Stuart Jeanne Bramhall's Blog: The Most Revolutionary Act , page 1365

Nobel Prize for Walmart

Guest Post by Steven Miller

Walmart deserves the Nobel Prize for economics!

Just consider what the giant retailer has accomplished. Walmart perfected a scientifically designed, electronically based “just-in-time” system of distribution that is maximally efficient in getting stuff to people. This is a tremendous world-historic achievement. Walmart has proven, once and for all, how simple and easy it is to distribute the basic necessities of life to everybody. Perhaps even for free!

Walmart has also become one of the 21st Century’ greatest teachers. This too should be recognized! Economics these days have become increasingly arcane, maniacally focused on how to make maximum profits for corporations. Walmart has brought economic concepts out of the clouds and made them comprehensible for everyone. Economics is now something we all have basic life-experience with. Now we, the public, can recognize the tools of economics and learn to turn them to our own benefit.

At the same time, of course, Walmart is an odious construct. It abuses and exploits its workers, denies them economic rights, loots public money from every country, plays a fairly large role in the corporate destruction the planet, and it sells more guns directly to the public than any other commercial entity. These are open intentional predatory corporate policies that Walmart even brags about.

Thus arises what is perhaps the historic question that defines our Age: We all like the good stuff, so is the incredible destruction that Walmart produces, a necessary result of the technology or… does it emanate from the corporations that control it?

Everyone can now see that world ecological destruction comes not from a single corporation, but from a system that chooses only to use our wonderful technology for private corporate profits. They make choices in beyond public control that hurt us all. These choices are developed in secret behind corporate firewalls, justified as “private property” and “private profit” and removed from public control. Corporations even go so far as to tell us that fracking chemicals are “proprietary information” and therefor not our business! Thus corporations strive to seize and appropriate all human production away from human society and the very people who made this wealth.

So it’s not the technology that’s the fundamental problem. The negative aspects emanate from the corporate ownership.

Walmart is just a giant 99-cent store on steroids. The corporation receives massive tax subsidies and makes enormous profit, which is then removed from the public and hoarded in banks. Why not eliminate the middleman? Let’s keep the profits for the public and use the subsidies to support the full distribution of everything for free. After all, Walmart’s slogan is “Save money. Live better.” We should take them at their word.

More Teachings

When you walk into a Walmart there is… all this STUFF! Everybody knows that their stuff comes from factories all over the world. While millions of people engage in production, we can also see at Walmart that most of this stuff is machine-made, not made directly be people.

Walmart proves that production in today’s world is completely social. So if production is social, why is its distribution private? Walmart advocates, of course, that economic production should belong to private corporations.

Supreme Court Chief Justice John Marshall explains what a corporation is – and isn’t – in the 1819 Dartmouth College Case:

 “A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creation of law, it possesses only those    properties, which the charter of its creation confers upon it…. Among the most          important are immortality, and, if the expression be allowed, individuality….”

So it is clear: a corporation is not an Act of God; it is not a law of nature. It is a legal construct – agreed to by people – that is empowered by law. It then appropriates social production privately and diverts the wealth that society produces together into the hands on a few.

Of course, Walmart’s legal counsel would respond to the court of the people that the corporation has incurred all the expenses to create this wonderful economic infrastructure for society. So therefore it should reap the profits in order to cover expenses and be rewarded for its contribution. What’s wrong with that?

Let’s examine this one.

Unearned Income and Tribute

One of the jobs of government is to create infrastructure. Infrastructure means systems like roads, airports, water pipes, sewers, ports, satellite communication systems, parks, beaches, scientific research, the Internet, health services, etc. These functions are expensive to establish, but, when finished, lower expenses for every individual. Once in place, infrastructure costs are simple maintenance and regular improvements. This is a perfect use for taxes. The public investment makes it up to everyone by providing services that make things easier. Throughout the 20th Century generally it was the public that built the infrastructure.

What happens in the case of a toll road? Back in 1700s America, government would allow a corporation to form, with private investment money, with the goal of building a road – say, from Albany to Syracuse. Since this combination expended its funds, they were allowed to recoup them by putting a Toll Booth on the Highway. In addition, they were allowed to continue to charge to make a state-limited profit.

