Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Below comes an incoherent heap of ideas and arguments, but if this is a brainstorming, it might be alright :-)

Regarding 1), I think this would be a wrong approach. On one hand, we are progressives, thus we don't need past examples - our proposals could (and in my personal opinion, should) be of something new. At best, we could praise single measures, rather than a whole country.

I will treat 2) and 3) together. This will be rather long. (Special note to DeAnander: my treatment will start like a conventional approach, but at the end - I hope in your eyes too - move much closer to what you emphasized.)

First, when I denied the importance of demographic structure in the present voes, I didn't say where I think the cause lies, now I do. I think the issue is technology. If a big new technology goes economical, it will create a lot of jobs and growth, until 'the market is saturated'. In capitalism (but to some degree in an idealised socialism too), from this point on, companies can try marketing, product improvements - and rationalisation of production, which inexorably leads to loss of jobs.

Now, a 'big new technology', in my eyes, was f.e. the steam engine, the railway, electricity, cars. Each of these transformed the economy and society in a fundamental way: not simply replacing some older technology in a more efficient (and resource-wasting) way. Compared to these, mobile phones are nothing, and even personal computers aren't much. That is, in short: I think we're struck in technological progress.

But, I think there would be rather good directions to head for. You guessed it: I am mainly thinking of alternative energies. I note there are already more jobs in wind and solar in Germany than in the entire supply chain of coal and coal-fired power plants! Alternative energies like wind and solar wouldn't only replace fossil fuel wasting electricity production as we have it today: the end result would be a highly decentralised, but strongly interdependent system.

Something qualitatively different from both the libertarians' and neoliberals' mad individualism and the centralised statism of classic social democracy and socialism - with corresponding social effects. Among them, specifically, the rural population would regain importance, and much of the third world would gain something that benefits the domestic population and can be sold to the North without a situation of exploitation and depletion.

Now, consider that each of the 'big new technologies' I listed were successful not on their own on a free market, but benefitted from heavy pushing by the state, or other communal instances. This precedent should serve us as both a model and an argument against the market fundies.

I'll go further: I recommend a specific measure. It is one actually applied, with success, even copied elsewhere (tough most often by hollowing out the basic principle). But, also one whose lasting success would need people's good understanding of its basic principle and their defense of it against propaganda from opponents. It is the German law on feeding electricity from renewables into the grid.

Instead of giving state subsidies, this law makes the purchase of such electricity obligatory to distributors, that at a fixed price, thus distributing the extra costs among users. The fixed price is above market price, but decreases over the years, thus limiting the extra costs. The result is a separate market for alternative energy, where producers don't have to compete with say gas turbine producers, but do have to compete with each other - resulting in development which makes these technologies cheaper. (If someone objects to the capitalist element in this, I refer back to the passage on decentralised-interdependent production.*)

On a more general note, to close this part off, I think a sustained effort to transform the economy can in itself generate more jobs (and GDP growth), including a sustained effort to get a self-sustaining economy, one not living off fast depleting fossil resources.

But, I have to address two more issues. One is productivity. I think a new leftist economic manifesto should argue hotly against the current productivity fetishism. First, the obvious point should be made that two half as productive men doing the same job for half the pay is not worse in any way for a company, even if average productivity is less. What matters for a capitalist company (and a socialist company interested in upgrading its machines) is workers' product per pay - that is, in effect, profit; so all of the talk about productivity would be a distraction, save for tax and tributes issues (these costs can depend on the number of workers in a nonlinear way).

Now applying the above principle may lessen the number of jobless, but not change, just shift social problems. But, in my observation, the current productivity fetishism results in a lot of totally silly decisions even from an economic point of view: companies fire old 'unproductive' guys with experience, and then lose much money when systems break down and no one knows why; companies hire young hotshots but pay exorbitant sums to them, much more than the productivity gain; big companies rationalise away specific kinds of jobs, entrusting the necessary tasks to others or machines, but the others would often have to do their original and new tasks at the same time, while customers are put off by inflexible automats; and so on.

The second issue is: what number do we consider the measure of progress? In today's neoliberal consensus, GDP. Some people criticise various different ways to measure GDP. There are many who argue for GNP. Others reject such measures entirely. I'll do neither, but suggest something rather vague (at least in my mind, don't know if others tried to attempt to quantify this).

