds flowing to the government (like cigarette taxes). This would make every thing that contained carbon – light, heat, travel, food, etc., etc. – much more expensive, with terrible human consequences. Of course, government could use this money to help those badly affected, but that would be most people. And, of course, the vast bureaucracy of means-testers, scheme administrators and other controllers would be very expensive. Economic power would flow from people to government as people found themselves facing crushingly higher prices and mountains of forms to fill in for handouts to help them cope. For these reasons this option is not politically possible in a democracy.

(2) The second way to internalise the costs of carbon is through Cap and Trade, also known as Emissions Trading – what we have now. This involves government setting a cap on carbon use, then letting the market buy and sell pollution permits and offsetting credits. This method worked to reduce the sulphur emissions that caused acid rain and the CFCs that caused ozone layer depletion because there were only a few big players in those markets. But it doesn’t work in the much bigger market for carbon in which we are all involved.

Cap and Trade
It’s OK – they bought some credits from a tree farm in Moldova.

In reality, Cap & Trade rewards the heaviest polluters (who get more carbon permits), transfers pollution to jurisdictions with weak measurement and enforcement, and creates perverse incentives (don’t reduce emissions because then you’ll get fewer permits in the future). It even causes carbon emissions, with extra carbon being emitted solely for the purpose of gaining permits, which can then be sold. It raises costs for consumers and small business (who aren’t part of the market for permits), and transfers money from consumers and small business to big business. The ‘cap’ is set largely out of sight, so big business influence is considerable.

Pope Francis summed up Cap & Trade well in his encyclical on the environment: “The strategy of buying and selling ‘carbon credits’ can lead to a new form of speculation which would not help reduce the emission of polluting gases worldwide. This system seems to provide a quick and easy solution under the guise of a certain commitment to the environment, but in no way does it allow for the radical change which present circumstances require. Rather, it may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors.”

(3) The third way to put a price on carbon is through carbon Fee and Dividend. This is ‘revenue-neutral’ carbon taxation in which all proceeds are distributed equally to everyone. Everybody’s costs go up, but everybody also gets a cheque in the post. If you use less than the median level of carbon then your cheque will be bigger than your extra costs and you’ll come out ahead. If you use more than the median level of carbon then your cheque will not cover your extra costs and you’ll lose out. Under Fee and Dividend two thirds of people would come out ahead, making a real, serious price on carbon politically realistic. Money would flow from heavy polluters to light polluters.

Fee and Dividend
Political tribalism and ideological rigidity don’t solve climate change.

James Hansen supports Fee and Dividend. The US Green Party supports Fee and Dividend. Elon Musk (who has used the market to do more to reduce emissions than all the climate activists put together) supports Fee and Dividend. The Democratic Party legislature of California supports Fee and Dividend. On the other side of the ideological spectrum Exxon supports Fee and Dividend, dozens of non-denying GOP congressmen and senators support Fee and Dividend, and many other big business people and corporations support Fee and Dividend.

Fee and Dividend
The red line is 2016. Something significant has clearly changed this year.

It may already be too late. Three days ago the temperature at the North Pole was 20C above normal, and in the depths of the arctic winter night the ice is still melting. Ice coverage data from the last two months suggest we may have already reached a tipping point (see image below). If we do still have a chance then it is not through big, bloated, controlling, bureaucratic, wasteful, out-of-touch government directly controlling people’s incomes and energy usage like some sort of God or emperor of old – nobody will vote for that. And, as has been amply proven, it won’t be through big corporations wheeling, dealing and speculation in pollution permits issued in the dark by heavily lobbied government, as we have now.

Fee and Dividend puts a real, high, serious price on carbon while making 2/3 of people richer. It is politically possible, viable and realistic – a policy that Exxon and the US Green Party agree on. It establishes the idea that polluters should pay and the polluted should receive. It has rock solid economic, philosophical and moral foundations. It gives power, choices and freedom to people, and not to fat, out-of-touch governments or greedy, shortsighted corporations. It can provide the foundation for a basic income. It can be implemented gradually, in any tax jurisdiction, and can be expanded internationally.

Complaining, whining and criticising does nothing for anybody – if you’re not FOR something then you’re part of the problem. No solution to carbon emissions will work without a real price on carbon. Direct carbon taxation at any meaningful level is highly regressive and thus not politically possible. Cap and Trade has been tried and shown not to work at anything near what’s needed.

Fee and Dividend is our only hope.

 

The Ongoing Collapse of Economics

We’re obviously at the end of an economic era. Clearly there are at least one, maybe several, fundamental, structural flaws deep in the heart of our economic system. Any financial news source from any day of the week will give you evidence of economic stagnation and instability. And any Trumpeteer, Bernie Bro or Brexiter will tell you that all is not well among the ordinary people of the heartland. Clearly something is badly wrong with the actual, real economy.

Is Economics Bollox?
Very serious people who think about very important things that affect us all. Or is it bollox?

Meanwhile, in the dusty halls of academia, of governments, and of banks, think tanks and other established and often ancient institutions, a bunch of people, mostly men, who like to think of themselves as smart are charged with fixing whatever it is that has gone wrong. They’re economists, and their ideas, perspective and advice not only strongly influences what governments and central bankers do, but influences how governments and central bankers think about what they do. Economists even frame the choices within which governments and central bankers operate. In a way, their theories help create real, actual economic reality for us all.

Money is important, governments have power, and economists influence what governments do with that power. Economists are therefore very, very important people doing very, very serious and important things that affect the real lives of hundreds of millions of people. This is serious stuff. Just ask them – they’ll tell you.

economics bollox
They don’t look very practical.

The thing to know about economists is that, like the magicians in the world of Jonathan Strange and Mr Norrell, there are two kinds of them: Practical Economists and Theoretical Economists. Practical economists are the ones out to change something. They work for governments, banks, central banks, lobby groups, etc. They want to fiddle with the workings of the economic machine to make it better – for somebody, if not for everybody.

Theoretical economists, on the other hand, are above all that. They think of themselves as scientists and see their purpose as a search for Truth. The practical economists, occupied with many other matters, depend on the theoretical economists for their theories. In other words, theoretical economists (specifically, theoretical macroeconomists) create the theory used by practical economists to strongly influence power. Theoretical economists may be relatively unknown, they may be boring, they may be incomprehensible, but they are very, very, very important people.

This is unfortunate, because there are two serious problems facing the community of theoretical macroeconomists these days:

The first problem facing theoretical macroeconomists is that reality is diverging from theory. More specifically, reality is diverging from their theory. In theory, theory and practice are the same, but in practice they’re not. In macroeconomic theory, X should be happening, or Y should be happening. Meanwhile, in practice, financial instability, weak growth, austerity, inequality, income insecurity and many other economic woes blight the lives of billions. In other words, whatever it is that macroeconomists are doing, or think they’re doing, it’s clearly not working.

economics bollox
That was a surprise! Oh well, these things happen.