The fee you pay at the tollbooth is really a form of rent. Rent is a charge based on monopoly control. Rent, and its evil twin, financial interest, is established without doing any work at all. It is the result of a legal privilege that exists even when there is no cost of production at all. We all know that banks love to charge you for using a different debit card. There are no people involved who do any work on this. Everything is handled electronically. The same with the humungous “service charges” on bounced checks. This is rent. It is unearned income. It is a major source of profit for capitalism these days. It is theft.

Economist Michael Hudson explains:

       “… unearned income is getting money without working for it, getting money simply by lending money or by owning property and putting up a toll booth and  charging people an access price. So the economy is putting up tollbooths for education. If you want an education, you have to borrow from the bank. If you want to drive a car on a road, well, we’re putting up tollbooths on the roads; we’re turning the roads into toll roads. If you want to park your car, we’re now putting  parking meters on the sidewalks and the parking meters’ revenue’s sold off in Chicago to Wall Street for the next 30 or 40 years to get money to pay the interest to Wall Street now.” (1)

 As corporations merge ever more closely with the state, they are seizing control of every kind of infrastructure. President Obama has proposed turning all the publicly built infrastructure of the last 100 years into “public-private partnerships”, where the public supplies the money and the corporations retain the profits. The goal is to build a future where corporations control everything.

Having set up a valuable infrastructure, Walmart as a corporate entity or a corporate person contributes nothing to the process. All the work is actually done by Walmart workers who are considerably abused and exploited. In essence, what the corporation does is function like a tollbooth on the distribution system and demand rent as a monopoly. We simply pay for access. That is rent.

Walmart as an entity could easily be abolished without harming its distribution system in the slightest. The big lesson is that so could every corporation. This is the direct implication of John Marshall’s comment above. If a corporation is a legal fiction, rent is a legal fantasy that can be undone by the same process of public agreements that created it. So sorry, Walton Family billionaires, you do no work; you don’t get paid.

Move to Amend (www.movetoamend.org) is a national organization that is striving to amend the Constitution to clarify that corporations are not people and money is not speech. They sum it up nicely this way, “Slavery is the legal fiction that a person is property. Corporate personhood is the legal fiction that property is a person.”

Rent is Metastasizing

Rent evolved beyond the toll road with the rise of the insurance industry. Once again, a corporation squats on the infrastructure and demands a tribute, a “profit”, for adding nothing, simply for allowing you the next step of access to what you need.

The next step was Cable TV. This monopoly claims to provide special services through wires, but they really just block you from accessing a program unless you go through them. Comcast claims monopoly control of an infrastructure and charge you rent for using their infrastructure.

The newest monopoly form of rent is being created right before our eyes – the Cloud. This newest form of electronic superstructure is based on distributing relative limited and stupid devices to the public, while keeping all the “intelligence” in centralized computers. Once again, you will pay rent for access for what you could get for free.

It gets worse. The World Economic Forum is an organization of the planet’s biggest capitalists. They hold a policy summit in Davos, Switzerland every year. These elite capitalists are well aware that capitalism is not sustainable and is beginning to devour its own base. Thus they are scheming up what they consider is a kinder, gentler version of private corporate property.

Out of this year’s profit fest, Frans Van Houten, CEO of Royal Philips, floated the ultimate extension of rent:

“Instead of selling products, businesses would retain ownership, selling the use of the goods they make as a service. Selling a product’s benefits instead of the product itself would create a powerful incentive for producers to design for longevity, repeated reuse, and eventual recycling, which would enable them to optimize their use of resources.”

Capitalism is already devouring public property and turning it into private corporate property. Now they are planning to do the same with the only other form of property there is – your personal property. Personal property is what a person actually uses individually on a daily basis. This can include a house, cars, computers, clothes etc. Van Houten’s idea is that all your personal property would be rented, not owned! Personal property would become corporate property.

The future is becoming clearer:  Either corporations will take control of everything in life, or the people will take over the corporations.

So let’s give Walmart the Nobel, recognize its historic achievements, and then take it over, in the name of the public, in order to serve the public. Those nice Walton folks can each keep one of their several estates to live in. But they will have to clean it themselves!

