Chiltern Green Party

(These thoughts were penned shortly after yet another defeat at Conference for the proponents of Monetary Reform)

The Green Party's Economics spokesperson Molly Scott Cato summed it up from me on the eve of another failed attempt to make support for monetary reform the Party's official position. "We'll argue the case as best we can", she said, "the opposition will call us a bunch of loonies, and we'll be back where we started." Or words to that effect.

I don't entirely understand what it is about monetary reform that gives people the heeby-jeebies. But I do think that the confrontational debates we are having are just serving to entrench the views of those who have any understanding of what is being discussed. If the motion had passed by a few votes, what would we really have achieved? Many of those who oppose it are quite instrumental in the policy development process, and it seems improbable to me that the passing of this motion would give suddenly result in a significant shift in Green policy as a consequence. Were there pressure to do so, sure as eggs is eggs another motion to revoke the policy of monetary reform would appear on the agenda in two years time.

What I do believe we ought to be able to get to, however, is some kind of shared Green view about the money system, even if we don't entirely agree on what makes for practical monetary policy. I understand if Greens don't agree on solutions, but it's when we don't agree on the nature of the problem that an urgent meeting of minds is called for.

Objectives

I would have thought that one objective of monetary policy that we ought to agree on would be to attempt to slow down economic activity. There is a lot of economic activity that is surplus to requirements, and most results in pollution of various kinds, energy-use and the depletion of natural resources. Often overheating economies are countered by limiting borrowing through raising interest rates. It's an old monetarist tactic, and a lot of progressives think monetarism stinks. In some senses, monetary reform is radical monetarism: an attempt to control the money supply by, er, literally controlling the money supply. So instinctively I'm jumpy.

But the other side of the coin is that we would make the money available for those activities that society needs. The whole point of Green economics as I see it is that if what we need is a massive investment in renewable energy the judgement is not that we can't afford it but that we can't afford not to do it. And if we are starting our thinking afresh, why would we set up structures such that Government would need to borrow money from private banks and investors to achieve this (and them make a profit on the deal) when the theoretical option exists at the very least to lend that money to itself interest-free? Even if at any moment in time it was decided that it was not economically prudent to create money this way, why should we rule it out a priori?

Your Bank Manager; your pin-up?

Moreover, if we do decide that we need to slow down economic activity by control of the money supply, why would we allow a private financial institution to subvert this policy by creating money itself? Not its own money (which I can live with), but Government issue legal tender? (OK, I know it promises to rip it up when it gets it back, but it's undermining our policy and getting a pay-back for it).

If this was a small-scale social security fraud, we probably wouldn't worry too much, but the top 5 UK banks made by my calculations about £1,000 per second in 2005 from this. So it makes me choke when Greens say that if banks didn't recover their costs through interest it would have to be through fees, and fees are more regressive. I can argue a case either way on this, but the point is that profit (to my understanding) is what you are left with after expenses have been taken into account. It's not the cost of providing the service that we are talking about here.

And how is that they can achieve these profits? Can they inspire me like Ghandi, enchant me like Bonney, or even dribble like Rooney? No, they make their profits by lending what isn't theirs to lend, without our permission, several times over...and without actually lending it. If you were in business and managed to explain this away to your auditors without them raising an objection, you might have a sly chuckle to yourself, because you'd know you'd just got one over on them. Why as Green economists - starting from a clean sheet of paper - would we want to legitimise this?

Another contentious subject

But just when you might be thinking that maybe it's safe to let me loose in society, I've got another confession to make. Yes, you guessed it: I believe in Land Value Taxation.

To me it all starts with thinking about ownership. In a finite world, the more we can share the more we can all benefit. Private ownership puts things and places out of bounds to everyone but the owners and their guests. They are lost to most of us, and all our worlds are poorer as a result. I don't have a problem with ownership per se. I don't want to share my underpants with anyone, nor to wake up not knowing if I've got a coat to put on today, or food in the cupboard. And if you want to get anything done, ownership at least gives you the expectation that you'll find everything where you left it. It's bad enough trying to find your glasses or your keys as it is without adding the possibility that someone might have waltzed off with them.

And in the evening I kind of like the idea that the shelter I return to is mine, and the people I share it with (if any) are the ones I've chosen to. So I don't really have a problem with home ownership. But I just don't happen to believe that this means that I should own the land it's on.

The land is ours?

In fact I don't happen to believe that land should really be owned at all. Like the air that we breathe and the water that we process the earth is part of what is given to us to live in, by and with. Air's easy enough to come by that we shouldn't need to charge for it, and I don't think the meter I might need to wear if anyone thought differently would be particularly fetching. Clean water is finite and increasingly scarce, and it is proper that I should pay for the cost of its provision and the amount I use.

And land is also scarce. It can't all be available to everyone all the time or we could not have fixed abodes or be able to protect our food production. But we are surely stewards not masters of this land, and to me structure that best reflects this arrangement is one of rental and not ownership.

But today the land in this country is largely owned by private individuals. We could confiscate it, but this would really scare the horses and I'm not convinced of the moral case for this. (With a more flexible monetary policy we could create the money and compulsorily purchase it, but hey guys I'm not even going to go there).

A compromise

Which kind of leaves me with LVT as the best compromise. I'm not going to go through the full list of arguments for LVT, but what I'd like to think we could achieve at the very least would be to transfer the money people pay for their mortgages that ends up as profits to lenders and transform it into Government revenue for the benefit of everyone.

More madness?

What then condemns me utterly is my support for Citizen's Income. (Any two from three might be acceptable, but all three...?)

When its great advocate Clive Lord talks about CI these days he goes on about South Pacific islanders, and I get a bit baffled. Clive wants to present CI in a Green context and not just in terms of social justice. For him, CI is a tactic that we can employ that will help us live sustainably.

This is all very fine, but I want to go further than this. For me, CI is an entitlement not a handout. It stems from the fact that if ownership legislation did not prohibit this we would be able to pick the fruit off any tree and use all the facilities that the previous generation had left us. CI is the expression of that inheritance in a world in which we have to pay for things that we have decided are best owned.

It follows, of course, that if the money that backs CI is merely transient and not permanently in circulation what we have is not a Citizens Income but a Citizen's Loan. And if I am right in talking about the CI as entitlement, the structure cannot be one in which that "entitlement" has to be repaid when you are able to afford it!

Apples and pears

Now, the total money stock does not itself regulate the amount of economic activity that takes place. If Mabel has 1,000 apples and Bill 1,000 pears, if both are selling their fruit at £1 a piece they don't need to have £1,000 each for Mabel to buy all Bill's pears and Bill all Mabel's apples. In fact, £1 between them will do. But the set of possible purchasing permutations increases with the size of the money stock. In our £1 world, all trading ceases as soon as Bill gets sick of apples or Mabel pears.

So the correlation between the money stock and economic activity is never going to be an exact science, and regulating may not work the way we'd hope. This is where I would see local currencies acting as a safety valve for any problems that trying to set this centrally might bring. But, as Greens, might we not see this as less of a bail-out and more of a welcome development?

Loonies' law

The nearest thing to an economic formula I am going to be pretentious enough to suggest is that in times of equilibrium when heavy investment is not called for the total stock of money should equate to CI (covering basic needs) + any leftover carrying capacity of the planet. This "leftover" might be a better indicator of economic prosperity than the current GNP measure.

Nick Wilkins

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