Taxation is an interesting facet of our society. Economists view taxes as a disincentive in a free market, and rightly so. Taxes increase the price of a product or service, making it less desirable. Yet, when you think about what we tax in this country, it’s mostly things we desire more of – income, profits, sales, et cetera. This odd behavior should be questioned, even more so today when every budget (state, city, federal) seems to be facing seriously tenuous times.

I took the train down to Oregon this last weekend to see my sister graduate from college. While there I stayed with Rob Dietz, Executive Director of CASSE and a good friend of mine. He handed me a very modest looking magazine called Sockeye. I am sure I will be drawing material from this one issue for some time (check it out, amazing articles). For now I want to talk about tax shifting, as mentioned in the article by Alan Durning and Amy Chan, “Making Prices Tell The Truth: Shifting Taxes from Bads to Goods.” (pdf)

The Imbalance of the Free Market

Taxes have the power of acting as a means of balancing what are called “market inefficiencies,” things in the free market system that generate negative externalities. These are unwanted side effects that are not taken into account in a product, service or activity. A great example of this is any fossil fuel, let’s take Coal for instance.

Let’s imagine a coal power plant starts leeching mercury into a watershed and a city water planet down river takes it in (coal accounts for most of the mercury in our waterways). The coal power plant is not paying to filter this mercury out, nor is it paying for all the damage that could occur from the toxin leeching into the ecosystems. Because the producer does not pay for the negative externalities it is left out of the decision to pursue coal power.

If these externalities were eliminated by charging or compensating for them, then they could be factored into the decision making process. This is especially important as all too often these become costs placed upon the society instead of the producer (e.g. the city water plant in the above example has to filter out the mercury from its water source). If these prices were added into coal’s price they would eventually make coal production to costly to be worthwhile.

One of the best ways to internalize these negatives into our free market is to increase their expense with taxes to help offset costs like oil spill clean ups, health care or water treatment.

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Banks should protect our money, not fleece us for their profit

Our money is loaned into existence and then must be paid back, plus interest. This interest can only come by earning (taking) money from other loans in the system, thereby installing inherit competition and scarcity in our society. Could you imagine a society in which we didn’t have to compete for a scarce amount of funds? How could this alter our communities or the way we treat each other?

An ethical banking system is one that upholds the value of the people who use it. Instead of a institution that values only profit, an ethical bank would value the people that support it. This really shouldn’t be too crazy of an idea, but our banks today do everything in their power to leverage greater profits. The recent economic crash being a prime example. We should support and create banks that support our societal and economic well being, not their CEO bonus checks.

The Reason We Need It

It seems like second nature to me that systems we create as a society should function with the ethics we value, but there is obvious room for improvement. When a lot of our organizations and industries started the room for growth seemed limitless, so it was much easier to gain advantage in the market and grow without sacrificing ethics. Like many things in this era, we’ve run out of that room and the only way to make a higher market share this year and next year is to start finding ethically gray (or black areas) for expansion (e.g. derivatives).

Paper exchanging for paper is now 20 times greater than exchanges of paper for real commodities. This distortion of value from real wealth to phantom wealth encourages a financially dependent system, driving up debt and down real value. Eventually those claims on wealth will be exchanged for actual wealth – even if there are no longer enough. An ethical banking system supports a more realistic approach to real wealth and the money that represents it – as well as environmental concerns with investment and social justice.

An Ethical Banking System is one that encourages stable and equal amounts of material wealth. If you haven’t clued into it yet, our current banking organizations do not function in an ethical way. Our banking system encourages debt, competition, scarcity, and unequal distributions of wealth. What if we created a bank in line with our values? One that supported the people, community, and real wealth?

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Next month in the town of Leeds, UK, the first Steady State Economy Conference will be presented entitled “The Steady State Economy: Working Towards an Alternative to Economic Growth.” The conference is organized by the Center for the Advancement of the Steady State Economy and Economic Justice for All. The two collaborating organizations have brought together some great minds including Peter Victor, Andrew Simms, Dan O’Neill, and Tim Jackson.

