Characteristics of a political economy that addresses the possibility of tyranny arising out of the use of capital as power if one citizen controls more wealth than another
Resource dominance is a mal-adaptive characteristic of human nature. The only way to prevent resource dominance hierarchies from arising is to remove every pathway by which they can arise. Community members must agree among themselves to achieve this by means of the architecture of the political economy. Thus, the community must realize that this particular characteristic of human nature (resource dominance) is so horrifying - not to mention inconvenient - that it must be subverted to avoid the demise of civilized society if not the extinction of the human race. (For the purpose of this post, I will assume that the destructive nature of resource dominance hierarchies is understood. It will require a great deal of work to popularize that view.)
Here is a brief outline of the characteristics of the recommended political economy:
1. A system of rationing as described in my posts on a new monetary system, a vector-valued currency, or community currency. If more than one enterprise produces desired goods or renders service, the consumer will influence future production by choosing one of them. Thus, the economy is consumer-planned subject only to the consumer's responsibility (a) to use no more than 1/Nth of the total sustainable dividend of the economy where N is the number of consumers and (b) to reproduce himself only, to pass on his reproductive rights to another, or not to reproduce. Life can be made discouragingly difficult for cheaters.
2. Local economic enterprises owned by workers in the sense of custodianship. Decisions are made by direct vote – one worker, one vote. It is important that worker ownership not extend beyond the premises of the plant where the work is done.
3. Public servants chosen quasi-randomly, somewhat as jurors are chosen, for limited terms that cannot be followed by another such appointment. Recall is by direct vote of all members of the community whom I call citizens for lack of a better term. The term fractal government denotes a system of small communities wherein every citizen belongs to a local parliament that is tied in a loose federation with other such communities in similar parliaments that are tied in loose federations to other parliaments of parliaments. This is similar to fractal structures, except that a loose federation of the world can have only a finite number of sub-levels, as does every representation of a fractal in the real world. Among a very small number of public servants are the members of local communities who sit in the parliaments that determine public policy for the community’s eco-region, which randomly selects members of itself who make policy for a collection of eco-regions. And so on. Every one of these “members of parliament” is subject to immediate recall by the direct vote of the body that chose him or her. Thus, the only permanent members of the government are the people themselves who share political power at the community level in the sense of one-person-one-vote. Naturally, some people will have more influence than others if they are widely respected; but, they cannot convert this influence to greater wealth. Ultimately, this arrangement should evolve into no government at all.
Figure 1. Fractal
Figure 2. Fractal Political Structure
4. The Fundamental Principle of Neighborliness in dealing with neighboring communities, so that the dependence of economic well-being on geography is minimized. (Wealth flows always from richer communities to poorer communities or not at all.)
5. Defense by citizen militias if necessary. The decision to bear arms is up to the citizens.
6. It is recognized that the federal government is likely to suppress any effort to form an intentional community (or reform an existing community) along egalitarian lines, i. e., with a Natural Economy, unless collapse has already commenced, in which case the federal government will no longer be able to function because the most powerful people in government will have given up in despair and will be trying to save themselves - at least Dmitry Orlov has made a good case for this in “Closing the Collapse Gap”, which compares the collapse of the Soviet Empire with the very likely collapse of the United States American Empire.
Wayburn writes, “I regret very much employing the expression ‘natural economy’ because, if you google ‘natural economy’, you get 136,000 hits, and most of them do not agree with my definition. My paper ‘Energy in a Natural Economy’ doesn't show up until the second page. Fortunately, the first google hit is from the article in the Wikipedia where we read, ‘Natural economy refers to a type of economy in which money is not used in the transfer of resources among people’ and ‘German economists have invented the term Naturalwirtschaft, natural economy, to describe the period prior to the invention of money.’ The definition by Karl Marx is included too, which argues against a modern capitalist interpretation – as does the article under discussion.”
There is a slightly better description in Energy in a Natural Economy, which is listed in the hyperlinked table of contents at http://dematerialism.net/demise.htm#NaturalEconomy
. It just begins to describe the Earth as a Garden as I envision it in a post-industrial, decentralized, eco-community with a steady-state economy in the wake of Peak Oil. Such an economy should not be based on buying and selling; and, although people might still compete for importance or the recognition of their own importance by the rest of the community, they would not compete for status. I take “status” to refer to resource dominance or the acquisition of power over other people the purpose of which is to increase personal wealth. One could convert fame to personal wealth too, but that needn’t be the case. I take “importance” and “recognition” to refer to the sort of fame and influence over people that most of us would like – perhaps even seek, but we do not want them for the money. I picture a community where one can compete in a hierarchy of personal importance but not in one of personal wealth or power. This accounts for so-called human nature, which may or may not be universal and immutable.
