I was asked recently to give a talk to a small but distinguished group on “how to survive the global financial and ecological crises”. Easy uh! Well you have to start somewhere and have a rough idea of where you’re headed. For me, the more difficult the situation gets, the simpler the solution becomes. Essentially, changes that once would have been rejected flat out as unworkable, implausible and idealistic, are suddenly deemed more acceptable.

We are all conditioned to think and live within a certain paradigm or system. For many of us (especially readers of this blog), it’s considered to be democratic, liberal capitalism. More realistically it’s a neo-liberal system where free markets dominate at the expense of any concept of the public good. Markets will solve any problem. Actually that’s a truism. It’s the outcome that is often of dubious merit.

When I look at the Occupy Movement, I see a protest against this system, a system where people are secondary to profit, and the public is considered to be a wasteful and unnecessary construct. As John Key noted of the Christchurch post-EQNZ insurance problem, eventually the markets will sort it out. Again they will but there may not be any insurance for anyone for a while. This mirrors the government’s approach to managing our prisons: simply contract it out to private operators, who will manage it more “efficiently”. The belief in the idea of the “public” is slowly being eaten away by this neo-liberal fantasy that for profit organisations will always achieve the best outcome.

It will be interesting to see how this protest develops but it feels like it has legs. The outrage is fair and justified: the corruption at the heart of the political-financial system; the gaping inequalities; the disenfranchisement and the feeling that the whole system is built on sand. Over time the picture will be clearer and the protests may coalesce around a series of concrete demand but the consultative and participatory process is a fascinating starting point. Participatory, as opposed to representative, democracy is messy, frustrating, turgid, slow, tedious and annoying but that’s the whole point. It is built on allowing all people a voice and on allowing a process to develop. It is a far cry from the many bills rammed through under “urgency” in the NZ Parliament, with little debate or scrutiny for even our partially elected representatives.

I wish them well in their endeavour. In the meantime, I have three simple proposals to offer, as a starting point:

1) Monetary Dialysis - No more public debt; new public money; raise limits on bank credit.

2) Trucost pricing - Start pricing ecosystem goods and services.

3) Participatory Universal Income - Basic Income for all those participating in society; rebalanced tax system; provision of key public goods.

I focused on the first 2 ideas in my presentation, the outline of which is below. By repricing our economic system, both in the cost of goods and services, as well as the creation and volume of money, we will immediately realign it towards a path of lower volume but higher quality consumption. We will reduce the burden of compound interest, this alleviating the constant pressure to produce and consume. The UPI will restore the public good in reflecting all contributions to society and laying the foundations for a more stable, harmonious and prosperous world. Far fetched? Not really, when you think about it for a bit. My turn is over for now. Who is next in the stack?

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.