THE NEW ECONOMY;

For The Simpler Way.

31.1.07

The critical analysis of the present economy given in The Economic System: A Radical Critique, (TESARC) argued that there is no possibility of achieving a sustainable and just society without huge and radical change from the present economy.

A summary of the difference.

In the present economy we all compete against each other to take as much wealth as possible. A very few end up getting most of the wealth, and the power to decide what will be produced. They decide this solely in terms of what will most enrich themselves. Thus many urgent needs are ignored. There is pursuit of limitless increase in wealth; i.e., economic growth is the supreme goal.

In a satisfactory economy we would apply the available productive capacity to giving to all the highest possible quality of life. This means economies must be mostly small, localised, basically cooperative, and under social control --- and there must be no growth.

The principles.

What do we want from an economic system?

· It should provide all with sufficient basic goods and services for a comfortable and pleasant material, social and cultural lifestyle.

· There must be no economic growth. We are already beyond sustainable levels of production and consumption.

· So lifestyles must be relatively frugal and self-sufficient. The goal cannot be affluent or luxurious lifestyles. The planet cannot sustain that.

· There must be economic justice; i.e., a reasonable level of equality with no one deprived of necessities for a good life.

· The basic unit must be the small, highly self-sufficient localised economy. There can be a role for (much reduced) national and international economies, but for ecological and resource reasons there cannot be a globalised economy. All sectors, household, suburban, town, regional and national must be as self-sufficient as they can.

· Thus there must be much social regulation and planning of economic affairs, infringing as little as possible on important freedoms. Market forces cannot be important determinants of economic activity.

· The social control can and should be exercised via participatory local assemblies, not via a centralised, authoritarian and bureaucratic state.

· The criteria determining economic processes and decisions must include all factors which affect the quality of life and eco-systems; i.e., justice, morality, ecological sustainability and social cohesion, and therefore to include far more than what will maximise business profits, incomes and GDP.

· There must be a high level of cooperation, collectivism and mutuality. The basic philosophy cannot be Liberalism. It is not acceptable that the most energetic and gifted can be free to get as rich as possible without limit, taking wealth others need. (However there can also be much individual freedom.)

· We would go directly to appropriate development. The indiscriminate, eventual trickle down approach is not acceptable. It allows productive capacity to go into producing mostly things that are not very important and which mostly enrich the rich. We would focus first on what most needs doing.

· None of this is possible without enormous value change. People must want to be collectivist, to give, to see their community thrive and to live in materially simple ways. The economy of The Simper Way cannot work without active, responsible citizens. The situation will encourage and reward citizenship.

The slow transition

The following ways are very different to those we have today so it is important to see them as long term goals to which we might move fairly slowly and in small steps. The main concern in this document is not how we might get there, but where we have to try to eventually be.

Contents:

1. FAR LESS PRODUCTION AND CONSUMPTION AND NO

GROWTH.

2. MOSTLY SMALL, LOCAL, HIGHLY SELF-SUFFICIENT

ECONOMIES.

3. SOCIAL CONTROL OF THE ECONOMY;

NOT DRIVEN BY MARKET FORCES.

4. MOSTLY COOPERATIVE SYSTEMS

5. THE LARGE MONEY-LESS DOMAIN; "FREE GOODS"

6. THE REMAINDER OF THE ECONOMY.

7. THE LONG TERM FUTURE?

8. MONITORING, MEASURES.

9. MONEY, FINANCE, CAPITAL

10. SOME OTHER ISSUES

11. ECONOMIC THEORY

1. FAR LESS PRODUCTION AND CONSUMPTION

AND NO GROWTH.

The most important fault in the present society is the fact that levels of production, consumption, affluent living standards economic output are far beyond sustainable levels (For the detail see TESARC andThe Limits to Growth.) This is the major cause of the big global problems and a sustainable society is not possible unless we cut the resulting levels of resource use and environmental impact to perhaps 10% of the present rates. Most people fail to grasp the magnitude of the overshoot. A number of very important implications follow from an understanding of this basic point, especially the fact that a sustainable society cannot have affluent “living standards and it cannot have economic growth.

Living standards cannot be affluent.

