In 2020, for the first time ever, Ireland’s dismal failure to control its climate-changing emissions will result in direct financial consequences for the state and for its taxpayers. We will overshoot our binding EU emissions target and will have to cover our excess emissions by buying carbon credits from other countries at an annual cost estimated at €455 million. This looming prospect of financial accountability has powerfully focused minds among Irish decision makers, as it was intended to do. Slowly but surely the country is waking up to one central and salient fact with deep implications for national finances, trade, the economy, and for the lives and livelihoods of many Irish people: carbon has a price, and that price is only going up.
Average global temperatures are increasing, ice sheets and glaciers are melting, the seas are rising and we are experiencing more of what have come to be called “significant weather events”. Climate scientists agree that the cause of these changes is carbon dioxide and its greenhouse gas equivalents (conflated here as ‘carbon’), and economists agree that the most effective and efficient way to reduce carbon is to make it more expensive, thus “internalising” the considerable costs of climate change into the actual price of the products and behaviours that cause it. There are many alternatives to carbon and more are being developed and brought to market every day. A price on carbon makes each one of these alternatives cheaper relative to their fossil fuel competition, biasing the entire market away from carbon and towards renewables and sustainability. It’s a fundamental part of any realistic solution to climate change.
Ireland currently prices carbon in two ways: by participation in the EU’s Emission Trading System (ETS) in which emission permits are bought and sold, and by directly taxing carbon not covered by the ETS at a flat rate of €20/ton. Growing scientific, economic and political pressures mean that both of these carbon prices will rise dramatically over the coming decade.
There is widespread recognition that the EU’s ETS carbon price is far too low and uncertain to meaningfully influence purchasing and investment decisions. As a market signal the current ETS trading price of €20/ton is essentially background noise against the fluctuating prices of oil and other fossil fuels, and far below the €40-€80/ton required to meet Paris Agreement commitments. In response to this failure the EU will reduce the number of emission permits available to the ETS from 2021, with the goal of increasing the market price of ETS carbon. The ETS is also scheduled for a full review and reform by 2028 and there is growing movement to put a minimum “floor price” on carbon, essentially going around the ETS market to directly tax carbon instead (the UK already has such a floor price, currently £18/ton). The point is that whatever way the ETS carbon market is reformed or circumvented in the coming decade, it’s clear that the price is only going one way.
Ireland’s existing direct carbon tax of €20/ton can also only rise. Ireland has the third highest per-capita emissions in the EU (after Luxembourg and Estonia) and is far behind most other member states in decarbonising its economy. Finland currently taxes non-ETS carbon at €62/ton, Norway at €52/ton and France at €45/ton, with plans to increase this to €84/ton by 2022. Professor John Fitzgerald, chairman of the Climate Change Advisory Council, has estimated that Irish carbon tax would have to be as high as €70/ton to be in line with our 2020 emissions target. Meanwhile Sweden, which currently taxes carbon at €120/ton, is moving beyond EU targets (source: World Bank’s Carbon Pricing Dashboard)
Not all EU states directly tax carbon, but most of them are better positioned than Ireland on emissions. If we are to have even the slightest chance of reducing our emissions to within acceptable EU levels, dramatic increases in carbon taxation will be necessary.
In two years the Irish taxpayer will begin to pay an annual carbon bill to others, outside of the country, who are better at reducing and eliminating carbon. This recurring bill will be our fiscal and legal responsibility under EU “burden sharing” in response to increasingly alarming climate change. The expected €455 million due in 2020 is only the beginning of an ongoing and growing liability.
The EPA estimates that on our current path Ireland’s annual emissions will be around 50 million tons beyond our agreed target by 2030 . At €100/ton – a very realistic carbon price for 2030 – that overshoot would cost us €5 billion, or about half of the current cost of servicing the entire national debt. Considering the quickening urgency surrounding climate change, the very real possibility that emissions targets may tighten further, and the growing upwards pressures on carbon prices, the actual cost of our excess emissions could easily be much higher.
There are other threats too. Significantly higher EU carbon prices would require “border adjustments” in order to maintain competitiveness against jurisdictions with lower carbon taxes. These ‘adjustments’, essentially tariffs on imported goods containing carbon, would likely be returned in kind, with significant effects for agricultural and other emission-intensive Irish exports. Tourism, a significant employer and foreign exchange earner, is also likely to be hit hard by higher travel costs. Throughout the country businesses and lifestyles will be seriously disrupted.
Ireland is starting from a bad place. Our late industrial development, our high agricultural emissions, decades of planning and building with little regard for carbon, the way EU emissions targets are calculated, our growing population and our late start on taking the environment seriously – all are standing against us now. But carbon dioxide, climate change, and the rising price of carbon are not going to go away because of our unique circumstances. This is a war on carbon and like it or not, Ireland is part of that war.
We will pay much more for carbon in the decade ahead – that much is certain. Ireland’s essential choice now is what will happen to that money. If we continue on our current path our taxes will flow outside the country to those who are better than we are at eliminating carbon from their lives, businesses and economies than we are. One way or another we will be paying a much higher price for the carbon we use in the years ahead. If we want to keep that money in Ireland, then the time to start paying that price is now.
Graham Caswell is the coordinator of Citizens’ Climate Lobby Ireland, an advocacy group campaigning on carbon pricing.
This was my submission to the UNFCCC’s Talanoa Dialogue on climate change. Although the consultation process was advertised as being open to “all interested stakeholders”, my contribution was rejected because I was not attached to a “a non-Party stakeholder to the Convention” (i.e. an organisation).
Table of Contents
Where are we?
1.1 A permanent global catastrophe is approaching.
1.2 The window for effective action is closing.
1.3 The demand for carbon must collapse.
1.4 A price on carbon is central to any solution.
1.4.1 Tax and Subsidize doesn’t work.
1.4.2 Trading Systems don’t work.
1.5 The core challenge in pricing carbon is political.
Where do we want to go?
2.1 Voters must gain.
2.2 Low and middle income earners must be protected.
2.3 The free market must be protected.
2.4 Cross-spectrum political support is necessary.
2.5 An international adjustment mechanism is necessary
2.6 Values, morality, justice and fairness must be central to any carbon pricing.
3. How do we get there?
3.1 Carbon fee and dividend.
3.2 Building political will.
1. Where are we?
1.1 A permanent global catastrophe is approaching.
A nightmare is coming. Climate change is much, much more than just global warming of a few degrees. It is the arctic melting, the permafrost thawing, the coral dying, the extinction of many species and the dramatic loss of biodiversity. It is the sea level rising, storm surges and accelerating coastal erosion. Climate change is hurricanes, typhoons, wildfires and flooding, and also desertification, the death of forests and the failure of the rains. Climate change is unpredictability. It is chaos.
For human beings, climate change is drought, crop failure and famine. It is the vast inundation of the great coastal cities. Climate change is hundreds of millions of refugees fleeing drought, flooding, famine and collapse. It is destabilized societies, ruined economies and infectious pandemics. Climate change is hatred, conflict and war on a vast scale. It is human misery, pain, fear and horror. Climate change is a return to the darkness from which we have so recently emerged.
1.2 The window for effective action is closing.
We do not know the details of this nightmare or how fast it will arrive. Ice core data shows that dramatic shifts in temperature are possible within a matter of years. If the antarctic ice sheets collapse we could see many meters of sea level rise within a few decades. The methane of the permafrost might be a tipping point, or perhaps the release of ocean methane clathrate, or a dieback of the Amazon or of the great boreal forests, or something else that we don’t yet know about. We do not know if a tipping point will occur at 2°C, or 2.2°C or 1.8°C or something else. We don’t know the specific details of the coming nightmare or how fast it will arrive. But if we do know that if we do not change then, sooner or later, it will happen. Catastrophe is the default option.
Climate change is caused mostly by our emissions of carbon dioxide, formed when we burn carbon for energy. The Paris Agreement is the commitment of the nations of the world to reduce these emissions, but it is weak and it is not enough. Even if every single country meets their Paris Agreement commitments we would still be emitting enough carbon to cause permanent and catastrophic damage. We have already burned enough carbon and emitted enough CO2 to raise the temperature of the world by 1°C. In order to keep it under 1.5°C or 2°C we need our CO2 emissions and thus our use of carbon to essentially collapse within the next few decades. Make no mistake – it may already be too late. But if we are to have a chance, then this is it.
If we are to avoid the collapse of our modern, technological, organised human society then our CO2 emissions and our use of carbon must collapse. We cannot have both. This is a fact. For humanity to have any chance of a prosperous, progressive, positive future, our use of carbon must collapse.
1.3 The demand for carbon must collapse.
Imagine what would have to happen for humanity’s use of carbon to collapse within the next few decades: Our entire energy supply would have to change. Many of our manufacturing processes would have to change. Many of our modern agricultural practices would have to change. Finance and investment and the way we do business would have to change. The work that many of us do to earn a living would have to change. We would have to change the way we heat and light our homes, the way we travel, cook, shop and socialise. Our lives and behaviour would have to change.