And it’s not just that theoretical macroeconomists can’t fix the economy – they can’t even predict what’s going to happen! The 2008 financial calamity came out of the blue for most of them. Can you imagine the credibility of weather forecasting if the biggest storm in 75 years hit with almost no warning whatsoever? When an economic theory can’t even predict that, and seems useless at improving the situation, then what’s the point of it? It’s hard not to call bullshit.

Which brings me to the second problem facing theoretical macroeconomists today – the growing rebellion within their ranks. Essentially, theoretical macroeconomists are dividing into two camps, with more and more of them publicly doubting the orthodoxy. Faced with fact after fact that does not conform to their theories, more and more theoretical economists are, to their great credit, doubting those theories. Simply put, the ideas of theoretical macroeconomists affect the lives of millions, and there is currently an earthquake happening in their conceptual field.

The Chief Economist of the World Bank says that much of macroeconomics has become a religion, whose “pseudoscience” is infecting all social disciplines (that’s the Chief Economist of the World Bank). In a NYT article titled ‘How Did Economists Get It So Wrong?’ Paul Krugman questions the very assumptions that underlie conventional macroeconomic theory. Willem Buiter, the Chief Economist of Citigroup, calls most modern macroeconomics “useless“. Former Bank of England economist Charles Goodhart argues that economists need to start paying attention to money again. Olivier Blanchard, former Chief Economist of the IMF, calls the dominant strand of macroeconomic thinking “insular” and “imperialistic”.  And on and on it goes, with the recurring theme that macroeconomic theory has become orthodoxy, not science.

In other words, the macroeconomic theories behind the decisions of finance ministers, central bankers and other powerful people and institutions may well be bollox. Looking at financial instability, stagnant demand, tepid growth, austerity, inequality, income insecurity and all the other endemic economic problems of our age, it’s hard not to think that this might explain a lot.

You might think that the debate between orthodox theoretical economists and their colleagues who call bullshit would be dry, boring and filled with talk of phlogistons, cycle theory, DSGE models and other impenetrable concepts, but it’s not always that way. With a kind of morbid fascination at the spectacle of concepts behind many a distinguished career crumbling in the cold, hard light of factual reality, huge entertainment can be had from following the twitter feed of Paul Romer, the Chief Economist of the World Bank, as he appeals to his more orthodox colleagues to face facts. It would almost be funny if weren’t for all the real human pain behind it.

If we accept the rapidly growing body of evidence and authority suggesting that many of the core concepts of conventional macroeconomics are bollox, and that economists don’t really know what they’re doing, then the important question becomes ‘What next?’ As conventional macroeconomic theory crumbles in the face of facts, what will replace it?

One of the primary contenders is Modern Monetary Theory, which focuses on money itself (something which,  believe it or not, conventional macroeconomic theory doesn’t do). Another possibility is that macroeconomics will learn from complexity and systems theory, and that its models (and, hopefully, their predictive ability) will become more like those used in meteorology and climate science. Anti-economist Steve Keen is working in this direction, influenced by the Financial Instability Hypothesis (FIH) of Hyman Minsky, whatever that is.

But wherever macroeconomics is going, it’s clear that the old order is collapsing. The theoretical orthodoxy that has guided the highest level of economic management for many decades is crumbling. Either economics is an objective science or it’s not. And if economics is not an objective science, then we quickly need an economics that is. Countless livelihoods and lives will be deeply affected by the revolution we are witnessing in theoretical macroeconomics. It may be dry, it may be boring, it may be theoretical, and it may seem incomprehensible.

But it’s hard to think of any discussion that’s more important.

The 25 People Who Made €1.2 Trillion out of Nothing

Yesterday, as happens every six weeks, the Governing Council of the European Central Bank met in Frankfurt to discuss monetary policy. In attendance, as always, were the six members of the ECB’s executive board and the nineteen governors of the eurozone’s national central banks. Together these 23 men and 2 women discussed economic conditions, interest rates and their €1,225,566,000,000 (and counting) quantative easing program.

The decisions made at these meetings are vast, and have very real effects on the financial lives of the 340 million people who live in the Eurozone. The results of ECB meetings dramatically influence markets, the economy and the amount that governments have to spend on public services. In other words, those 25 people who met in Frankfurt yesterday are, for all practical purposes, the gods of money for the 340 million of us who live in the Eurozone.

As usual, Mario Draghi, president of the group, held a press conference right after the Frankfurt meeting. Again, as usual, that press conference was published on YouTube as soon as it had finished. Four hours later that YouTube video had attracted a total of 35 views. A full 24 hours later and there have been 460 views. As I write this there are 650 views.

ECB Press Conference
Monetary policy for 340 million people. Not exactly riveting YouTube viewing – but only 650 hits?

However I know for a fact that at least a dozen of those views were mine, and I imagine there are others who also account for multiple views. And since the press conference is not exactly riveting viewing, I expect that many viewers only watched a little of it before clicking on elsewhere. Apart from the 50-odd people who were in the room, it’s safe to say that only a few hundred other people have actually seen the whole thing.

The last ECB press conference, on August 2nd, has had only 1,308 views in the 6 weeks it’s been on Youtube. The July 21st press conference has attracted 4,130 hits, several of them from me. The one before that only got 3,962 views since it was published nearly three months ago. Again, several of those hits were mine.

Now, money is very important to me, and I’m sure it’s important to you too. Money is especially important for poor people, who spend much of their time thinking about it, but many rich people also spend a lot of their time thinking about money. Many of us spend much of our lives working for money. It’s how we eat. It’s how we put a roof over our heads. It buys our clothes. It allows us to travel. It dictates what our democratic governments can and can’t do. Reach into your pocket or purse or wallet and take out some money and look at it. It’s important, right!

So despite money being, lets face it, the most practically important thing in the day-to-day lives of us 340 million people; and despite the fact that the financial sector accounts for around 20% of GDP; and despite the vast size and reach of the business and financial press and media, and the many thousands of people writing and communicating in this area; and despite the fact that highlights from Mario Draghi’s press conference were publicised in news broadcasts across the continent and around the world (it was even mentioned on my local radio station) – despite all that, only a few hundred people out of 340 million were interested enough to see for themselves what the Eurozone gods of money had to say.

The ECB’s website statistics tell a similar story. Their site gets around 216,000 visits a month, or about 50,000 a week. However it’s ‘bounce rate’ (i.e. the number of visits in which the viewer looks at only one page on the site, discovers they’re not interested, and moves on) is a phenomonal 65%. That means that there are only around 17,500 real visits a week or about 2,500 per day.

ECB Press Conference
The ECB website: A dense, boring, inpenetrable morass of euphemisms for ‘printing money’.