In the nineties, it became normal to measure the prowres of a company not merely by the real profit it made, but add the change in its value (i.e. stock market value, assets' auditioned value). Yes, this led to the bubbles of the nineties, but this got me thinking. What if we somehow add the change in value of life in general to GDP? The increase and decrease of estate prices, house prices? The decrease of public health? The increase of stress and discomfort of due to noise? The decrease of natural resources? The decrease of pleasure from seeing nature? The decrease of good arable land?

I will not address 4) - I have some thoughts on this, but rather weakly formed.

* If anything good can be said of any part of capitalism, it is that competition can bring technological improvements. Even in the nominally socialist, in practice state capitalist (= production was non-profit and the means of production were nominally owned by The People, in practice by the Party cadre) Soviet Union, the competition of design bureaus - say, MiG vs. Suhoi - was employed to push development (tough of only stuff we don't welcome).

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Jul 24th, 2005 at 08:01:46 AM EST
Dodo, many interesting points, and a valid approach, but I find myself disagreeing with a number of your conclusions. Let me point out a few things which will hopefully get the discussion going:

  • on the German feed-in law. I agree that it has been a great way to kick start the industry, but we are getting now to the point where it is becoming slightly counter-productive as it creates rents for some green producers and encourages the exploitation of sub-optimal wind sites. I would recommend the Spanish regulatory framework, which has proven to be just as effective (including to help build a domestic manufacturign capacity) and which has fewer negative side effects. It is based on a twin mechanism - one for small windfarms, which get also a fixed tariff (linked to a percentage (80-90%) of the regulated retail electricity price, thus ensuring that it creates no unfair burden for power distributors), and one for larger manufacturers, which get the market price for electricity plus a green premium, which can be either (and the producers get to choose each year) a fraction of the regulated price (but adjustable every 4 years by the government) or a full market price supported by the obligation for traditional power producers to buy such green certificates pro rata to what they pollute. With a government fully committed to renewable energy, as in Spain, this means that the regulated tariff never remains too high too long, i.e. the government can set it at the level which allows for the best projects to be economic but not the borderline ones, AND it encourages polluting producers to switch to better forms of power production.  Such market-based mechanisms work and should be more palatable to the business world, and the business media, which matters;

  • on productivity, I am not sure that it is right ot fight that concept. As I wrote briefly above, we should focus productivity towards increasing efficiency instead of towards increasing output. Maybe we agree in the sense that we should not focus only on increasing the productivity of labor, but rather on increasing the productivity of capital, and even more the productivity of "rent", i.e. of natural resources or other such "free" value provided by our environment (one of Stirling Newberry's better economic diaries over on dKos a couple of months' back was about the economics of rent - it would definitely be worth linking to here but I cannot do that for now).

I fully agree on the need for a redefinition of some of the most basic numbers we use to measure "progress". GDP is one of those. Consider simply that when you switch off a light, you reduce GDP (because the power company sells you less and loses turnover), whereas you are saving resources. When you have a car accident, it generates activity GDP (the tow truck, the repairs, the road patrol, possibly the hospital and associated expenses) but everybody can feel properly that such activity could have been used more productively, precisely...
So we do need to focus on value added, and we should probably adopt some of the more sensible rules of corporate accounting for public accounts and "wealth"-like statistics like GDP, such as:

  • depreciation of public assets: that would reflect the fact that a lot of GDP is used up in that same year and creates no lasting wealth - and that should apply to assets as well. That would of course require that some "public" balance sheet is built up, and that's where a number of externalities could be valued. It would be reasonably easy to give a value to buildings, infrastructure and other physical assets (which could already provide some nasty surprises if you depreciate them in a realistic way); the next thing to put on the balance sheet would be all natural resources. That way, they would already be part of our wealth, and their exploitation would only create value if they are smartly used, not just from extracting them. The next step would to value collective goods (museums, hospitals, parks, clean air, clean water) - and that would be an interesting fight. But if we have already managed to bring the fight to "how much to value them" instead of "this will hamper economic growth).

  • accounting of off-balance sheet liabilities, i.e. things done today that will, or may, incur costs later. That would make more visible all the shenanigans that we do now and that pass costs on to future generations (open ended commitments, polluting air and water and ecosystems, draining finite resources);

  • counting some activities as costs and not as value creation. Using resources is an obvious one (and easy to make it appear as a cost if the resources already "belongs" to the public in our collective accounts), and this should extend as much as possible to all externalities. If an increase in CO2 in the atmosphere translates into negative GDP-equivalent, then we will care about it.

