Report of the Economic Conference held on 24th October 2012 at the School of Economic Science
This conference was one of a number of seminars moderated by James Quilligan dealing with the Commons. The Coalition for Economic Justice (CEJ) organised the event.
The conference was designed to examine key aspects of the economy recognising that the economic system is seriously inappropriate in meeting the needs of the population. These aspects covered the dysfunctional taxation system; banking and financial services; and the issue of money supply and interest rates. These were planned for discussion as significant changes must be made if we are to achieve an economy that serves society’s needs.
James Quilligan started the conference by setting the scene and indicating its purpose and direction. Abstracts of two papers by JQ setting out a summary of what he spoke to at the introductory and final sessions are set out in appendices A and B. His more detailed exposition has been put on the CEJ website, www.c4ej.com.
The key question at the initial discussion was a request for a clear definition of “the Commons”. The formal definition of the Commons by the Global Commons Trust, co-founded by Eleanor Ostrom and James Quilligan, is set out in appendix C, explaining in depth that the Commons are the shared resources of humanity, despite its exploitation in previous centuries whereby those resources continue incrementally to be owned by a small minority.
Summary reports from breakout groups
Group 1: Taxation
The session, chaired by Tony Vickers, started with a series of short presentations by a panel consisting of David Triggs, Dave Wetzel and Ed Randall.
The group considered a wide variety of taxation issues arising from their interest in the work of the member organisations of the Coalition for Economic Justice, the Tax Justice Network and Taxpayers Against Poverty as well as considering the value of introducing an annual Land Value Tax (LVT).
David Triggs outlined the principles that should underpin any system of raising and sharing public revenue. He drew attention to how the ethical principle ‘not to steal’ lies at the heart of civilised economic behaviour and how implicit in this is the recognition of a clear basis for distinguishing private property from that which is due to the whole community. A person producing an item by their own efforts, using resources equally available to everyone, is quite naturally able to call that item their own and it should not be taken from them through exploitation of any sort, including tax. This is theft. He emphasised the importance of man’s social instinct and how this, together with his tendency to exchange, trade, specialise and render mutual service to others increases the advantages that accrue to certain locations. Further, this ‘Location Value’ is created by the presence, activities and services (both private and public) provided by the whole community and is thus a natural and just source of public revenue. He pointed out how to describe this payment as a ‘tax’ is misleading since it is not an arbitrary impost but a charge by the community which is only levied on those who chose to enjoy the value of a location that exceeds the value of locations that the community makes freely available to all others.
Dave Wetzel developed the discussion into why and how a land value tax could be implemented. He emphasised that location value (reflected in the rental value of land) is created by all of us in the community and hence the community should share in this benefit with the rent of land being collected for the public purse. He described how some past attempts to introduce it during the twentieth century had been frustrated by economic crises and vested interests and offered suggestions on how it could be implemented. There are some supporters of LVT who would only want to see it introduced to fund local services but Dave emphasised the benefits of collecting a national LVT, as only in this way would the depressed, poorer areas of the country really benefit with both a low payment on less valuable land and reduced taxation on production.
The group spent some time identifying areas of the current tax and benefit system which are in urgent need of reform, assisted by contributions by Ed Randall and Paul Nicolson. These included Ed’s reference to the regressive nature of the overall tax system, particularly council tax, tax avoidance and evasion, fiscal transfers to the wealthy and tax evasion by multinationals and individuals (as dealt with by the Tax Justice Network). He made the point that the CEJ and the TJN had much in common and could work as partners concerned about what the TJN term the ‘tax gap’. Closing the tax gap would, according to the TJN, yield up to £120 billion of additional government revenue by eliminating tax avoidance, tax evasion and late payment of taxes.
Paul Nicolson spoke about the critical crisis caused by the 2012/13 benefit reforms (universal credit, caps on overall benefits and caps on housing benefit) raised as a key concern by the Taxpayers Against Poverty. Paul has subsequently advised that a small increase in council tax (£45 a year) would, on the example of Haringey Council, enable those on benefits to for their fellow citizens.
Most in the group considered that there is an institutional failure in the taxation system. There was some recognition that the economic significance of land and location maintain their 100% council tax benefit. Many people would be happy to pay this and so avoid misery value and the impact of taxes on the production and distribution of wealth as currently taught in universities was far from satisfactory and that whilst the economic case for introducing LVT was a strong one it had significant political difficulties. Information was therefore shared about Land Value Taxation (for which the Coalition for Economic Justice is campaigning). Land value depends on its location and is created by the community. LVT is a charge, not a tax; it avoids the deadweight burden (i.e. it is not a tax on production which thereby reduces what can be produced); and it recognises that we need access to land and other natural resources to live by the product of our labour. It was noted that LVT was receiving support from the Occupy movement, the Green party, the Cooperative party, the Mirrlees review and the Institute for Fiscal Studies together with a number of journalists.