Notes

1) Michael Hudson: Trade Advantage Replaced by Rent Extraction. 18 Dec 2013. See his website: http://michael-hudson.com

2)  Frans van Houten. The Circular Revolution. January 20, 2014

Steven Miller

Oakland, California

Nanodog2@hotmail.com

photo credit: takomabibelot via photopin cc

Originally published in The Daily Censored

Reclaiming Adam Smith

Contrary to conservative claims, Adam Smith was a liberal who argued for government intervention to ensure economic growth and “general prosperity.” I find it intriguing that he attributes Britain’s global economic dominance to “division of labor” and a superior agricultural system. Despite an entire chapter in Book I on the origin of money, he makes no mention of the role of English banks in creating money (which started in 1666), which kick started the industrial revolution. 

The Wealth of Nations

by Adam Smith

Abridged Version by Laurence Dickey, Professor of History, University of Wisconsin-Madison (Hackett Publishing 1993)

Book Review

The Wealth of Nations consists of five books (written between 1767-1784). Adam Smith’s work is cited extensively by neoliberals and neoconservatives as justification for ending government regulation of corporations . Free marketeers argue that regulation negatively impacts the totally unobstructed free market Adam Smith allegedly advocates.

I think it’s high time for liberals, progressives and left libertarians to reclaim Adam Smith as one of our own. Smith self-identifies as a liberal – one of the first in Europe. He also frequently advocates for what he calls “progressive” economics, i.e. government intervention to ensure that rich people invest their profits in increasing productive labor, rather than corruption and vice.

The 1993 Edition

Smith’s writing tends to be quite repetitive, as large sections of the later books predate the earlier ones. In his abridged version, Dickey merely summarizes material Smith has introduced in earlier sections. There is also a generous preface, as well as appendices, that position Smith among the various writers of the 18th century Scottish Enlightenment. In this way Dickey shows that, to a large extent, the Wealth of Nations is a consolidation of widely held views on basic economic principles.

The overall intent of the Wealth of Nations is 1) to make general observations about the economic and social changes that underlay the transformation from feudalism to modern industrial society and 2) to lay out basic macroeconomic principles that Smith believes are essential for a prosperous, politically stable nation which provides an adequate standard of living for its workforce. The latter is extremely important to Smith, both as a principle of social justice and to prevent social unrest.

Contrary to claims made by free market conservatives, nowhere does The Wealth of Nations make the case for a totally unregulated free market economy. Quite the contrary, Book V Revenue of the Sovereign or Commonwealth makes a strong argument that government intervention is essential in free markets to ensure economic growth and general prosperity.

Book I (Of the Causes of Improvement in the Productive Powers of Labour)

Book I describes the historical development of international trade and the origin of money. It also lays out Smith’s belief that “division of labor” – in which individual farmers stopped making their own plows, dwellings, shoes, clothes, etc. and organized into specialized trades to provide these services – was the fundamental socio-economic change that made modern economic development and western-style democracy possible.

A notable omission here is Smith’s failure to mention the role private banks assumed in issuing money after the 1666 Free Coinage Act. Carroll Quigley (see The Real Vampires: an Insider’s View of Banks ) argues that Britain’s control over international finance (not British agriculture and “division of labor”) was responsible for Britain’s lengthy dominance over world commerce and trade. I suspect that Smith, like many modern day politicians, had no idea that private banks were creating the money supply out of thin air.

Book I also makes the case that daily “subsistence” (i.e. wages) should be proportioned to the cost of daily necessities and that slavery is uneconomical:

“No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe and lodge the whole body of the people should have such as share of their own labour as to be themselves totally well fed, clothed and lodged.”

Book II (Of the Nature, Accumulation, and Employment of Stock)

Book II lays out Smith’s view that capital accumulation (the reinvestment of profits to employ more workers) further advances divisions and subdivisions of labor to improve the “productive power of labor” and the wealth of society. Here Smith emphasizes the importance of spreading wealth to wider and wider circles of people to keep employment constant and prevent social disorder.

Book II also emphasizes what Smith calls “frugality” or the “mediocrity-of-money” as being essential to this capitalization. He also calls for limited government intervention (which Book V elaborates on) to ensure “doux-commerce.” This he defines as an economy based on “frugality,” in which rich people invest their profits in increasing productive labor, rather than luxuries, corruption and vice, which contribute nothing to a society’s economic well being.