And it would have to change soon. If we are to have a chance of avoiding the terrible consequences of 2°C or 3°C temperature increases then these change would have to begin almost immediately, and this beginning would have to be strong and noticeable and dramatic. The reduction in the use of carbon would have to deepen, and deepen, and deepen again. Every person on this planet would have to know, without doubt, that carbon was ending – and make their choices accordingly.
There is no organisation or government or group of governments that could micro-manage the behaviour and choices of so many people so quickly without catastrophic economic effects. Laws can be passed but are useless if ignored or destructive if they lead to political instability or economic collapse. It is not possible for any group of human minds to reorganise the entire economy of the human species within a few decades – that is just not realistic. There is much for governments to do, but the heavy lifting of mass societal and economic change is beyond their capabilities.
There is only one mechanism that has even the potential to flexibly and efficiently offer the innovation, mass communication, distribution, organisation and other factors necessary for humanity’s use of carbon to collapse within the next few decades. If we are to have a chance of doing what must be done for our modern organised societies to survive, then we must make the power, creativity and efficiency of the market work to this end. That means a price on carbon.
1.4 A price on carbon is central to any solution.
Climate change has many terrible financial and human costs, today and in the future. But when you buy an airline ticket or fill your car’s fuel tank or pay your electricity bill, you do not pay these costs. In economic terms, the costs of climate change are not internalised into the price of carbon. There is no price signal, and so as far as the market is concerned, climate change does not exist. If we had to pay for the consequences of your carbon choices then we would probably make different choices, but we don’t. Essentially the market cannot see climate change. To the powerful market forces that shape the world around us and how we see it, climate change is invisible.
In order to make climate change visible to the market – and thus to every person making every spending decision – we need to internalise the costs of climate change into the price of carbon. In other words, we need to put a price on carbon so that we are financially aware that it is not free and that its use has consequences. This means that the price of things that include carbon (electricity, heating, fuel, food, etc.) must increase, making them much less competitive relative to competing non-carbon products, services, options and behaviours. In order for the demand for carbon to collapse, the price of carbon-related consumption must dramatically increase.
1.4.1 Tax and Subsidise doesn’t work.
One way to increase the price of carbon and thus discourage its use is simply to tax it, and to spend the revenues raised from that tax on subsidising non-carbon alternatives. This is command-and-control, in which government or regulatory authorities decides what to tax and what to subsidise, thus altering and influencing the market away from carbon. One problem, of course, is that civil servants may not be the best people to decide what technology, products, services, processes and people to subsidise – especially since they are not spending their own money. There is also a substantial administrative cost, including an army of means-testers deciding who is and is not deserving of financial assistance. And there is the fact that everybody’s life and situation is different, and so the costs and benefits as imagined by government may be substantially different on the ground in the lives of real people. Perverse and expensive incentives may be created. Carbon tax and renewable subsidies dramatically concentrates financial power and thus power over the lives of others. Mistakes can be made. There is wide opportunity for abuse.
However the core problem with the tax and subsidise model of pricing carbon is a moral one. When carbon is taxed, everybody’s prices go up equally. This means that the prices that must be paid by the poor and the middle rise more relative to income than for the rich. A carbon price that is a barely noticed inconvenience for the rich can create misery for the poor. Similarly, because rich people tend to use much more energy than poor people, subsidising energy is essentially a subsidy for the rich. A good example of this injustice can be seen in present carbon pricing in my own country, Ireland, where fuel for heating and transportation is taxed at €20 per ton. Ireland also offers a subsidy of up to €5,000 to encourage people to switch to electric cars. In practice this means that poor people struggling to stay warm are taxed so that the expensive new cars of rich people can be subsidised.
Leaving aside the centralisation of power, the high administrative cost and the potential for abuse, the tax and subsidise model of pricing carbon ultimately means that the necessities of the poor are taxed to subsidise the luxuries of the rich. This is not only deeply unfair, immoral and unjust, but it is politically impossible at the scale necessary. It might work at €20 per ton, but it won’t work at €50 per ton, or €100 per ton or more. Electorates will not accept it.
1.4.2 Cap and Trade doesn’t work.
Another way to increase the price of carbon and thus discourage its use is emissions trading, also known as cap and trade. In this model the government issues, sells or auctions pollution permits to big polluters, gradually reducing the number of permits available. These permits can be bought and sold, giving big polluters flexibility and incentivising them to reduce their pollution. Emissions trading can also involve offsets, i.e. carbon credits for activities (like planting trees) that take carbon out of the atmosphere. This system is implemented in several jurisdictions around the world, notably in the EU.
Cap and trade was extremely successful in reducing the CFCs behind ozone depletion and the nitrogen oxides (NOx) and sulfur dioxide (SO2) behind acid rain, but it has been far less successful in reducing CO2 emissions. The reason is that CFCs, NOx and SO2 were relatively minor pollutants used in relatively few industrial processes and relatively insignificant in terms of their importance to our modern economy, society and life. Carbon, on the other hand, is energy itself and is embedded in almost every aspect of our modern world. Put another way, if CFCs, NOx and SO2 are comparable to products in a marketplace, carbon is comparable to money itself. The market rules of carbon are thus very different.
There are many practical problems with cap and trade. If polluters receive their pollution permits for free they may not cut their emissions (because if they do they will get fewer permits in the future). On the other hand, if pollution permits are sold or auctioned we have the moral and thus political problems encountered with the tax and subsidise model. Carbon cap and trade is highly complex and the carbon markets that result from it encourage speculation and thus price volatility. Some of the biggest polluters make the most money from this system, and many of the offsets are little more than hot air. Trading schemes such as the EU’s Emissions Trading Scheme (ETS) have been beset by perverse incentives, profiteering and even criminality.
Most importantly, however, is that carbon cap and trade does not work at the scale necessary to reduce our carbon emissions enough to avoid catastrophe. As I write this, carbon pollution permits are trading within the ETS at just over €14 per ton. This is nowhere near sufficient to alter behaviour to the extent necessary. Pope Francis had this to say about cap and trade emissions trading: “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.” Essentially he is saying that it is an attempt to hide inaction behind the veil of complexity.
1.5 The core challenge in pricing carbon is political.
If we are to avoid permanent and catastrophic climate change and untold human misery we must quickly and radically reduce our use of carbon, and thus we must dramatically increase the price of that carbon. €14 per ton or €20 per ton is nowhere near enough to effect the kind of deep changes that we need. We need €40 or €50 per ton just to start, rising regularly to €100 per ton and more. The price of everything containing carbon must skyrocket. Whatever way we do this (and we must do it), it is important to recognise that the most important challenge we face is political.
Nobody is going to vote to be poorer, no matter what the disaster facing the planet. Nobody is going to vote for themselves and their family to freeze in the dark. Nobody is going to vote for sacrifice and pain. This is not WW2 and climate change is far, far down the list of voter’s priorities. Nobody is going to vote to make their own lives worse and they are not going to be persuaded to make their own lives worse. It is not enough to be scientifically realistic when it comes to carbon and climate change. We must be politically realistic too.
2. Where do we want to go?
I believe that this is the wrong question, because it implies that we have a choice. However, if we want our modern world to survive and to thrive and if we want any chance of a prosperous and positive future, then we do not have a choice. We must dramatically reduce carbon. We simply have to. The question might therefore be better phrased: “Where do we have to go?” or even: “What do we have to do in order to survive”. I would suggest that there are a few things that are non-negotiable.
2.1 Voters must gain.
Existing carbon taxes, subsidies and trading schemes have attracted some political attention (particularly in Australia), but so far they have generally been beneath the radar of most electorates. A carbon price of €14 or €20 per ton is so low that it is lost in the background noise of fluctuations in the price of oil and other carbon resources. However, a carbon price high enough to change behaviour must, by definition, be high enough to be widely noticed, and that means it becomes political. It is politically unrealistic to expect electorates to vote to make their own lives worse, and in the absence of a vast environmental catastrophe it is unlikely that voters will be so persuaded. There will be winners and losers from any carbon tax, but if a policy is to be realistic then there must clearly and unambiguously be more winners than losers.
2.2 Low and middle income earners must be protected.
A price on carbon will increase a wide range of prices, including the price of essential necessities, putting pressure on low and middle income earners at a time when there is already substantial economic stress and insecurity and resulting political anger and instability. Median wages in many countries have remained static for decades while core costs – especially housing costs – have risen. There is a strong sense that financially secure elites are out of tough with the financial reality of daily life for most people, and many voters have abandoned centrist political parties in favour of populist extremes, resulting in political instability and uncertainty. In this context, therefore, any carbon tax which adds to the financial burden of most workers is not politically possible, and there are many powerful political parties and blocs that would fight such a policy at every turn. A political majority of people are low and middle income earners, and they must be protected.