Unfortunately, the meeting provided little scope for reasoned debate or agreement and the group were not able in the time available to produce a range of agreed measures to deal with the taxation system.
Group 2: Money Supply and Interest Rates
The three speakers gave their views on the aim of achieving a stable monetary system. Ben Dyson summarised the position of Positive Money on national currencies, the process of creating money and the monopoly of commercial banking. The current system has various incentives which work against the interests of the people and the economy. Money supply should be the remit of an independent committee for monetary policy overseen by government.
Clive Menzies of the Occupy London Economic Working Group and Critical Thinking considered that interest introduces inequality into the system. Debt follows an exponential curve. He proposed a land-banked currency to pay for national revenue, an international currency for global trade and an ecosystem of complementary currencies.
Sesto Castagnoli promoted the natural economy of life and proposes a threefold system with no interest charges to replace the present arrangements. This consists of a basic income for each person coupled with taxes taken from the community for infrastructure maintenance and, further, taxes used to replenish the environment.
In discussion the group considered the nature of money and agreed that a good outcome would be achieved through a mutual credit system. The need was for money to be designed for a society built around the commons. Although not specific in their proposals the group considered the proposals put forward by the contributors formed the basis for resolving the current money supply and interest rate problems.
Group 3: Banking and Financial Services
Greg Fisher of Synthesis spoke about the need to bring the banking system into the real world. He explained the basis of the government’s draft Financial Services (Banking Reform) Bill put forward as a response to the Vickers Report. In his view this would not resolve the problems. Banks had to work on a much more localised basis working closely with customers. The investment or casino side needed to be controlled in an effective manner.
Claudius van Wyk, Director of Transformation Strategies Ltd., showed that behavioural economics indicates that institutions such as banks and their practice are a reflection of collective behaviours rather than rigid structures and principles. These reflect on our deeper consciousness. Consequently, the solutions to economic inequality lie in a transformation of our thinking. The response to the banking crisis by government will be shown to have limited effect. Both speakers spoke from an understanding of complexity and network thinking.
The group then attempted to work out possible solutions to the unsustainable system on which banking and financial services are based. A number of proposals were put forward. One is the establishment of a UK Sovereign Wealth Fund to focus on long-term investments in uncertain projects which the City struggles to deal with. The Fund should be independent of government, mutualised and set up as a Trust operating with transparency. Another is to further cultivate the Social Investment market so that people may invest in viable pro-social and pro-environmental projects. A popular idea was to transform the Royal Bank of Scotland into a localised retail bank working on the principle of subsidiarity i.e. with decisions taken close to the customer. This could also apply to other banks where the public have a stake. Banks should also be taxed according to their size, and progressively i.e. all banks above £100bn in assets are levied and that levy is increased with each £50bn in size. Banks should be required to set up a “banking charter” of good practice. Consideration could also be given to a financial transaction tax.
Whilst these proposals were put forward for consideration there was not time for the group to come to firm agreed conclusions.
Group 4
Despite the fact that the conference was specifically planned to deal with the three economic subjects described above this group asked to meet together, they said, to consider the subject in the round. This was conceded by the chair, even though it reduced the size of each debating group. Some in this group felt they did not have influence on economic practice, others were looking to a holistic exploration. They clearly recognised the influence on the Commons created by the Occupy movement and looked to ways in which they could find projects that change peoples’ experience of social relationships. Although there were no firm outcomes the group said, quoting Eleanor Ostrom, that ‘we want to be part of changing something’.
Outcome
In its subsequent consideration of how the conference had gone, the CEJ decided that they would work with the chairs and contributors for the three breakout groups with the aim of producing over the coming months agreed policies in these key areas of economic activity. It was recognised that no conference could produce specific policies but this one had certainly laid the groundwork for this task.
Thanks are due, particularly to James Quilligan, but also to the contributors to the break-out groups listed above as well as the chairs of these groups, Peter Challen, Dave Dewhurst and Tony Vickers, and the conference chair, John Lipetz – and, of course, to all those who took part.
Appendix A Abstract of JQ’s paper on the Commons, Part 1
Appendix B Abstract of JQ’s paper on the Commons, Part 2
Appendix C Description of the Commons
JL/PC