There is a citizen-friendly solution to the Global Fiscal Crisis (Part 4)

In the previous 3 parts we introduced you to the concept of Gaianomy and the first steps towards global institutional reformation.

Specifically in Part 1, https://gaianomy.wordpress.com/2011/11/13/there-is-a-citizen-friendly-solution-to-the-global-fiscal-crisis-part-1/  we introduced the Human Institutions and way they influence societal behaviour, the way they combine to create complex forms,  the mechanism through these forms shape our economic behaviour at a global and local scale and the ways that economic measures will always affect the social and vice-versa.

Based on the above we concluded that in order to address the current crisis one has to modify the human (informal) institutions that combined to create the so called “Global Economy” instead of relying to pure fiscal measures or wait for The Markets to bring the “Global Economy” to order.

In Part 2,  https://gaianomy.wordpress.com/2011/11/19/there-is-a-citizen-friendly-solution-to-the-global-fiscal-crisis-part-2/ we introduced the first four changes out of a total of eight we feel necessary in order to exit from the crisis. These were, rethinking Globalisation and its governance needs, introducing the need for one world currency, one new standard the H2E that should replace the fiat and the golden standard and finally the abandonment of all physical representation of currencies in favour of the electronic one. We listed as well a myriad of benefits deriving from this.

In Part 3,  https://gaianomy.wordpress.com/2011/11/26/there-is-a-citizen-friendly-solution-to-the-global-fiscal-crisis-part-3/ we introduced the next major step the re-evaluation of work based on macro-social and meta-social criteria or in simple terms the net value of work to the global society, as well as the net value of its environmental contribution.

Once more, the benefits described are far reaching but do not complete the Gaianomy vision.

To do so we need to follow the path to the end and it tales only three more steps that we will present in this and the final part.

Step 6

This will be the last major step, and maybe by having achieved the previous this will be considerably easier, however, one must prepare himself for some additional “hardship”.  Changing Profit one of the most ancient institutions, through the redefinition of our material value system, may well equal in number the obstacles of the previous step.

Just to clarify by material value system in this instance I mean the way that, for example, we calculate;  how much a company stock should be valued, how much is the net added value of an industry at the end of its production line, what is the net value of transporting  goods from place A to place B, what is the actual value of a specific service of a Bank or a Consulting Firm, what is the value a mill adds to the price of wheat by transforming it into flour etc.

We need to always be mindful of the fact that what ever is produced has an impact on the environment, the ecosystems, our genes, and the society overall. It is a cost we never calculated before, with some exceptions. Can we really afford to keep ignoring all these parameters? How does it makes sense to allow water demanding cultivations to sprang in areas where water is a scarce resource, and value the product the same as one produced where the environment is impacted minimally?

Profit as an institution is really prehistoric. From the moment our ancestors start to consider the effort needed vs. the reward, in choosing what food to gather/hunt and what not, the institutional segments to build Profit where in place. With the addition of Growth and Money, Profit took a life on its own and infiltrated all socioeconomic theories developed over the millennia, even communism where it was practiced by the state, to reach in its current “selfish” form.  It is exactly this selfishness that we need to alter in a way that profit, at last, takes under consideration the impact it has on the rest of us and the environment. Making profit from cutting down out fins from sharks currently is still acceptable by some societies, as is opium trade profits that sustains revolutionary movements. It is madness and it will have to stop.

So, how we approach the whole change?

First of all we need to redefine the cost of all products using the Human Effort Equivalent (H2E) principal introduced above. To do so we need to define the actual value of the raw materials and the value of the capital needed in addition to the human effort. (Changing the basic principals of our economic theories at this moment in time will pay no dividend and will not affect our decision making hence, I am using the same ones.).

Raw materials can be valued again as products, as do all other elements of any production process and consequently can be measured in H2E but in this case with an additional twist.

All non-renewable raw materials are finite (at least until we build replicators or we achieve space mining) and consequently scarce to a degree. In most cases we know for how long we can keep harvesting them based on the projected consumption trends. It is relatively easy consequently to agree how much we need to “invest” as society in research and development, in order to have an alternative or a replication mechanism ready when they are depleted.  By adding this “cost” in the equation we can calculate the actual value of this material.

On the same subject, I think that, this part of the material’s value should be excluded from local taxation and the accumulated revenue  be divided through a mechanism build within the processes of our global governance body, to research centres around the globe.