2.3 The free market must be protected.
From the products and services we take for granted, to the incredible technological innovation so quickly and efficiently distributed, to the opportunity for billions to rise and escape abject poverty, the global free market has radically transformed our world in recent decades. While there have been both winners and losers in this transformation, and while the global expansion of the free market has caused both social and environmental damage, the aggregate human effects have been largely for the better. While there is substantial ideological and political opposition to the free market there is also a large and powerful constituency determined to protect it and the bounty (and profits) it has delivered. No command and control policy that substantially restricts market freedom is therefore politically possible. Our modern economy and society is built on the global free market, and it must be protected.
2.4 Cross-spectrum political support is necessary.
For any substantial price on carbon to be politically possible, therefore, both low and middle income earners and the free market must be protected from its effects. This essentially means that cross-spectrum political support would be necessary. This does not mean that such support need be universal across the parties and power blocs of both the Left and the Right. However any politically realistic price on carbon must satisfy the core ideological concerns of both sides of the political spectrum. If carbon is to be priced sufficiently to dramatically reduce its use in the time we have left, it cannot conflict with core ideological values and belief.
2.5 An international adjustment mechanism is necessary
If one jurisdiction taxes carbon and another doesn’t, then the carbon-pricing jurisdiction will be at a cost disadvantage compared to its irresponsible neighbour. No state, province, nation or country should be disadvantaged for doing the right thing, nor should they be given advantage from doing the wrong thing. This means that whatever way a price is put on carbon, some form of border adjustment mechanism will be necessary. Any such adjustment mechanism would have to measure the flow of carbon across the border (including embedded carbon) and tax that carbon accordingly, but in a way that would not hurt exporters or damage trade. This means that its not enough simply to tax the carbon coming in to a jurisdiction (basically a carbon tariff). Exporters who pay carbon tax should not be disadvantaged over competitors who do not.
2.6 Values, morality, justice and fairness must be central to any carbon pricing.
In light of our scientific knowledge and awareness of climate change, the use of carbon is a moral issue. It is the rich people and the rich world who have caused the problem, both historically and today. And it is largely the poor people and the poor world who bear most of the consequences, both today and in the future. The actions of we who are alive today will dramatically affect the lives of those who will come after us. Knowing what we now know, carbon use is a deeply moral issue.
But the solution to carbon use is also a moral issue. It is not acceptable that the necessities of low and middle income earners be taxed so that the luxuries of the rich may be subsidised. It is not acceptable that those who do the right thing are harmed and disadvantaged, while those who do the wrong thing are rewarded. It is not acceptable that the market freedoms that have so radically transformed our world for the better be replaced by the command and control of government. It is not acceptable that opaque complexity be used by insiders and speculators to profit from others without providing real value.
Climate change is a clear and present danger. This is an emergency and we are in the midst of a deep and possibly existential crisis. We will not survive as a society unless we pull together and act together. In order for this to happen values, morality, justice and fairness must be central to any carbon pricing.
3. How do we get there?
A nightmare is coming. The seas are rising, the arctic is melting, the permafrost is thawing, the coral is dying and extreme weather events of all kinds are occurring more frequently. Drought, crop failure, coastal flooding and dramatic storms are with us already while the Syrian conflict and resulting refugees are merely the briefest glimpse of an unimaginably dark future that will happen unless we change dramatically.
Carbon is so embedded into our society, our economic system and our way of life that it is impossible for any government to extract it using command and control measures. The market must be used and thus we must put a substantial prce on carbon. Carbon tax and subsidy isn’t fair and carbon cap and trade doesn’t work. Neither are politically possible or realistic at the substantially higher carbon prices that are urgently needed. We need another way to put a serious, substantial, behaviour-changing price on carbon. For any such carbon pricing mechanism to succeed it must find favour with a clear majority of voters. It must protect both the poor and middle, while at the same time keeping the market free. It must attract cross-spectrum political support and include a border adjustment mechanism. And above all it must be based on values, morality, justice and fairness.
Fortunately such a policy does exist and is rapidly gaining popularity, particularly in the United States. This is the policy of making the revenue from carbon tax neutral, by distributing it equally to everybody. It is known as carbon fee (or tax) and carbon dividend.
3.1 Carbon fee and dividend.
Unlike cap and trade, the policy of carbon fee and dividend is simple: carbon is taxed as it comes out of the ground or enters the port, and the revenues from that tax are shared equally with all. Imports from countries that don’t tax carbon are taxed according to their carbon content while exports attract a rebate. That’s it.
Under a fee and dividend carbon pricing system everybody’s prices would go up, and everybody would also get a cheque in the post or a regular deposit in their bank account. For most people (about two thirds) the cheque would be more than the higher prices, making this policy a politically possible way to dramatically price carbon. Essentially redistribution would be from heavier users/polluters to lighter users/polluters, making this policy undeniably fair. And this would happen across the market, to all industries, all firms, all competitors with no favour, making this policy market friendly. Since all of the revenue would be redistributed to everybody, it would not centralise financial power or increase the size of government. And there is already demonstrated and substantial cross-ideological, cross-party and bi-partisan political support (amazingly enough, both Exxon and the US Green Party support this policy, as do both the Democrat state legislature of California and the pre-Tea Party GOP establishment). And a border mechanism ensures no nation, state or tax jurisdiction is disadvantaged for doing the right thing. Carbon fee and dividend fills all of the requirements for a politically possible price on carbon.
Most importantly, though is that carbon fee and dividend – or tax and dividend if you prefer – is scalable. Other methods of pricing carbon are limited by political impossibility. But with most people gaining under fee and dividend, popular support would be assured. Saving money and saving carbon would become aligned and the same thing. Those who do the right thing and make the right choices are rewarded, while those who do the opposite pay for that reward.
One way to see fee and dividend is as a form of financial carbon karma, aligning with and centering around basic, core human values and concepts of morality, justice and fairness.
3.2 Building political will.
The Talanoa question we are answering here is: How do we get there? Part of that question has been answered in the proposal for the carbon fee and dividend pricing policy outlined above. But it is not enough to simply propose a policy. In order for any policy to have any meaningful effect it must be implemented, and that requires political action. In other words, the answer to the question “How do we get there?” is that we get there not only through policy but through politics.
We all want a bright, hopeful and positive view of the future. We want the world to be safe for our children and our grandchildren and those who come after them. We want to think of ourselves as good people, doing the right thing to make things better for everybody. Individually and even organisationally, we want this world and this future. But our individual and organisational will is not enough. We must become political, and translate what we want into terms that our complex systems of governance can understand. We must persuade, leverage and influence political will.
Each of us needs to take a stand, and specifically decide what it is we are for. We cannot research and study forever as the world burns. We cannot wait any longer to make up our minds. We must decide. We must choose what we are for, and loudly, clearly and unequivocally speak out in favour of our choice. If ever there was such a time, now is the time to make a stand.
If you are an individual, then speak. Work to influence who you can – especially politicians and media. Write letters, make phone calls, go to constituency clinics and encourage friends and family to do the same. Join and connect with others who want the same. If you lead or influence an organisation or a group, then work to endorse the specific policy you stand for, and seek other groups and organisations with which to collaborate with to influence politicians and media. If you work in media, close to politicians or if you otherwise have influence, then use that influence in the best way you can in favour of your chosen policy. And if you are a politician then do the same.
The hour is late and the time to act is now. Nothing is more important that averting the coming global and essentially permanent catastrophe, so whatever you can do, do it. Do it now.
It’s 2068. Three years ago the CO2 content of the atmosphere fell below 350ppm for the last time, even in the northern winter. Depending on who you listen to, temperatures may have stabilized over the last 20 years or so but it’s still too early to definitively tell (although the recent evidence of some Himalayan glacier growth is encouraging). Sea level rise may have slowed slightly (according to the Intergovernmental Panel on Science), but the sea defense industry won’t be short of business for the foreseeable future. Argument over the carbon-fixing price continues, with fewer and fewer people paying attention.
Use of nitrogen, phosphorous and many other elements and chemicals are a fraction of what they were in the early decades of the 21st Century. Non-renewable resource use is also a fraction of what it once was, and some reserves of rare, important and strategic finite resources are held in perpetuity, earmarked for the use of future generations. Nearly 45% of the planet’s surface is now under some form of legal protection, and regular progress is being made towards the global goal of 50% of the planet as full nature reserve. The human population of the planet is 9.7 billion, most of them in cities and almost all of them online.
The economy is circular. Plastic and other materials are standardized and easily and almost universally recycled. One operation’s waste is usually a resource for another operation, with resource/waste efficiency at the core of industrial design. There is flexible exchange and sharing of all sorts of goods, and refurbishment and reuse is the norm. Since both waste and resources are very expensive, people and businesses organize themselves accordingly. But even if it wasn’t expensive to be inefficient and dirty, nobody wants to be thought of as a “waster”. Nobody likes wasters.