The conference keynote speakers will present the need for a steady state economy in the UK, and other developed nations, as well as how the UK might move towards a steady state economy. Workshops will take it a step further and “explore specific policy proposals for achieving a steady state economy.”

It is an exciting step in the process towards a sustainable economy! Rob Dietz, CASSE’s Executive Director, and Dan O’Neill, at the University of Leeds, have been working hard with David Adshead, Lorna Arblaster, Claire Bastin, and Nigel Jones of Economic Justice for All to create a great conference.

It’s being hosted on Saturday, June 19th and for a small registration fee of £30.00 (£50.00 if you register after May 30th). For all those who are in the area of Leeds or might want to make the trip, be sure to take advantage of the opportunity. Unfortunately, I won’t be able to make this conference, so I will be looking to others for news of the event!

Go online and register now!

Okay, I am tired of these terms being used improperly. The last two are thrown around by politicos like they’re handing out free candy. Usually socialism is used by someone (we all know who) to label something they want to attack without using an actual argument or facts to support their opinion (also called bullshit).

Let’s quickly review the actual definitions of these three types of systems:

Capitalism: An economic system that allows private ownership of production. That’s it, that’s all capitalism actually entails – not low taxes, or private health care, or small government. Capitalism is simply a system that does not have government control of production (the government doesn’t own the factories, the companies – well, outside of car companies now – or the processes to produce products. Period). Capitalism refers to a type of economy, not a necessarily a type of government (“Social democracies” in Europe are still capitalistic countries, as the government does not control production).

Socialism: An economic system that advocates either public or direct worker ownership and administration of production and allocation of resources. Socialism removes production and wage labor as commodities, maximizing the “use value” instead of the “exchange value” – that is to say, real wealth versus phantom wealth. In a socialist economy the worker owns the production means and rights to resources.

Communism: An economic and social structure that advocates complete public ownership of production and allocation of resources. Communism is by far the most intertwined with political control of classes, wages, and policies to eliminate poverty or wealth gaps. Communism is considered more of a political expansion of the economic system of socialism and has been in the past portrayed as an attempt to create a Marxism utopia through government (ironic, as true Marxism would have no government).

Each of these systems has political ramifications in any society that institutes it. However, capitalism and socialism in-and-of themselves are economic systems. More importantly, none of these systems require economic growth. You can easily have privately owned production (flourishing production) without a continual expansion of the entire economy. Each of them are human creations. Economic growth is a human creation!

Any human system will be flawed, but hopefully we learn from our mistakes and get closer and closer to perfecting it. Perhaps this is humanity’s own Zeno paradox. While communism doesn’t work for us and socialism has its flaws, why should we assume that rampant capitalism is the answer? We should question the flaws in our system and work to correct them. A non-growth economy can be communist, socialist, capitalist, or anything else we want it to be – the economy is our creation.

I’m going to start a new serious in this blog, “Points Of Progress,” a once-monthly report of things happening in our world, policies, articles, and practices in-line with the steady state economy, that are worth some time to read about -  the good news, the promising results. This stems from the many articles I have been scoping through on google reader (a great RSS feed tool, for those of you interested in getting updates via rss).

Through the 50-100 posts I receive daily, I manage to pick out a handful of good ones and post on twitter (follow me), but some of these deserve some recognition on this blog. This monthly report is for the exciting things happening I just don’t have time to post about in-depth. Here are some cool things happening in the world:

Maryland’s New Alternative Metric: The GPI

Herman Daly‘s home state has just instituted their version of the Genuine Progress Indicator. This alternative to the grossly inadequate GDP takes into account 26 factors, from incorporating the costs of crime to the costs of ozone depletion. The state is using the GPI as a tool to education the public and policymakers on the balance between costs and benefits of decisions regarding resource use.

As Governor O’Malley said, “The GPI will help us ensure that our economic growth will not come at the cost of our natural resources, and that they both support our progress toward a sustainable future and a better qualify of life for all Maryland families.”