Now, 2,500 visits a day might sound like a lot, but it’s not – especially when you consider the importance of the institution and the fact that it controls the money supply of 340 million people. And, since many of those visits are multiple visits from the same people, and some are search engine bots and other non-human visitors, we’re probably talking about real traffic of significantly less than 2,000 actual people each day. And even among those 2,000 people the average visitor looks at only 2 pages and spends less than 2 min on the site. Almost none of this traffic (only 1.27% or about 200 real visits per week) comes from social media. My Twitter profile sometimes gets more than that.

The inescapable fact is that, despite the importance of the European Central Bank to the real financial lives of 340 million people, almost nobody, including most financial journalists, is interested in the details, minutiae and specifics of what they actually do. I suspect the same is true for the activities of the Federal Reserve, the Bank of England, the Bank of Japan and other central banks.

This is a pity, because there’s some interesting stuff on the ECB’s wesite. For example, did you know that the ECB now owns €1,225,566,000,000 (i.e. €1.2 TRILLION) worth of assets (mostly government bonds) purchased with printed money through its Asset Purchase (i.e. QE) Program? Or that it has lent $20 billion of printed money to corporations since June and is printing and lending €7 billion more each month? Did you know that the ECB buys some of this corporate debt directly from the corporations concerned, even though it’s not allowed to deal directly with governments? And did you know that the ECB even promotes the availability of its printed money to corporations, advertising that “Market participants involved in private placements can contact the relevant national central bank”.

ECB Press ConferenceDid you know that the ECB lends out the corporate assets it has bought with printed money so that borrowers of those assets can sell them short and make a profit if the price falls? The ECB has already bought and lent out securities from SAP, Siemens, Allianz, E.ON, BMW, Volkswagen, BASF, Bayer, Bosch, Merck and many other corporations since it started lending out the securities it owns six weeks ago.

And did you know that lists of all purchases of assets with printed money (minus the amounts) are available on the websites of the six national central banks buying on behalf of the ECB, and that those lists are updated every monday? Did you know that the ECB does buy securities from corporations classified as “public undertakings” (i.e. owned or controlled by government), but won’t disclose any details of exactly what “public undertakings” it is buying from? And there’s lots more of interesting, juicy information that could easily be spun into accessible and interesting media stories.

ECB Press Conference
You can borrow the ECB’s freshly printed money to buy Monsanto, but not to buy groceries.

For example, the ECB says that it is lending €7 billion of freshly printed money each month to big corporations in order to “further strengthen the pass-through of the Eurosystem’s asset purchases to financing conditions of the real economy”. One of the corporations it lends to is Bayer, which is in the process of buying Monsanto for $65 billion, so the ECB is essentially printing money to help Bayer buy Monsanto. Surely that would be interesting to many people, if only they knew?

As one of the literally one-in-a-million Eurozone citizens who actually watched yesterday’s ECB press conference, and as one of the very few people who have waded through the ECB’s website, it seems clear that more people, including more financial journalists, need to pay a lot more attention.

How Trump can Win the Presidency – and the Respect of History

Donald Trump is popular. His defiance of political convention is widely admired. His unscripted, politically incorrect, flaws-and-all humanity is trusted (despite his words). And his willingness to take risks is seen by many as what’s needed in the face of an overwhelming appetite for fundamental, systemic change.

Of course, that’s not the only reason Trump is popular. Many support him just because they hate Hillary Clinton, or just because he’s the GOP candidate. Some support him because they believe he shares their prejudices. The point is, a lot of people support Donald Trump.

But probably not enough to win the presidency.

Donald Trump Demographics
Old White People vs Everybody Else

Hillary has the lead in people under 65 – and the younger they are, the more likely they are to support her. She has runaway leads among minority groups, and strong leads among educated whites (the more educated, the stronger her support). Trump has most Republicans, of course, but apart from that he’s relying on less-educated, older white people for his core support. Sixty percent of non-college educated whites support him. They are his base, and there’s probably not enough of them to win an election.

 

Trump does well among those left behind by automation, technology, globalisation and by our new, global, high-tech, 21st Century information society. He does well among those who find it difficult to compete in the modern labour market because of education, or location, or family situation, or even aptitude. Yet he doesn’t do well among those who are immersed in this world, but who also find it difficult to compete (or even to stay afloat). In other words, Trump doesn’t do well among the young.

Bernie Sanders – the other ‘surprise’ political challenger of the campaign – had no problem attracting the young. He even had a majority of young women supporting him over America’s first female presidential nominee! He did this because he offered a hopeful, inclusive, positive vision of deep, fundamental change, and because he focused on the political issues that young people care about – systemic economic unfairness, inequality and the environment. Turned off by Trump’s divisiveness and lack of focus on inequality, 85% of them intend to vote for Hillary. If Donald Trump wants to be more popular with young people, he could do worse than study why Bernie Sanders had their support.

After all, if Donald Trump could attract a significant portion of change-hungry young people away from Hillary, he would win the presidency.

Young women love Bernie!
Young women love Bernie!

At first glance, it should be easy. Like Trump supporters, Bernie supporters also find the current economic and political order untenable. They also want deep, radical, fundamental change in economic policy and in politics. Both Bernie Sanders and Donald Trump attract passion and support from those who see their own lives, and the lives of their loved ones, becoming more difficult and economically stressed. And supporters of both Trump and Sanders feel that their candidate has been treated unfairly by a biased, comfortable, establishment, and out-of-touch mainstream media and politics. Trump and Sanders supporers share a lot.

But Trump’s divisiveness alienates young, inclusive Bernie supporters, and he offers them few economic policies to address their concerns about financial power, income inequality, and the environment. They have overwhelmingly turned to Hillary not just because many of them are loyal Democrats, but because Trump offers them nothing. That’s understandable, considering the seeming contradictions between traditional Republican and traditional Democrat positions, between market and government as solutions, between freedom and equality as values, and between rough-and-tumble capitalism and Bernie’s vision of Scandanavian-style socialism. But what if these contradictions could be resolved?