In a Natural Economy good citizens are trying to minimize their personal consumption. They might even take personal pride in doing so. Ultimately, they might welcome the animal kingdom back into the Garden, which will have become much more hospitable to nearly every species. Some readers might find The Parable of the Shipwrecked Brothers illuminating.
The Earth as a Garden should have a number of easily-identified necessary characteristics:
1. As in Erewhon, Samuel Butler’s version of Utopia, the manufacture of energy intensive inventions of the Twentieth and Twenty-First Centuries should not be permitted. This does not apply to energy-saving inventions that replace inventions of earlier centuries and are immune to Jevons Paradox. This follows from Item A of "The Economic Growth Trap" (below). “Every technological innovation results in the exchange of one set of nuisances for another.”
The Economic Growth Trap by David M. Delaney
Economic growth requires increasing the amount of high quality energy and materials degraded by the economy each year. Economic growth on a finite planet will eventually stop. If it does not exhaust the resources needed for its continuation, it will stop earlier for some other reason. Allowing resource depletion and biosphere degradation to terminate economic growth will produce catastrophe. Unfortunately, our dependence on economic growth makes it extremely unlikely that we will give it up voluntarily before the catastrophe. Our dependence has at least four aspects: A) in the need to deal with adverse consequences of labor-reducing innovations, B) in commercial bank money, C) in the need to maintain tolerance of inequality, and D) in financial markets.
A) The first dependence on economic growth is in the need to avoid the adverse consequences of innovations that reduce the need for labor.1 By definition, each labor-reducing innovation either increases the amount of a good produced or throws some people out of work. Firms that create or exploit a labor-reducing innovation create new jobs internally by driving other firms out of business. The new jobs implementing the innovation offset the loss of jobs caused by the innovation, but the innovating firms don’t necessarily hire all of the job losers, because the innovation reduced the total amount of labor needed to produce the original amount of the good. In order to re-employ all job losers, the economy must grow to produce more of the good with all of the original workers, or produce more of some other good with the cheaper labor (the job losers) now available. In either case the economy grows. Much of what we consider progress is due to labor-reducing innovations. In order to live without economic growth, we would have to give up this kind of progress, or introduce arrangements to allow workers who become unproductive to retain their relative wealth and self-respect, or relegate most people to a repressed underclass. There is a powerful incentive to avoid these contingencies by encouraging economic growth.
B) The second dependence on economic growth is in the creation of money by the act of borrowing at interest from commercial banks. Much of the money in each loan by a commercial bank is created by the loan itself. The bank collects a fee—the interest—for providing the service of creating the money. Other ways of creating money have been explored in theory and practice. Successful local currencies have been based on some of these alternatives, (see Douthwaite, Short Circuit, page 61) but all national money is now created by interest-bearing loans from commercial banks. This way of creating money contributes instability to an economy based on it. In order to keep the money supply from contracting when a loan and its interest are paid, a larger total of new loans must be created, increasing the money supply. (This is not transparently obvious. For a more detailed explanation, see Douthwaite, The Ecology of Money, page 24.) When the economy grows to match the increasing money supply, the value of money is relatively stable, and commercial-bank-created money is benign. If the rate of economic growth does not match the rate of growth of the money supply, the money supply becomes unstable. Given the use of money created by interest-bearing loans from commercial banks, an economy can minimize the resulting instabilities of the money supply by sustaining moderate growth. Monetary instability would put significant hazards in the way of deliberate attempts to contract our economy unless the creation of money was radically reformed.
C) The third dependence on economic growth is in the political and geopolitical need for tolerance of inequality. Differences of wealth are at least as great within the developed countries as they are between developed and developing countries. Think of the ratio of the average income of American CEOs to the average salary of workers in their companies. Domestically and internationally, the tolerance of the poor and middle classes for the existence of wealthier classes and countries depends on a belief in economic growth. The poor struggle, while seeing that others are wealthy and still others are grotesquely wealthy. The poor are told a story: if they keep to their work and to their diversions, and tolerate the rich, they will be better off in the future than they are today. They believe this story, or at least don’t revolt against it, because it is supported by propaganda and shared myths, and has been true for many. When economic growth disappears forever, the poor, like everyone else, will recognize that they will be progressively worse off, with no future relief possible. The peaceful tolerance by the poor and the middles for the rich will disappear. A peaceful end of economic growth would require redistribution of wealth, with consequent political and geopolitical contention. Desire to avoid the contention makes it unlikely that deliberate elimination of economic growth will be attempted before economic growth is ended by nature. The intolerance of differences of wealth that will then appear will itself not be tolerated by the rich, causing additional domestic and international conflict just at the advent of other adverse changes. At that time, if not before, tyrannical repression of the poor will greatly tempt the rich.
