#RIC2014 Report: Opposing Austerity / Currency Complexities
- #RIC2014 on Bright Green: Read more reports and reflections from the event, watch all the sessions online, or visit the Radical Independence website.
Opposing Austerity Now
Katherine Trebeck (Oxfam) kicked this workshop off highlighting the now more widely held view that the economy is broken and growth cannot continue to be our aim. Rather, that we need to look beyond GDP, to an economic system that delivers decent work opportunities, where business is delivering social value and we and business are able to take the long term view.
Katherine gave the example of Ecuador and Bolivia where they have an alternative economic model based on ‘Living Well’ or ‘Vivir Bien’ which guarantees nature’s rights as well as the rights of people to fair, stable and dignified work as well as spaces for social interaction.
She suggested some approaches that we might use in Scotland: an economy based on sharing value, re-use of materials, workers co-operatives, fixed ratios for setting top level earnings, shared working hours, providing rights to employees to own or manage the business they work in, use of fiscal policies and incentives that encourage business to deliver social value and changing the way we measure success in the economy.
Professor Geoff Whittam followed, explaining the idea of the Scottish Service Tax proposals that he and others have put forward. This would replace the regressive Council Tax system (where poorer people pay proportionately much more than richer people) to a progressive system of local income tax (SST) based on a person’s ability to pay – i.e. the tax rate increases with increased income. He also proposed the introduction of a land value tax, where tax is levied on any land that increases in value as a result of public spending (e.g. if a piece of land of low value becomes more valuable when the government builds a road near to it). Currently the public do not benefit from this increased value resulting from public investment, just the individual that owns the land and this tax would redress this imbalance and provide funds for putting back into public benefit. He noted the statistic that if there was a one-of tax of 20% levied on the top 10% of wealthy people, this would wipe out our national debt.
James Meadway from the New Economics Foundation gave us a flurry of statistics on the economy, de-bunking many of the claims of the Conservative Party that all is going well on the economic front and that we are coming out of the recession. The Coalition Government set itself the target of reducing the national debt to £40 billion through austerity measures – however it is now £100 billion. This has meant that our debt has gone UP not down – we now have £517 billion of debt, more than under Labour.
Despite GDP rising recently, this has not resulted in benefit for the large majority of us in the UK real earnings have fallen by 10% in general and by 22% among the self-employed (while the wealth of the 1000 richest people has doubled over the last 4 years). Many of the new jobs created have been through zero hours contracts and this period has seen the longest sustained decline in earnings since the 1870s – even longer than during ‘the depression’.
He strongly urged us to welcome the prospect of RBS’s headquarters leaving Scotland in the event of independence as we need to clean up the financial sector in Scotland (and the UK) and go back to a banking system that does real things rather than speculate.
Liz Ely of the Living Rent campaign followed and persuaded many of us in the audience to support their campaign calling for proper rent controls and rights for tenants so they cannot arbitrarily be evicted from their homes by the landlords. She urged us to use the existing powers we have in Scotland to make sure that rents are made affordable and that letting agents and landlords are more regulated.
Solving Currency complexities – did the movement fail on money?
This immensely interesting and informative workshop had both Daniel Gay (who works as a consultant to the UN) and Duncan McCann (of the New Economics Foundation) clarifying for us some of the key ways in which we need to re-think and understand money.
Daniel explained why he thinks Scotland definitely needs its own currency and how this is entirely possible. Using the example of Singapore, a former colony of the UK, he explained how newly independent countries usually set up their own currency successfully. Singapore was a ‘poor’ country in 1965 when it secured its independence and economists in the UK gave dire warnings that Singapore would not be viable if the UK withdrew. However through strong government intervention in their economy, a forced saving scheme and good governance they were able to secure the confidence of the global markets and within 20 years Singapore overtook the UK economically.
Duncan McCann also strongly recommended that before the next referendum, having a strong proposal for money and currency will be key to success.
He started by outlining that money is an agreement within a community as a way of exchanging things. He also emphasised that money is not neutral but bears power. In the UK, as in many countries now, money is not created by the government but rather by the banks when they give loans and create debt. Every time someone takes a loan, extra money is created and when a loan is repaid money is destroyed. In this way, 97% of all the money in the UK is made by banks and is made up of debt. Also, 92% of bank loans in the UK go to unproductive activity such as house mortgages, financial speculation and NOT to productive business. This creates a very unstable currency system and the World Bank has found through research that over the last 40 years there have been 420 different currency crises.
In the manufacturing industry this level of failure would result in a fundamental review of the process. However this does not seem to have been the case with currency, with each crisis being dealt with using ‘sticking plasters’.
Duncan suggested that Scotland should develop a new national complimentary currency and could do so with our existing devolved powers. The currency system that NEF are proposing would be debt free, where the Scottish Government would distribute a dividend each year to every eligible person in Scotland.
The Scottish Government could also set up a low cost digital payment system to replace the more expensive system used through the Bank of England. This currency could operate alongside the pound at the start, as is the case with some existing such currencies running in the UK, such as in Bristol (the Bristol Pound) or the larger scale ‘Via Franc’ in Switzerland which is used by 65,000 businesses to enable them to exchange with each other.
Having a local currency ensures that the circulation of money and value remains within a city or country and therefore benefits the local economy. Then, as any new Scottish currency grew in acceptance and use it could become the national currency. In the meantime we could use the pound as the currency for those who do not want to use the new currency and for trade outside of Scotland. Having an economy with multiple currencies is stabilizing as is having a more diverse banking sector with many smaller banks. Duncan also highlighted the need to curb the financial sector as it is a drag on the economy with its speculation and investment in non-productive activity.
A wide range of questions from the audience showed the strong support for such ideas but also queries as to how we build political support for these ideas and public engagement. Both Daniel and Duncan were though optimistic that despite our institutions being slow to change there is momentum in the right direction. Despite the Economics profession appearing to be neo-classical and uniform, actually there is a diversity of opinion among Economists which has until recently been squashed but which is now pushing to be heard and gaining traction.