The three core policies of Equitable Capitalism offer Donald Trump a way to reconcile these seemingly irreconcilable values, structures and priorities. Consider:

  • Helicopter money, the Chicago Plan, or some other version of ‘QE for People‘ would take at least some the vast power of money creation away from incompetent, self-interested, and often corrupt bankers and give it to the Federal Reserve, dramatically reducing financial instability, economic stagnation and federal debt while giving the real market an adaquate supply of the medium of exchange it so desperately needs to function. Milton Friedman, Irving Fisher, Ben Bernanke and other prominent free market thinkers have supported this policy direction in one form or another.
  • The introduction of some version of a Basic Income (paid for through some combination of reduced welfare bureaucracy, taxback from higher earners, people’s QE, Fee & Dividend, increased economic growth and reduced social spending), would radically and positively alter the lives of most Americans. It would generate sustained market demand, remove existing disincentives to work and enterprise, practically eliminate poverty, and would get the government off the backs of the millions of Americans who depend on it. Experimental implementations are underway or planned in Finland, the Netherlands, Canada, New Zealand and elsewhere. Prominent free market thinkers that have supported a Basic Income in one form or another include Tom Paine, Friedrich Hayek, Richard Nixon and many others. Support is especially strong among technological entrepreneurs, who understand where we’re heading better than most.
  • Finally, you don’t have to accept climate change to know that oil, coal and other carbon are the dirty, expensive, Saudi Arabian-dependent energy souces of the past. The policy of carbon Fee & Dividend – a revenue-neutral carbon tax in which all of the proceeds are distributed equally to everybody – is not only fair (polluters pay more), but market friendly. By internalising the real costs of carbon into its price, Fee & Dividend powerfully motivates the market in favour of alternatives, while maintaining complete market freedom. Two thirds of people come out ahead, which could make Fee & Dividend a significant funding source for a Basic Income. This was originally a GOP idea, and supporters include Hank Paulsen, Bob Inglis, George Shultz and many others from the Right.

Together, the three core policies of Equitable capitalism offer a coherent, interconnected alternative to both anti-market, redistributive socialism on one hand, and ruthless, dog-eat-dog, free market capitalism on the other. Together these three policies vastly expand individual freedom and individual security. Each of these policies has a solid economic, philosophical and moral pedigree. Each of them is fair. Each of them vastly expands equality. Each of them has existing bipartisan political support from across the political spectrum. Each is evidence-based. Each is politically possible.

Donald Trump
Go on, Donald – Do the right thing.

The three policies of Equitable Capitalism offer Donald Trump a way to appeal to Bernie Sanders’ young supporters without alienating much of his existing support. After all, what Bernie supporter could be against the reduction of the power of the bankers? Or the almost complete elimination of poverty? Or meaningful action on climate change? And what die-hard Republican could be against solutions to debt, inequality and climate change that support the free market instead of restricting it? What sales person, business executive or entrepreneur could be against policies that would vastly stimulate market demand – while protecting the environment? And what American could be against a vast real expansion of individual opportunity and freedom?

And who’s going to vote against more money in their pocket?

If, in the final months of the 2016 presidential election campaign, Donald Trump were to put the policies of Equitable Capitalism firmly on his agenda, and communicate those policies in the way that only he can do, he would radically alter the dynamics of the campaign overnight. Framed carefully, this new, radical, coherent pro-market and pro-social economic policy would draw in huge support from progressives, Bernie supporters, Jill Stein supporters and young progressives, while maintaining and even expanding support among the GOP and the conservative right. It wouldn’t get them all. But it would get enough. That’s how Trump could win the presidency,

But it is through the implementation of these three policies that Donald Trump (or any other political leader) could win history. One hundred years from now, – twenty five presidential elections into the future – ever-growing debt will be a thing of the past, artificially intelligent machines will do most jobs, and climate change and its effects will be obvious and apparent. If that future society is a happy, prosperous and peaceful one, then it will be because we have countered and resolved the problems of ever-increasing debt, income inequality, and atmospheric carbon without restricting and damaging the market that makes the abundance of our modern world possible.

We must resolve the current, destructive contradictions between freedom (including market freedom), and genuine equality and economic security for all, regardless of the circumstances of birth. Capitalism will have to be fair and sustainable if it is to survive. A stagnant economy of ever-rising debt is not financially sustainable. Ever-increasing income inequality and insecurity is not politically sustainable. And carbon emissions along our current path are not compatible with the long term survival of our organised, global civilisation. One way or another, dramatic change is coming.

Equitable Capitalism offers the only realistic, responsible, politically possible way for that to happen. It would not be easy. Minds – especially over confident, institutionalised minds – are difficult to change. An equitably capitalist political leader would need courage, self-belief, tenacity, excellent communication abilities and, above all, the willingness to take risks (a willingness absent among mainstream, institutionalised ‘leaders’). Like anything worth doing, it would be very, very, very difficult. But it’s probably the only chance the United States has to Make America Great Again.

We don’t have to slowly decend into some Mad Max nightmare of vast inequality, drought, abandoned cities and hundreds of millions of climate refugees roaming the globe to esape hunger. Instead we can essentially have a ‘Star Trek Economy’ in which all are secure in the basics of life, in which all are free to follow their dreams, and in which future environmental stability is assured. We can survive and thrive – but only if we radically change the way our current economic system works.

Whoever does that, whether it be Donald Trump or somebody else, will lay the economic groundwork for our far, far future, and will earn the enduring and indelible respect of history.

The Answer to Trump is a Basic Income

Across the western world and beyond, the political status quo is crumbling. In response to the effects of automation and globalisation on the sufficiency and security of labour and incomes, and in the light of clear, blatant, and unambiguous unfairness in our political economic system, voters are revolting. Electorates in nation after nation, in election after election, are abandoning traditional ideologies, loyalties and political parties in favour of new radicals, revolutionaries, nationalists and populists from both the Left and the Right. Sometimes it seems like their policies are from both Right and Left.

Answer to Trump is a Basic Income
“My whole life is about winning. I don’t lose often. I almost never lose.” – Donald Trump, 2016 GOP Presidential Nominee

In the UK the narrowness of the Scottish independence defeat was a surprise, the popularity and rise of Jeremy Corbyn to the leadership of the British Labour Party has been a surprise and, of course, the loss of the Brexit referendum was a surprise. In France it’s Marine Le Pen, in Iceland the Pirate Party, in Spain Podemos. In the United States, of course, there is Bernie Sanders and Donald Trump. Everywhere the barbarians are at the gate, and the comfortable classes (and media) are surprised. After all, their theories say things aren’t so bad.

Pope Francis
“We want change – real change, structural change. This system is by now intolerable”. – Pope Francis

But to many ordinary people – to voters – struggling to pay their rent, or their car insurance, or their utility bills – for the Amazon packers, the Uber drivers, the so-called freelancers and contractors of the Gig economy, and for the ones left behind when manufacturing moved on – for them it wasn’t a surprise. Their political anger, cynicism and sense of injustice is palpable. And since many see themselves as having nothing to lose, they are more and more willing to take political risks. Every country is seeing challenges to the intolerable economic stress, insecurity and unfairness of the Way Things Are. As Pope Francis spells out: “We are faced… with one complex crisis which is both social and environmental. We want change – real change, structural change. This system is by now intolerable”.

When the people are suffering and their politicians ignore them or are ineffective in relieving that suffering, there is a political vacuum. Voters who are unrepresented by existing politicians will seek new ones – it’s as simple as that. And the unscrupulous, self-interested and power-hungry will seek to fill that vacuum and meet that demand in whatever way they can – including relying on the corrosive division of identity politics.

