Prologue
“I am inclined to think that neither the stereotyped conservative nor radical conceptions of capitalism shed light on the economic and political reality that surrounds us”.– Robert L.Heilbroner[1]It seems that Utopia has grown unfashionable of late – perhaps because, as social and ecological woes continue to escalate, it looks an ever less likely destination. Whatever the reason, we are increasingly exhorted to eschew idealistic utopianism, and embrace hard-nosed realism. The world ‘is’ as it ‘is’, we are told (redundantly), and we must work within that reality, find solutions that improve current arrangements without attempting wholesale change. Yes, of course, we have problems, but history has clearly left us with the most practical, the most successful, the very best set of systems and institutions for progress and achievement, so any proposal of an alternative to the status quo must not only reek of simple-minded idealism and/or hubristic utopianism, but necessarily suffer undermining flaws that render it inferior. No, we need – at most – only realistic incremental change, not idealistic and impossible transformation.
I don’t buy any of that for a moment. Proceeding on the basis that we just need to tweak things a bit to make everything all right, while ignoring the inherent contradictions and destabilising, unsustainable, problem-causing dynamics of current arrangements, is not realistic at all – it seems more like denial. Similarly, idealism not realism best describes the assumption that the status quo represents a superior, even optimal, system, rather than a flawed, problematic, cumulatively accrued, almost accidental outcome of various historical processes – one among numerous possibilities.
This book attempts a realistic appraisal of the causes of the major problems besetting modern civilisation: it explains how they arise unavoidably – or, in some cases, all but unavoidably - from the inherent dynamics of our economic system, and why they cannot be adequately addressed without fundamentally changing that system. Incremental change within the straitjacket of continuing the status quo offers only futility, disappointment, and more of the same problems. Instead, we need to design a better economic system, one able to avoid the present’s failings. The attempt I make will almost certainly be criticised as utopian or idealistic. Of course, any proposal faces difficulties of implementation, and these have to be assessed, but rejecting alternatives out of hand – by simplistic labelling – without fully considering them or why the inbuilt flaws of the status quo make them so desperately needed, misses the point entirely.
The first version of this book was completed after six years of private study in 1995, but rejection by publishers and the onset of parenthood left it unpublished and indeed unknown to any but myself and close friends. Although the book was left to languish, not so its ideas – I have contemplated them frequently, and gradually (I hope) improved them.
In this revised version (completed in 2011, then updated minimally in 2020), the original material has been trimmed but the central ideas have been retained, developed and refined. I have also retained most of the references used in the original version, adding only a few more recent citations for occasional support or clarification. Alas, while much has happened since 1995, the theory, practice, substance and intent of economics and politics have barely altered – the names may have changed, but the game remains the same. Indeed, the various crashes, crises, busts and debacles since 1995, as well as the orthodox responses to them, follow the same patterns as those that preceded them, even if additional layers of creative complexity have been added. So nothing of significance has occurred to alter my original analyses and proposals, only to confirm them.
The book has two parts: the first critiques competitive profit-based market economies, the second mostly concerns proposals for a cooperative alternative economic system without profit or interest, but begins with a brief critique of modern democracy and a proposal for replacing it with a pluralist participatory version.[2]
Part one explains how market economies function, and how economic ‘science’ misconceives it, with particular emphasis on the distortions caused by, and ramifications of pursuing, profit. Because the forest can so easily be lost for the trees, each chapter of part one begins with an ‘executive summary’, the counterpart for all of part one being as follows…
By adopting many unrealistic assumptions, neoclassical economists have claimed that market prices function as accurate signals which ensure the most efficient use of resources and the most optimal of all possible economic outcomes, including ‘full’ employment and trickle-down income equalisation. But even putting aside the unrealistic assumptions, this ignores the inherent inaccuracy of prices… their exclusion of many relevant costs (such as ecological, social, government)… their inclusion of many other unwarranted costs (mostly waste and excess)… the delusional manipulations of financial flows which cause money to be mistaken for real wealth… and how the pursuit of profit causes work of great need to be ignored unless it looks lucrative. Because of all this, and because the unrealistic assumptions do not hold (as even a few economists admit), prices need not function as accurate or even meaningful market signals, resources need not be used efficiently, and outcomes need not prove optimal – the ‘market’ need not provide the best solution. Instead, market competition usually misleads, wastes time and energy, creates unnecessary work, ensures instability, guarantees loss for some, ignores and aggravates the needs of the poor and the environment, futilely pursues continual expansion, and leads to many other inefficient unwelcome outcomes. Indeed, the ecological and social problems besetting the world can all be traced back as mostly unavoidable symptoms of the real problem: market competition for profits.