Neoliberals often make Smith out as an advocate of laissez-faire economics, in which economic imbalances and social injustice is addressed by the “invisible hand” of competitive market forces. It was actually one of Smith’s contemporaries J. Harris who made this argument.

Book III (Of the Different Progress of Opulence in Different Nations)

Book III elaborates on Smith’s ideas about the accumulation of capital and “frugality,” as well as describing the rise of cities and mercantilism, which in Smith’s view negatively impacts investment in agriculture. Using numerous historical examples, he argues that the inability of a country or empire to produce their own food (and subsequent reliance on food imports) always results in their downfall.

Book IV (Of Systems of Political Oeconomy)

Book IV is a frontal attack on mercantilism, which Smith despises. “Monopoly,” according to Smith, “is the sole engine of the mercantile system.”

Smith, who makes the strong argument that money has no intrinsic value of its own, blames mercantilism on an overemphasis on accumulating gold and silver reserves (money), at the expense of genuine productive capacity and overall economic wealth. He’s highly critical of European nations for being obsessed with a positive balance of trade (to build up their gold and silver reserves). He’s also critical of the wrongheaded way they go about it, through the granting of monopoly rights and protective tariffs, and quotas, which always negatively impact domestic production.

This book also outlines Smith’s views on government intervention. According to Smith, a sovereign (government) has three duties:

To protect society from violence or invasion
To protect, as far as possible, every member of society from injustice or oppression from every other member of society). Smith calls for direct government intervention in “facilitating” investment in agriculture.
To maintain certain public works and institutions “which can never be for [the benefit of] certain individuals or groups of individuals.”

Book V (Of the Revenue of the Sovereign or Commonwealth)

Book V – elaborates on specific interventions Smith would allow government to make “in relations between the rich and poor.” He argues for a government role in ensuring that educational institutions provide moral up-lift (i.e. a “culture of frugality”) to ensure the continuing investment necessary to create jobs.

Here he also delves at length into the effect of military spending on economic wealth. He argues that military spending must be strictly limited and never paid for by borrowing. He predicts that indebtedness for military spending will eventually cause the economic ruin of all European countries.

WikiHouse and the Means of Production

(This is the 9th of a series of emails about ending the right of private banks to issue money. It concerns WikiHouse and a proposal to remove the means of production from the monetary system through publicly owned Open Source technology.)

In the following video, architect Alastair Parvain envisions using WikiHouse and comparable Open Source manufacturing tools to take architecture, construction and manufacturing out of the monetary system by allowing people look to the commons to meet their basic human needs – via freely available Open Source technology.

Originally applied to free, publicly available software, the term Open Source has been expanded to include architecture, scientific research and other technical information which is made freely available in the public arena. See Open Source and Sustainability.

WikiHouse has been described as an open source construction set. The aim is to allow anyone to design, download and “print” CNC-milled houses which can be assembled by a small group of people with minimal formal skill or training. A CNC wood cutter is a CNC (computer numerical control) router that creates objects from wood along the same lines as a 3D printer.

WikiHouse has caught on in a big way in New Zealand, thanks to the 2011 Christchurch earthquake that caused over 6100 businesses that were displaced and needed to relocate quickly to survive. WikiHouse seemed an ideal solution to Martin Luff and Danny Squires, who founded New Zealand’s WikiHouse Lab

In addition to offering relatively low cost rehousing for businesses and residents, it also builds community solidarity by turning house building into a social event. Prior to the fossil fuel era, home building was a major community event in which your friends and neighbors got together to build you a house. With skyrocketing energy costs, we need to look more to community and cooperation, rather than technology, to meet our basic needs.

Parvain stresses that the world currently faces major economic, ecological and resource crises. These urgent dilemmas can’t be solved by either corporations or non-profit organizations so long as they continue to treat citizens as passive consumers.

