Posted on 03 April 2021 by Carmine Gorga, The Somist Institute A lovely expression has been around for quite a few years: Econ-Ecol. When I heard it, I become full of hope that such a marriage was indeed going to be consecrated any time soon. I even published in a peer-reviewed journal a paper titled Economics for Physicists and Ecologists.The initial enthusiastic reaction from one economist made me think that we would soon get there. Instead, I had to assume that, since this economist did not find in the paper a continuation of the linear math practiced by economists, he lost interest. And other economists, evidently, never have even looked into this paper.Please share this article - Go to very top of page, right hand side, for social media buttons.The math of Concordian economics
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posted on 03 April 2021
by Carmine Gorga, The Somist Institute
A lovely expression has been around for quite a few years: Econ-Ecol. When I heard it, I become full of hope that such a marriage was indeed going to be consecrated any time soon. I even published in a peer-reviewed journal a paper titled Economics for Physicists and Ecologists.The initial enthusiastic reaction from one economist made me think that we would soon get there. Instead, I had to assume that, since this economist did not find in the paper a continuation of the linear math practiced by economists, he lost interest. And other economists, evidently, never have even looked into this paper.
Please share this article - Go to very top of page, right hand side, for social media buttons.
I might be wrong, of course, but until the seed planted in that paper comes to full bloom the Econ-Ecol marriage has to be still in waiting. What I can do, and I have been doing in the meantime, is to give some specifics about the points at which there a clear intersection between Economics and Ecology. Here are some of these intersection points.
There is a deep reason why these intersections have to be brought to life now more urgently than ever. The necessary $1.9 trillion of the current coronavirus relief program does nothing to resolve long term problems of inequality, and poverty, and economic growth, and ecological despoliation. It is only Concordian economics that will eventually take care of these pesky long term problems.
Besides, should we not worry that a replenishment of the current rescue program will not have smooth sailing next time around?
As there are four (modern) factors of production, so in Concordian economics there are four rights of access to the factors of production and four corresponding responsibilities, whose exercise actually gives birth to the rights. Passing from the realm of jurisprudence to that of political science and politics, through an extension of Concordian economics one passes on to building four economic policies out of these four economic rights and responsibilities. Ecological implications of Concordian economics are better observed in the context of these four economic policies: Concordian monetary policy, fiscal policy, labor policy, and industrial policy.
1. On Concordian Monetary Policy
Create money only to create real wealth while enlarging the ownership base of the nation and reducing the costs of capital formation.
The long term roots of Concordian Monetary Policy reside in the incredibly fruitful work of Benjamin Franklin. It was he who praised the use of paper money in the colonies; it was he who fomented the rebellion against England, once England tried to prevent the issuance of paper money by the colonists; it is to him that we owe the inscription of creation and distribution of money in the very Article 1, Section 8 of the US Constitution. Hence, the implicit attribution of control over the process of creation and distribution of money by We the People rather than They the Bankers.
Let us start with the financial causes of ecological degradation. They are many; in my humble opinion, the fundamental one is our level of indebtedness, as a consequence of which we create jobs, not to satisfy any real need, but because we need to repay our debts.
To alter this condition, we need to reform the monetary system. There are many things that are wrong with our monetary system. Rather than engaging in the exercise of listing any of them, I prefer to outline the solution to the many wrongs.
The solution involves fundamental changes in the operations of the Federal Reserve System (the Fed), our central bank, for a large number of reasons. These changes start with the creation of money as an asset to the nation, not itself a debt by borrowing from existing wealth owners. Then, by creating money to create real wealth, while the creation of financial wealth through public money is starved. Creating money at cost, the piling of interest - and compound interest at that - is prevented.
Finally, to keep the list short, by enlarging the ownership base of our wealth - hence, through an equitable distribution of income - we might foster a reduction of indebtedness.
I have recently focused on a potential practical outcome of Concordian monetary policies, the possibility of creating financial independence for one oligopolist and all as well as for each and every peon on earth. The three-lane highway leading to that happy conclusion is rather simple, let us follow it:
A. INVEST YOUR MONEY LOCALLY
B. DEFUSE THE TIME BOMB
C. MEND THE FEDERAL RESERVE
For an ideally quick implementation, these three policies are synthetically presented in the form of three Internet petitions. The content of these petitions is rather simple:
A: Invest at least 10% of your money on Main Street rather than Wall Street.
B: Make full use of the economic wisdom of the Mosaic Laws of the Jubilee, namely
apply as soon as possible a systematic Debt Jubilee on a seven-year cycle. This policy will deflate the financial bomb that is any time ready to explode on Wall Street. Defusing the bomb, everyone will benefit: debtors in this age of pandemic for sure; but creditors as well. Since very little real wealth is created these days through the convolutions of financialization, done systematically, the debt jubilee leaves social, economic, and human relations on a steady basis. What is destroyed are only the zeros fast accumulating in accounting ledgers the world over.