It’s not just the economy that’s circular now – economics is circular too. Every schoolchild knows the Doughnut and understands the world ecologically. Later they learn about how fees are put on resources, pollution and public services and returned to everybody as the citizen’s dividend (of course, there are central bank dividends too, but that’s different). Everybody understands that it’s this redistribution from the heaviest users and polluters to the lightest users and polluters that keeps money flowing through the free market economy while keeping us within the ‘safe space’ between ecological limits and human necessities. The point is that everybody is a commoner now. Even the contrarians who rail against the Commoner Movement are, in fact, commoners if you look at their underlying assumptions. We’re all commoners now.
Some american historians like to trace the Commoner Movement to the 2020 US presidential election in which congressman Carlos Curbelo defeated Donald Trump in the GOP primaries. Although he went on to lose the election, Curbel’s pivotal Carbon Fee & Dividend policy was quickly adopted by the Sanders-Warren administration and then around the world. It was these first carbon dividend payments that grew into the ecotaxes and citizen’s dividend that we know today. Carbon still provides over 20% of the citizen’s dividend – higher than nitrogen and phosphorus combined.
Other historians see the roots of the Commoner Movement well before 2020 in campaigns for policies such as carbon tax and dividend, monetary financing, land value tax and, of course, a basic income (essentially the citizen’s dividend that we know today). Many of the core ideas of the Commoner Movement had been well articulated long ago by people such as Thomas Paine (18th C.), Henry George (19th C.) and Elinor Ostrom (20th C.). But it was after the rise of social media that campaigns for specific, actionable policies aimed at returning common value to society and to individuals began to proliferate. These campaigners were the crucial innovators and early adopters of the idea that shapes the world that we live in today.
In 2068 we take it for granted that all people are inherently equal and that every single person is entitled, as their birthright and inheritance, to a share of the returns on valuable and productive commonly owned assets. It seems obvious that the free market is only free if all participants have the power and security to say “no”, and that those who use the most and pollute the most and who cause the most damage should also pay the most. These things seem like common sense today, but they were considered radical ideas well into this century. Today it’s inconceivable that a free market could include environmental and social freeloading that damages and destroys the freedom of others, but that was once the norm. The market wasn’t always “Equal, Free and Fair”!
With carbon at $527 per ton, most people’s lives today are extremely carbon efficient – even rich people don’t want to be seen to waste carbon. The first carbon taxes were practically insignificant – background noise in the fluctuating price of oil. Even when they started to increase in the 20’s it was initially the effect on investment that was much more significant than the effect on behavior. It wasn’t until carbon reached nearly $100 per ton that people started abandoning it en masse, as the carbon boom of the late 20’s and early 30’s transformed the economy away from carbon.
Today solar heating, generation and cooling panels are widely available at essentially trivial cost, every house has a battery, and every tractor, train, car and delivery vehicle is electric. Many small towns exist completely separate from the industrial grid, even where old housing stock can’t be made fully passive and still needs electric heating. Nearly half the world’s food is now grown indoors or under glass, and every large town and city has it’s garden district. The average tomato is consumed less than 23km from where it’s grown – all year round even in the northern cities. Nitrogen is the only industrially-derived additive to most commercial growing media, and 96% of it is captured in the food cycle. Like any industrial process, most modern food production is essentially a closed system.
Home work, work hubs, flexible hours and general workforce independence means there’s a lot less daily travel now than there was in the past, and VP (virtual presence) means much less long distance conference and business travel. Most people travel a lot when they’re young but, since they can make a good living from almost anywhere, they also tend to end up close to home! Only 30% of the workforce work on a fixed contract for government, corporations or other large organizations and most people work independently. Figures show that approximately one in eight people of working age have no income other than the citizen’s dividend, and that another one in ten earn only a community wage. However in the real world it’s impossible to identify who makes what based on how they live. Most people on high salaries live lifestyles that would be considered modest a century ago, and money and material status just aren’t as important as they once were. It might still be legal to waste as much as you like as long as you pay for it, but what aware, responsible, mentally healthy person would act like that? Who would want to be a waster?
We live in a world in which personal AIs, gene therapy and deliberative democracy are taken for granted. At any one time over 300 people are living on Mars and it looks like the Titan mining station will be profitable within the next year or two. The Spiral Dynamics of Clare W. Graves has long replaced Abraham Maslow‘s Hierarchy of Needs as the accepted organizing structure of our individual motivation and growth, and our educational, media, professional and organizational perspective is based on the famous ‘trinity’ of Awareness, Empathy and Science. Most of us still face many deep and difficult personal challenges, it’s just that we just choose a lot more of them ourselves now.
Those who study the media and society of the early 21st Century tell us that there are three key differences in how people feel today compared to fifty years ago: (1) we have more time, (2) we feel safer, and (3) our future is much more hopeful. We are more relaxed today than we were in the past, and have more time to explore, cultivate and improve ourselves and the world around us. Although serious relative poverty still exists, almost nobody on the planet lives in fear of destitution any more. Everybody has the physical security and freedom from fear that makes equal participation in the market possible (and so much fun!). Everyone understands that markets can’t be free unless they’re fair, and that basic physical security is a perquisite for full market engagement and fair competition. It’s obvious now, but it wasn’t always that way.
Today we don’t just feel safer, more secure and more relaxed on a day-to-day basis than we did in the past – there are also deeper securities. Although the ruins of the unsustainable era are still all around us and the seas are still rising, the environmental trends are almost all positive. Most countries are at or close to the UN target of 5% of GNP for ecological remediation (although much of that is still spent on carbon fixing). Nature is returning in often spectacular ways and, while it will never be the same as it was before the technological revolution and the period of unsustainable expansion, there is much that remains. There is even hope that some coral reefs may come back once sea temperatures begin to fall.
It’s as if the time horizon within which we can realistically allow ourselves to think has opened up in front of us – expanding with the belief that our children and our grandchildren will also live rich, meaningful lives. The growing evidence of our own sustainability makes it psychology safe to think realistically about the far future, and so we make more and more decisions in the context of decades and even centuries, increasingly secure in the knowledge that what we do actually matters in the long term. It’s almost as if meaning has returned to the world.
We are no longer betraying the lives of our ancestors while destroying the lives of our children. We act responsibly and so, although we’re clearly far from perfect, we know that we’re good. And we’re getting better.
There is hope for the future.
Note: The idea of taxing carbon and distributing the proceeds of that tax equally to everybody as a ‘carbon dividend’ is well established and has extensive political and other support from across the political spectrum. It is the (Liberal) Canadian federal government’s ‘backstop’ policy: it is supported by Exxon, Shell, Unilever and many other giant corporations (see https://www.clcouncil.org/founding-members/); it is supported by the (Democrat) California Legislature and by the US Green Party; it is supported by James Hansen and many (possibly most) senior climate scientists, and by a wide variety of climate activist organisations from both the Right and the Left and neither/both (notably the Citizens’ Climate Lobby – see https://citizensclimatelobby.org). Not least, carbon dividends are the defacto climate policy of the non-Trump, non-Tea Party GOP (see https://www.nytimes.com/2017/02/07/science/a-conservative-climate-solution-republican-group-calls-for-carbon-tax.html).
I chose Curbelo for my imaginary story because he is the leader of the Climate Solutions Caucus of the US Congress, which now includes 88 congressional representatives (44 Democrats and 44 Republicans) – over 20% of the US Congress (see https://en.wikipedia.org/wiki/Climate_Solutions_Caucus). While the Climate Solutions Caucus doesn’t formally support carbon dividends, it was established by Citizens’ Climate Lobby with Curbelo and so is saturated by that policy. Curbelo is also young, upcoming, anti-Trump and supports sane, bipartisan policies not only on climate but on immigration and other issues. I have no idea what his political ambitions are, but he would be a natural presidential candidate for the scientific, rational, responsible and genuinely conservative remainder of the US Republicans, and a realistic potential challenger to Trump. Whether such a challenge would succeed is, of course, another issue.
In terms of the wider picture of what I have called the ‘Commoner Movement’ in my story – that is also happening already to a certain extent. As you have an interest in these matters I am sure you are familiar with the emerging policy movements on Land Value Tax, QE for People and a Basic Income, and with growing interest in the concept of ‘the Commons’. I have been immersed in these issues for five years now and engage almost daily with many of the key people involved, and I can assure you that there is plenty of evidence of overlap between them – in both the thinking (and actions) of the individuals involved, and in terms of the deeper philosophical and political-economic ideas. Three of these real, implementable policies (CD, LVT, and QE4P) are potential funding sources for the other (UBI) and this synergy is not completely unnoticed. Leading economic thinkers (Kate Raworth, Mariana Mazzucato, Francis Coppola, Steve Keen, Scott Santens, and many more) are already connecting these threads (at least in their private and social media conversations). Much of my time is spent encouraging these connections and trying to connect the silos of each individual policy movement under the organising concepts of the Commons and Raworth’s Doughnut.