D) The fourth dependence on economic growth is in the financial markets—the mechanism of capitalization of public corporations. Public corporations, the main actors in industrial economies, depend on financial markets not only for capital for innovation, but for discipline, valuation, motivation, and a major part of their rationale for existence. Owners of capital—investors—give the use of it over to public corporations by buying equity or debt in financial markets. They do so only because they expect that they will, on average, and over the long term, receive back more than they gave up. That expectation disappears when most investors understand there will be no economic growth. Most of the apparent wealth of the world consists of equity and debt bought and sold in financial markets. . Any realistic possibility of the end of growth would fill investors with something like terror. Political initiatives to bring an end to growth will be opposed by investors with every means at their command. The controversial nature of proposals that would reduce or eliminate economic growth will likely prevent the proposals from reaching even the status of political contention. When the onset of sustained economic contraction is generally perceived, investors will withdraw from financial markets. The resulting failure of the markets will make many necessary developments impossible to finance and will produce confusion and stasis in public corporations just when we need them to adapt to new circumstances.
[end of Economic Growth Trap]
2. Banking, finance, fiduciary instruments of every sort including stocks, bonds, options, and money, in short monetary systems themselves, must be rigorously excluded. Otherwise, the economy will grow and will not be sustainable as shown in Items B and D.
3. The necessity of reasonable equality in wealth in a steady-state economy follows from Item C.
1. An economic actor is a member of a community who makes decisions regarding consumption for herself and any dependents.
We Need a New Monetary System: The complete essay as far as I got
I have entered the various parts of the following in my blog at http://eroei.blogspot.com/
; however, since it is best read as a single idea, I have posted it to my friends, colleagues, allies, comrades, and detractors on two Yahoo! forums. (I hope my Australian friends are not offended by a post that applies strictly to the US.) Jay Hanson says that, if we cannot fix government, we can’t fix anything. I agree. We do not have to find a way to bell the cat; we need only install a government dedicated to achieving sustainability insofar as it is possible and doing the best it can otherwise. This government must be composed of qualified scientists, engineers, ecologists, and other legitimate scholars - independent, with no corporate ties. When the economic plan is in place, the exchange of US dollars for ANYTHING should be an extraditable capital offense.
We need a new monetary system.
And if thy right hand offend thee, cut it off, and cast it from thee: for it is profitable for thee that one of thy members should perish, and not that thy whole body should be cast into hell. - Matthew 5:30
Defects of our present monetary system
My Incomplete List
I do not need a list of defects to be offended by the current monetary system of the US; however, I shall mention a few fatal flaws that are likely to lead to collapse soon.
1. Like all fiat money the United States dollar (USD) is not tied to any real wealth such as gold bullion, barrels of oil, or acres of fertile soil. Its value depends upon what people will give for it. (Let us agree for the purposes of this argument only that the presence of United States military personnel in hundreds of foreign countries has nothing to do with the willingness of foreign nationals to accept it in payment for real goods.) The quantity of money can be altered by the issuance of debt instruments by banks and others - especially the federal government; hence, we are always susceptible to monetary inflation, that is, inflation caused by a larger supply of money chasing the same or a smaller amount of real goods and services.
2. The rules according to which economic transactions are conducted so favor talented money managers that they are able to acquire a disproportionate share of the money.
3. Etc. (Items can be added to this list by edits and comments; but, for now, I would like, once again, to refer to Gail Tverberg’s list and paste it below.)
Gail Tverberg’s List
1. Funds are not available to pay for fossil-fuel subsidies for renewable energy projects.
2. Wages consistent with financial solvency and private profit are too low.
3. Energy production companies, especially heavily front-loaded renewable energy production such as photovoltaic solar energy installations, need to borrow money that the credit system can no longer supply.
4. There are insufficient financial returns to pay taxes desperately needed by governments.
1. Private profit from energy production is seen as inadequate by corporations.
2. Rent cannot be paid for land used in energy production. This cost might be highest in bio-fuel operations, but it belongs to every process that harvests sunlight in real time.
3. Insufficient funds are available to prevent pollution and mitigate its effects. These costs are never paid unless mandated by law - if then.
4. Energy production companies do not pay to prevent mineral depletion and degradation of soil or even try to nor do they pay fines for failure.
5. Energy producers do not account for limitations in so-called free energy. For example, there ought to be a cost premium charged to the process for using limited coastal or off-shore wind power sites.
Let us agree then to take the advice of the fictional Jesus. I hope nobody thinks Matthew’s character didn’t have a single lucid moment. It remains to discuss what sort of a monetary system we do need.
Monetary Systems in General
Good old Dave Kimble has offered to help me write the following in plain English, which I am trying to learn. It deals with community currency because of the perceived benefits of decentralization. What is needed now is a central (national) currency; but, the principal ideas in the following apply just as well if only they can be understood:
On Designing a Community Currency (January, 2007)
Thomas L Wayburn, PhD
This is a draft - nay, a draft of a draft. - Herman Melville, Moby Dick
To walk in money through the night crowd, protected by money, lulled by money, dulled by money, the crowd itself a money, the breath money, no least single object anywhere that is not money, money, money everywhere and still not enough, and then no money, or a little money or less money or more money, but money, always money, and if you have money or you don’t have money it is the money that counts and money makes money, but what makes money make money? - Henry Miller, Tropic of Capricorn
One of the principal reasons for replacing the current national monetary system is that money is created by banks when they lend more than the sum total of the money deposited with them. This money cannot be repaid unless the economy grows, that is, the total cash value of sales and purchases is greater this year than it was last year regardless of the quantity of real wealth such as food, clothing, housing, energy represented by each unit of currency. The total amount of currency must increase continuously; and, each unit of currency can be divorced completely from physical wealth. We wish to replace this currency, which represents only a number in a computer somewhere and not anything tangible with a currency based upon measurable quantities of real physical wealth.
If there were one physical quantity, such as emergy (with an M), that could be used to measure all physical wealth - in particular, all wealth necessary to sustain human life on this planet - we would do well to base our new currency upon it. We cannot do this at the present time for two reasons: (i) the emergy values of water, land, and human labor have not been established nor is there any on-going effort to establish them or even to determine how they should be established and (ii) temporarily the government will need to issue un-backed scrip with which to pay the workers to do the necessary work to transform the United States to sustainability. The workers can use the scrip to purchase goods and services that formerly were paid for with United States dollars (USDs). Hopefully, in time, the economy will be a net producer of real wealth and the new fiat currency will be redeemed with currency described below. Clearly, among the necessary jobs will be the production of sufficient energy, food, and health care to sustain citizens who obey the new sustainability laws.
I need to explain “sustainability laws” and to show that enough workers will be available for essential occupations after the government furloughs workers who serve the market currently but produce nothing that we actually need to live. In “Energy in a Natural Economy”, I analyzed the Bureau of Labor Statistics data from one of the last years in which the United States produced almost everything it consumed. We should now try to establish a small list of fundamental economic entities in terms of which all economic goods and services can be evaluated.
Currently, provided we use Howard Odum’s concept of emergy to as great an extent as currently possible, we can evaluate every economic good or service in terms of land, water, energy, and time. Therefore, we could design a new rational monetary system with four types of currency:
(1) Emergy certificates that would pay for almost all economic goods and services in terms of energy properly weighted by transformities to account for the cost of conversion to a useful form
(2) Water certificates to pay for fresh water as it is found in Nature - as opposed to desalinated sea water
(3) Land certificates to pay a rent for all land use based upon ecological characteristics to be described later. (Clearly, not all land has equal value.)
(4) Certificates to pay for the time spent by workers at essential jobs. The government may not issue these any faster than they are needed to pay workers; so, they are not fiat currency in the sense that the USD is.
The government needs to establish the conversion factors so that workers can pay for economic goods.
Special Characteristics Needed to Avoid Economic Collapse
Our crisis has a physical component and an imaginary component. The physical component comes from limitations in the quantities of land, water, consumable energy, and the environment itself. The ecological footprint of the human race exceeds the carrying capacity of Earth. The imaginary component is instability in the monetary system caused by excessive debt and excessive monetary inequality. To ameliorate the physical crisis we must eliminate the imaginary one. I do not mean that indebtedness, poverty, and wealth are imaginary; but, rather, that we can eliminate all three with the application of our imaginations without affecting the physical universe. Stabilizing our population and reducing our ecological footprint will ultimately have a desirable effect upon the universe.
