The Search for a Perfect Economic System

The search for the perfect economic system.

How can we construct a good economic system that will provide for the material needs and give purpose, to a whole planet?

Definitions:

Work: Paid for physical or mental effort directed towards a desired result . That is, effort directed at a given objective in order to receive a material reward.

Working life: The period between being educated and being retired.

Necessities of Life: Security, food, water, shelter, clothing, externally supplied energy, education and health care, for a family or for each individual.

Family: A self selected group of people living as a collective or social unit.

Pension: that which is paid to a person who has reached an age where society considers they do not have to work. That which is paid to a person who has retired, (being accepted as over the age of work.)

Benefits-social security: that which is paid to a person unfit or unable to work

Education: Training and study, learning, mental or physical preparation for work.

Time scales: For the purpose of this essay we are looking at medium ( 30 to 50 years ahead) to long term (over 200 years ahead).

In the future, artificial intelligence and automation will reduce the need for huge numbers of human hours of work. Over the next few centuries this will have a very profound effect on all the existing economic structures and systems. During this same period it is probable that science will unlock the secrets of cold fusion, unleashing the potential for virtually free unlimited, energy supplies. The exiting economic power blocks will be replaced, but what by? National boundaries, economic power blocks, social cohesion and possibly even, religious collectives will all be changed. The reduction in the need for human labour will cause great social unrest, unless existing communities and existing governments start planning and acting now. Since such planning will need the breakdown of the present political power structures and ideological divides; it is doubtful that any cohesive preparation, (for the vast surplus of human labour) will be made. Social unrest and disruption will be the result of this political failure.

There is a need to think now about what will eventually replace the see-saw of politically controlled economies. At present national economies are forced to be one thing under one government and the opposite under the next. Coping with the dual problems of surplus populations and dwindling natural resources on planet Earth, will overwhelm all existing social and political systems; unless a new economic basis for life can be found. The obvious first step is to reduce the human population of Earth to about one third of its present level.

The aim of a good economic system is to provide for and give purpose to a whole nation, in which everyone who does some form of work for more than a given number of hours a day, earns enough money to pay for the necessities of their life. A system where greater effort earns greater reward. A system where greater skill and ability earns greater reward. Every person would like to find some value and some personal satisfaction from their work.

There are many problems in designing such a system, some are obvious but can be noted as: judging what is a greater effort, skill or ability. Also judging what are the most deserving results of any work. For example if judgement is based on “market forces” then skill in a sport, such as soccer, is of greater value than skill as a medical surgeon. Judge these two by any other criteria and the surgeon is of greater value. There is also the question of how to reward brief periods of highly skilled achievement compared to long hours of demanding but repetitive work. An original artist such as Picasso, is surely worthy of greater reward that someone who can produce several very close copies of his work but how is the judgement to be made as to their relative rewards?

The new industrial era where physical labour is not required, will bring in the demand for new skills. Design will become the most important facet of any production train. Artificial intelligence will take over from an original creative design and turn it into the instructions for robotic automation to actually make. Even the production of raw materials will be largely automated. Control of production quantities will be done by computer. The computers will judge demand and supply to ensure the owners of raw materials get the best price and volume combination. No humans will be involved. Financial institutions will use the same levels of artificial intelligence to make share buying, or loan granting, decisions.

Will we actually need the same type of banking industry that we have now? Any open minded assessment of the present profit generating market led banking system, has to suggest the present set up is designed to make money for the banks owners and that the support of customers and even support for income generating customers, comes way behind the profit for owners. The capital needed to design and build the fully automated systems will initially give even greater power to the investment banks and it will probably reduce the number of companies able to competitively manufacture any product.