“Today, we are up against businesses that work out of a garage, take risks, operate in a nimble way, and have a different kind of energy and drive. Large incumbent companies that can’t create a similar kind of culture just won’t be able to compete. One of our rallying cries has been how do you create a 20,000-person start-up?“
Transformational change is hard. It’s easy to add something new to what already exists, but changing what’s already there is more difficult. And what do you do in a market, business, societal and environmental context that’s constantly changing? You could change everything and it might all be redundant in five years. It’s hard enough to navigate yourself in the midst of such deep, wide-reaching and unpredictable turmoil. Bringing hundreds or thousands of other people with you is much harder.
My perspective of transformational change starts with characteristics of change itself, structured into three separate layers.
(1) First level change is the day-to-day background change we’re used to – changing weather, people, projects, priorities. Adding something new, cancelling something else, picking and choosing from the menu of options in front of us. Time moves on, things change and we do stuff. As both organisations and individuals, we do this all the time.
(2) Second level change is transformational change. Unlike first level change, this is not just adding to or subtracting from what already exists, but fundamentally changing it to it’s core. This is deep change, fundamental change, structural change, transformative change. You’re changing what the thing really is, and this is no small thing to do – especially if you’re a large organisation. The hardest part of transformative change usually lies not the adoption of the new (which can be exciting and liberating), but in letting go of the old and familiar. Just like breaking up is much harder than falling in love.
(3) Third level change is continual or dynamic transformative change. Change, even transformational change, is not enough in a world in which everything’s changing. If the world is changing you have to change, and you have to keep changing as long as the world is changing. This is the question of what you want to change into. If you change into something static you might gain a few years, but sooner or later the world will pass you by again and so you’ll have to change again. So the goal is to change into something dynamic, with the fluidity and flexibility to meet, adapt to and exploit whatever comes at you.
The more you have to lose the more vulnerable you are. In a world of dynamic change you have to change dynamically too – it’s not enough to change once. Essentially you have to teach yourself, your team or your organisation how to change so that individually and together they can change again and again and again as the world changes around them.
The River Model of Dynamic Change
One dynamic model for thinking about organisational adaptation to continual change is that of a young, fresh and fast-flowing river system.
This model begins with the force that animates us – purpose. If you’re going to get people to organise in large numbers while remaining flexible enough to meet and exploit change, you’re going to have to have a good story – a clear, concise narrative of who you are, what you’re about and why you’re doing what you’re doing. And it better be a real story, underwritten by real shared values and demonstrated by real actions. There are no secrets safe from social media, so you’d better drink your own cool aid and eat your own dog food, or eventually you’re going to get found out.
Purpose is the reason we get out of bed and do what we do, giving us meaning and direction. At a collective or organisational level purpose helps form our identity and connects us to others who share a similar purpose. Purpose is the why that gives us a reason to be interested in the what and the how. The bigger, deeper and more ambitious the purpose, the more potential customers, readers, viewers, constituents, employees, partners, talent and other allies you can attract. Shared purpose based on core values and expressed in a simple and coherent narrative is what brings people together and focuses them. Good leaders tell good and inspirational stories.
Purpose, if you haven’t already guessed, is the gravity of our river system model of dynamic change. It’s not only the gap to be crossed and the distance between here and there – it is the very animating force that causes movement between here and there. But that journey is rarely a straight line, and must adapt to the reality of the second part of our model – the landscape.
“God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.”, says the Serenity Prayer most associated with 12-step programs. That wisdom essentially involves recognising the things that you can’t change, and thus have no choice but to adapt to and accept. If these unchangeable things stand between you and your purpose then you’ll have to go around them because you’re not going to go through them. This is your topography – the hard reality of the landscape through which you must move.
A good tool to help survey your landscape is PESTLE analysis (a systemic look at the Political, Economic, Social, Technological, Legal and Environmental landscape facing you or your organisation). SWOT analysis is also useful, and a SWOT analysis of your PESTLE landscape is even better. But it would be a mistake to sit in an office reading reports, because that’s not where reality happens. The full picture is the human picture and that happens inside the heads of individuals. If you really want to know your landscape you have to actually get out there and talk to the people in it.
When doing all this research, reading, talking, listening, thinking and other analysis it’s very easy to focus on the negative (after all, you’re looking for the things you can’t change). But it’s not just the obstacles you’re looking for – you want to spot the opportunities too. A great way to do this is to adopt a Blue Ocean perspective, which trains you to identify and evaluate pools of untapped demand. After all, the flip side of unprecedented threat is also unprecedented opportunity and if you’re going to do a comprehensive survey of your landscape anyways, you may as well look for both.
The third and final part of the river system model of dynamic change is, of course, the water itself. A water molecule consists of an oxygen atom and two hydrogen atoms. The two hydrogen atoms stick tight to the oxygen atom, but interact more weakly with other hydrogen atoms, constantly connecting and letting go. It is this rapid and incessant series of connecting and letting go that gives water it’s fluidity and it’s ability to flow. Connect, let go; connect, let go; connect, let go – again and again and again, instantly adapting to whatever it meets.
Your customers, shareholders, employees, audience, constituents or other stakeholders together create your organisational identity – each has a part in your story. But each is also a real, actual and unique human being with their own internal life, free will and choice. Remember, you’re not just trying to change what these people think or do – you’re trying to make them much more responsive, flexible and adaptive, able to continually connect and let go and thus flow like water.
This is the world of Lean and Agile thinking and practice – the ideas and community of SCRUM masters, project owners, change agents and mindset coaches. Lean-Agile grew from the cutting edge software industry operating in the hyper-competitive realm of the internet – the red hot core of technological change. Grounded in KPIs and other performance metrics and loyally wedded to the interests of the end customer, Lean-Agile advocates small flat teams of equals, open to test, risk, failure, ideas and people and working incrementally and holistically in time-bound bursts, with each iteration being better than the last. It’s like AI for human beings – evolving performance rather than constructing it. And it comes from the flexibility of Lean-Agile teams.
An Adaptive Organisation
As change, in all its myriad forms, continues and accelerates we don’t just have to adapt, we have to adapt to adaptation. We don’t just have to learn, we have to learn to learn. We can’t just take snapshots of our environment, we have to actively and continuously scan and probe it. Whether we’re a lone individual or a vast organisation, we don’t just have to change – we have to change into something that continuously changes.
Water molecules, connecting and letting go, splash onto the rocks of the high mountains. Inexorably drawn by gravity they find each other, become drops, and then trickles. The trickles become small streams, which combine to form bigger streams, then small rivers and bigger rivers, getting bigger and stronger as they go. Flexible particles animated by gravity across a defined but irregular landscape. A river system.
People, connecting and letting go, land into a team. Inexorably drawn by purpose they effortlessly co-operate with each other and with others, organising and reorganising themselves and their teams and communicating and collaborating widely as they openly work towards clear and specified goals – all clearly directed towards an important, higher and deeply meaningful purpose. Who wouldn’t want to belong to, buy from or otherwise associate with that kind of team – or an organisation made up of such teams? In an unpredictable world of seismic change, this is the environment we want to create – an environment in which people can align their purpose with organisational goals and work freely and flexibly enough to do magic.
Whoever or whatever you are, you will change and change and change again in the coming years and decades – reality and survival will require it. And these won’t be small changes – your entire market, business model, customer base, audience or electorate could change almost overnight. And not just once, but again and again. There will be vast threats and also vast opportunities ahead, the stakes growing ever higher. But if you and your people have a clear and focused purpose to energise you, bring you together and direct you, and if you know your landscape and are flexible enough to flow towards that purpose, then you can handle any change. Like water, you will always find a way.
An adaptive organisation is focused, framed and flexible. It’s people feel their purpose, know their landscape and work freely on focused goals. It’s performance is grounded in both quantifiable metrics and active listening to end customers. Its boundaries are vague as it engages with and includes customers, audience, constituents, partners, supporters and others. It’s as comfortable letting go of the old as it is adopting the new. Such an organisation flows easily through the ever-changing landscape of it’s wider reality, always knowing which way to go.
Like a river.
I am actively seeking consulting, freelance, contract, employment or other work related to organisational change, particularly in the direction of sustainability or social responsibility.
If you, your group or your organisation are developing your purpose, surveying your landscape, creating agile teams or otherwise transforming I am available for consulting, freelancing and other hire. My full CV/resume is available here, my personal narrative (including an account of my explorations in economics) is available here, and I can be contacted here.
Change shortens your horizons. The faster things come at you, the more your attention is drawn to the immediate and the urgent and the further it moves from the long term and the important. But if you’re a corporation, government, fund, lender, organisation, institution or individual with assets, obligations or investments due ten, twenty, thirty or more years from now, you don’t have the luxury of focusing on the here and now. You’re paid to think about the big picture and the far future, and that’s getting a lot more complicated.