Eventually with all the end to end process of every product calculated based on the H2E and the capital already measured against the same standard all one needs adding is the impact to society which will always be both positive and negative to different degrees. To calculate that I am proposing that we use the same 10 elements list as above, and by accessing that as well we are done.

Services now as products are much simpler to calculate as we already have defined how much every work actually “costs” including its social impact. We know as well the material it needs   and we can add that to the total cost as well.  We know finally the energy consumption needed for this service to take shape, which itself as being a product in its own right is no difficult to account for and add its worth to the final total cost.

So we have all cost ingredients (capital, materials/products and services) and all one needs to do is add the applicable elements.

After that we will be ready to estimate profit and that will be a straightforward calculation to make, depending on the method we will decide to use.

This include several options, none of which need to be decided now. Examples can be:

  1. To regulate globally a min and a max profit climax depending on product desirability
  2. To connect the profit margin to the workers remuneration packages. You may recall that we calculated above with relative consistency the value of every work. I never suggested that this should be his payment, so adding to that the same margin the enterprise wants to make as a profit overall may sounds in a lot of people’s ears as fair. However, every application of this type is better to remain with the local governments as it affects taxation levels.
  3. To use a rigid min and max profit margin depending on any other parameters or a combination of them like country’s GDP vs. Global average, scarcity, poverty levels, level of unemployment etc.
  4. Or…we can devise as many as our imagination and our sense of social justice allows us.

Brace yourselves though for a confrontation with all the short sighted ones, those with vested interests in retaining the currents status quo or those that are generally afraid change.

You see, most nations in this post-industrial era with some notable exceptions, those mono-product based economies and China, followed economic services oriented paths. These were build on the belief that services offer better profit margins then industries, they offer more predicted taxation revenue, faster growth and practically no need for subsides. Even nations that could not afford to migrate away from their traditional products followed that path (i.e. Greece). Cheap labour utilisation and the numbers in which it was available fuelled the industrial migration.

Look however in today’s world, which are the strong economies under this capitalistic model, Brazil, Russia, India, Korea and Germany. What do they have in common? Their ratio between the industrial products vs. post industrial era ones is positive. Every nation that lost its balance and moved too soon into the post industrial era has suffered the consequences and currently carries disproportional depts. The notion that capitalism is all about fiat money capital, has proven disastrous and we know it now. (See the terms or banks recapitalisation the EU leaders propose, demanding an increase of the banks’ securities to 9%) But on the other hand high profit margins have been associated even now with growth and countries will find it difficult to move away from this institutionalised idea.

What I am suggesting above is a totally radical and it will force all policy makers and political theorists alike into bringing forward a white paper start again approach.

Ok enough said on the topic, so let us see the benefits of such an alteration.

Well as expected they will be almost unbelievable.

  • Drastic reduction in pollution levels will follow immediately as product prices will be connected to environmental impact. No need for any additional Kyoto like treaties will be needed
  • All non productive functions will gradually disappear boosting this way global growth
  • Unemployment gradually will hit its lowest ever level and with it the benefits cultured that fuelled anti-social behaviour in various countries will be altered for ever
  • Inflation will decline to its lowest level as new mechanism to control it will exist within the system
  • Financially driven migration will be reduced further
  • Human trafficking will become a thing of the past
  • The equal rights charter will be further  enforced
  • Poverty will start to decline rabidly as decision on capital investments will alter course
  • Remunerations at all levels will reflect social and environmental contribution and with it social anger will cease
  • Poaching will stop all together
  • Drug trafficking will reduce further as new legal absorption avenues will open and people will be given realistic alternatives to its cultivation
  • Fiat money will be reduced further as profits from its use will stagnate
  • Research and the open source movements will get all funds needed
  • Pensions crisis will become a thing of the past as amount of people at work will multiply
  • Several major reasons that fuel war will be eliminated and with it weapon fuelled research will be able to contribute to society more
  • Refugee camps will diminish
  • Stability will increase globally and with it capital flow and investments in currently deprived areas
  • Countries GDP will be further rationalised to indicate the nation’s global contribution not just its richness
  • Global institutions will move a step further empowered to make this planet a better place to live

….

Next week we will finish the journey we started five weeks ago and publish the final chapter (Part 5) of the theory.

Until then enjoy life and your weekend and please keep up sending us your comments and suggestions.

S

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: