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Wednesday, 22 April 2009

Is it possible to realise “Economic Democracy”?

Do we have a financial system:
• that is purposely designed to work and serve people’s needs?

• that takes as the first consideration the preservation of our planet host and its resources for future generations?
• that enables us to produce all that is physically possible and desirable - limited only by available labour, technology, sustainable resources, environmental considerations and community approval?
• that has individual and co-operative enterprise, not corporate greed, as the basis of economic organisation?
• that considers the proper purpose of industry is the production of goods and not the provision of employment or solely to make profits?

The answer is, obviously, no we do not have such a financial system.

Many New Zealanders feel like pawns in somebody else’s Monopoly game - despite their best efforts in planning and working to achieve financial security and social well-being.

Generation by generation people have been getting further and further into debt. None of us can escape the burden of debt, no matter how financially literate we are. One way or another every New Zealander is servicing debt, whether it is our own debt or the debt loaded on the prices we pay for goods and services. And of course we pay tax to service the government's debt, and we pay rates or rent which helps service local government debt.

Unfortunately, under the current financial system, increasing debt is necessary just for our economy to stay still. An even greater growth in debt is required to make it grow. The barrage of advertisements in all forms of the media are designed to "Lead us into temptation" to buy, buy, borrow and buy.

Can you imagine the levels of unemployment, the closed shops and businesses if there were no sales fuelled by debt? This is happening right now. We openly abhor debt. We loathe the amount of interest we pay, and we feel fear when we get caught in the clutches of compounding interest. Under the current system we will be in debt until we die. The literal meaning of 'mortgage' is 'the grip of death'. Our futures are well and truly mortgaged!

The reason we are in this debt slavery is that we do not own and control our own money supply. Until we do, we will never have any sort of democracy, economic or otherwise.

It doesn’t have to be like this.


Anonymous said...

If there is an obvious answer as you seem to be suggesting there is John... then why don't our politicians address this issue? What is it they don't understand? But I would say that if people want to buy more goods than they can afford then surely that is their problem? How do we own or control our money system as you put it?

Dominic Baron said...

John, you have outlined what is wrong and you raise the interesting concept of an "Economic Democracy".

What is your prescription for realising this idea? I am intrigued by the thought, especially as I have a strong history of Trade Union activity and have always wondered how we could achieve democracy in our work places. Or is the very nature of all enterprise essentially authoritarian?

Then comes the next question: Can democracy in our political environment co-exist with the hierarchical traditions of the business world?

Ultimately it is a question of where rests the power. Is it always with money? This appears to be the case, even in relatively civilized societies such as New Zealand.

How do we break out of that constantly repeating pattern?

John Pemberton said...

Anonymous asked: “Why don’t our politicians address this issue? What is it they don’t understand?”

Politicians get bogged down with the immediate problems. They prefer quick fix solutions that briefly satisfy voters, rather than looking for the fundamental flaws in the economy. Any politician who does understand the situation is faced with a small army of ‘advisors’ arguing for economic orthodoxy. There is enormous pressure to ‘go with the flow’, which does not include a popular call for changing the economic system. Media silence has a lot to do with this  it’s not a sexy issue. The major political parties are funded by big business, and have a vested interest in keeping the economic status quo. Many understand that money creation for the public good may seriously endanger the power base of the corporations that are keeping them in office.

John Pemberton said...

Anonymous asked: “If people want to buy more goods than they can afford then surely that is their problem?”

True, if the goods they are buying are luxury items they can do without. The trouble is, more and more people are going into debt just to buy basic necessities  food, clothing, shelter, health care, education  because the gap between incomes and prices is getting wider every day. Collectively, if we can produce the goods and services we need, we should be able to afford them without debt. In the present debt system, the gap between the goods we import and our exports is filled with borrowed money. The whole country buys more goods than they can afford! Even when we get it more or less equal, financing and interest charges tip the balance back into the red.

John Pemberton said...

Dominic Baron asked: “Is the very nature of all enterprise authoritarian?”