We’re already seeing this across the western world and beyond, as growing income stress and insecurity result in populist political challenges and political (and ideological) instability. And as the pain and the blatant and self-evident unfairness grows, so too will this political pressure.

Long before the 1% own it all, in some major country there will be the election either of a disastrous, conflict-causing leader, or of a pragmatic revolutionary agent of positive change. Either the problem will be solved, or change will happen – there is no middle ground any more. And that major country, whichever is the first to take that leap, will be an example – either a horrific example or a shining example – to the entire world.

Brexit may be that example, or maybe Trump will be. Or perhaps it will be France and Marine Le Pen. Or maybe it’ll be Jeremy Corbyn, or somebody who rises in his reinvention of the British Labour party. It’s too early to tell. But until individual economic stress and insecurity are alleviated it’s only a matter of when.

But how can economic stress and insecurity be alleviated without restricting the technology and globalisation that’s causing it? If you don’t now the answer to this, then you’re not paying attention to important economic experiments planned or underway in Canada, Finland, the Netherlands, New Zealand and elsewhere.

Simply put, the answer to Donald Trump, Bernie Sanders, Brexit, Front Nationale, Jeremy Corbyn and all the other challengers is a Basic Income.

Burning Taxes Rather than Admit a Mistake

One way to think of debt is as an ever-growing mountain of interconnected paper, largely created out of nothing, and piling up against the gravity of finite income and ability to repay. The 2008 crisis was an avalanche of default in such a metaphorical mountain – initially triggered by defaults in US sub-prime mortgages. Today the mountain is much, much bigger, and the ability to repay is more limited. And, of course, the mountain continues to grow – both in absolute terms and, in many cases, as a percentage of income (i.e. the ability to repay).

So the question is not if there’ll be another financial crisis, but when it will start. It might begin with Italian bank debt, or Greek sovereign debt, or a collapse of a residential or commercial real estate market in China, or London, or Canada, or Australia. Or maybe it will be triggered somewhere else, by some other over-leveraged, unrealistic, boom-and-bust collection of debtors and creditors. And when the defaults get big enough they will cause other defaults, and on and on the contagion will go. Just like the last time.

Except the next financial crisis will probably be worse than the last one, because the vast effects of the last one are still with us. Some individuals, companies and countries will come out if it better than others, depending on their exposure, just like last time. And the sheer and utter stupidity of relying on consumption debt and speculative debt for the creation of our money supply will become even more farcical.

One of the most surreal aspects to this farce is that central bankers and government are and will be essentially taxing hardworking people and cutting desperately needed services, and then burning the some of the proceeds. For years central banks bought up vast quantities of government debt using directly created QE money fresh off the presses. In order to make the books balance in traditional economic theory, what came from nothing has to go back to nothing, and so QE has to be paid back in order to be destroyed. And who’s going to pay those $€£trillions back so that it can all be destroyed? That’s right – you are!

Burning money.
This is what happens to some of your taxes. It’s necessary, so that the economic models still make sense to those who have built careers around them.

You could sort of understand this if the economy was overheating and if inflation was raging out of control, but our current predicament is far from that. So why are they doing it?

They’re doing it because establishment economists can’t face the fact that the old equilibrium models in which money is just another traded good (models to which many have devoted much of their careers) are at best seriously flawed, and at worst a load of nonsense.

In other words, hundreds of millions of people are suffering, and will be on the hook for $€£trillions, just because a bunch of established economic ‘experts’ can’t admit they’re wrong. And because government and central bank economists can’t admit they’re wrong, they’re not even seriously looking at the solutions right in front of their noses.

They can’t even see the need for deep, structural and systemic change. They can’t even think about being honest about the money they’ve already directly created. They can’t even see the need for reform of our monetary system.

They have to keep pretending.

Response to Javier Solana’s article: ‘Taming the Populists’

Note: This post is a response to an opinion piece by Javier Solana. Since it’s a response, if you don’t want to waste your time you’ll have to read the original article first.

 

I’m getting sick of this waffle.

Solana may have finally grasped the problem – but that’s hardly grounds for congratulations. After all, hundreds of millions of ordinary, struggling people supporting Trump, Corbyn, Wilders, Sanders, Le Pen, Iglesias, Ukip, Syriza, the Austrian Freedom Party and all the other radical challengers to the system figured that out years ago when they had a problem paying the rent or insuring the car. Welcome to obvious, practical economic reality, Mr. Solana!

Javier Solana, waffler
Former EU High Representative for Foreign and Security Policy, Secretary-General of NATO, and Foreign Minister of Spain, and currently President of the ESADE Center for Global Economy and Geopolitics, Distinguished Fellow at the Brookings Institution, and a member of the World Economic Forum’s Global Agenda Council on Europe, and waffler, the “Most Excellent” Javier Solana.

You’d wonder why somebody as clearly smart as Solana can be so emotionally and empathetically dumb. I guess that’s what comes of having more money than you could ever morally need for most of your live, and having yourself and your family assured of economic security. Meanwhile, back in the real world with the rest of us, the electricity bill is due… No wonder they just don’t get it.

And look at his solutions: “Bold initiatives to tackle inequality”, “stopgap measures”, better and smarter education and training, “improve global governance” and, of course, the admonition that “leaders must ensure that discussion is translated into real action”.

What a crock of nonsense! What a weasly, vague, wishy-washy, meaningless list of nonsense! No wonder people despise politicians who come out with drivel like this. Oh, it sounds great – it all sounds wonderful! But the problem is that it doesn’t actually MEAN anything at all. What do the words “bold”, “better”, “improve”, “ensure” and “real action” actually mean? There’s nothing specific, nothing explicit, nothing defined, nothing precise, nothing clear and nothing real about whatever it is he’s talking about. What, exactly is he proposing? What, specifically, is he suggesting? Where can I find a link to the text of the law that he’s seeking to implement?

Nowhere, that’s where. This is all called ‘waffle’.

And it’s not even very good waffle. Does he really think that redundant factory workers, Uber drivers, Amazon packers, fast food servers and all the many millions of others struggling near or below the median income – does he really think that they’re all going to brush up on their math skills and get jobs writing code for Google? Do we all have to be high-tech entrepreneurs now? Is that it? What a crock!

And what are these “stopgap measures”? I’ll tell you what they are. Sometimes you’re forced by circumstances to do the right thing, but you don’t want to do it, and so you keep reminding everyone that it’s only temporary. QE is a ‘stopgap measure’, for example. Whatever Solana’s “stopgap” measures” are (and like I said, it’s all waffle), he doesn’t want you to think they might be permanent. After all, we don’t want real change, do we.

And don’t get me started about his idea that huge sections of the population have to be “tamed”!

Disconnected, bubble-insulated, comfortably status quo nonsense from a waffler, in my opinion.