Historic Breaking News: Canada, Vatican & Crown GUILTY of Genocide

stuartbramhall:

 

Canada has been dissolved. Founding convention for the Republic of Kanata to be held June 14, 2014 in Winnebag. Canada is a rogue nation, created in genocide and conquest and sustained by crime and corruption. But this past year, its heads of state and church have been lawfully convicted of crimes against humanity, and under the Law of Nations, their authority has been nullified and disestablished. (see http://itccs.org/tag/republic-of-kanata/)

Originally posted on hipmonkey:

Massive Deaths of Aboriginal Children in Canada is officially admitted, as Genocide Verdict and Kevin Annett’s work are finally vindicated -

“Canada, the British Crown and the Vatican stand guilty as charged as disestablished criminal bodies” – International Common Law Court of Justice, Brussels

A Special Report from ITCCS Canada with Commentary by Kevin Annett 



Vancouver, Canada:  March 31, 2014

Seventeen years after Rev. Kevin Annett publicly disclosed evidence that over 50,000 children died in Canada’s church-run “Indian residential schools”, Canadian governments have finally confirmed this genocidal mortality rate after releasing hitherto-concealed death records from the schools. (http://westcoastnativenews.com/tens-of-thousands-first-nation-children-died-in-residential-schools/)

Until this week, government and church officials have either denied or stayed silent about Rev. Annett’s documented estimate. But previously “segregated” statistics of the deaths of residential school children made public last Friday by different provinces indicate that “tens of thousands” of these children died in the facilities…

View original 411 more words

New Plymouth Hits the Street

photo by Moana Williams

Thousands marched in New Zealand’s nationwide mobilization against the Transpacific Partnership Agreement (TPPA) on March 29, with more than a thousand in Auckland, 400 in Wellington, 200 in Hamilton and Nelson, 125 in Whangarei, 100 each in Tauranga, Napier, Christchurch and Dunedin, 80 in Palmerston North and New Plymouth, and 30 in Invercargill. For a small town like New Plymouth, protests this size are rare, and it got good coverage in the Taranaki Daily Newsl

The TPPA is a free trade agreement which is currently 12 countries, including the US and New Zealand, are currently negotiating behind closed doors. Up to this point, the other 11 countries have caved in to US demands that the text of the TPPA be kept secret until it’s signed. About a month ago the Malaysian government  government announced they would release the text before signing it.

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According to draft text released by Wikileaks, the new treaty would allow corporations to sue countries in a private tribunal for any laws that interfere with their ability to do business. In New Zealand, this would undermine our access to cheap generic medication, environmental and labor regulations and reduce Internet freedom.

Like NAFTA and the WTO (World Trade Organization), the TPPA only helps corporations – it’s a pretty shitty deal for ordinary Americans.

C’mon Americans we need your support in stopping Obama from turning the global economy over to Monsanto. Go to http://www.exposethetpp.org/ to find out how you can help.

Economics to Save Our Civilization

(This is the eighth in a series of posts about ending the role of private banks in issuing money)

“Somewhere in our history we took a wrong turn and today we are reaping the consequences. If we don’t step back to evaluate the root causes of the rolling economic crises, our civilization is in danger of collapse.” – Clive Menzies

A few years back, Clive Menzies, president of British Fund Building and member of the Free Critical Thinking Institute entered into an ongoing dialogue with the London Occupy movement. The result is a radical monetary reform proposal to fix the global economic mess. In the video below, he is presenting it to the Chartered Institute for Securities and Investment (translation: a high-powered group of investment bankers and stock brokers).

In his presentation, Menzies attributes the current crisis, as well as capitalism’s recurrent boom and bust cycles, to the alienation of the vast majority of the global population from the commons (i.e. communal ownership of land and natural resources that ended with the Enclosure Acts) and the prohibition of any discussion of this catastrophic event in contemporary economic discourse. (This is a topic Fred Harrison discusses at length in The Traumatised Society.)

Most of Menzies’s talk focuses on the urgent need to abolish our current debt-based (bank-controlled) monetary system. For five main reasons:

It drives systemic inequality by allowing those with more money than they need to exploit those who need money.
It drives unsustainable, exponential debt growth because the interest cost rises faster than society can create wealth to pay it.
It discounts the future, driving environmental destruction – it makes a forest worth more as sawed timber than as an ecosystem preserved for future generations.
It demands exponential GDP growth, rapidly depleting finite resources – 3% GDP growth means the economy doubles every 24 years which means extracting resources at twice the rate and throwing twice as much away.
It drives inflation.

He also demolishes the prevailing myth that a person’s existence on this planet is only justified by paid work. In a way it’s deliberate falsehood more than a myth. There is only enough “productive” work for 50% of the adult population and the vast majority of income in contemporary society is generated via “rent-seeking” (i.e. charging interest or rent or extracting and exploiting publicly owned natural resources).