After this initial revolutionary phase there will be a situation where a very few companies control the mass production of goods. The banks will control these companies and they will demand greater productivity to generate greater profits but the numbers of the population, in employment, will fall thus the number of customers will fall and so will profits. The banks will then be in a trap of their own making, they need more customers with money to spend, while they have reduced the number of those with money. Governments will have to either tax these productive companies and the banks or use draconian methods to suppress the needs of millions of unemployed people. Since banks will try to avoid tax they will shift their notional places of management to tiny sovereign states who are not beholden to anyone except the banks. The risk of global meltdown will be great. Food production will either have to become totally industrialised or, if the population is curtailed; divided into industrialised mass production of basic food with another sector that provides small quantities of high quality food for those with incomes.

If the population levels are drastically reduced then only this second sector will be needed but this level of population will mean the vast output of manufactured goods has insufficient customers to make it worthwhile. It is probable that many of the educated unemployed will start small artisan production of goods and services and if the economic system allows it, these could prosper and alleviate the social problems of mass unemployment. The economic system to allow this will have to take money from the banks and distribute it to the customers of these tiny enterprises. This will not be popular with the bank owners.

One possible economic system that could, with luck and good management, cope with all these problems; is for each nation to take 40 percent of the ownership of all enterprises operating within its boarders. The government would then provide 40 percent of the financial investment needed and it would effectively control pay and conditions for the employees. It would then distribute the profit share it receives, as benefits and pensions and so ensure there was money in circulation to support the artisan enterprises. This would not be wholesale communist nationalisation of all means of production, since they only have 40 percent and the law should ensure while they can appoint non executive directors, the state bureaucracy would not have control of how the enterprises function. This is important since total state ownership always has and always will, cause stagnation and decline in any and every activity it takes over. This government ownership will require extremely good fiscal management by the individual governments. If they spend too much on their own employees there will be no circulation of money to the non state sector. If they borrow money the banks will ensure most of the profit revenues, from their 40 percent share, ends up back with the banks as interest on state loans.

Perhaps fixed proportions of national revenue will have to be imposed, that is for example: Ten percent of all money a government gets goes to pay for itself, ten percent goes on defence, ten percent on health care, ten percent on education and the rest goes on benefits and pensions. Thus ensuring circulation of money. Such a rigidly controlled system will not suit the politically ambitious, most of whom want power rather than the furtherance of some political ideal. The banks will fight against such a system since the governments will be investing their nations wealth and not borrowing from the banks. Each national government becoming its own investment bank.

One other solution is to do away with banks and the banking system completely. Break all societies down into smaller communities, say 5,000 people maximum. Each community to be self sufficient in energy, food, water, shelter (housing),primary education, primary health care and joining with other communities for defence (security) secondary and higher education and specialised health care. Money would be only used as interchange, for bartering between communities and for each community paying towards those joint functions. The price in money terms would be fixed and never varied. There would not be mass production of goods. Provision of energy would be by fusion generators or whatever each community decides. There would be no central control of how each or any community fulfilled its self sufficiency needs.

What other possibilities are there? Total state ownership and control of everything has always failed from Russia to Venezuela. The state does not know what is best for all the variations in local needs. The state bureaucracy does not know what is best for every person within the state. Career bureaucrats are not engineers, they are not designers, they are not marketing experts, they do not know what is right for all the various sub divisions of society. This economic structure has to be forgotten. Total free market, no controls, no government interventions in fiscal policy? This does not work either; human greed takes over and financial anarchy becomes the norm. We only have to remember the effect (in Britain) of Browns light touch approach, to know the banks will act only out of short term self interest. This is another possibility that has to be forgotten and ruled out. So the extremes are definitely out. Could controlled capitalism work? I guess that depends on who doing the controlling and how they do it. The effectiveness and benefits, will depend on the rules and the variations. In a way the option described above with governments owning, on behalf of the people, a share of every enterprise, is a form of controlled capitalism.

We are discussing possible solutions to problems but without a much greater understanding of how the future is going to be affected by climate change, (which is inevitable and no amount of legislation or taxation will change that) and by new technologies; it is so hard to be precise about what will be needed from a new economic system. One thing that has to be faced is the effect of an ever increasing world population. Controlling this will be the key to the survival of the human race; whatever fiscal or political systems are in place. Having a serious debate now, may just save disastrous trial and error governance in the future.