Social Democratic Economy: Part 2

Guest post
12 years ago
Categories: Deep stuff, Economy

When I first started studying economics at Uni the tutor told us that:-

Economics is the study of the distribution of scarce resources

This seems reasonable but then we started studying the distribution of money and how to make a profit which didn’t. Resources are limited and proper distribution is needed but the drive for profit has left us with massive inequality, overuse of resources and Anthropogenic Climate Change that has us heading for the first (and possibly the last) Anthropogenic Extinction Level Event. The only possible conclusion from these facts is that the present socio-economic system that we use, namely Free Market Capitalism, is a failure.

When thinking about the economy and how it works I realised I had to go back to basics as almost everything that’s taught about economics in the mainstream theories is bollocks – most of its assumptions aren’t even close to being realistic. This led me to two questions:

What is the economy and
What is the purpose of the economy

The Economy

Absolute Resource Base: The resources the nation has in it’s borders and EEZ such as minerals, water, fish, land etc. These numbers will change over time as better methods of counting are developed and resources are used.

Renewable Resource Base: The resources that the nation has in it’s borders that it can use indefinitely. This is the amount that can be used year on year as it’s replaced by the natural cycles of the ecosystem (i.e. limited to what the environment can clean up, the limited amount of water available etc), what can be recycled and electrical power through renewable generation. ATM we have no idea as to what this is in respect to NZ but we know that, in many places, we’ve gone beyond it as the pollution of our streams, rivers and lakes by farm run-off proves.

These are broad categories and each would probably break down into dozens of individual items which I’m not even speculating about ATM. The most important consideration here is the Renewable Resource Base as it’s limited within any time period (the most likely measure would be a year). Contrary to what economists have been telling us for the last couple of centuries the economy really is a Zero Sum Game as what we are able to do is dependent upon the resources available to us and what’s available to us is the Renewable Resource Base. Going beyond that will, inevitably, force a collapse upon society when resources run dry.

Now, what we can do with the Renewable Resource Base is the economy and can change due to increased knowledge and better processes. A good example of such a change would be changing the cold houses that make up most of NZ housing stock by improving their insulation or replacing them with houses that meet or exceed the Passive House Standard. Such a change would, effectively, increase the amount of power available to us without having to build more generating capacity by decreasing the amount of power used and thus allow us to do other things with that power such as power trains or run more factories. It is this point that seems to confuse economists and others into thinking that the economy isn’t a Zero Sum Game but this is wrong as we’re still limited to the Renewable Resource Base as such efficiency gains aren’t infinite, at some point increasing efficiency costs more than the resources saved from that efficiency.

These limits are an inescapable physical constraint.

Purpose

The purpose of a societies economy is simply to provide everyone within that society with the resources necessary to maintain a good living standard, to engage with their society and with rich and rewarding work. Simply stated, not so simple to address in what it actually means. Here’s some thoughts on the matter:

Living Standard:

A healthy place to live in, a home
A healthy and safe environment to live in
A healthy and active community with the resources to be active within that community
Healthy and diverse food on the table
A fast and reliable internet connection
At least one computer in the house and possibly as many as one per individual (In fact I like the idea of giving school kids in year 5 a pad)
Plenty of leisure time

Some will question the need for the internet and PC but it is this technology that will help people to have more say in the governance of their community and country and help to connect with other people of like mind so I see both as essential. This is a minimum standard and so even those who aren’t working (preferably nobody) will have these available to them.

Work:

Work is the hardest one to define. It really needs to be of interest to the person doing it else they tend not to engage with what they’re doing and so aren’t creative within that sphere. Some will complain What if they just want to be surfers? But that brings up two points:

Apparently some people make a good living surfing because a lot more people like to watch thus meaning that surfing is, as a matter of fact, of value to society and
There’s the story of the unemployed surfer out at Piha (IIRC, It was in the Western Leader in the early 1990s, possibly before Ruth Richardson’s MOAB) who couldn’t afford a new board and so he made his own – and then got orders to make more and became a successful board maker

The story of the board maker is the story of why the basic income of people needs to be higher than what is presently paid on the unemployment benefit. ATM, the unemployment benefit is slightly less than enough to support a subsistence level living standard actively preventing the entrepreneurialism that we see in the board maker - the entrepreneurialism that we want to encourage and that can only come about if people have access to resources.

Some things though, need more than a single person and the resources that that person has to create and so we also need to encourage and broaden peoples networking which is another use for having a PC and internet connection in every house that will allow people of the same interests to connect with each other and thus take a cooperative and creative approach to researching and producing what they want to produce.

The first part of the economy’s purpose provides enough so that people are free to choose the work that they want to do. That they are not forced through poverty and deprivation to do that which they don’t want to do. It also provides them with enough, either individually or as a cooperative, so that they can create their own work.

Draco T Bastard

Also see Part One