Menzies lays out a monetary reform proposal that would abolish interest exploitation by the private banks who currently issue and control global currencies. Instead it would empower governments to issue interest-free sovereign currency.

GrowthBusters: Hooked on Growth

(This is the seventh of a series of posts about ending our debt based monetary system and reckless emphasis on perpetual economic growth. Dave Gardner makes the ecological case for ending our addiction to continuous economic growth.)

Growthbusters: Hooked on Growth

2011, Directed and produced by Dave Gardner

http://www.growthbusters.org/

Film Review

Growthbusters is the inspiring story of Dave Gardner’s efforts to challenge conservative Colorado Springs’ failed growth promotion policies. The film also takes a broader theoretical look at the overall failure of economic growth to solve the global economic crisis.

While Gardner is clearly an environmental crusader concerned about the link between unlimited growth on carbon emissions, resource scarcity and species extinction, he inserts a heavy dose of economic reality into the discussion. All of us involved with local government have heard the same insipid assertions about the urgent need to cut corporate tax and regulations to attract new industry and jobs, as well as the need to spend to spend billions of dollars on new infrastructure to accommodate the hoards of people we want to attract to our cities and towns.

In reality, the people and institutions who promote growth most heavily are the only ones who benefit from it – at the expense of everyone else. This includes real estate developers who derive profits from building more homes, office blocks and shopping center; the mining and fossil fuel companies that fuel this economic activity, as well as heating all the new homes and powering the new cars; and the banks who finance all this. In other words the super rich.

The Population Bomb

In addition to tackling the pro-growth agenda head on, Gardner also makes the important link between exploding population growth and environmental degradation. Paul Ehrlich, who appears briefly in the film, warned in his 1970 book The Population Bomb that mankind was rapidly outstripping the Earth’s natural resources. Dennis Meadows, who directed the 1973 Club of Rome project resulting in the book Limits to Growth, also appears. Based on advanced computer modeling, this controversial report warned forty years ago that population growth and resource scarcity would cause the global economy to falter at the beginning of the 21st century. Apparently, as Meadows reminds us, the 2008 global economic crisis was right on schedule.

As Gardner, Ehrlich, Meadows and other experts point out, humankind is living beyond our means, “liquidating” resources we should be should be saving for our children and grandchildren. If we were still growing all our food locally, as we were at the beginning of the 20th century, it would be obvious there is no longer enough land in cultivation to feed 7 billion people. However because of globalization, most of the industrialized world has no idea where their food comes from. While the one billion people who die of starvation or gradual malnutrition are virtually invisible.

Family Planning: the Best Way to Reduce Carbon Emissions

Gardner doesn’t advocate for mandatory population control like they have in China. However he argues strongly for major environmental groups like the Sierra Club to use their public profile to begin educating governments and communities about making informed decisions around family size.

There’s no way we can possibly change enough light bulbs or plant enough trees to compensate for all the babies born to our children and our children’s children. Population control is a critical ecological issue. The “official” environmental movement is letting us all down by refusing to take it up.

New Paths Forward

Gardner himself does his part. When he’s not running for city council or making movies, he’s out in the street distributing free Endangered Species Condoms on the street. The condoms come in choice of packaging featuring endangered panthers, polar bears and cute critters.

He also encourages people to join the Transition movement to help in strengthening their communities, re-localizing economic life and rebuilding skills that don’t depend on corporations and fossil fuels.

 

The End of Growth

The End of Growth: Adapting to Our New Economic Reality

by Richard Heinberg

(New Society Publishers Aug 2011)

(This is the sixth of a series of posts about stripping private banks of the right to issue money. It stresses the link between our debt-based monetary system and the drive for perpetual economic growth.)

The basic premise of The End of Growth is that the world economy has flat-lined. Not only is it contracting, rather than expanding as most politicians claim, but there are important reasons why it will never return to pre-2007 growth levels. The reason? The last two centuries of continuous economic expansion were only possible due to the ready availability of cheap fossil fuels. Growing fossil fuel scarcity has caused energy costs to skyrocket. And this, according to Heinberg, is the main reason for declining economic growth.

As well as making an strong case that economic expansion has ended, Heinberg also writes about far-sighted governments (Japan, Sweden, Denmark, Norway and Finland) that are enacting policies to ensure the welfare of their citizenry as they confront new economic realities.

Heinberg and others in the Peak Oil/climate change movement have always argued that infinite economic expansion is mathematically impossible on a finite planet with finite natural resources. The End of Growth highlights the massive ecological devastation caused by this reckless obsession with economic growth, while warning that we are depriving our children and grandchildren of natural resources (fossil fuels, water, industrial fertilizers, fish stocks, top soil) that may be needed for basic survival.

In Heinberg’s previous work, he predicts it will take a decade or more before fossil fuel scarcity causes the capitalist economic system to hit the wall. In The End of Growth, he argues it already has: in October 2008. While a few countries can claim an occasional quarter of increased GDP, aggregate global economic growth is either stagnant or slowly contracting. Even China’s so-called economic “miracle” hasn’t been sufficient to generate a genuine increase in total global wealth.

The Ultimate Ponzi Scheme

Heinberg goes on to explain how private banks use the fractional reserve system to invent money out of thin air. In a global economic system where money can only be created by issuing bank loans, there’s never enough money in the system to repay all the debt. This means the global economy can only function via continual creation of new loans. And continuous economic growth is essential to make this happen.

Heinberg’s analysis of the 2008 meltdown starts with an introduction to classical economic theory, and a discussion of of the “financialization” of the US economy that occurred in the 1980s. There’s a detailed discussion of the risky financial derivatives that led to a decade of speculation and “debt” bubbles. The largest was the subprime/derivative boom, in which massive amount of borrowed money was speculated on derivatives and subprime mortgages that couldn’t be repaid. The debt bubble created was so large it plunged the entire world economy into depression when it burst.

The End of Growth in China

Heinberg also presents a painstaking analysis of why the China’s current phenomenal growth rate (7-8% per year) and somewhat slower growth rates in India, Thailand, Malaysia and Vietnam also represent “bubbles” that will eventually pop and trigger recession. China is pursuing the identical economy strategies that caused the Japanese economic miracle to collapse in the 1990s – resulting in a two decade long recession.

Life in a Steady State Economy

Obviously the end of economic growth, and continuing job, wage and benefit cuts mean that people in most industrialized countries will be forced to massively downsize their lifestyles. Outside the US, some far sighted governments are intervening in ways to make this transition less painful. Heinberg gives examples of countries (Japan, Sweden, Denmark, Japan, Norway) who openly acknowledge the reality of their steady state economies and pursue policies that make it easier for their citizens to adjust.

Sweden, for example, has transformed depressed industrial towns into “ecomunicpalities,” by “dematerializing” their economies. They have made them into fossil fuel-free towns with organic farming, public transportation and alternative energy projects – while simultaneously fostering social equity.

A Second Model for Regaining Control of Our Money

(This is the fifth in a series of posts about stripping private banks of their power to issue money)

Modernising Money: Why Our Monetary System is Broken and How It Can Be Fixed

by Andrew Jackson and Ben Dyson (Positive Money 2012)

Book Review

Modernizing Money lays out a model for restoring government control of the money supply that’s very similar to the Chicago Plan. However it differs from the Chicago Plan in several important ways. Unlike the Chicago Plan, this second model isn’t obsessed with sovereign debt repayment. This, in my view is the most significant difference. Given the IMF’s singular focus on servicing debt, their heavy emphasis on debt repayment isn’t terribly surprising.

In allowing publicly accountable government bodies to assume responsibility for issuing money, both models ensure decisions around money creation are based on the needs of a productive economy, rather than the profit profile of private banks.

Thus both go a long way towards ending bubbles and boom and bust cycles, as well as reducing debt and minimizing inflation and deflation. The 2008 economic downturn was triggered by sudden deflation, i.e. the permanent loss of 60-200 trillion dollars from the global economy.*

Because income inequality increases in direct proportion to debt levels, nationalizing the money supply will also reduce income inequality.