The vast, deep, systemic disruption we are witnessing spans economics, politics, media, business and society, including your industry, your market, and your customers, audience or constituency. Unfathomable technology has been unleashed in a world rapidly becoming one interconnected global network of human beings, with seismic results. Who knows where our assets, our interests or even our selves are going? Who knows what the world will look like five, ten, twenty or thirty years from now? When everything is moving fast and getting faster, how do you make a decision today that will have real consequences for decades to come?
In late 2009 IBM had lengthily, free ranging discussions with 1,541 leading global CEOs and senior government leaders. The recurring theme was accelerating complexity, and the inability of their organisations to deal with it. That was back in 2009 when Facebook had only 200 million users and before Instagram, Trump, Brexit, a lot of bad climate news and so much more. It’s much worse now.
Waves of Change
There are many models, conceptualisations, frameworks, ideas and other tools with which to think about change and what to do about it, each of them a way to reduce complexity by editing out everything except the most important things. Whatever it is that you consider important, it’s this simplification that allows understanding. The process involves not adding more information, but removing most information. It’s a process not of objective learning but of subjective judgement. From the chaos of data and complexity a new and higher pattern is born, and understanding occurs. These conceptual tools are maps, diagrams, narratives, summations and, ultimately, also cartoons, caricatures and other gross approximations of an impossibly complex real world. They are extremely simplistic, subjective and prone to error and bias. But they’re what we have to work with.
The model and conceptualisation of change presented here is based on McKinsey’s Three Horizons (3H) model, which views change as waves of decline and ascendance of prevalence or occurrence. The old, stagnant, increasingly useless and unsustainable patterns of the past are declining, weakening and ending (Horizon 1), while the new, vibrant, useful and sustainable patterns of the future are emerging, rising and strengthening (Horizon 3). In the middle, where these two waves meet, we have an interference pattern that looks a lot like the maelstrom of disruption we see around us (Horizon 2). This is the chaos that we must navigate, aligning ourselves with the new while letting go of the old. The Three Horizon view of change can be visualised like this:
By simply mapping imagined aggregate occurrence over time, the Three Horizons framework is as basic a model for visualising change as it is possible to get. While it does give us some sort of structure within which to think about change, it doesn’t tell us much. New stuff occurs more. Old stuff occurs less. Eventually disruption will settle down into some sort of consistency. That’s about it.
One way to develop this perspective is to look at H1 and H3 in more detail, especially at how they differ. One important difference is surely that we’re familiar with H1, since it’s been around for a long time. In contrast, H3 is new and therefore less familiar. Whatever H3 may be, it’s not nearly as clear to us as H1. The emerging H3 may be there all around us, but it has not yet ‘resolved’ into a coherent pattern or identity. We can see H1 in front of our faces, but we have to go looking for H3. In other words, while H1 is ‘normal’ to us, H3 is not.
A second important difference between H1 and H3 is what’s happening to the pattern, energy and ‘force’ behind it. In the declining patterns of H1 we might expect to see increasing divergence, decay, division and dissolution as energy, power and pattern weaken, decohere and dissipate. Meanwhile, in the rise of H3 we might expect to see the opposite: increasing convergence, growth, alignment and resolution, with energy, power and pattern strengthening, cohering and focusing. As our timeline moves through the intersection of a declining, fragmenting and weakening H1 on one hand, and a rising, cohering and strengthening H3 on the other, we see disruption increase as we would expect. As these forces cross, the resulting interference pattern appears extremely complex to us as we move through it and see H1 order dissolving into H2 chaos before resolving into H3 order. We could visualise this process like this:
Remember, this is just one step from the simplest of cartoon-models that we can use to think about change. The actually reality of vast, interconnected, foundational change is far, far too complicated to ever grasp. This is just one possible way to think about it all within some sort of structure. It’s a tool, nothing more. Its value is not in proving a truth, but in whether it is useful or not.
We are trying to explain and understand massive and accelerating change in search of useful insights, ideas and practices. With this aim in mind, and assuming that the aggregate change even might be occurring in patterns like these, the question then becomes; What’s causing these patterns? Why is H1 weakening, declining and dissipating while H3 is strengthening, rising and cohering? What are the organising forces behind these two patterns?
The following is one answer to this question that is both explanatory and (more importantly) useful. What makes it practical is that it is based on a concept that we are all familiar with, a concept central to the market, to legal, justice, academic, media and political systems, and to every other aspect of our modern lives – the concept of human choice.
Human beings have always had choices, but for the most part our ancestor’s lives were incredibly restrictive compared to our own. For most of history most people lived more or less the same way their parents lived, worked at what their parents worked at, lived or moved with the same small group in the same general area, and believed what their parents believed. Today, in contrast, the lives lived by more and more of us are vastly different. Our choices of food, clothes, products, connections, work, partners, locations, information, ideas and much, much more is unimaginable to our younger selves, never mind even our most recent ancestors. The point here is that, in the context of geological, biological, civilisational and human time, this explosion of mass expressed human choice is radically new.
Ideas or beliefs concerning choice, such as the nature of consciousness, the source of free will, or the inevitability of determinism are best left to philosophers, the religious and others. Whatever human choice is, and wherever it comes from, is irrelevant for our purposes – it is the actuality we are concerned with. Specifically, it is a fact that the number of options available to people, and thus the number of actual choices made by people, has exploded in recent years, decades and centuries.
In H1 we may be seeing the decline of a natural, historical, evolutionary force expressing itself as ever greater and more diverse complexity (like the Tree of Life). In contrast, the force behind H3, which includes the additional element of our own modern and individual awareness, choice and purpose, expresses itself as ever greater and more unified coherence and convergence. The result is that the new H3 becomes more focused, relevant, useful, powerful and real, while the old H1 becomes the opposite. While evolution selected for survival and reproduction, aware choice selects for goals, values and purpose. And the dynamics of these selection gates produce different results in that evolution works towards diversity while choice works towards singularity.
In other words, one way to look at the 3H model is as a map of declining evolutionary and historical forces on one hand (H1) meeting the rapidly rising force of human choice on the other (H3). Simply put, as innovation, technology and efficient distribution vastly expand real human individual, organisational and collective choice, that choice becomes ever more important in shaping our world, our society and our market.
Thinking of disruption as the result of a vast and deep collision between evolution and choice also makes some intuitive sense. Our society, our economy, our technology, and our highly complex systems and our selves have spectacularly developed, dramatically increasing our awareness, power and capability far beyond anything before. With an infinity of choices in front of us, we need some way to choose between so many options. This is the orientation of reasons, values and purpose. It wasn’t as important before because we didn’t have so many choices before. But now we do, so now it is.
You could think of H1 as the dissipation of historic evolution into complexity, and of H3 as the coherence of modern choices from that very same complexity. Both happening together, at the same time, overlapping. And both happening inside every institution, organisation and individual. As individuals, groups and organisations face more options and thus become more powerful, goal, value or purposeful choice overrides, counteracts and otherwise interferes with evolutionary and historical patterns.
We all know and experience this as individual people. When you can eat anything you like whenever you like, sooner or later you’ll have to start making informed choices about what you eat in order to stay healthy. You’ll feel the interference of making those choices every time you turn down a treat or drag yourself out for a run. Evolution has not designed you for so many food options, or to sit in front of a computer all day. So you have to override evolution and make your own choices in the direction of some sort of organising reason, goal or purpose – such as your immediate appearance or your long term health. Evolution collides with choice within you and the resulting interference is experienced as internal struggle or disruption.
Organisations too experience this collision between historical evolution and choice within themselves. Established organisations are left with legacy assets, structures, roles, systems, cultures, people, perspectives and other factors with which they must work. With these resources they are faced with customers, audience or constituents who are experiencing an explosion of choice, especially on the internet. As markets, networking, recruitment, public relations, branding, customer service and much more all move online, old buildings, systems or perspectives may no longer make sense. In attempting to grapple with this changing landscape and adapt accordingly, problems inevitably occur. Transition causes friction. It disrupts.
Even fresh startups, free of legacy issues, must usually operate within a legal, financial, organisational and other structure that developed in a different time and that makes less and less sense in an age of interconnected hyper-choice. Even if the organisation has no legacy issues it still operates in a legacy environment that it must deal with. To the free and enthusiastic founders forced to deal with this legacy environment, the result is often frustratingly called “bureaucracy”. An evolved historical legacy meets an explosion of human choice.
Even at the biggest and highest level we witness this dynamic as the governments of the world attempt to meet the historical legacy of carbon with the choice expressed in the Paris Agreement. For corporations, institutions and individuals living under the rule of these governments, the implementation of the choices made in Paris will cause disruption as they interfere with traditional energy patterns and associated cost structures. The evolved historical legacy of carbon is meeting the single, global human choice of Paris. In other words, human choice is being imposed onto the historical legacy that we were given. Choice is being imposed on historical evolution, with resulting disruption.
