The New Zealand Film festival drew to a close on Sunday with a showing of the Annie Goldson documentary “Brother Number One” about the torture and murder of Kerry Hamill in Cambodia back in 1978. I’ve written about this case a couple of times in the past here and here and I also saw Rob Hamill, Kerry’s brother, give a talk about this at TEDxChCh last year. The film explores Rob’s journey, physically and emotionally, as a civil party in the trial of Duch, the CEO (Chief Execution Officer) of Tuol Sleng, the infamous S-21 torture and death camp in Phnom Penh.

The film has been put together very well, enabling those not familiar with the story, to really understand what happened and how the immediate family was affected. This year’s film festival had a strong theme of war and torture, with films like “Incendies” and “The First Grader” but I was still deeply moved by this film. It’s easy to become worn out by such stories, either feeling powerless, pessimistic or resigned. For me though they simply reinforce the need to keep pushing for democratic systems where human rights abuses are less likely to happen.

One interesting aspect of the film was the ability to interview survivors of Tuol Sleng, a handful of people who made it out alive and were able to bear witness to the atrocities that took place. Even more amazing were the interviews with those complicit such as the head of the local navy and an interrogator. Annie and Rob, especially, did a great job in keeping their emotions in check whilst doing their best to dig out as much information as they could without losing control. For Rob this really was a search for clues, for any piece of information, which would help him to piece together the last days of his brother. There was something almost masochistic about this undertaking. Why put yourself through that 30 years after the event? It was interesting that not all Rob’s siblings were entirely supportive of the idea (though on seeing the end result that changed). I can understand the reaction. The family had suffered enough so why drag it all up and make a film about it?

But that’s the whole point of bearing witness, of the calling to account, ultimately of justice. It’s also about acceptance, about releasing hidden and suppressed feelings of anger, hurt, betrayal, disgust, worthlessness and so on. Testifying in front of the court was the culmination of Rob’s journey and it was a fascinating moment, as he interrogated Duch directly. Duch was very courteous in answering his questions, bringing all his new found Christian beliefs to the fore. You almost had to pinch yourself to believe this was happening. Rob’s wife, Rachel, watched on the television outside the court, sensing his pain. I sensed that pain was still there when he spoke to the audience after the film.

Maybe it’s something that never leaves you. Even with all the Truth and Reconciliation Committees, The International Criminal Courts and other justice organisations, one is left with grief for the manner in which a loved one is killed. So within the carnage that was the Cambodian genocide, we are left with a simple human story of a brother that never came home and who found himself, by sheer misfortune, in the midst of a terrible process of human destruction. There is a no easy answer to be gleaned, no trite conclusion to be presented, just a revealing portrait of the suffering of one man and those around him.

Whilst the nature of justice is explored constantly, there are no solutions offered. How can there be? We’ve seen it all before, with the 20th Century littered with genocidal maniacs and the 21st Century is off to the same start. No, this is very much Rob’s personal story, a journey of discovery, understanding and exploration. One can only hope that producing this great film (there will be lots more footage on the website) will help him to release some of that pain and suffering. The film is an important testimony and it stands upright in that endeavour. In the end though life goes on and I’m left with the image of Kerry, not in S21, but sitting on the front of the Foxy Lady, grinning away at the joy of life. I’m sure that’s how he’d like to be remembered.

Slowly but surely mainstream commentators, economists and policy analysts are all starting to realise that exponential debt is the core of our current economic malaise. This is great news to those of us who have been banging on about this for many years.

But still there is confusion around what to do about it. “Saving” has become the new buzzword, sitting squarely alongside “austerity”, as private individuals are urged to save more and governments are urged to spend less. That sounds like a sensible way forward. But watch the economy tank when that happens. Why?

Simply because when debt is paid down (and no corresponding new loans made) the money supply contracts as the debt is destroyed. The debt never existed as “money” in the sense of notes and coin but as an asset and liability for the bank. The interest is collected and the debt destroyed, leaving the profit for the bank. A monetary system based on debt will always lead to booms and busts as the interest charged overwhelms the ability of the productive sector to pay it. Ironically the system always needs infusions of new debt to stay afloat as the amount of money in the system declines.

Of course, when companies start to lay off workers (their first cost saving option) this creates uncertainty and an unwillingness for new borrowing to take place. This creates a self-reinforcing cycle which in some cases leads to recessions and occasionally to depressions. So what’s the best way out of this?

Austerity? No. Austerity will keep some investors happy but generally this will simply lead to slower growth and higher unemployment. But austerity is also a fact of life. When you have borrowed money and spent it, you know one day you have to pay it back. If you haven’t saved for that day then you will have to forego consumption for repayment. If you are in that position, which many governments are, you have, in fact, over consumed your income and eaten into your future. That’s not a pleasant space to be.

Is there an alternative?

Yes there is. I’d like to propose what i term “Monetary Dialysis”. This process seeks to replace debt money with real money (let’s assume for the moment that fiat money is real). The difference between debt money and real money is two fold: firstly, real money is permanent and once it enters the banking system it remains there; secondly, real money enters the banking system without interest, with no charge for its creation.

This two key differences will lead to new outcomes: a more stable money base and a less inflationary one.

How will this process take place?