The Politics of Public Money

Note: This is a long article (about 4,500 words), and is extremely nerdy on the subject of monetary policy, so be warned! It offers my perspective of the political environment faced by advocates of all forms of Public Money, along with four suggestions for the direction of the movement.

People’s QE, Sovereign Money, Helicopter Money, the Chicago Plan, Full Reserve Banking – there are many names for and variations of the simple act of creating money directly and reducing our reliance on ever-growing, destabilising and unsustainable debt to do the job. Faced with zero-bound interest rates, a deflationary threat, an unstable financial system, weak growth, slack demand, and an economy starved of money, central banks have been doing just that. Their word for this money creation is “Quantitative Easing”.

It’s a lovely word, ‘Quantitative Easing’. Whatever it signifies is ‘quantitative’, and thus countable, objective and scientific – all very reassuring. And there’s nothing sudden or dramatic about the process, whatever it is. It’s merely an ‘easing’ – almost relaxing in a way. There’ll be no shocks, surprises or discontinuities about this process. It’s just a gradual, gentle and even soporific easing, safe in the arms of quantitative objectivity. The central banks and their economists picked their word well.

Of course, the term ‘Quantitative Easing’ is really two words, as is the term for the concept that the central bankers were most assiduously trying to avoid, i.e. the idea that they were ‘Printing Money’. To most people, Printing Money is obviously wrong. After all, if you can just print it, then how can it be valuable? The public understanding of money and of monetary policy is not sophisticated, and even the more knowledgeable people often automatically associate direct money creation (AKA ‘Printing Money’) with Zimbabwe and the Wiemar Republic. In the aftermath of the 2008 debt crisis, the maintenance of public confidence was critical, and central bankers and their economists had to stay as far away from the idea of printing money as possible. As I’ve said, they picked their word well.

“Anyway”, argue central bankers, “QE is not really printing money. It’s just being printed temporarily, to be loaned out – just like any bank does. It’ll be paid back and destroyed, just like any money. What came from nothing will go back to nothing and, eventually, all will be balanced as the theories say it should. Economic theory is still valid, so we can carry on as before. It’s just quantitative easing and it’s only temporary – nothing like Printing Money at all”.

But, of course, Printing Money is exactly what they’ve been doing, whatever they choose to call it.
A Vast Experiment

The term ‘Quantitative Easing’ was first used by the Japanese central bank (the BOJ) in the early 2000s to describe its attempt to fight domestic deflation by Printing Money and introducing it into the economy by buying government bonds, asset-backed securities, equities and commercial paper. The financial crisis following the 2008 collapse of Lehman Brothers saw other nations also adopting QE, and it has continued ever since, with over US$13 trillion created since then (that’s $13,000 billion or $13 million million). Of course, that figure is necessarily approximate because QE is ongoing. The central banks of the Eurozone, the UK and Japan have all expanded their QE programs recently. The European Central Bank and the Bank of Japan are now buying around $180 billion of assets a month with freshly printed money, while the Bank of England has responded to Brexit by extending QE by $60 billion. Something around $8 billion is being created out of nothing every single day.

And nothing has happened.

Well, that’s not exactly true. Asset prices have been pushed up, government debt has been massively expanded, market traders have made vast commissions, and fresh money warm off the presses has flowed into a thirsty economy (albeit in a distorted, inefficient, wasteful, unjust and generally cockeyed way). But what didn’t happen is much more important than what did happen – i.e. there has been no inflation (indeed, the deflationary threat continues). In a classic case of the Dog that Didn’t Bark, the absence of inflation in response to vast, vast quantities of freshly printed money is the most interesting effect of QE. In essence, faced with an illiquid economy starved of money and unable to encourage more debt due to the lower bound, central banks have been forced to do a vast experiment. We’re only now beginning to grasp the results of that experiment.

The idea that if you print money it will lose value has been publicly, empirically, actually tested, and found not to be true – at least, not in all circumstances. It has been proven beyond doubt that money is not just another good to be traded or bartered, but operates by different rules than those claimed by conventional economic orthodoxies. In other words, the core concept of directly created money has already been proven, the action has already been taken, the taboo has been broken, the deed has been done, and the gate has been opened. Economic reality and the threat of economic calamity have forced this policy through and, while it has been done in a grossly inefficient and unfair manner, the sky did not fall. The direct creation of money has already been done – and continues to be done. Now we just need to change how it’s done, so that it is both more efficient and fairer. QE is already a reality. We just need to tweak, adjust and reform it.

Debt-created money is a vast ‘meta-problem’, and is a core cause of many other problems – not least financial instability, inequality, austerity, poverty and all the very real human and social pain and insecurity associated with these problems. And directly-created money (a ‘meta-solution’) can address many of these problems in a very real, practical and significant way. Imagine if that $8 billion per day was being invested in infrastructure, education, healthcare and other social value. Even giving it to individuals directly and equally would have huge positive changes on both human security and welfare, and on consumer demand and economic growth. This could start tomorrow if central bankers chose to do it. Remember, they’re already printing the money, they just have to decide to redirect it.

Energised by the human costs of debt created money and inspired by the vast benefits that properly organised and directed QE could bring, many intelligent, visionary people from around are working hard at this effort, often trying to do the best they can with few resources. The International Movement for Monetary Reform lists national organisations in 23 nations, including half of Eurozone nations. The American Monetary Institute has been campaigning since 1996. The UK’s excellent Positive Money was founded in 2010. Here in Ireland we have Sensible Money. Growing numbers of economists have joined the fight, and many, many others, not affiliated with organisations, do what they can to inform, educate and raise public awareness of these issues.

Public money activists are focusing on a vast, important and urgent problem, and are proposing a simple, practical solution that could almost instantly make many millions of human lives better. I admire these people immensely, and I deeply respect their thoughts, their views and their work in this field. I, on the other hand, am new to the politics of directly-created money and my understanding of the various people, groups, organisations, perspectives and passions of public money advocacy, while growing, is still very limited. But despite this limitation I would like to begin my contribution to this struggle with what I think the global public money movement should focus on. I understand that my perspective may be uninformed by experience, but it is as knowledgeable as I can make it, and also has the advantage of being fresh.

So, for what it’s worth, here’s my overview of the situation we face and my suggestions for what I think we should do:
The Targets

Although central banks are considered independent, in practice their actions are necessarily affected by government. Of course, some form of ‘People’s QE’ directed at infrastructure or social investment would require the involvement of government, but even direct ‘Helicopter Money’ transfers would require some degree of coordination and cooperation from politicians. There are therefore two separate decision-makers involved in potential changes to QE, two sets of minds that have to be changed, and two ultimate targets for advocates of Public Money: central bankers and politicians.