To sum up then, we began with the Three Horizons Model and imagined branching diagrams in order to think about the possible forces at work inside of H1 and H3. We hypothesised that the forces impelling these changing and colliding patterns were the vast explosion of expressed human choice on one hand, and the historically evolved legacy landscape on the other. The core contention is that, in the complex world of modern human affairs evolution divides, weakens and decoheres, while purpose attracts, strengthens and coheres.
By conceptualising the different forces at work inside of H1 and H3 like this we can give some structure not only to thinking about what is changing, but also about how things are changing and even about why things are changing, albeit at a deep, abstract and even philosophical level.
But what use is that?
Rivers of Change
Seeing disruption as a rising tide of cohering choices meeting a declining tide of diversifying evolution might be an interesting way of looking at things, but that’s not much use if you have real lives and money at stake, real problems to solve, and real decisions to make. For those more interested in managing and navigating disruption, a philosophy, conceptualisation or model of change isn’t much use without at least some indication of how it might be applied in practice.
In order to be practically useful, we must apply this highly abstract and even philosophical model of dynamic change to the real world of business, money, politics, economics, life and human affairs. But that’s a jump too far. What we need is a stepping stone – a way to see and imagine the dynamic flow of an infinitely complex sequence of choices and changes flowing through the patterns outlined above – that we can apply to human affairs. Fortunately, it’s not difficult to find such a stepping-stone analogy, since these patterns resemble nothing so much as a river system.
The declining, dispersing, decohering, dissipating and disappearing H1 brings to mind an old, mature river dispersing into a delta, its force spent. As it reaches sea level and its gradient and gravity disappear the river loses its central, coherent focus, structure, identity and form and branches out, again and again into disconnected complexity, eventually blending into the background noise of the sea. This is the old world, losing its power and coherence, and fading away.
The new world, on the other hand, while less familiar to us, is much more interesting. In our dynamic river model the future H3 is analogous to the early stages of a young, fresh and vibrant river as it comes down from the mountains. Drops become trickles, trickles become streams, streams become rivers, which in turn become bigger rivers until eventually there is one big and unified river. The water is drawn across the topography of the landscape and is animated, organised, formed and focused by gravity. This is where the energy and the future is, so it’s here we want to focus.
Imagine a drop of water, freshly fallen on a mountain slope and about to begin its long journey to the sea. As soon as it lands it feels gravity, pulling it incessantly down the slope. The topography of the landscape guides this movement, as the water unfailing obeys the compulsion of gravity by following the easiest route, without thought or hesitation. Water always knows where to go.
As the water drop tumbles down the mountain slope it meets other water drops. It joins with these drops to form a trickle, all moving together and in the same direction as gravity draws the water downwards within the constraints of the landscape in the most efficient way possible. Trickles become streams, streams become rivers and rivers become larger rivers. Many billions of water drops, each acting independently under the influence of gravity applied over an irregular landscape, come together and become stronger and more powerful. Water effortlessly co-operates.
The secret of water lies in its molecular structure. Two small hydrogen atoms bind tightly to one large oxygen atom, but also bind weakly and intermittently with hydrogen atoms in other water molecules around them. This means that individual water molecules bond and let go, bond and let go, billions of times a second even in a glass of water. Connect and let go, connect and let go, connect and let go – over and over and over again. This is how a water molecule navigates its world under the influence of its gravity, and it is this characteristic that gives water its shapeless and extreme efficiency and ability to flow. Water is infinitely flexible.
A river system is much easier to understand, visualise and think about than an abstract model or deep philosophy of change, and it has the advantage of being dynamic. We can intuitively see and understand how individual water molecules, incessantly connecting and detaching, flow through a landscape under the compelling force of gravity, becoming more united and thus more powerful as they go. Armed with this Perspective we can now starting mapping some of the elements of our deep model of H3 change to the complex reality of modern business, organisational, economic, social, environmental, and other human affairs that we see around us.
There are three variables in our analogy of a river system: the landscape, the gravity and the water itself, each representing an aspect of our more complex, abstract and philosophical model of change. We ourselves, as individual agents, are analogous to the water molecules, flowing through the landscape of modern physical, social and economic reality choice by choice. Purpose is the orientating, cohering and unifying force over both ourselves and our ever-changing landscape. It pulls us, draws us, compels us and attracts us in a particular direction, and draws others in the same direction across the landscape of vast global forces, deep social trends and cold, hard facts. In a world in which everything seems to be turning upside down, purpose is our gravity.
To sum up then, we started with the Three Horizon model of change and speculated on the differences between the internal dynamics of the declining and rising patterns of H1 and H3 respectively. We explained these differences as the emergence of mass, expressed human choice as a force in the world interfering with the legacies and artefacts of historical evolution in disruptive ways. We then added dynamism and simplification to this conceptual model by using the analogy of water, comparing the emerging and future patterns of H3 to a young, fresh and vibrant river system, cohering and increasing in power. Finally, we applied the river system analogy to human affairs, seeing ourselves as water molecules flowing across the landscape of reality under the gravitational influence of our purpose.
Now we’re ready to look for examples in the real world around us.
Creators of Change
One person who seems to know exactly where he’s going is Elon Musk, who’s going to Mars. While I was writing this his SpaceX company launched his car into an elliptical orbit around the Sun that goes out as far as the Asteroid Belt. What passes for the car’s radio is playing David Bowie’s Space Oddity, and there’s a copy of The Hitchhiker’s Guide to the Galaxy in the glovebox, along with a towel and a sign saying ‘Don’t Panic’. Musk’s car will orbit the sun essentially for eternity – a monument to the very beginnings of humanity in space.
The car, of course, is a Tesla, from Musk’s revolutionary and intelligent car company. No doubt it’s powered by batteries from his Gigafactory or panels from his Solar City. And then there’s the Boring Company, who want to build a high-speed subway system for cars (solar-powered, electric cars, of course). Even Musk’s toys are cool and make money. You have to wonder: how does he do all this?
How does Elon Musk start and lead multiple organisations in multiple industries, each producing remarkable results? Why are he and his teams so creative, so focused, and so good at hard, technical, practical problem solving? How does Elon Musk lead others to turn dreams into reality, while satisfying the various markets in which he operates? How does he maintain his focus on the far future and the big picture, while meeting and exceeding expectations in the present? Why is he so good at spotting, capturing, navigating and creating change?
He’ll tell you himself. He looks from the perspective of the biggest of pictures in both space (Mars) and time (climate change), while remaining firmly grounded in science, empiricism, physical reality and the present. He is also firmly grounded in financial reality, but money is only a tool to him and those he leads, not a purpose. Even the development of self-driving cars and deliveries to the ISS are mere milestones towards much greater and grander ambitions: establishing humanity on Mars while preventing its destruction on Earth. Not to talk about it, discuss it, debate it or raise awareness about it. Not to lobby, campaign, urge, suggest or demand it. Not to write reports, papers and books about it, or have meetings, conferences and symposiums about it. But to actually do it, down to the last micron and nanosecond.
That kind of vast, significant and grounded purpose not only attracts the kind of talent that money just can’t buy, but tightly focuses them as well. I would guess that at the heart of research, design and development at SpaceX, Tesla, Boring and all the other Elon Musk enterprises you’ll find open, flexible and highly-focused teams of exceptional individuals. These are superteams of talent drawn together and focused by brave and vastly important common goals far beyond themselves, their company or the coming quarter. Boldly going where no one has gone before.
And it’s not just technical talent that deep, global, significant purpose attracts and focuses. Executives, managers, employees, partners, investors, lenders, shareholders, regulators, customers and potential customers can all feel part of Musk’s overarching mission in some way. That deep, global, important and significant feeling and goal aligns them, orientates them, focuses them, motivates them, connects them and otherwise positively influences them in an almost magnetic direction towards a grand goal that can be reached step by step by step, like an Antarctic explorer drawn to the pole. There’s a lot of interest in and goodwill towards Elon Musk and his various companies.
Musk is an excellent example of purpose-driven leadership and what it can achieve, but he is by no means alone. By thinking, feeling and acting towards a significant, specified purpose beyond your self, group or organisation, you open yourself up to alignment with others who share the same purpose. The bigger and further and more important your purpose is, the more people you can potentially align with. Important, far, big-picture purpose runs deep in people, and people are complex beings, so that alignment can have powerful results. Clear, simple, overarching yet realistic purpose attracts people, drives people, aligns people, focuses people and guides people, allowing them to operate quickly and flexibly in complex ways. Superteams of all sizes need big, deep, far and positive goals in order to flexibly cohere. Money, including share price, just isn’t enough. Neither are votes, for that matter.
Think like water
Our world is changing faster than it ever has before, and the pace of that change is accelerating. Economics, politics, media, work, relationships, business, markets, the environment, the climate and a lot more are changing in front of our eyes. We ourselves are changing. This is not historical change like the rise and fall of dynasties or the invention of the printing press. This is something radically different – something new that has never happened before. There is a quickening. It’s getting faster.