Regardless of what the people want, the owners of the country want to retain their positions of power, privilege, and wealth. Naturally, they despise the idea of government control of the economy and the means of production; however, when a crisis arises that they cannot handle, they readily accede to crisis socialism to save them. During World War II, without adopting socialism completely, they allowed rationing, wage and price control, and management of vital industries by government employees even if they were paid only one dollar per year.
To respond appropriately to resource and environmental limits, we need to establish crisis socialism. However, to eliminate debt, we need to repudiate the US dollar; and, to eliminate inequality, we need to pay everyone the same even if no work can be found for them to replace the inessential work from which they were furloughed to reduce our consumption of fossil fuels and our ecological footprint. After all, the requirement that every citizen does useful work to get paid and the requirement that the pay should be commensurate with the value of the work are completely imaginary. The idea that everyone should be allowed to get as much money as he can is completely wrong.
More on Land, Energy, and Time
We may assume, then, that every economic actor* in a community has been assigned a portion of contiguous land of equal value excluding the most desirable locations of all - normally coast lines, river banks, the best scenic outlooks, and the best locations for intensive energy collection, which will be retained by the community as part of the commons. In many cases, this common land will be made available to economic enterprises owned in equal shares by their own workers according to the maxim that every worker should own his own tools - or, as stated in the ancient Hebrew rabbinical writings, a carpenter without tools is not a carpenter. No person may control land upon which he does not live or labor. The land upon which men and women labor is held in common by all of the workers who labor upon that simply-connected (not disjoint) piece of land.
* Dependent children are not economic actors.
Energy* is the most important fundamental economic quantity. It should be the basis of every currency. It is the life’s blood of every economy. Howard T. Odum is famous for the following words:
Real wealth is food, fuel, water, wood for houses, fiber for clothes, raw minerals, electricity, information, …
· A country is wealthy that has more of this real stuff used per person.
· Money is only paid to people and is not proportional to real wealth.
· Prices and costs are inverse to real wealth.
· When resources are abundant, standard of living is high, but prices low.
· When resources are scarce, prices are high, more money goes to bring resources, a few people get rich, but the net contribution to prosperity is small.
· Real wealth is mostly the work of nature and has to be evaluated with a scientific ... measure, emergy.
Therefore, to place a value on an economic good or service, the first quantity to be assigned is the emergy (with an M) or embodied energy. I have completely reworked Odum's great concept.**
* In this essay, and in the rest of my writing, the term energy refers always to either Gibbs availability or Helmholtz availability depending upon context. Please see http://www.dematerialism.net/Chapter%20 ... efinitions
This is not a frivolous personal definition. To go about referring to energy consumption is barbarous and technically wrong!
** See http://dematerialism.net/onemergy.htm
The only time a person has is the time of his life. Clearly, every person’s life is equally valuable to himself. Until a thousand years have passed after an individual has died, there is no valid way to evaluate his contribution to the community. Therefore, every person’s time must be assigned the same value, namely, one hour per hour since time is fundamental and cannot be evaluated in terms of anything else, least of all money.
But, it is said, “Some people spend many years in engineering school, medical school, apprenticed to a tailor, etc. preparing to render useful services to the community. Clearly, the time of such people’s life when they render such services to the community must be compensated at a higher rate than the time of unskilled laborers with no preparation.” This can be finessed in the following way: Time spent learning a skill must be compensated at the same rate as it will be compensated when they are rendering service to the community. Thus, if a person spends 1000 hours* in classrooms being instructed in the great art of engineering with an average of nine other people, he will have earned 900 hours that he can use to support himself and others until he is able to contribute time practicing engineering. (Each student contributes 100 hours to the time spent by the professor.) In addition, he will spend about 2000 hours studying alone. This too represents earned time with which he can buy books each of which carries a price tag compounded of the land, water, energy, and time that went into its construction by the author and the book binder to name only two.
* The number 1000 is chosen for convenience in writing this essay not as a reflection of the actual time needed to learn engineering. However, the previous paragraph was written before I realized that I need a system to regulate and equalize consumption rather than an old-fashioned scheme to regulate earnings. It now can be explained as a charge to each student's ration card for his equal share of the professor's time - in lectures and in preparation for lectures as well as in other duties. This is passed on to other consumers along with the time put in by the student of engineering when they use materials and devices the costs (in time) of which entail a certain amount of time spent by the engineer. I will supply an example of this sort of computation if it is requested.