A call for building strong productive local and regional communities and new trade systems that fulfil human lives without wasting resources and energy
Today the Financial Times (paywall) reports that the number of foreign investment projects has dropped by 14% to 1,782 in the financial year ending March 2019, since the 2016 Brexit referendum. This is the lowest level in six years, according to a report published on Wednesday by the UK’s Department for International Trade.
As multinational profits continue to fly out of the country and taxes are evaded, we return to the valuable 2017 report by Victor Anderson and Rupert Read entitled ‘Brexit and Trade Moving from Globalisation to Self-reliance’, published and launched by Green MEP Molly Scott Cato.
“This report puts on to the political agenda an option for Brexit which goes with the grain of widespread worries about globalisation, and argues for greater local, regional, and national self-sufficiency, reducing international trade and boosting import substitution”.
Colin Hines comments: It details the need for an environmentally sustainable future involving constraints to trade and the rebuilding of local economies. On page 14, the report calls for ‘Progressive Protectionism’:
“Reducing dependence on international trade implies reducing both imports and exports. It is very different from the traditional protectionism of seeking to limit imports whilst expanding exports. It should therefore meet with less hostility from other countries, as it has a very different aim from simply improving the UK’s balance of payments. It could be described as ‘progressive protectionism’, or ‘green protectionism’“.
The report’s recommendations are summarised under three headings: the environment, globalisation and localisation (below):
- Change trade agreements to allow governments to promote greater national, regional, and local resilience.
- Shift taxes, subsidies, and public expenditure on infrastructure, away from unfairly favouring large and global companies, and redirect them to help build up local economies.
- Link banking directly to local and regional economies rather than to the international financial system.
- Boost the number of places for skills training in sectors where UK production can substitute for imports.
- bring in short-term government subsidies to invest in and develop economic sectors where UK production can be expected to substitute for imports as part of the new strategy. These would not necessarily be ‘infant industries’: they might be old sectors being revived and renewed.
- Introduce or increase tariffs on imports of goods and services, especially those where domestic production is a viable and environmentally sustainable option.
- Democratise English sub-regional devolution arrangements and reform local government finance, so as to provide for effective decentralisation of power.
The globalisation of recent decades has been very one-sided. There have been enormous benefits for large business corporations, financial institutions, and the super-rich. As smaller companies have found it difficult to compete, the multinationals have used a worldwide network of tax havens to escape from taxation and regulation.
‘Brexit and Trade’ sets put a new option for Britain. Instead of removing protective regulations against environmental threats it advocates establishing high Green standards and practical localisation measures. It would address the very real social, economic and environmental problems of globalisation, serving present and future generations well.
The IMF said that austerity theory is based on a faulty monetary system that can and should be changed, but vested interest prefers the status quo . . .
James Bruges 14.3.2013
My bank failed to send statements for three months so, after finals, I visited the manager to ask why. He thought the overdraft might have taken my mind off studies at a critical period. He was a man who understood the needs of his clients and handled money in a way I thought was sensible but must make for a rather boring occupation. I was deeply grateful for his concern.
I can now no longer think about banks without fury. Maybe it’s only the 80 or so directors that should be locked away, but why do their subordinates tolerate these parasites whose driving principle was articulated in the 1987 film, Wall Street: “Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit”?
Their claim to provide benefit to the nation is clearly a lie if you take into account the recessions and crashes – caused by the banking system – that seriously damage our economy on a regular basis.
And the £375 billion of quantitative easing that, for some inexplicable reason, was money created by the state to benefit banks rather than the productive economy. Also the bailouts and, less widely appreciated, the huge too-big-to-fail subsidies. Fines for their criminal activities, like the Libor scandal, indicate that these banks are also too-big-to-manage and will continue to cause havoc. The biggest scandal and loss to the exchequer, however, is the role the banks continue to play in funnelling money to tax havens.
The five mega-banks are a liability to the country. It would be better if they took their headquarters abroad for another country to bail them out when in trouble (if another country would accept them). It’s only the gullibility of our politicians on both the right and the left that allows their lies to carry any weight.
The pay and bonuses of bankers have sunk the country into obscene levels of inequality. When banks receive money, they invest over 90% in assets like prime property that do nothing for the productive economy. The rich benefit as the value of their assets rises, so 12% of the population now own half the country’s wealth. Might our future resemble Syria? Syria was a peaceful yet divided country under the authoritarian Alawite regime that represented 12% of their country. Then the Arab Spring lit a spark that led to its disintegration.
In Britain, the 12% are exceptionally well housed, have gold-plated pensions, bulging share portfolios, fine art, luxury yachts and shrinking taxes. There is a chasm opening between them and the majority of society who are mostly in debt, suffering reduced welfare and tax benefits, unable to afford a home, increasingly forced to relocate away from their community of friends and travel for hours in order to pick up menial work for the rich. Those in a run-down area lucky enough to own a flat pay eight times as much council tax proportionally as the rich.
A spark will again ignite rioting in the streets — might it escalate to violence on the Syrian scale? We are not immune. Edwardian levels of inequality led to the Great Depression. Austerity measures under chancellor Hindenburg led to Hitler. The drop in household income in Japan between 1929 and 1931 led to a wave of assassinations of government officials and bankers. Social policies after WW2 turned the tables and brought peace, with inequality steadily dropping in Britain until the 1970s. But inequality is now returning to pre-war levels. Be afraid.
How have banks escaped onto a planet of their own? The following little conversation is part of the answer, though it does not explain why society tolerates their pernicious practices.
Imagine a game of Monopoly where John is the bank and Ann wants to buy a house:
Ann The price is £250,000.
John OK. Give me £50,000 as a deposit.
Ann Here you are.
Ann Now lend me £200,000.
Ann Wait a minute, I can see your hand. You don’t have the money!
Ann So how can you give me a loan?
John I’ll show you. I open my computer. I type £200,000. Hey presto. Here’s the money.
Ann You mean you are going to lend me money you don’t have, have never had, which you conjure out of nothing, just figures typed into a computer, and you expect me to treat it as real money?
Ann But …
John Now we come to the part that matters, you start paying me interest on £200,000.
Ann: ! ! !
You may find it hard to believe but that’s how money is created – out of thin air – not for the needs of the country, but for the benefit of banks. It’s so cynical, when I first heard it I could scarcely believe my ears. However, the governor of the Bank of England has confirmed it. Martin Wolf, chief economics commentator of the Financial Times, put it like this in 2010. “The essence of the modern banking system is the creation of money, out of nothing, by private banks’ often foolish lending.”
OK, it’s a bad system, but it’s what we have and to change it would be difficult. Or would it?
I went to a talk given by Michael Kumhof of the International Monetary Fund (IMF). He said the system can and must be changed. Conflict could develop due to 10% in society who are ‘investors’ (those with money to lend at interest) and 90% who are ‘workers’ (who are in debt – many as debt-slaves – to the investors). He outlined three key measures that should be introduced. First, a state body, independent of government, should be charged with increasing or reducing the amount of money in circulation in order to keep inflation at 2%. Second, commercial banking must be separated from investment banking. Third, banks must keep 100% reserves on deposits, which would prevent them from creating money in the way described above. His department’s modelling of the changes indicated that they “would reduce business cycle fluctuations, eliminate bank runs, dramatically reduce both public and private debt, and reduce net inflation to zero.” And, “To summarise, our analysis finds that the government is left with a much lower, in fact negative, net debt burden.” The government would then be able to concentrate on the real issues relating to our future on the planet — global warming, depletion of non-renewable resources and loss of biodiversity –- and banking would become a boring but useful occupation.
Shortly after Kumhof’s talk, I attended a seminar with members from the Bank of England, the London School of Economics, and a number of economics editors and authors. I asked for the panel’s views on the IMF paper, The Chicago Plan Revisited, published three months earlier, and was staggered to be told that none of them had heard of it, let alone read it! What the hell is going on? When the top authority with responsibility for the global economy is saying that the austerity theory sweeping Britain, Europe and the USA is based on a faulty monetary system that can and should be changed, you would expect anyone interested in the national economy to take notice.
There is obviously a conspiracy of silence. The 10% investors intend to retain their privileges at whatever cost to the 90%.
The campaign for monetary reform has set out in detail how the change would take place. A Money Creation Committee would increase or reduce the money supply on a monthly basis to keep inflation at 2%, making sterling the most stable currency in the world. How would it affect you and me? Household debt – yours and mine – stands at a staggering £1,500 billion, equivalent to ten-years’ worth of income tax revenue. It is the nation’s money, which the banks have been allowed to create out of nothing, so it belongs to the nation. Premiums would return to the government, which would use this revenue for welfare, schools and hospitals. Half of it would be distributed as a citizen’s dividend with the requirement that you must first eliminate your remaining debts. Household debt would drop dramatically, austerity measures would no longer be necessary and your mortgage would diminish. Banks would, once again, provide us with a useful service and my fury would evaporate.
The New Economics Foundation has published “Where Does Money Come From?” which is now a university textbook. James Robertson has written “Future Money”. Positive Money has an engaging website with videos and has published “Modernising Money”.