“I discovered a ﬂaw in the model that I perceived is the critical functioning structure that deﬁnes how the world works. ”
Alan Greenspan, former Chairman of the US Federal Reserve, 23 October 2008
I do love that quote. It’s to brilliantly demonstrative of the problem: “I thought the world worked like this. I was just doing what I’ve always known and thought, but it turns out that the world has changed and my view of it has not.”
So it is nice to be reminded of it in the opening pages of the NEF’s new book, ‘From the Ashes of the Crash‘ (you can download it free).
They supply 20 steps we can take to a stronger economy. I’ve added some more information to the ideas I particularly like.
- Demerge banks that are ‘too big to fail’
- Segregate financial markets
- Bring onto the balance sheet, rigorously check and officially license all ‘exotic’ financial instruments
- Create a secure, accessible local banking system
- Enhance economic support for the local economy
- Encourage the introduction of complementary, multilevel currencies
- Create new public money
- Introduce a ‘People’s Pension’
- Enable ‘local bonds’ as a secure investment vehicle
These could include local authority green bonds, green gilts and green family savings bonds and publicly approved enterprises, all of which could help deliver the mass transition to a cleaner more environmentally sustainable Britain on a path of low-carbon economic transition, whilst creating more secure vehicles for savings. These investments would also stimulate productive local economic activity, and yield rich rewards through job creation.
- Introduce a moratorium on crash-related home evictions and rebuild the UK’s stock of social housing
- Take a ‘social investment approach’ to public services
Recent nef research found that for every £1 spent on alternatives to prison that reduce reoffending, an additional £14 worth of social value
is generated. Also, when we value the long-term benefi ts of sound relationships and stable homes for children in care, we could see returns of up to £6. These savings over 20 years could pay for the entire annual care bill each year. If measured properly, investment in public services can have returns that demonstrate their ‘worth’. While they may not yield immediate fi nancial returns, they can nonetheless generate substantial social value.
- Tap into the hidden value of time banking and grow the ‘core economy’
- Improve checks and balances by introducing capital controls
- Make taxation work
As an organising principle, we should also move towards taxing more what we want less of, such as pollution and unsustainable consumption of natural resources, and taxing less what we want more of, such as those activities needed for the environmental transformation of the economy. This transition should be managed not only to just protect the poor, but so that it reduces inequality.
- Increase stability and raise resources with currency and financial transaction taxes
- Launch a Green New Deal to fight the recession whilst tackling energy insecurity and climate change
- Pay for energy transition and fuel poverty with a windfall tax
- Hold accountancy firms accountable
- Introduce a maximum pay differential, or maximum wage
- Take a ‘five-a-day’ approach to well-being to help beat the negative psychological effects of recession and build resilience
The irony is, of course, that we used to have much of this, and we sacrificed it all at the alter of ‘efficiency’. We knew at the time that we were losing something, but I think most just put it down to a sentimentality for the old ways of doing things. What we lost was slack in the system. We tightened every process so much and that a big impact at one end was felt just as strongly all the way through the rest of the connected economy.
But in a way, we’ve had it easy with this financial crash. Food is still on the shelves, petrol in the pumps … life goes on pretty much as normal for most people. There are quite a few jobs lost, of course, and people feel pretty miserable much of the time, but at the end of the day we’re still warm, fed, and alive.
So it is interesting to think about how we manage the production chain which keeps us supplied with our basic needs. Remember when Russia recently cut off the gas? We only have about 15 days of gas supplies stored in the UK (and 80 days of oil and 90 days of coal). Think about how many other parts of our daily life have been pared to the bone… I’m not suggesting we stock up on tins and guns just yet (though actually a well stocked larder is always a good thing), but I would urge you to consider the wisdom of ‘just in time‘ logistics.