The five chapters of part one spell out the details. Chapter 1 begins with an overview of doom-laden claims and optimistic counter-claims about widespread ecological and social damage. To better comprehend how such opposing views can co-exist, various barriers to human understanding are discussed. With these in mind, it becomes apparent that each side of the debate usually ignores or else blithely assumes the indefinitely continued if not expanded functioning of competitive market economies. Accepting as very real the symptoms of ecological and social damage, they are assessed as incapable of being properly addressed without focussing on the underlying disease of market competition. An overview of market competition demonstrates that not only does it depend on and compel the impossibility of continuous economic growth, associated rising debt, and ever more work, but it also inevitably fosters poverty and inequality, and generally causes rampant ecological degradation. Competition for profits also ensures loss for some players sooner or later, and incessant instability. Loss cannot be avoided, not even by steadily increasing debt (because interest functions as another form of profit) or by economic growth (which only provides more of the same) – at best, loss can only be diverted by exports and government spending, or delayed by credit.
Chapter 2 begins a more detailed examination of market competition by first explaining how prices cover costs of waste, duplication, ego gratification and high living, yet do not include considerable social and ecological costs, nor take into account the direct and indirect savings to businesses that result from work done outside the official market economy, or the public-funded bailouts, subsidies and other assistance provided by governments – overlooked factors which sometimes exceed reported profits. Attention is then given to how a plethora of unrealistic assumptions are required for economic theory to treat prices as being set by the ‘Law’ of Supply and Demand, and to conclude that, when markets are left to regulate themselves, prices function as accurate and meaningful market ‘signals’ which lead to ‘optimal’ prices and outcomes, efficient use of resources, and trickle-down wealth creation. Rejecting the unrealistic assumptions forces the conclusion that market competition resembles a lottery, with success not necessarily following from efficiency, discipline, skill, or any other advantage, nor failure from their lack, and with no guarantee of even efficient let alone optimal prices, outcomes, resource allocation, or trickle-down wealth creation.
Chapter 3 examines the difficult task facing economic ‘science’ and the extent to which it fails. Attention is first given to how economic activity depends on too many subjective evaluations to expect predictable behaviour bound by rigid ‘laws’, how economists can only posit ‘laws’ after making overly restrictive assumptions that leave out significant details, and how those laws are generally based on explicit or implicit assumptions which rest on value judgements about goals and ends that support the status quo (in particular, the assumption that ‘optimal’ outcomes follow if markets are left to themselves). Even worse, economists generally fail to treat their assumptions as working propositions capable of refutation, but instead defend them against all contrary evidence, tweaking models as necessary to retain the assumptions. This is exemplified by two fundamental economic models – optimisation and equilibrium – as well as the standard treatment of international trade, and the underlying assumption of scarcity. The poor predictive powers of orthodox economics is also detailed, before the chapter concludes with an explanation of why, when economists call for ‘sustainable development’, most really mean the oxymoron of sustainable growth – a hopeless attempt to run in two different directions at once.
Chapter 4 explains how money further destabilises and undermines market competition. A brief historical overview of the many forms money has taken makes obvious how its successful functioning requires widespread agreement or belief – but, too often, money is confused with wealth, which further corrupts the market’s flawed price signals, encouraging even less optimal results including the frittering away of energies on money-making yet wealth-destroying goals. The mere symbol of wealth takes over the game and becomes its end rather than its means, with ownership allowing, and competition compelling, the charging of interest for borrowing money – but, as a consequence, lending is restricted to ventures expected to make profits, not efforts that satisfy more pressing needs, such as homes for the homeless. Confused beliefs also lead to financial practices that can look like sleight-of-hand or, particularly regarding banks and speculative markets, like delusion, with money conjured out of thin air, incessantly being bet upon, for and against, its value constantly shifting based on perceptions. The constant turmoil of our confused monetary beliefs also lead naturally to frequent and often undesirable changes to the prices assigned to real wealth, their inherent inaccuracies and flawed functioning as market signals corrupted further by inflation.
Chapter 5 looks at the ‘macro’ effects of market competition, beginning with how the compulsion to grow motivates the creation of an endless amount of frequently unnecessary, often counter-productive, even self-destructive activity: only about thirty percent of paid work in modern economies produces real wealth, while forty percent cleans up the mess made by the rest. And yet, despite their compulsive need to grow, and the efforts made to try to ensure this, market economies periodically contract into recession, casting many participants aside in the wake. Indeed, business cycles of boom and bust cannot be avoided as long as we compete economically. Governments try to play the role of the market’s fuse-like optimiser, going to considerable lengths to keep them growing, but they frequently fail because they remain part of the market, inextricably tied to the private sector by mutual self-interest, and because the regulatory methods they use – fiscal and monetary regulation of aggregate demand – not only have little suitability for the task, but also require a series of often contradictory juggling acts. The chapter concludes by reiterating that economic competition has no way of avoiding its unwelcome outcomes, because they follow irrevocably from its game rules. As a result, despite claims of orthodox economic theory, market economies do not involve equilibrium and have no neat circular flow. Instead, their interdependent parts engage in a perpetual contest to direct onto themselves as much as possible of a complex and turbulent, yet coagulated, eddy-filled flow of liquidity – a contest which invariably leaves some fully immersed if not drowning but others bone dry.