The proximate cause of this accelerating change is, of course, technology. Highly automated systems produce food, products and services unimaginable to our ancestors at prices that are often trivial or non-existant. Innovation expands possibilities with a regularity that is disorientating. Global development, integration and highly efficient distribution means not only new competition but new markets, new threats and opportunities, new weaknesses and strengths. Technology in many forms has changed and is changing our world in many ways. However one new technology stands out for the sheer depth and scale of change that it has unleashed – the internet.
Over half of the population of the world now use the internet and that number is, of course, rising rapidly. Facebook alone has over two billion monthly active users. About ten billion searches are made on Google every day, just one of seven separate properties it owns, each with over one billion active monthly users. As of 2017, global social media use was about two hours and fifteen minutes per day per internet user… and rising. Entire ecosystems of market, social and cultural minnows exist around and even inside the tech giants, all with their own customers, audience, supporters and constituents. The internet is much more than an economy influencing $2.1 trillion in sales. It’s where humans increasingly live. Human attention is quickly flowing online.
As disorientating as this dramatic shift can be, we can easily see where it’s heading. Since the planet and its population are finite, we’re clearly on the road to a situation in which for all practical purposes everyone is on the internet. And, since time moves on, eventually everyone will be a digital native, having known nothing else. Not all of life will be lived online, but much of it will. And it is there that we will do much of our business and, informed by the world, make many of our choices. The end point of internet development is surely one global, interconnected network of human minds, feelings and perspectives – an arena of almost infinitely available and rapidly expanding knowledge, connection and choice.
We are already living in such a world of global, interconnected hyper-choice, the potential of which is limited only by the human imagination. Although virtual, ethereal and somewhat unreal, what happens on the internet has very real effects and consequences, including for your industry, market, interest or niche. Adapting to this deep and fundamental change is not easy, even for those who have lived their entire lives in the midst of it. But it’s not as if we have a choice – we have to navigate through it. So here are some practical lessons we might draw from the river perspective of change:
1. Be flexible. All change, any change, essentially involves something new and something old. There are, of course, many old ideas, practices and perspectives that have come from the past, that are no longer fit for the present, and that we have to let go of. And there are many new, interesting and exciting ideas, practices and perspectives growing rapidly in many spheres. We must pick and choose as best we can.
But people are different. In a global interconnected network of human beings with few barriers, the rules of human interaction are different. No longer constrained by geography, spectrum, social class or other limiting factors, people have become free to follow, interact with, and associate with whomever they like. In such a world, mutual attraction is the connection that leads to action. Whether a giant corporation or a lone individual, if I don’t like you, or if I get the feeling that you don’t like me or care about me or value what I value… then we have a problem. And since we don’t like problems, we move on. But if I like you, and you like me, then we can do something together and make something happen, maybe business. For this to happen, we first have to attract each other. And that means being open.
We cannot attract unless we are seen. Transparency, authenticity, openness and honesty allow others to know us more deeply and thus connect at a deeper level. If you want to get the best talent, employees, partners, investors, and to come to you, then you have to show them who you are. This involves vulnerability and trust and these, of course, have limits. But the deeper you reveal yourself, the deeper the connections you will attract.
Connect and let go. Connect and let go. Connect and let go. Like an orangutan swinging through the forest from vine to vine, we navigate our social and business lives individual by individual, person by person. We repel some, attract others and have no influence on many. It’s the ones we attract that are important. And it’s the ones from that subset that we are also attracted to that are really important. These are the ones you will be working with, in whatever it is you are trying to do.
So be flexible, and let your people be flexible. Open yourself to others and encourage your people to do the same. Manage for this flexibility. Design for this flexibility. Promote this flexibility. Remove barriers to this flexibility. Attract, connect, interact and let go. Attach and detach. Flow like water.
2. Feel your purpose. You can’t feel your purpose if you don’t know your purpose. If, like Elon Musk, you already and clearly know your purpose, then that is good and good luck to you. But if you’re still looking, then here’s some advice:
Whatever your purpose is it must be vast, significant and at least partly achievable if it is to meaningfully connect you with others. The bigger your purpose is, the more people are drawn to it and the more potential connections and allies you have. The deeper and more significant that purpose is, the more powerful the impelling force behind it. The strongest purpose is one that is far and deep, big and important, serious and meaningful, challenging but possible.
Big, important, audacious but possible purpose is powerfully attractive but it’s useless without specific goals, plans and action, and most people know that. Talk and words never changed anything by themselves without firm decisions, realistic plans and concrete actions to make something happen. While vague talk of values, intentions or imperatives might be temporarily attractive, purpose and the people who associate with that purpose focus around real, ambitious but achievable goals. Goals make purpose real.
Once you know your purpose and have a clear goal in front of you, it’s difficult to think of anything else. Such purpose gives the meaning to what you do, entices you to go further, and keeps you going when all hope seems gone. Clear, focused, important, deep purpose not only orientates you in a world of ever-expanding and mostly frivolous options, potentials, possibilities and choice, but it does so by pulling you, drawing you and compelling you. Focused purpose expressed in effective action motivates teams like nothing else. It is emotional, it is deep, it is spiritual, and it focuses and develops creativity itself. Our purpose is the gravity that causes us to flow and that orientates us. You know it when you feel it.
3. Know your landscape. This is your reality – the totality of everything you comprehend, especially things related to your business, interests or purpose. And it starts with your data. Whatever your market, industry, interest, agenda or niche, you won’t be short of data about it, especially if you collect and produce it yourself. But precision is not accuracy, interpretations are not reality, and the potential for bias is high. Not everything important is quantifiable and some of the most significant details lie hidden in the aggregates. Some of the most important aspects of your landscape are not contained in your data, however much of it you have. These are usually the parts that involve people.
All decisions, all choices, all preferences are ultimately made by human beings. Talent, employees, partners, investors, clients and customers are all people before they are anything else, and each has her or his own unique perspective, including about you, your company, your cause, your market and anything else you might be interested in. The only way to accurately discover this perspective is to actually talk to these people, in a relaxed setting and in an open, honest, equal and informal way. If you ask them they’ll tell you, but you have to ask in a way that suits and respects them. Humility helps. So does patience.
Finally, your knowledge of your landscape must include a planetary perspective. Whatever the immediate details of and issues in your own particular area, market or niche, and whatever your ultimate purpose is, you’re not going to win by going against global facts, universal trends and unstoppable forces. These are the unalterable mountains of our landscape that we must all accept. In particular there are two absolute boundaries through which we must navigate – the twin boundaries of environmental and social sustainability illustrated so well by Kate Raworth in her conceptualisation of the Doughnut. Whatever your long term purpose, if it’s outside of either of those two boundaries then, one way or another, it’s not going to happen.
It’s easy to look around the world today and lose hope. The lives of many of us are increasingly stressful and difficult, even some billionaires worry about ever-growing inequality, and the permanent catastrophe of runaway climate change hangs like a shadow over everything we do. Donald Trump is in the White House, Britain is leaving the EU, and the seas are choked with plastic. It’s easy to lose heart and to slip into the uselessness of despair, cynicism and apathy.
But there are real and solid reasons for hope. Don’t forget, H3 is much less familiar to us than HI. The dominant H1 is in front of our faces – on the TV, on major news sites in polite conversations, and everywhere else. In contrast, we have to look for H3. The good news is that when we do, we see signs of H3 coherence everywhere. The internet is bringing people together, and it’s not doing this randomly.
We need purpose. We crave purpose. We want to work together to do important things. We yearn to belong. We love to feel useful and valued, and part of something bigger, greater and more important than our selves. It fills an important part of us. People are connecting as never before, and these connections are not stochastic or random. They are chosen by human beings and thus they are biased towards purpose.
There are stormy waters ahead, and things are going to get stranger before they settle down. There is much historical baggage to let go of, and not all of it will go quietly. There is a lot of novelty that will not last. There is great danger in the not so far future, for us all. Whether you are a large legacy organisation or a nimble independent millennial, it will not be easy.
But if you know and understand the world you are in to the best of your ability; and if you feel your purpose and know why you do what you do; and if you are willing to open yourself to the new and to let go of the old, then you will be OK. Whatever happens, you’ll know exactly what to do.
Know your landscape. Feel your purpose. Connect and let go, again and again and again. Think like water.
If you, your group or your organisation are surveying your landscape, developing your purpose, or otherwise seeking to connect and cohere I am available for consulting, freelancing and other hire. My full CV/resume is available here, my personal narrative (including an account of my explorations in economics) is available here, and I can be contacted here.
I am also seeking funding, sponsorship and support to enable me to independently continue my work and expand my reach. If you see value in what I am doing and would like to contribute, you can do so by making a one-off donation via PayPal, or by establishing a recurring sponsorship via Patreon.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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”.
Did 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.
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.
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!
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.
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.