C: Mend the Fed, do not Destroy the Fed. To Mend the Fed, we need to consistently apply three rules, and three rules only:
1. Issue loans exclusively to create real wealth, not financial assets;
2. Enlarge the ownership base of the nation by issuing loans exclusively to individual entrepreneurs, corporations with Employee Stock Ownership Plans (ESOPs) and/or Consumer Stock Ownership Plans (CSOPs), and public institutions;
3. Issue loans at cost.
Implicit in this outline is the fundamental distinction between capital credit and consumer credit. Capital credit frees us; consumer credit enslaves us. With capital credit, we repay the loan through the productivity of the loan. With consumer credit, we pledge to the lender the fruit of our own future productivity, an activity that is not assured at all. What happens if we remain unemployed for a long time?
A paper outlining the two policies B and C was sent to the Fed for evaluation, and the Fed responded:
“Given your proposal, I suggest that you contact your state and federal representatives."
It is to be noted that the Fed has traditionally been against any interference from politicians into its operations.
My resources have allowed me to do extraordinarily little with these three petitions. I have not had either time or money to work on their flourishing systematically. Might this be an opportune time to concentrate our attention on this task? Is a study group ready to be formed somewhere?
Some Ecological Consequences
To enjoy financial independence means not to be in debt to anybody. Two extraordinary ecological consequences will result from a regimen of widespread financial independence. First, do we ever stop to consider how many trees are felled, not to create tables and chairs, but to generate income to repay debt? Second, in the process of generation of monetary income, there is a subtle form of waste that cannot be overemphasized. These consequences occur under our very eyes, but we hardly ever take it into account. Under the pressures of a consumerist society, how many items we buy that we do not use and that go to waste? In the meantime, trees are felled.
2. On Concordian Fiscal Policy
Pay taxes on land values.
The long term roots of Concordian fiscal policy can be found in the persistent thought of Henry George and the brigade of faithful Georgists. Henry George was neither the first nor the last to extol the merits of land tax value as the basis of a national fiscal policy. Eight Nobel Laureates in economics eventually joined the choir, but there is no visible stirring in creating a national movement to implement such basic policy as a tax on land values. Indeed, a tax on such values only: No income taxes; no corporate taxes - or at least a corresponding reduction in income taxes and corporate taxes. Clearly, this policy will have to be coordinated will all other economic policies; basically, the welfare state, the overwhelming bureaucratic state will have to shrink considerably, organically, internally - an outcome that can only be the result of a capillary application of economic justice.
Perhaps, the coming of the implementation of a Georgist/Concordian fiscal policy can be shortened by a day or two, if we link this form of taxation to an older national policy: our understanding of the tragedy of the commons. Ecologists are supposed to care for the land. Deep ecology will never come to light if ecologists do not go to the bottom of this cultural tragedy. There never was a tragedy of the commons; there has only been a steady tragedy of the enclosures. The commons have been in existence for millions of years; they have always been a safety valve for the poor, people who need so little as to take only what they need out of the land.
Once kings started selling ownership rights to the commons, rights that they did not have, rich land owners literally enclosed the land; then, to recoup their purchasing costs, overexploited the land and the enclosures collapsed. By the same token, large estates could not be tended by the few landowners and their fertility was wasted.
This is an incidental way to touch upon the problem/opportunity of the commons. Land - and money - are commons. Do not privatize them; as Elinor Ostrom thought us, let the appropriate community develop rules and regulations to control access to the commons.
Henry George was right. Too many things hang on land value taxation. We set the issue aside to our great risk and peril; risk and peril of not understanding the issues; risk and peril of perpetuating the damage that a poor treatment of land value taxation automatically carries with it.
One way to reestablish the holy alliance between people and the land is to tax land values, so large homesteads can no longer be afforded. The organical breakup of the large estates will again allow the poor, the majority of the population to care for as much of the land as they can afford to till.
Large tracts of land owned by the few exist not only in the downtowns of many cities, but especially in that band of the land encircling the cities. These are lands that strangle the cities from within and without. Much poverty arises from the fiscal stranglehold on those lands. An inordinate amount of waste is taking place on those lands. Will ecologists ever become alerted to these close relationships between economics and ecology?
Just one observation: Is not poor land tax value the fundamental cause why we witness long commuting lines between work and lodging? Is the “commuting" not an inordinate waste of carbon fuels? Is not the injection of such fuels a primary cause of the climate crisis?
When will city planning, brilliant city planning, humane city planning be carried out in full accordance with the dictates of economics and ecology?
Conversely, does anyone have serious proposals on how to avert the disastrous consequences of climate change; on how to reduce emissions of carbon dioxide and other greenhouse gases - have environmentalists ever seriously tied their expectations to well-planned urbanism?
Perhaps, the coronavirus pandemic, apart from painful degradation of our lives, is giving us hints at fundamental solutions as well.
3. On Concordian Labor Policy
Rather than higher wages, aim for equity distribution of ownership rights over wealth created by workers.