However, neither central bankers or politicians make decisions on economic policy in a vacuum. They rely on a wide network of analysts, academics commentators and other advisors, influencers and expertise that they judge to be credible. To our two primary advocacy targets we must therefore add two more: the economists, advisors, academics, financial commentators and other expertise that influences both central bankers and government, and the voting public who so highly motivate politicians.

I don’t know any central bankers personally, but I do know that there are only a few of them, and that they are already very familiar with all of the options for monetary policy. I also imagine that these are probably very busy people focusing on very important things, and that they might not have much time to talk to you or I about issues that they are already thinking about. So, while I would not discourage anybody from reaching out to their friendly, local central banker if they can, for the purposes of this discussion it’s probably best to leave them alone and focus our attention on more productive pastures.

That leaves us with three targets: Experts, politicians and the public.
The Political, Media and Communication Environment

Money is a difficult topic on which to think about and talk about at a theoretical level. There’s a magic to it – something very unique and special. Money is both very real and very abstract at the same time. It’s made real and made useful solely by shared belief. In a strange parallel to the weirdness of quantum mechanics, quantified value is only potential until it collapses into a numerically-defined price during a transaction. As observation is to wave function in quantum mechanics, so transaction is to value. And it’s money that makes transactions of value possible. In many ways, the very concept of money – what it is and what it does – is weird. Part of it seems ethereal. To paraphrase the late, great Richard Feynman, “If you think you understand money, then you don’t”.

What makes it harder to discuss money in any deep and meaningful way is that, because of its importance to our day-to-day practical and emotional lives, and because of the ‘quantitative weirdness‘ at its heart, the subject of money attracts all sorts of professors, analysts, explainers and cranks. Even central bankers and their economists, with all their resources, knowledge and theories, cannot accurately predict recessions, or improve the economy much. The fact that they didn’t see the debt crisis coming, and the weakness and ineffectiveness of their response to that crisis, indicates that they, too, don’t really understand money. Into this theoretical vacuum pours a lot of noise, diluting and distracting from serious thinking and discussion of the topic. In other words, we are dealing with a complex and slippery concept that is of deep importance to most people and that everybody has an opinion about, but that few understand in any meaningful way.

Our attempts to communicate this difficult message are happening at a time when media is fragmenting into a myriad of channels, each with its own rules, culture and communicative dynamics. Mainstream media is losing market share and credibility. Fact-free ‘Trumpism’ saturates the social media channels. People are angry, cynical and distrustful. In the minds of far too many people in their struggle to understand the world, wishful and emotional belief have overcome empirical evidence about reality.

To sum up, then, in a distracted and fragmented communications environment our task is to communicate a difficult, complex message to experts, politicians and to the public. That’s what we have to do and, I’ll admit, it does seem difficult when you put it like that. But don’t forget that they’re doing it already. Don’t forget the vast QE experiment that has proved it can be done. Don’t forget that we’re just looking for the reform of an existing program. Don’t forget, we’re almost there already!

Reality is on our side, as are the many, many millions of people suffering under austerity, stagnation and instability, and the many millions more who are outraged at the clear and blatant injustice and incompetence of banking, economics and finance. They might not know it yet, but we are together in the pursuit of a very clear, defined, specific goal. Our cause is an unlocked door waiting to be pushed open. The next question is: How do we do it?
Focusing the Message

Our task is to communicate the advantages of directly-created money over debt-created money to experts, politicians and to the public. Keeping in mind that both politicians and the public listen to experts, and that the public listen to politicians, so the flow of awareness goes from experts to politicians to the public. It’s also true that some of the public will listen to anybody, that politicians listen to the public (especially at election time), and that experts only listen to each other. But for our purposes, the priority should be experts, politicians and then the public. Put it this way: if enough experts agree, then it’ll be easier to convince politicians, and if enough experts and politicians agree, then it’ll be easier to convince the public. Hopefully that will be enough to convince the central bankers.

For our purposes we can define ‘experts’ as ‘monetary nerds with a platform or with the ear of power’ (there may be people out there with a perfect understanding of and prescription for monetary economics, but if nobody’s listening to them then it doesn’t make much difference to anybody). Monetary experts are often economists, or economic commentators, or writers and editors of economic media. They may work for government, for business, or for an NGO. They may have the ear of a Prime Minister or a Treasury official, or even the ear of that unicorn that is our Holy Grail – the central banker. If they influence the monetary policy ideas of others, then they’re an expert.

There is credibility in consensus and even economists and monetary nerds are susceptible to the crowd effect. The more experts who agree, the more experts will agree with them, and so the consensus grows. A major step forward in this process was made recently in a letter to the UK Chancellor of the Exchequer, published in the Guardian, in which 36 economists put their names and academic reputations behind the following call:

A fiscal stimulus financed by central bank money creation could be used to fund essential investment in infrastructure projects – boosting the incomes of businesses and households, and increasing the public sector’s productive assets in the process. Alternatively, the money could be used to fund either a tax cut or direct cash transfers to households, resulting in an immediate increase of household disposable incomes“.

My own opinion is that this is an excellent statement, and that it may be pivotal in moving us forward to sane, stable and fair monetary policy. I was disappointed to see the qualifier ‘could’, and would prefer to see the more politically courageous ‘should’. But my biggest problem with the letter is that, for PR purposes, it’s over, largely forgotten about already in a news cycle of the rapidly receding past. I am sure there are other economists, experts and prominent people who would like to have signed that letter, but they will never get the chance. The number of economists who put their name to the letter will be forever fixed at 36, and that number will never grow.

I therefore propose that interested members of the ‘Group of 36’ who signed that letter discuss among themselves, consult widely and agree upon a permanent, definitive and preferably political statement that other prominent economists, experts and supporters can sign, that anti-austerity, poverty, and anti-debt groups can endorse, and that the movement for Public Money can get behind. This statement would be simple, brief and, best of all, permanent. The number of individuals, groups and organisations publicly associating themselves with this statement could grow and grow, concentrating much of the credibility on this issue in one place.

In a way, what I am proposing is a petition reserved only for prominent signatories. As it grows, these signatures could e kept in a database, organised by country, or monetary jurisdiction, or profession or any other way – all to maximise the publicity value of the endorsements. Since it was the UK’s excellent Positive Money that organised the important Chancellor/Guardian letter, it makes sense that they take the lead in organising and coordinating this effort. But ideas, concept and out-of-date orthodoxies do not respect borders or jurisdictions, especially in the age of the internet. This effort must be international and global in its scope.

The gay rights movement thrived when gay people publicly and proudly came out. The marijuana legalisation movement gained huge momentum when celebrities confidently admitted to smoking. The European anti-GMO movement gained enormous traction when its cause was taken up by celebrity chefs. The movement for public money, often accused of being cranks, grows in strength every time an established, credentialed, authoritative economic expert loudly and proudly supports it – but only if others know about it.

In other words, let’s widely agree on something definitive to support, and get as many experts and influencers as possible to support it.
Building the Coalition

Once we have a defined political statement that experts, politicians and other prominent influencers can sign, we can start building our coalition. This might be a simple as asking a well-known anti-poverty NGO to sign our statement, or getting an anti-austerity political party to sign, or getting an anti-debt group to associate themselves with our common purpose. Building the list of signatories and endorsements is building the coalition. But there’s no reason to stop there.

If anti-poverty, anti-austerity, anti-financialisation and anti-debt groups can be made aware of how beneficial this policy would be to their interests, then it is reasonable to expect that they might talk to their own supporters, their own members, and their own networks about it. And since these groups are often well versed in the dark arts of politics and publicity, it is reasonable that they might focus at least some of their efforts, resources and contacts on this singular important meta-issue. With a snowballing list of economic credibility and some informational tools and material, who knows what is possible?

In other words, by using the nucleus of the expert-drafted, widely agreed and easily understood statement, and by informational tools and materials to affiliated individuals, groups and organisations, we can leverage activism and deep desire for change and coordinate this much greater political energy towards our specific policy direction.

In particular, I strongly urge coordination, cooperation and cross-pollination with another movement struggling against entrenched power and practices to solve a vast ‘meta-problem’ – i.e. the Basic Income movement. In the same way that ‘inflation’ is the primary public attitude against Public Money, ‘cost’ is the major public argument against the Basic Income. Public Money spent by government dramatically relaxes the ‘fiscal space’ available to fund a Basic Income, and Helicopter Money even directly contributes to or supplements it. Since the Basic Income movement is much, much bigger and more advanced than the Public Money movement, and since the Public Movement offers a major support to the financial viability of the Basic Income, these two progressive movements are natural allies that have much to gain from each other.

Cooperation and coordination with the Basic Income movement is also important for another reason. Most voters care little for the specifics of monetary policy. Few people cast their vote on the basis of what kind of QE the central bank should adopt. Those who follow the words of Janet Yellen, Mario Draghi and Mark Carney are few and far between – and most of them are working for the other side. Instead, the energising force of politics today is not monetary policy but the devaluation of labour and the low, unequal and insecure incomes caused by automation, globalisation and financialisation.

Income insufficiency and insecurity are the political issues of the day, which is why the Basic Income idea is developing so rapidly. People who are struggling to pay the rent or insure the car might not be interested in monetary policy, but they’ll support something that puts money in their pocket. Either directly (using Helicopter Money), or indirectly (using Public QE), the implementation of Public QE would do exactly this. And the Basic Income movement is a way to politically reach many of these people.
Focusing the Communication and Lobbying

There are many ways to influence a politician, media editor or financial journalist. Press releases, tweets and constituent’s letters may all have an effect, but nothing works better at changing minds than engaging and meeting with an individual in person. This is especially true when trying to communicate concepts as complex and confusing as monetary reform. Nothing works better than being in the room, being able to respond to questions and concerns on your feet, in real time.

I think that the Public Money movement has a lot to learn from another group campaigning on another vast, urgent ‘meta-problem’ that’s complex to explain. That ‘meta-problem’ is climate change and the group is called the Citizens’ Climate Lobby (CCL), an American-based, international organisation that campaigns for the policy of ‘Fee & Dividend‘ as a response to climate change (essentially the idea is to tax carbon and distribute the proceeds to all equally). They do this mostly through educating, organising and supporting their members to professionally lobby politicians and media. In other words, the function of the CCL is to train their members to lobby and communicate professionally and effectively in support of their agenda.

I think that the Public Money movement and the campaigning organisation within it could learn a lot from the methods of the Citizens’ Climate Lobby. I’m sure they wouldn’t mind having some of their ideas, methods and materials ‘repurposed’ for the cause of Public Money. I would encourage anybody interested in effective, focused lobbying for Public Money to check them out.

The great advantage of communicating with individuals individually is that you can adjust your message to suit that individual’s unique concerns, interests, situation and perspective – in other words, you can customise your approach. For this reason it would be difficult and counterproductive to specify what that individual message and approach should be in too much detail. However there are two aspects to communication and lobbying that I believe deserve special attention.

The first is the fact that by far the greatest conceptual barrier to acceptance of directly-created money is the fear of inflation – of money losing it’s value. This is a deep, visceral, emotional and very real fear, easily whipped up by visions of Wiemar and Zimbabwe. I believe that in the argument for Public Money it is important to fully face and acknowledge this fear. We can point out that vast QE has already happened, with no resulting inflation. We can say that vast QE is currently being produced, while deflation remains a threat. We can emphasise the irresponsibility of money created through debt by dodgey, self-interested bankers – and the responsibility of money directly created by genuinely independent central bankers with the prime mandate of maintaining the integrity of the currency. And we can acknowledge that inflation is a threat that must always be guarded against, and we can point out that deflation, stagnation and financial instability are other such threats.

My second point is that care must be taken not to alienate any particular political ideology. The Left, with their concerns about poverty, austerity, social security and government capacity are natural promoters of Public Money. But the market-loving Right, with their concerns about slack demand, weak growth, and financial instability, are also important allies. Remember, in the political PR game unlikely allies are more effective than obvious ones.
Reaching the Public

Imagine a Public Money movement that is (1) united behind a single policy statement that is, (2) endorsed by a wide and growing number of experts, politicians, groups and organisations, and (3) promoted by and within those organisations, while (4) using the resources that would flow from this new-found attention to organise a targeted and professional lobbying and PR campaign along the lines of the Citizens’ Climate Lobby (the Citizen’s Money Lobby’?). Imagine a Public Money movement that contributes to and draws support from the Basic Income movement in a coordinated movement towards a smart, effective and new economic direction fit for our globalised, high-tech, 21st Century knowledge economy.

Many of us hate the human and social costs of austerity. Many of us are outraged at the vast injustice of bank bailouts, at entrenched financial power that is a threat even to our democracies, and the direction of vast quantities of QE to benefit the richest of the rich. With a simple statement of purpose backed by as much credible expertise as possible, and with just a little organisation, we can come together to be much, much more effective than we are apart.

The many problems caused by reliance on debt-created money, and the many significant economic and human benefits of implementing some form of Public Money, are vast and sometimes difficult to grasp. Most people, most voters, most members of the public will never fully grasp them – quite rightly, they have many other things to worry about. But if they are presented with a clear and specific political goal that offers to lighten their economic load and that is endorsed by substantial and credible expertise, many people would be willing to follow.

My final suggestion is therefore to leave the job of communicating directly with the public in the hands of editors, journalists, bloggers and other communicators who understand their respective audiences better than we ever will. If we can unite behind a single, defined policy goal, and focus our shared efforts on influencing the influencers, then surely we will succeed.

After all, the money is already being printed.