In view of the limits to growth analysis (See, TLG) a sustainable society cannot possibly be an affluent or consumer society. We might have to live on per capita resource use rates that are around 10% of today's rich world levels. This does not mean hardship or deprivation. It means being content with what is sufficient for a high quality of life, deriving life satisfaction from other things than consuming, e.g., from community activities, arts and crafts, gardening and personal development. Many sources of satisfaction can be found in living more simply, communally and self-sufficiently and indeed the quality of life can be higher than in consumer society. (See TSW: Rewards.)

We will move from the “maximiser – taker” mentality with its focus on “efficiency” and having the best, to a concern with effectiveness and sufficiency, where we will be content with products and services that are good enough. We will not expect the best or the most expensive or luxurious things. However most of our goods and services will probably be of much higher quality than we get from the supermarket. They will be well-made by people we know and who enjoy doing good work They will be designed to last and to be repairable. Today almost no goods are made to last or to be repaired. For instance furniture is usually flimsy and shoddy, the buttons and cases on electronic items break down, cars have no bumper bars. Our new local firms will therefore mostly produce goods with lower lifetime dollar costs, as well as very low resource and ecological costs.

Far less work and production will take place.

In consumer society there is a vast amount of more or less unnecessary production going into things like advertising, packaging, transport, construction, cosmetics, waste disposal, sewage disposal, shipping, insurance, junking shoddy goods that don’t last and can’t be repaired, roads and freeways, unemployment agencies, and provision of "welfare" for people who crack up and become mentally ill or take to alcohol or drugs. We will eliminate much of this. We will need far less aged care, financial advice, paid entertainment, professional government, health care, professionals and car repairs. We will save billions by not having to produce arms any more!

In addition many of the things we do need will be produced in far less resource-expensive ways, for example we will not need to produce trucks to bring food to cities. There will be far less government. There will be much less crime and therefore less need for courts and prisons. Far fewer people will break down so we will need far less counselling, medical treatment and "welfare".

Many shops would open only two or three days a week. If you need a pair of shoes you might get them on Tuesday or Saturday. In familiar neighbourhoods some shops and local firms might operate without shop assistants, via stalls where you serve yourself, further reducing the amount of work that needs doing.

All this means that at present we work about three times too hard. In the new economy the GDP will be a small fraction of the present size. Deciding what not to produce might be difficult but will be worked out via participatory community discussions (see below.) Remember that people will understand that sustainability requires large reductions in production and consumption, and they will have other sources of satisfaction than consuming, so reducing the economy will not be as difficult as it might seem at first.

The average monetary income per person would be much lower than it is now, people would be far less wealthy in conventional dollar terms, but the quality of life of all could be far higher than the average now. One will need very little money to live well in The Simpler Way.

Reducing the GDP does not mean that the “living standards” of the poorest must sink even lower than they are now. The quality of life people experience does not have to be connected to their income or to the GDP. The solution is not primarily to do with redistribution of income. There would not have to be a high level of equality in income or monetary terms, because these would not affect the quality of life much. The goal must be to give all people access to all the things that make a high quality of life possible regardless of income, such as community workshops, festivals, free fruit from the commons, a livelihood involving worthwhile work, great concerts, skilled artists, a caring community and a leisure-rich environment.

Fewer models.

In many fields we would work out what is the minimum number of models that makes sense, e.g., for cars. (Why is there any need for more than two kinds of soap, a block and liquid, and one kind of sock for men?!) However at the level of small firms within the town there could be a very wide range of items produced by family businesses, for example as our local shop enjoys making up many different jam recipes.

No advertising or marketing!

We will save astronomical amounts of money, energy and time by having the sense to eliminate marketing. That is, no effort will be made to persuade anyone to buy anything. There will of course be an important place for providing information on goods that are available, and especially on new items. All of this can be done much more effectively than the present $550 billion global marketing industry does it, simply by the use of computers. If you want to buy a new fridge you should be able to look up comprehensive, accurate, succinct and critical information on the types available. There could be useful segments within news publications introducing valuable new products recently developed.

As we move towards The Simpler Way the need for firms to compete via advertising will diminish. We will in time get to the situation where our town or region has just enough bakeries etc to meet its needs and they are kept effective by means other than deadly competition for limited sales (below.)

Only one or two days a week working for money!

