Among a group of thinkers who predicted the credit crunch in 2003, the London-based New Economics Foundation is now advancing radical proposals on ways to rebuild the British economy.
In its overview of the impact of the crisis last week, the International Monetary Fund predicted Britain would lag other major economies, forecasting a decline of 1.3 percent in 2009, compared with a 0.7 percent contraction in the U.S. economy.
Following is a summary of 20 first steps proposed by the foundation in its pamphlet "From the Ashes of the Crash", published earlier this month:
– DEMERGE BANKS to reduce the risks of systemic failure. Instead of further consolidation, the discredited financial institutions that have needed so much public money to prop them up during the credit crisis should be reduced to a size whereby their failure would not jeopardise the system itself.
– SEGREGATE FINANCIAL MARKETS by separating activities such as trading and retail banking. The foundation argues we need financial institutions to focus on specific functions and to do these well, not to chase the latest bandwagon.
– Bring all EXOTIC FINANCIAL INSTRUMENTS on to the balance sheet, rigorously check and officially licence them.
– Create a secure, accessible local banking system for people by growing the role of Britain's POST OFFICES, which are a vital part of the social fabric.
– Enhance economic support for the local community by expanding the range of smaller-scale, friendly sources of finance, such as COMMUNITY BANKING.
– Encourage the introduction of COMPLEMENTARY, MULTILEVEL CURRENCIES — monetising assets whose value has hitherto not been recognised in financial terms — to provide credit in tune with the needs of regions, towns, cities and neighbourhoods, while helping inoculate the economy from systemic financial shocks.
– Make available NEW PUBLIC MONEY, FREE OF INTEREST where necessary, to cope with unprecedented financial emergencies and as the basis for loans to rebuild the infrastructure of productive local economies.
– Innovate to ensure productive and secure savings, including introducing a "PEOPLE'S PENSION" that would give people more control over where their savings go and in what they are invested. This the foundation argues would be more insulated from market turbulence than orthodox pension schemes.
– Innovate to ensure productive and secure savings and introduce LOCAL BONDS as a secure investment that also help to finance essential investment and new infrastructure for a more environmentally friendly Britain.
– Housing:
a) Introduce a MORATORIUM on crash-related home EVICTIONS;
b) REBUILD Britain's stock of housing;
c) implement radical innovations — such as MUTUAL HOME OWNERSHIP — to prevent a repeat of destructive house price inflation.
– Take a "SOCIAL INVESTMENT APPROACH". Unprecedented investment in banking stability has been justified on the grounds the cost of doing nothing would be much greater. The same logic can be applied to public services when the cost of failing to deliver effective services is often much greater than the cost of ensuring them.
– Tap into the hidden value of "TIME BANKING" and grow the use of HUMAN ASSETS — the "core economy". As faith in the money-based economy collapses, the value of exchanging other assets, such as using the skills of people who are under-employed, should be recognised.
– Improve checks and balances by introducing CAPITAL CONTROLS. Re-regulating the international financial sector is an urgent priority, the foundation argues, as is reducing its size in relation to the real economy.
– Make TAXATION work. Crucial to minimise corporate tax evasion by clamping down on tax havens. Tax should be deducted at source.
– Introduce CURRENCY AND FINANCIAL TRANSACTION TAXES. The foundation argues that rather than a means to an end, finance has become the end in itself, with trading strategies turning over trillions of dollars every day, often for no public benefit.
– Launch a GREEN NEW DEAL to fight recession while tackling energy insecurity and climate change.
– Introduce a WINDFALL TAX ON "UNEARNED PROFITS" of fossil fuel companies to provide a safety net for those in fuel poverty and help finance the transition to clean energy. Fossil fuels are an "unrepeatable windfall" from nature, but the British government has so far failed adequately to take advantage of its income from oil to prepare for a low carbon future. The foundation draws the contrast with Norway, which has set up a fund for future generations.
– Hold ACCOUNTANCY FIRMS ACCOUNTABLE, counter cronyism, re-regulate and improve auditor self-governance.
– Introduce a maximum pay differential or MAXIMUM WAGE.
– Take a FIVE-A-DAY approach to well-being to help beat the negative psychological effects of recession and build resilience. These simple steps require people to: connect with those around them; take exercise; take notice — be curious in the world around you; keep learning — sign up for a course, learn a musical instrument; give or do something for someone else.