This certainly fits in also with Deanander's links about "true cost economics", which I have not been able to access.

The other thing that we need to focus on is REGULATION, i.e. enforcement by the government of rules that apply to public goods and externalities. The above accounting can only happen if it is done by a "neutral" public entity representing the collective interest (i.e. the State or equivalent), and it can work only if all private interactions with such public goods are accounted for, i.e. are known, made public, and properly valued. Thus the State must police the use of public goods, must measure their use or abuse, and must enforce the rules that apply (i.e. make people or corporates follow the rules and pay the requisite fee/fine for use/abuse of public good) RUTHLESSLY. This means that regulatory agencies (and/or relevant government departments) must be funded well enough to do their job (defining the rules smartly and enforcing the law).

Linked to that is the regulation of the labor market, which should benefit from the same kind of treatment - i.e. ruthless enforcement of existing rules.
While we're at it, I am personally favorable to an elimination of corporate taxes, and a simplification of personal taxes via a flat tax with a high deductible. while this may not sound lefty as a proposal, I'd like to argue that it is. When you don't work in that world, you cannot imagine the effort, imagination and ingenuity that is put to lower tax burdens on companies. With the current complexity of tax systems, there are always loopholes, advantages, breaks, tax give employment to armies of accountants, lawyers and bankers, to no obvious value added (there is value to the company, as it pays less taxes, but no obvious value to society to spend so much talent avoiding tax). All corporate taxes are passed on to consumers eventually. Taxes on consumption and revenue (to include capital revenues) make a lot more sense, and the VAT, with its self-enforcement mechanism, is very easy to police and costs little (relatively speaking) to collect. I also have the nagging suspicion that a very simple flat tax, with no breaks whatsoever, would make the rich actually pay more. If you put a decent exemption for the first mayer of revenues, you'd have a nicely progressive tax as well.

Of course, a number of these ideas run against the fact that they are useless if only applied in one country (you just handicap yourself while your competitors keep their old behavior without paying for their use of externalities), so there needs to be at least a continent-wide application of them, combined with some form or external tariff linked to these externalities (to be discussed in a later episode...)

I am thinking out loud here, so all comments, and critique, welcome...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Jul 24th, 2005 at 10:50:11 AM EST
[ Parent ]
I agree with the productivity point. We certainly do want to increase labor productivity, but people (especially in rich countries) don't necessarily need to enjoy the increase in the form of more material goods and services. We could, alternatively, choose more free time by reducing the work week or lowering the retirement age (see the Greider  "Riding into the Sunset" piece for Robert Fogel's views on material vs. "spiritual" well-being).
by TGeraghty on Sun Jul 24th, 2005 at 10:52:25 PM EST
[ Parent ]
You might also check this out, thanks to Paul Rosenberg for posting it:

[T]he whole World Values Survey, which grew out of the European Values Survey in 1981, is concerned with tracking value evolution across the globe, which is commonly seen as a two-step process.  Though it is often simply referred to as "modernization," a more precise description differentiates between two stages.

The first is modernization, which involves the transition from agriculture to industrial societies, dominated by increases in income that translate into increased well-being. The second is post-modernization, which involves a shift in emphasis toward quality of life,  self-expression and self-determination. . . .

The two-phase structure is very evident in the following graph of GNP and perceived well-being:

which is schematized thus:

by TGeraghty on Mon Jul 25th, 2005 at 06:33:00 PM EST
[ Parent ]
This comment, in itself, could...and probably should, become a diary all on its own. Very interesting example of a new way to gauge sucess (thanks!)

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Tue Jul 26th, 2005 at 02:36:46 AM EST
[ Parent ]
by TGeraghty on Sun Jul 24th, 2005 at 10:57:56 PM EST
[ Parent ]
I strongly agree with your point of dectralizing the energy production, although it has to be applied differently wrt to rural and urban areas.  In general though, energy production should be as local and dectralized as possible.  (Cut out the middlemen.)

Secondly, I think that localization should be applied to production more strongly.  While it makes sense in capitalism to focus on a particular domain and then gain a big market share world-wide, it produces lots of waste and huge transportation issues.  This applies to food in particular.  Does it really make sense to raise the piggies in one country, ship them to another country to be turned into meat and then have the "product" (food) distributed all over Europe?

by hesk on Sun Jul 24th, 2005 at 02:09:31 PM EST
[ Parent ]


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