The government, instead of issuing new bonds to raise money (primarily from overseas investors), will directly spend the money into the economy. In other words public spending will be funded by new money, not new debt. Immediately there will be a saving in interest costs, with current funding costing 5-6% per annum. The current annual bill (previous to the recent enlarged debt issuance) has been running at close to $4billion a year which is a hefty sum (I am only talking government borrowing here).

I use the term dialysis as a representation of a monetary system that is malfunctioning, not just here but globally. I propose a slow transfusion with the goal to end government borrowing completely by 2017.

Where’s the catch? Ok clearly there needs to be some balancing on the other side of the equation. As well as issuing new money instead of new debt, another part of the monetary dialysis approach is to create stronger limits on the abilities of banks to increase the money supply through the issuance of new debt. This can be done in many ways, using a variety of macro prudential tools, whether it’s increasing capital requirements or other similar actions.

Monetary Dialysis is the first step to cleaning up our monetary system. It will lead to a more stable money supply, lower inflation and clear savings in interest costs. The reduction in public debt will be highly beneficial for the economy and the country as a whole. The cost savings from this clean up will be in the order of $20billion over 6 years.

Now that’s something to really think about.

Last week I attended the Fabian Conference entitled “Fresh Ideas For A Productive Economy” held at Parliament in the Legislative chamber. It’s the third time I’ve been there for a conference and it’s a good place to debate ideas away from the main chamber. As the title says, the focus was on fresh ideas and this was very appealing given the current government has been rather light in that area.

Two key themes developed from the 8 speakers and their various proposals:

1) New Zealand’s financial position and framework must be addressed.

The current debt situation is untenable in the long run. The borrowing binge of the government is driving up the currency and causing serious problems for our export sector. Whilst NZ has, so far, been exempt from the debt dramas of the US and Europe, that may not last forever. The exchange rate is volatile, our interest rates too high and our investment in property has led to a mis-allocation of resources. Market liberalisation has seen financial markets (the capital account) rather than the productive sector (the balance of payments) drive the economy. This has led to severe imbalances within the NZ economy which are leading to entrenched impoverishment for a large section of society.

2) We must invest more in Research and Development in order to create a more dynamic, broad and innovative economy.

Our investment in people is woeful. We are a low wage, unproductive economy heavily reliant on basic commodities to pay our way. We need a revolution in investment in order to boost productivity, innovation and general skills. As a small country and economy, we have to be clever and nimble in how we generate our wealth and the revenue we need to pay for the goods we import. Our good people leave and many don’t come back. Without sustained investment into research, development and education, we will continue to fall behind. This is about building core infrastructure at the human level. See Dr Rhema Vaithianathan’s research at the University of Auckland.

There seems to be a recognition that the current system is not working and that we need to look at alternative options. The ongoing turmoil in the global financial markets is further proof that the system is irreparable in its current form. When you add in dysfunctional welfare systems and a job market seeing huge technological dislocation, then the time has surely come to take a different track.

The policy proposals from the Savings, Tax and Welfare working groups have been disappointing. Perhaps they have been limited by their terms of reference and by the selected participants, but the output shows very much a business as usual approach, looking for solutions from the same place they found the problems. So what’s the new road?

Simply it is nothing less than a revolution in the way we think about income, sovereignty, wealth and entitlements. What is it that we, as citizens, should be entitled to? How should the state pay for it? How should citizens be taxed? and so on.

I believe strongly that the answer lies in a system underpinned by a Universal Participatory Income (UPI). This a variation of the more commonly know Universal Basic Income (UBI) or Guaranteed Minimum Income (GMI). The main difference is that to receive it you must participate in society in one of the following ways: employment, education, volunteering or caring. In other words you can’t sit around doing nothing. There are always jobs to be done even if those are not in formal paid employment. In this way people will be recognised for making a contribution to society and welfare will be seen as a stepping stone to a more fundamentally just system.

The good news is that there are at least fully costed options for a GMI open for discussion. One is from Lowell Manning entitled a “Guaranteed Minimum Income for NZ” and the other is from Gareth Morgan entitled the “Big Kahuna”. They are both similar in that they see the dissolution of the welfare state and the system that supports it. No longer will there be a raft of differing benefits, just one single payment to all citizens. There are similarities in how the new GMI will be funded in that the tax base will shift from income and towards capital. Morgan proposes a Comprehensive Wealth Tax (CCT) and Manning a Wealth Tax (WT). There are slight differences in the broadness of the tax capture but they are minor in the grand scheme. Income tax would be flat and superannuation would disappear.

The key point to note is that this does not remove the incentive to find paid employment but recognises the contribution made to society by non-paid work such as raising children, caring for the sick and elderly, as well as voluntary work. The removal of superannuation would take way the silly idea that all people “retire” at a specific age.

No doubt there will be a great deal of debate around the specifics once people have got their heads around the idea. For example, one question that will be asked is whether people will have lots of children to access lots of GMI. This is easily dealt with by limiting the number of children that will be granted the child amount of the GMI (I would argue for 3, some maybe 2). This would deal with concerns that people might game the system.

One of the main advantages will be a huge simplification in the fiscal framework. No more welfare bureaucracy, a very simple tax system and the knowledge for people that they can move between different forms of work, knowing that they have a basic income to support them. This will lead to a more efficient and productive economy and will ultimately lead to a more cohesive society.

It would be the most revolutionary change in the fiscal systems since welfare was first introduced and now is the time to start discussing and debating the different proposals.