Enterprise does not have to be authoritarian. A good example of this is the memberowned credit union movement, still functioning well in spite of draconian regulations to keep it from becoming a serious rival of commercial banks. Most of our nationally organised societies are cooperative, run quite successfully by committees on democratic principles. New Zealand’s biggest business, Fonterra, is member owned. There are companies all over the world that encourage worker shareholding, successfully involving workers in the productivity and decision making of the enterprise. Ownership is the key  when people feel they own something, they work for it and are proud of it. This is true not only for an individual company or enterprise, but for the country as a whole.

John Pemberton said...

Dominic Baron asked: “Ultimately it is a question of where rests the power. Is it always with money?”

Yes, power lies where the money is. This has been true since money was invented. Kings lost power to merchants, who got together and created merchant banks, putting the kings in their debt. You can hold power by force, but you need money to create that force. This is why public ownership of our money supply is essential.

John Pemberton said...

Anonymous asked: “How do we own or control our money system?” Dominic Baron asked: “What is your prescription for realising this idea?”

Successive NZ governments have allowed the foreign-owned trading banks to create and issue nearly all of the nation's money supply and claim it as their own. Notes and coins, issued by the Reserve Bank and spent into the economy debtfree, make up less than two percent of the money in circulation. Ninety eight percent of our money supply is on loan to us at interest from commercial banks.
• We would establish an independent, publicly owned New Zealand Monetary Authority (NZMA) which will have the sole authority to create, issue and cancel our nation’s money supply, so that it works for New Zealanders rather than the shareholders of multinationals. We would not need to borrow from overseas banks, who are creating money out of thin air anyway. The NZMA will be answerable to Parliament, which is answerable to the voters.
• Trading banks will become licensed agents of the NZMA, and will only be able to advance to customers that money which has been made available by the NZMA. They will otherwise continue to operate as usual.
Successive governments have actively encouraged banks to charge some of the highest interest rates in the developed world. Public assets and non-commercial infrastructural works cost double or treble the original price in interest charges, driving up taxes and rates, and enriching the shareholders of foreign banks.
• The Reserve Bank of New Zealand (RBNZ), renamed Infrastructure New Zealand (INZ), will take on the specialist role of managing investment monies for low economic yield social investment, such as housing, roading, environmental and local authority infrastructure.
• INZ can deliver loans interest free for local and central government projects and assets, thus reducing debt by eliminating the interest component of the loan. Rates go down instead of up. Urgently needed environmental projects don’t have to go on the back burner, waiting for the economic crisis to ease. Taxes drop permanently.
Interest rates have been used as a blunt instrument to control inflation. Yet the resultant costs are excluded from the Price Index, so that their inflationary effects impact on low and fixed incomes with no compensation. Successive governments have deliberately used interest rate fluctuations to maintain an unemployed ‘pool’ of workers in order to hold down wage rates. They have commoditised such essential services as health and education, and created a skilldeficient, low wage economy.
• NZMA will be charged with identifying the income shortfall between total prices and total incomes (The Gap). Debt free money will be made available to fund ‘Kiwi Income’ (KI), in the form of a national dividend to every resident New Zealander. This will give each person an ownership stake in their country.
• NZMA will also fund health, education and environment projects in ways that decrease the call on family incomes.
Successive governments have allowed the current uncontrolled trading system to continue, without due regard to the growing ‘imbalance of payments’, or the negative effect on domestic production and employment. The flood of cheap imported goods has brought with it a huge overseas debt burden.
• NZMA will be responsible for the availability and flow of working funds necessary to facilitate trade with other nations. NZMA will ensure that money made available by each nation for trade is backed by the real value of goods and services, and will facilitate an exchange of equivalent value with no undue influence from currency, and other, speculators.
People are worried about what’s going to happen in New Zealand as the full impact of the global financial crisis hits home. They need to be aware that there is an alternative to the narrowly based debt system that is crippling us. We can choose to have a money system broadly based on the wealth generating capacity of the people, one that will bring us through the credit crunch to a more prosperous and just society.