Part two proposes a new economic system, and a better form of democracy. Chapter 6 briefly describes the failings of modern democracy, and why it needs replacement with a properly functioning system capable of allowing the economic proposals to be used to their full potential, before detailing a decentralised and participatory version of democracy. Chapter 7 sets out the economic proposals, while chapter 8 looks at some additional options available if both the economic and political proposals are adopted. The final chapter considers the practicality of all proposals, first summarising their pros and cons, then discussing what motivates and facilitates widespread social change, and the resistance likely to be met in moving from our competitive growth-based present to the proposed future, before finally offering a few ideas on navigating a transition.
Understanding the proposals of part two probably won’t be easy because they will almost certainly seem alien. One read of them might allow the parts to be understood, but probably a second read (or more) will be required to see the big picture to which the parts sum. With that in mind, the main features of the proposed economic and political system, which I call ‘a free lunch’, can be broadly summarised as:
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A decentralised, self-governing, pluralist, participatory, bottom-up political structure called ‘plurocracy’, underpinned by small self-governing electorates arranged into progressively larger associations, whose decisions require the majority agreement of constituent groups for any proposal that would impact them. ‘Representatives’ with mostly delegated coordinative roles, subject to permanent electronic elections. Each electorate with the right to secede from any ‘parent’ group.
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Decentralised economic arrangements based on plurocratic nomination of work requirements, wages, and prices that reflect need not money-backed demand.
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‘Cost And Price Equalisation’ (CAPE) to ensure balance between total prices of all goods and total costs of all wages. Avoidance of business cycles and protection of purchasing power by periodic adjustment via CAPE of all prices, by the same proportion as changes to average working hours and total costs caused by altered productivity and/or consumption.
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People paid for hours expected to be needed, even if improving productivity and working less, thus allowing the saving of work without fear of losing income. Consequently, an eventual (within a decade or so) one-day working week.
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Free land, housing, and fixed capital – stewarded (not owned) by local residents and workers, instead of distant corporations and owners, leading to greater ecological care. No rent.
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‘Public’ expenditure and construction costs of houses and fixed capital ‘absorbed’ into prices of consumables; likewise for free or discounted essentials such as staple food, basic clothing, health care, education, or anything plurocratically deemed appropriate.
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Foreign trade without balance of payments problems via an international account-money based on ‘labour standard’ currencies.
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Discounted exporting of appropriate technology from rich to poor nations.
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No profit, interest, debt, financial speculation, direct taxation, or unwanted unemployment; no possibility of losing savings and retirement funds.
Although many of the proposals have few if any precedents (those known to me are indicated as the proposals are explained), even the most original have been heavily influenced by ideas from other aberrant – sometimes flawed – thinkers, such as Henry George’s single tax,[3] Silvio Gesell’s Free-Money[4] (money that loses a thousandth of its printed value per week), C.H.Douglas’s national dividend,[5] even Milton Friedman’s negative income tax,[6] and Robert Anton Wilson’s various eclectic proposals based on all of the above.[7]
In the years since the first draft of this book was completed, I’ve also found two other independent and very detailed proposals that have many parallels with each other and with my ideas, such as the absence of profit and interest, and a reliance on participatory decision-making and planning (they also have enough differences to lead to vigorous debates between proponents). Although each has its own idiosyncrasies, emphases, and justifications, both Participatory Economics[8] and Inclusive Democracy,[9] like my own proposals, aim to provide workable alternatives to market economies. However, both go beyond my proposals by rejecting money itself, instead advocating ‘personalised vouchers’ (or ‘credit points’) that serve a similar role as money but with the important distinction that they cannot be exchanged more than once (in contrast, section 7.8 below suggests retaining money in a familiar form, but defines it and its usage in ways that should avoid its long associated pitfalls).
A thorough explanation or critique of either Participatory Economics or Inclusive Democracy is not within the scope of this book, but although both have much more to recommend than to fault, I will briefly mention what I see as their main weaknesses. To me, Participatory Economics has unnecessary and to some extent impractical complexity, particularly in regard to its ‘job-complexes’; and although it has begun to incorporate ideas about political reform, they seem to have been welded onto it as an afterthought. In contrast, Inclusive Democracy’s ideas about returning decision-making and power to ‘the people’ serve as the bedrock for all of its proposals and seem far better considered than the counterparts of Participatory Economics, although the structure of the proposed political system seems less rigorous and complete than my own proposals; however, Inclusive Democracy’s approaches to setting prices and wages and dealing with exchange via what it calls an ‘artificial market’, although fairly consistent with my own approach, look perhaps unnecessarily complex and may lack enough flexibility to work properly. The transitions required for both systems, at least economically, also seem more immense than that of my own proposals, which I believe provide greater capacity for a gradual but brief shift, and therefore a less alienating, more accessible alternative.
Remarkably, both Participatory Economics and Inclusive Democracy were first proposed in the same decade as I developed my own ideas – the 1990s.[10] Three independent proposals with so much in common being developed more or less simultaneously may suggest that very few options exist for alternative economic-political systems, or else none of us have imaginations up to the task. Nevertheless, I can’t help but wonder if some combination of the best ideas from all three proposals might provide the ideal approach for arranging a better and distinctively different future…
 Contents
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Part 1 |