21 Hours: Work Less, Live More

Part of the many policies of a steady state economy, adjusting the work hours for increases in efficiency is a policy that could revolutionize our society. Not only does this policy fight unemployment head-on by making more work available, it frees up time in our weeks to do something really important – live.

The new economics foundation’s new report, 21 Hours: Why a shorter working week can help us all to flourish in the 21st century outlines how the average time worked in Britian, 21 hours, should  be the new standard. As nef explains, “A ‘normal’ working week of 21 hours could help to address a range of urgent, interlinked problems: The average overwork, unemployment, over-consumption, high carbon emissions, low well-being, entrenched inequalities, and the lack of time to live sustainably, to care for each other, and simply to enjoy life.”

The IMF Rethinks Macroeconomics

The International Monetary Fund (IMF) has not only recently acknowledged that macroeconomic policy may have “exacerbated the recent financial crisis,” but also has begun to rethink those policies.

Olivier Blanchard, the IMF’s chief economist, published a paper, “Rethinking Macroeconomic Policy” (pdf), stating that better economic policies might include increased government involvement, higher inflation, and help for the poor. The IMF’s typical policy of telling governments that less intervention and low inflation were powerless to prevent the “Great Recession.” Great news for those of us hoping for changes in the IMF and World Bank.

Taking inspiration from economist James Tobin, the new UK campaign for a “Robin Hood Tax” is a great example of the type of social movement for economic reform we need across the world. A global Robin Hood tax is a crucial part of transition from a growth-based economy to one that is people-based. This type of financial policy can be instuted to actually help eliminate poverty and hunger, fight climate change, and put social equality into a system that rewards greed instead of good.

By taxing a minuscule amount of each financial transaction (we’re talking half a percent – 0.5%) you could raise up to $500 billion or more a year, reduce speculative investing (the kind that promoted the recent Great Recession), and put the banks in check (those guys we just bought out with taxpayer money that made $5 million bonuses).

Check out the video here:

The Wall Fell, But We Didn't Learn

The fall of the Berlin wall was a monumental event in history. Interestingly enough it acted as the end of a large-scale governance/economic experiment. Here we have two societies, each with similar backgrounds, but each with drastically different views of government and economics. On one side was placed a highly controlled society and on the other was placed a free market society. The prevalence of the capitalism in this instance was taken as proof of its superiority and also acted to secure it in our minds as they way for the future. However, there have not been any others to step up in competition – even if they would have been allowed socially.

So we are still locked in the same debate – capitalistic democracy or communism/socialism. Note how it is one or the other in this debate; no one seems to question that perhaps neither is the correct form for human prosperity. Given that the two extremes are both unsustainable, and the incredibly unlikely (and perhaps socially unwanted) possibility of a green, benign dictator coming to our rescue, we are ultimately left to our own devices to re-envision government So how do we make this change in the bureaucracies we have established and entrenched in unsustainable growth? How do we transition to a truly beneficial and socially just form of governance?

I would suggest we first ignore the initial pessimistic view (however likely it might seem to be) of a collapse of society in favor of an optimistic view of successfully transitioning without collapse. Why bother? Because the latter option gives us a challenge to work towards while the former option encourages laziness (and, in my case, would significantly increase my drinking habits in order to cope).

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New Scientist Sets Out To Make The World a Better Place

New Scientist‘s next three issues will follow up on what this week’s issue started: defining world problems and finding solutions. I have been continually impressed with New Scientist, from their articles on economic growth, endorsing the steady state economy, and their article about the nature of greed. I am one of the few Americans I have met that actually subscribes to this great weekly UK periodical, though I hope more will follow my lead.

Their ambitious premise on this four-part serious entitled “Blueprint For A Better World” is to “explore diverse ideas for making the world a better place, and the evidence backing them.” [emphasis added] It is one thing to talk the talk, but now it’s time for decisive action. We can no longer wait around for the change to self-manifest, we have to deliver it ourselves.

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