A Radical Change in the Function of Banks

The function of banks changes radically under both proposals. In both cases, private would function purely as money brokers, like credit unions and savings and loan associations. They would only be permitted to loan money from existing assets, from customers’ investment accounts or from reserves borrowed from the central bank. Under both plans, there would be no bank bailouts or bank depositor insurance. When private banks cease to serve the essential function of creating and maintaining the money supply, they will cease to be “too big to fail.” Those that continue to make risky speculative investments will be allowed to go bankrupt.

How the Two Proposals Differ

The proposal Positive Money puts forward in Modernising Money is based on the British economic system, whereas the Chicago Plan is based on the US system. Thus the transition would be somewhat easier in the UK, where the central bank (the Bank of England) has been government-owned since 1946. In contrast the US the central bank (the Federal Reserve) is a consortium of privately owned banks.

Unlike the Chicago Plan, the Positive Money model would use newly created sovereign money for other purposes that paying down existing debt. Under the Chicago Plan, using the new debt-free money to repay sovereign debt (aka national debt or public debt) would be one of the first steps in the transition. The Chicago Plan would also use the new money to issue a citizens dividend that businesses and households would use to pay off private debt.

The Positive Money proposal would simply transfer all existing public and private debt (i.e. mortgage and consumer debt) to the Bank of England balance sheet. Businesses and households would continue to make loan repayments to the Bank of England according to the terms agreed with their bank. This new revenue accruing to the BOE would be spent into the economy in one of five ways. At the discretion of the British government, it could be used to increase public spending, cut taxes or repay government debt. It could also be used to issue a citizens’ dividend (which households and businesses would be required to use for repayment of existing debts) or new loans to businesses.

Ensuring Adequate Credit for the Business Sector

Positive Money is also more explicit about how they would ensure there is adequate credit in the economy to make sure new businesses have adequate access to loans for productive business investment. They would use a variety of qualitative and quantitative methods, including the existing Credit Conditions Survey. They would then auction off a specified amount of new credit to private banks. This new credit could only be used for business loans and not mortgages or consumer credit.

*Both proposals also make the claim that nationalizing the creation of money would also end real estate speculation and bubbles by restricting the funds available for mortgage loans. However given that both proposals spend new money into the economy, there’s still a good chance this could be used for real estate speculation. In my view, the only way to prevent this would be to implement a Land Value Tax simultaneously with the transition to government-issued money.

An IMF Proposal to Ban Banks from Creating Money

(This is the fourth of a series of posts about ending the ability of private banks to issue money.)

For the past 18 months ago, IMF economists Michael Kumhof and Jaromir Benes have been circulating a proposal to end the ability of banks to create money.

As Kumhof explains in the Nov 2013 video below, the perception that governments create money is totally false. In the current global economic system, only about 3% of money (mainly coinage) is created by government. The other 97% is created by private banks out of thin air when they generate new loans. See Economic Justice: the Rolling Stone Version

For various reasons, which Kumhof explains in the video, he and Benes believe that unlimited and unregulated private money creation by banks is responsible for the current economic crisis. And that full recovery is only possible if the privilege of creating and controlling the money supply is restored as a government function.

In addition to assuming sovereign control over the money supply, national governments would also require banks to hold 100 percent reserves for the loans they initiate. This effectively terminates the ability of private banks to create money out of thin air. And this, in turn, massively reduces their political power.

Ironically, the proposal isn’t new. Entitled the Chicago Plan, it was first put forward by University of Chicago professors Henry Simons and Irving Fisher during the Great Depression.

The History of Private vs Sovereign Money

During the Q&A at the end, Kumhof briefly discusses previous experiments with government-issued sovereign money, which have mainly occurred in the US. Sovereign money funded the original 13 colonies, the American War of Independence and the Civil War.

In their paper The Chicago Plan Revisited, he and Benes trace the history of sovereign money back to the ancient Greeks and Romans. During the Middle Ages and Renaissance, all currencies were publicly controlled (by kings and the Pope) until 1666, when Charles II transferred control of money creation to private banks with the English Free Coinage Act of 1666.

The slides, which are difficult to see in the video, are available here

For me the high point of the video is Kumhof’s disclaimer that he doesn’t represent the IMF – that he’s only doing research. Yeah right. I sure wish I had an understanding boss who let me run around making radical proposals to strip investment banks of their power and wealth.

It seems more likely that people in high places know the ship of capitalism is going down – that this is a last ditch effort to save it.