When we eliminate all that unnecessary production, and shift much of the remainder to backyards, local small business and cooperatives, and into the non-cash sector of the economy, most of us will have little need to go to work for money in an office or a mass production factory. In other words it will become possible to live well on a very low cash income earned by only one or two days paid work per week. We could spend the other five or six days working/playing around the neighbourhood doing many varied and interesting and useful things everyday. You could choose to work for money five days a week, if for instance you were a specialist doctor. You would earn more money, but you would need to buy more whereas others would be getting more things in exchanges that did not involve money.

No growth!

Absolutely crucial for a sustainable world is a zero-growth or steady-state economy. (SSee The Limits to Growth.) There must be no economic growth. The amount being produced is already far beyond sustainable levels. We would produce only as much as was needed to provide all with a good quality of life. In fact we would be always looking for ways of reducing the amount of work and resource use.

Few big firms or transnational corporations would be needed.

The general principle will be to make productive units as small as we can and to locate them in as many small areas as possible, to minimise transport distances, travel to work, and distribution systems. Most things can be made very efficiently on a small scale, especially when we take into account the increase in morale that can come in small cooperative firms mostly serving their locality.

Those large enterprises that are appropriate, such as steel works, railway equipment and buses would best be owned and run by society as a whole, to provide basic materials and services to society. The boards of bigger firms would represent stakeholders (as distinct from only shareholders), including its workers, customers and neighbours.

The craft mode of production

Many things would be produced in very small firms, in craft ways. The main reason for this is that craft production is enjoyable. Remember that the volume of production in a frugal steady-state economy would be much lower than it is now, so people who love making pottery, furniture, clothing, toys etc. might provide all we need via hobby-produced, hand-made items. Production of things like crockery and furniture would have to do little more than replace breakages and wear. Of course it would make sense for some things to be mass produced in factories.

The greatly reduced economy

The total amount of producing and consuming going on in the new economy will be a small fraction of the amount in the present economy. Many luxurious, wasteful and avoidable things will not be produced; some whole industries will be eliminated, e.g., sports car production and motor racing. Some essentials will be produced in much less resource-0intensive ways, e.g., food. This will mean that the amount of resources available for important things such as medical research and cultural activities could actually be much greater than at present.

2. MOSTLY SMALL, LOCAL, HIGHLY

SELF-SUFFICIENT ECONOMIES.

In a world of scarce resources, especially fuel for transport, we will have no choice but to produce most of the things we need in and around our towns and neighbourhoods. Relatively few goods will travel significant distances, because there will not be the energy and resources for that. This means the end of globalisation. A sustainable economy for all the world’s people cannot be a globalised economy.

.

Economic self-sufficiency should be seen in terms of concentric circles. In the centre will be the most important economic and social unit of all, the highly productive and self-sufficient household. This will be more important in most people’s lives than their “career”. Outside this will be the neighbourhood, then the suburb or town where less frequently needed goods and services will be available, e.g., doctors. Then the town’s surrounding area will contain a dairy, timber plantations, grain and grazing lands, and some of the factories that would supply into the surrounding region, e.g., for fridges and radios. Some of these items would be exported out of the region. Much less will come from the state and national economic sectors, and very little from overseas, perhaps things like some high tech medical or computer equipment.

So the basic economic unit will be the local economy, the suburb or town. Most of the things we need in our everyday life will come from at most a few kilometres around where we live. Most of us will get to work on foot or on a bike, although a few will go a little further, in buses or trains. Because we will need very little transport many roads will be dug up increasing space in cities for local gardens, orchards and forests.

One of the (overlapping) sector of the new economy would still use money. In another market forces might be allowed to operate (although in the long term future we would not need the market; see below.) One sector would be fully planned and under participatory social control. One would be run by cooperatives. One large sector would not involve money. It would include household production, barter, mutual aid, working bees, cooperatives, gifts, i.e., just giving away surpluses, and the totally free goods from the commons, e.g., public orchards, clay pits, herb patches and woodlots. As many of these as possible would be crammed into neighbourhoods and towns and just outside them, run by working bees and committees, to provide a wide range of important goods and services, including fruit, nuts, timber, herbs, reeds, meadows, honey, premises, store sheds, meeting places, libraries, and especially neighbourhood workshops.

