Tuesday, May 30, 2006

A review in New Zealand Books from an economist

The following review appeared in the June 2006 edition of a publication called New Zealand Books. I am a little reluctant to put it on the website as it has a few inaccuracies. An author feels a little weird when someone gets a fact or two wrong..Anyway it seems he has cottoned on to what the book is about, particularly the chapter on diversity and on organic organisation and thinks it worthwhile reading. Some of his sentences are hard to understand and I am not sure that he reiterates or rephrases what I actually said. Deirdre

Current Account
Robin Johnson

Healthy Money Healthy Planet: Developing Sustainabiilty through new Money Systems
Deirdre Kent
Craig Potton Publishing $34.99
ISBN 1877333298

This book is a serious critique of orthodox economic writing and attempts to set out an alternative interpretation of the role of money in society. In particular, it attacks the creation of credit by the banking system and lack of controls over the money supply. The viewpoint is international as well as domestic and hence includes world monetary influences as well as those of particular countries. In summary the author deplores the concentration of wealth and power in a small percentage of the population, the undue influence of multinational corporations, the lack of regard for natural resources, and the baleful influence of international specialisation (world trade reform) on local economies.

The author presents a case for the reform of the money system consistent with a view of society that is self-reliant, environmentally friendly and helpful to all levels. She reviews what she calls complementary economic and monetary systems that might mitigates some of the worst features of the international monetary system she identifies. Complementary currencies are those set up to give the power to issue money to people at all levels of organisation. These have been developed in a number of countries, including New Zealand, and their implementation could overcome foreign or bank control of the money supply. If implemented they would require the introduction of community banking and local participation, the encouragement of commercial barter and exchange, enhanced local currency circulation and alternative means of exchange, like voucher schemes, in parallel with national and international systems.

For an economist this is a serious challenge, and, I believe Kent’s proposals are unlikely to be workable. However, for the non-economist, the book is an informative read on everyday aspects of the economy, particularly the workings of the monetary system and the author’s interpretation of it.

The title of the book derives from the author’s metaphor of an organic model for a healthy economy – thinking of it as a living system. It’s her view that in a healthy global economy there would be no essential conflict between what is good for the local region and what is good for the planet; and in a national economy, its parts, while competing for attention by demonstrating their uniqueness, should all cooperate and help each other at optimal capacity.

The author speaks of managed borders. In a human cell, if the cell membrane is removed, the contents will leak out and pathogens will enter the cell. While goods, services,, energy and money are all allowed to circulate freely within the economy, the borders should be managed to allow vital materials, energy and information to pass through. In an organic, hierarchic model each economy – supranational, national, regional, local and neighbourhood – would be a complete unit. To retain integrity each would have its own currency, while also using the national and international currencies for trade within the larger unit.

Kent follows other writers in this area by setting out operational characteristics of a healthy holarchic (a term said to come from Arthur Koestler, meaning that each living part of an organism is whole but also depends on cells around it; a group of such cells is a holarchy system). These characteristics are based on the following ecological principles: life is frugal and sharing; life depends on inclusive, place-based communities; life depends on boundaries; and life thrives on diversity, creative individuality and shared learning.

Theese propositions can be used to recreate economic institutions in the service of “life”. Thus:

"Human economies can and should function as self-organising systems in which each individual, family, community or nation is able to exercise its freedom of choice, mindful of the needs of the whole, and no entity has the power to dominate any other. Human economies can and should be organised to contribute to life’s abundance through frugal use, equitable sharing, and continuous recycling of the available energy and resources to meet the material, social and spiritual needs of all their members. Human economies can and should be built around inclusive, place based communities, adapted to the conditions of their physical space, adept at the collection and conversation of energy and recycling of materials to function as largely self-reliant entities, and organised to provide each of their members with a sustainable means of livelihood."

Human economies can and should acknowledge and reward cooperative behaviour towards the efficient use of energy and resources in providing adequate livelihoods for all and enhancing the productive capacities of a shared pool of living capital. Human economies can and should have managed borders at each level of organisation, from households and community to region and nation, which allow them to maintain the integrity, coherence and resource efficiency of their internal productive processes and to protect themselves from predators and pathogens while cooperating to enhance the potentials of the larger whole. Human economies can and should nurture cultural, social and economic creativity and diversity and share information within and between and between place-based economies. These conditions are the keys to system resilience and creative intelligence.

Now it seems to me that these social institutions are largely built around the Christian ethic and the efficient use of resources, and would be acceptable to economists and non-economists alike. Modern legislation also provides for the control of excessive monopolies and unfair competition, and international agreements are in place for sharing energy resources, preventing unfair trade and the control of bugs and disease (“predators and pathogens”). Where the two approaches seems to part is in the degree of control of local, national and international autonomy sanctioned by society. The author would prefer more local control over events, more self-sufficiency at the household and regional level, and less trade with other entities at all levels.

The political analyst is bound to point out that such an organisational change is well within the powers of democratic voting systems if sufficient people opt for it. The economic analyst would also have to point out that many social reforms of the kind prescribed can only be achieved by some loss of efficiency in the productive system. If there is a loss of efficiency in moving to such a system, there is less wealth to share among the unfortunate and the less advantaged. The very efficiencies gained from specialisation in trade at regional, national and international levels would be largely lost.

In the end it comes down to what kind of society we really want. We need to weigh the advantages and disadvantages of the various options. Most of us would vote for a caring, decently incomed, self-governing form of organisation if the benefits were clear. It could be that the information we have available is insufficient to make a constructive choice – a point suggested in the last of the aboe forms of organisation. Perhaps the most positive aspect of this book is that it exposes much new information and a new view on a subject that concerns everybody; a reading of its contents might influence ways our society might move in the future.

Robin Johnson is an economist and retired civil servant.

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