The long term roots of Concordian labor policy can be found in the ingenious thought of Luis O. Kelso. To really understand Kelso’s thought, one has to consider all the implications of his pivotal essay titled Karl Marx: The Almost Capitalist. In it, Kelso points out that much of the malady of today’s world could have been avoided, and can still be avoided, if our aim is not to pit one social class against the other, but if we foster policies that legally, gradually, orderly transform workers into owners of whatever they produce. A large group of consequences will ensue: inequality will be abated; poverty will be curtailed; financial resources will not be wasted in pursuit of ever larger financial gains. Corporations will then rather pay undisturbed attention to what they are doing.
If people were spending their own money, rather than a capitalist’s money, would not financial resources be used sparingly? Would not natural resources be used to take care of real needs?
From the ecology point of view, one of the major expected benefits of transforming workers into owners of their corporations is this: Only insiders know the deep effects of corporate operations. Would widespread ownership and control of our large corporations by We the People prevent the performance of operations that pollute our atmosphere, our rivers, our aquifers, our oceans? Ecologists do consider this revolutionary possibility.
4. On Concordian Industrial Policy
Internal growth of the corporations: unlimited; external growth by purchase: prohibited.
The long term roots of Concordian industrial policy can be found in the progressive thought of Luis D. Brandeis. Brandeis was one of the leaders of the Progressive Movement. His major concern was the behavior of exploitation of the large corporations to the detriment of everything in sight: land, people, cities, cultures. During the last four to five hundred years, the literati have been involved in dreaming of windmills; engineers have devoted their lives to constructing the windmills; and the oligopolists have been single-handedly devoted to taking control of the windmills.
Brandeis and the Progressives devoted much of their attention to anti-trust policies, policies to interrupt this deep cultural blindness. Rules and regulations trying to keep the irrepressible power of industrialism under control; the attention of leaders of the Progressive Movement was mostly concentrated on how to keep the industrial trusts together and, when their power became overwhelming, how to break the trusts up.
Concordian economics has focused its attention on the future rather than the present or the past. Hence, the Brandeis Rule:
Let corporations grow internally as large as the market allows them to grow; but, definitely prevent the growth of these corporations through outside purchase.
Let us start with the largest 100 corporations and prohibit them in no uncertain terms from purchasing or being purchased for a year or two by other entities and gradually extend this policy to cover the next and the next 100 largest corporations. Would not our great captains of industry give an eye tooth if they could concentrate their attention only on to the internal affairs of the corporation rather than keeping one eye to see what happens over their shoulders and another eye on what happens sideways?
How much waste of natural resources takes place in the doing and undoing of the trusts? Will ecologists ever care?
These are not simply technical issues; they are deep cultural issues. One small piece of evidence can be quickly adduced here. The trusts grew at roughly the same time as our modern megalopolises grew; and they grew by the same method - not by internal growth but by external aggrandizement.
I tend to be rather against expressions like “climate justice" and “ecological justice." Our atmosphere, our mountains, our plains, our cities, our aquifers, our rivers, our oceans do not need justice. Their “feelings," their “rights" are stronger than that. They require systemic, sane and sound utilization. Sanity, not justice, is the touchstone. Ecological insanity comes back to bite us. Exploitative extraction of our natural resources and pollution of our environment are wounds that engulf us.
It is an integration of sane and sound economic policies with sane and sound ecological practices that will give us peace of mind - and perhaps even survival.
By casting away the economics of avarice, envy, and grumbling, if we consistently apply just economic policies for at least ten years in a row we will discover that abject poverty disappears from the face of the earth and the rich grow steadily richer, all the while the despoliation of the land is abated. The reason for this prediction is clear. Economic freedom follows economic justice. With economic freedom at large in the land, people will start producing all the wealth that they need. (Indeed, they will start creating only the children they can possibly love.) And since they will directly bear the costs associated with such production, they will produce just what they need - and not one whiff more. The avoidance of inefficiency and waste will be the lodestar to guide production as well as consumption of wealth. Mother Earth with her flowers and trees and beasts will be rediscovered as the gentle giver of life and will again be considered as sacred - sacred, just as men and women are sacred; just as the whole universe is sacred.
It is only if we consider the land as sacred that we are going to have deep respect for her, that we are going to exercise deeply sane and sound ecological practices toward our Mother Earth. That the land is sacred there can be no doubt. The deep studies of Connie Baxter Marlow and Andrew Cameron Bailey - as few others - reveal that all indigenous people, the four continents over, have a deep sense of the sacredness of the land. A sense of sacredness that allows the Arapaho to state:
“Take only what you need and leave the land as you found it."
American Indians whose religion I like to call Americanism.
Ancient cultures had this innate natural religious relationship with Nature. There are modern interpretations of Quantum Physics, as again emphasized in the Marlow/Bailey studies, that lead to the same conclusions, the Oneness of Nature; the Oneness with Nature.
That Mother Nature is sacred can also be derived from an extension of the equivalence of matter to energy to include spirit as the third indispensable element of the equivalence. This extension is a logical necessity.
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