Many of our firms will produce at higher dollar cost than we would have to pay at the supermarket. They could not beat the transnational corporations which have mass production economies of scale, can import the cheapest goods and can exploit cheap third world labour. But the resource and ecological costs are extremely high and will not be affordable in a sustainable world. For example it will not be possible to have food items travelling on average 2000 km. We will have to pay much more for some things but this will not be important because we will not need to earn or spend much money and we will understand why it is desirable to pay the higher cost. One reason will be because we know that when we pay more for the hand-made chair we are helping to keep the town’s carpenters in their livelihoods. If some of them leave town there will be fewer pe9ople for working bees and concerts.

Taxes.

The main form of tax payment would be giving time to the working bees which build and maintain town infrastructures and provide se4rvices. Only a little tax in the form of money would be needed to pa7 for imported inputs for town systems.

Most tax would be levied and spent locally, i.e., not via the national government. Towns would work out their own arrangements whereby individuals might pay some or all their tax through extra contributions to working bees. Some communities would also have voluntary taxes, i.e., those who think a proposed project would be desirable contribute to it, others might support some other project some other time.

3. SOCIAL CONTROL OF THE ECONOMY;

NOT DRIVEN BY MARKET FORCES.

We cannot have a satisfactory economy unless we make sure that what is produced is what should be produced, that people have their needs met, that social cohesion and morale are kept in excellent condition, that the environment is cared for, and that the right things are developed. A free enterprise or capitalist economy will not do these things. Markets ignore need. They allocate scarce things to the rich and do not develop the most needed industries. (See TES

ARC.) Desirable outcomes are not possible unless there is much social control over the economy, i.e., careful discussion, deliberate, rational decision making and regulation.

Obviously these assertions contradict currently taken for granted conventional economic doctrine. They set a number of difficult theoretical issues that will be discussed below, e.g., "Haven't we learned that economic planning can't replace the market? " In the past we have not been very good at running economies without market forces but we must now master the process. It will be argued that the control and planning can be exercised through our open and participatory local assemblies, not state bureaucracies, and that the task will be made much simpler by the fact that the economy will be much less complex and will not be growing .

All relevant factors will therefore be taken into account.

Some of the worst aspects of the present economy are due to the fact that only one factor is taken into account in economic issues and decisions, ie., whatever will maximise monetary benefits. This is totally unacceptable. Millions of people die every year because the provision of food and water is determined not by whether or not they need these things but by what will maximise the profits of those who supply them. In a satisfactory economy whether or not something should be produced and who is to get it should take into account considerations of morality, social cohesion, justice, rights, needs and ecological sustainability, and all of these considerations should take precedence over whether profit can be made. By allowing market forces and profit maximisation to settle issues, this economy allows producers to completely ignore all these other important factors, and therefore to ignore the many of the costs of production. The cost of the noise from the factory therefore has to be paid by someone else. What's more, most of the most relevant considerations cannot be measured in dollars, so weighing costs and benefits and providing the right trade-offs can be only be done by deliberate, messy, social decision making.

How will we exercise the control?

Few if any of us would want the social control and regulation of the economy to be exercised by big, authoritarian, centralised state bureaucracies, but that is avoidable. A sustainable society in a world of very limited resources will have to be made up of many small and highly self-sufficient community economies. These will have to be run by participatory democracies – they can’t be run any other way. They will not make viable decisions unless the people familiar with that situation, and who will have to make the decisions work, are the ones who make it.. There will be few paid bureaucrats or councils, because in a world of scarce resources we will not be able to afford much paid government. Most policy formation and management of "public works" will (have to) be carried out by local citizens, and most of this will be via voluntary working bees. Fortunately the situation we will be in (smaller, zero-growth, localised economies) will make it easier for the social control to be exercised via participatory democratic processes.

It is important to distinguish between the near and long term future. Eventually we will probably have a fully planned and socially controlled economy that will function routinely and with little attention to provide well for all, without wages, profits or private firms…because we will have developed ways of easily producing what is needed via rationally organised systems. (This is of course how the economy within the household runs now.) But in the short-term future there will probably still be a considerable role for market forces, profits, markets or private firms and different wages, but within limits and conditions we set. (It will be explained below that as scarcity impacts we will inevitably move in this direction, realising that we must take much more control over and give assistance to the local firms we desperately need.)

So, in the near future market forces might be allowed to operate in many carefully regulated sectors. For example the kinds of bicycles on sale might be left entirely to the market. Local market days might enable individuals and families to sell small amounts of garden and craft produce. In other words market forces might even be allowed to make most of the economic decisions – but none of the important ones!

We would have the capacity, and the intention, to intervene whenever undesirable things were starting to happen in this market sphere. Market forces would never be allowed to settle the distribution of income or the access to livelihood or town development (although they might be allowed to have considerable influence.) The people of the town would have ultimate control over these issues through their political system, especially town meetings. For instance if it became clear that there were too many bakeries they would have to work out the best solution for all concerned. This might include helping to shift some people into other ventures the town needs. (The town will have its own banks and panels of experienced advisers and working bees to help its firms run well; see below, and see Mondragon.) The town would not tolerate any of its members being dumped into unemployment or bankruptcy, nor the establishment of a Wal-mart that threatened to ruin the town's many small businesses. (We would refuse to buy from it.)

Even if satisfactory ways of exercising this social control are not easy to find, but we must work them out because the welfare of our town and its people is at stake here. It’s our town, it must work well or we will all be sorry, a failing business is a waste of resources, we must look after each other, including the person running that bakery. Even if it is a private firm, it’s our town and we need a good baker. The basic orientation would therefore be friendly and helpful. Above all we will make the decisions and determine our fate, not leave it to the market (i.e., the wishes and “effective demand” of richer people.)

This means we will be in a position to retain or establish some firms that are important for the town even though they would not survive in a free market situation. These actions sometimes protect and subsidise, and therefore impose costs. Goods would be cheaper if purchased from a transnational corporation which can minimise prices by importing from China. But these are among the costs we will be willing to pay in order to maintain a good town.

Obviously these actions will not be possible unless people become much more socially aware and collectivist in their outlook than they are now. (See below on the tight connections between economy, polity and culture.)

Our many small private firms would not be part of a capitalist economy because they would best be regarded as the tools people work with to gain a modest, stable income and thus a secure livelihood. These little firms would not involve investing capital in order to accumulate capital in order to constantly increase investments and wealth.

The overwhelmingly dominant neo-liberal ideology insists that the best way to run an economy is to leave everything to market forces and not to try to cooperatively control economic affairs – that’s socialism and we all know it doesn’t work. The issue of how we could organise a good economy independent of market forces is discussed at length below but it is appropriate to note here that for bigger enterprises a highly satisfactory model is the “mutual” or cooperative, whereby those who want a product or service simply form an organisation to provide this to all without making any profit. There were many of these twenty years ago, e.g., for roadside repair olf cars, and for home building loans.

Provision of livelihood.

One of our top priorities will be to ensure that everyone has a livelihood. This is very important. The conventional economy sees no problem in allowing those who have most wealth and power to take or destroy the business, markets and livelihoods of others, and thus accumulate to a few the wealth that was spread among many. Its fundamental mechanism, the market, constantly worsens this problem. Globalisation is essentially about the elimination of the livelihoods of millions of people and the take over of their business by a few giant corporations. As a result inequality is rapidly increasing. A satisfactory society will not let this happen. One of its supreme priorities will be to ensure that all have a livelihood, and clearly this is only possible if local communities have control of their own local economic development and can operate contrary to market forces.

Although most firms might be privately owned, we would regard the economy as ours; i.e., as arrangements and institutions which the town “owns” and runs in order to provide itself with the goods and services it needs and to provide its people with livelihoods. The more we move in this direction the more "collectivist" our society could become.

There would be no poverty or unemployment.

It should not need to be said that there will be no poverty and unemployment. These are inexcusable and easily eliminated -- if that’s what we want to do it. They are not found in civilised societies. They do not occur in the Israeli Kibbutz settlements. We would have neighbourhood work coordination committees which would make sure that all who wanted work had a share of the work that needed doing. Far less work would need to be done than at present. (In consumer society we probably work three times too hard!) The warped economics of consumer-capitalist society generates a desperate need to “create more jobs”, but central to The Simpler Way is eliminating most present jobs! That is, when we stop producing unnecessary things there will be far less work that needs doing.

In the present economy the only conceivable ways to reduce poverty and unemployment is to increase production and consumption and therefore jobs and incomes, or to redistribute wealth. These are obviously incompatible with the need to dramatically reduce production and consumption. The Simpler Way solution is not to redistribute wealth, but to organise things so that significant inequalities do not arise in the first place and so that the "poorest" have abundant access to the many ( mostly non-monetary) things that generate a high quality of life.

No work-leisure distinction.

We will have eliminated the work-leisure distinction. Much of our time will be spent in useful productive activity, which we will enjoy and would have chosen as a "leisure" activity anyway. Working bees will mostly be "playing bees". Much leisure activity will be highly productive, such as gardening, visiting older people, and crafts.

The importance of the handy-man, the "Jack-of-all-trades”.

Most people will probably choose to do many different productive activities most of the time, while practising a speciality or profession only part of the time. The "handy man" will be the backbone of the new economy, able to make and fix most things around the house, farm and neighbourhood. There would still be an important place for highly trained specialists, but today most of them work on tasks that will not need doing so we will not need that many of them.

Who does the unpleasant jobs?

One of the injustices built into the present economy is the fact that some people are forced to do unpleasant jobs. This is never seen as a fault. In addition the people who have to do the worst jobs get paid the least! The educational system legitimises job placement; people who do not do well at school are judged not to deserve assess to nice or high paying jobs. (See Education; The Radical Critique.)

Ideally our town assemblies would give a lot of thought to the just allocation of jobs and of fair remuneration. (Centuries ago people thought in terms of a “just wage.) As on the Israeli Kibbutz settlements it would not be difficult to arrange for job rotation, so that people only do unpleasant tasks only for a short period. Work coordination committees could organise the rosters. Again the fact that it would be an economy producing far less than at present, and that much production would be in the form of craft would greatly reduce the difficulty of the problem. Many of the unpleasant jobs could be carried out by working bees, enabling all of us do our fair share. In our present economy, which heaps wealth and privilege on a few, “professional” people do not have to do a share of the boring, and unpleasant jobs. In our new villages all will be expected to come to the working bees. If we all benefit from some job such as cleaning out a garbage gas tank then why shouldn’t we all do our share of such work? Working bees turn many hum-drum tasks into enjoyable, morale boosting festivities. If you had to paint windmills every day for a wage you would surely find it boring, but when it is an occasional event for the town working bee, with tea, scones, witty comments and musicians on hand, it isn’t drudgery.

Our extensive monitoring and feedback systems would also deal with the problem of work justice by experimenting with measures of work satisfaction and difficulty and unpleasantness. If surveys find that some jobs are experienced as more distasteful then we would have to think out what to do about this.

Wages.

Another undesirable aspect of the present economy is the fact that people work for "wages". That is they take part in production only to get an income, they are forced to do this in order to survive, they must go to owners of capital seeking a job and might not be given one, they have no say in the organisation of the work, they do not own the things they produce and they cannot participate in their distribution or see them benefiting others. These are not desirable conditions and in a good society we would replace them.

But in the near future we will probably retain many private firms where people work for wages, although as the town takes more control over its firms workers will increasingly be involved in decisions about how to organise the work process. The many cooperatives in the town will of course be managed by their workers.

People will differ greatly in the proportion of their needs they meet the household and cooperative and communal Sectors (explained below), without money. Those who do need money will participate in Sector 3 to earn it. Their “wages" might best be regarded simply as the tokens that indicate how much time they put in and therefore how much of the products from Sector 3 they are entitled to.

What about the rate of pay? In time we would probably want to move to a standard, equal rate of pay per hour for all, regardless of skill. (That's how we are "paid" for work in the household economy now, and its how we will be happy to be paid for contributions to Sector 2 cooperatives and working bees.) This is not essential for The Simpler Way to work, but it is a desirable way of organising payment among cooperating comrades, especially because it contributes to the spirit of equality we should foster. In a good society those who were more skilled and intelligent would be happy to work one hour and be paid well, knowing that those who were less able were also working just as conscientiously and being paid the same amount. In other words, shouldn't the measure be how hard you try to contribute, not how lucky you are to be stronger or brighter and thus more able to produce more?

However an important assumption here is that we will provide properly for the time it takes for highly skilled workers to learn their trade or profession. The suggestion is that all training and skill development for socially useful work would be counted as work time and be paid at the normal rate. In other words you should be paid by your community for the work you do to acquire the skills your community will benefit from. When they graduate professionals and tradespeople earn at this rate; i.e., there is a set hourly payment regardless of skill and regardless of whether the time is spent learning or practising the skill.