Monday, 13 April 2015

Does Middle-out Survive The Bounce Test?

I've been in correspondence with the thoughtful Alex Howlett discussing the differences between Basic Income and Middle-out economics. I love that he challenged my ideas and asked me to justify my stance because it stands or falls on whether or not I can answer the questions asked without going quiet or changing the subject. The more I had to think about it, the more I realised that nothing is really that simple, after all.

I am not an economist, but...

Yeah, about that, I'm not an ornithologist either but I do know the difference between a swan and a swallow. Whether or not my faded memories of high school commerce lessons qualify me to speak on economic matters is immaterial; a fact is a fact, and these are the facts as I understand them.

How economies work in principle and in practice

a) The tension between the forces of supply and demand, in theory, control the availability and price of the items involved from labour to goods and services.

b) Every economy requires a foundation. There are three types of industry:
i. Primary - farming, mining, generation, etc. This is about getting hold of raw materials and selling them on, e.g. cotton or vegetables or iron
ii. Secondary - manufacturing, processing, etc. This is about turning raw materials into unfinished or finished goods, e.g. cloth which can be made into clothes or vegetables that can be packed or made into meals or iron that can be made into construction beams
iii. Tertiary - retail, services, etc. This is always going to be the biggest sector and covers everything from educating people in the retail industry to catering or construction work

c) Every community that exists is underpinned by some kind of major industry. Traditionally this would have been primary or secondary but now that tourism is a driver I find that tourism actually supports primary and secondary industries in some areas, particularly where I live, e.g. the East Lancs Railway. If you take away the main driver, whole communities suffer and may even break down, as many of the old mill towns and pit villages did all over rural Britain. The East Lancs Railway is a tourist attraction that appeals to people interested in old-fashioned steam trains. By bringing tourists into the old mill towns along its route, it provides them with customers who buy things from the local markets and eat in the pubs and restaurants. Savvy locals have found a way to make what is usually a seasonal trade last all year round by creating themed train rides and events and tying them in with local businesses. Rawtenstall now boasts an annual music festival, a direct result of the increase in visitors to the region.

It's not that simple because...

Not all economies can hoover up all of the unemployed in their catchment areas. Even in the most successful ones you will find poverty and unemployment. The fact is, there is no perfect system and no one-size-fits-all solution. Sometimes people go to a lot of trouble to "build it" and "they" don't come. Entrepreneurship requires that people come up with an idea and run with it. We can't all be entrepreneurs any more than we can all be farmers, bakers, or confectioners. What I'm saying is, community-based solutions need to be as individual as we are and they need to meet an actual need or they simply won't work. Regeneration schemes are all well and good till gentrification drives house prices up beyond the ability of local people to afford to buy homes in their own communities. The East Lancs Railway works because it creates demand for local businesses but other regions may require different solutions to exploit their resources.

Four questions for Middle-out

Alex asked me four questions to test the strength of my philosophy, to which I provided answers via Twitlonger. Rather than simply repeat my answers here I'll touch on them here and link to what I actually wrote.

1. What do you mean by a "self-sustaining" economy? 

How can you tell if an economy is self-sustaining? Do you have any examples of economies that are not self-sustaining?

Our economy here in the UK is very mixed. There is actually no such thing as a "pure" economy in which only one way of doing things obtains. This wasn't true even during communism; the black market still counts. I told Alex that leveraging debt is not self-sustaining and caused the Credit Crunch of 2008. I mentioned Walmart's recent wage hike and compared it with the East Lancs Railway and how it interacts with and benefits local industries in a self-sustaining way. I've got a very soft spot for the East Lancs Railway, I must admit.

2. What do you mean by "community-based"? 

Does it just mean that everyone is involved in some way?

Well, no, that's impossible in our society. In a closed or tribal society that's how things are done; hunting and gathering are for the benefit of the tribe, not just the individual. However, in our society, community relationships tend to be fractured because we're so mobile and there's more of an emphasis on individualism and personal choice. I told Alex that centralisation and concentration of economic power elsewhere takes agency from community members and limits their opportunities to exert influence in their local economy. I cited community regeneration plans and explained how local enterprises can take advantage of new infrastructure or the construction of a tourist attraction. This is what I mean by "community-based:" situated in the community where the local people can exert influence over it and benefit from the economy.

3. What do you mean by "the work we do"?

When you say that the economy should reward "the work we do," surely you don't mean all work. For example, if I go out into my yard and start digging holes and filling them back in again, you certainly agree that I'm not entitled to any reward. So how do we decide which work is worth rewarding and how much we should reward it?

That was a long one. Short version of what I told Alex:

a) The market decides what is worth paying for or not whether in cash or in kind. However, it is being manipulated so can't be trusted to determine wages and conditions because it's not a level playing field, though skilled workers tend to be paid more.
b) Relying on the market to arbitrate wages results in underpaid workers having to claim welfare, which basically subsidizes low-paid jobs. This well-meaning measure distorts the market, making it feasible to keep wages low.
c) Basic Income would have the same effect; disguising the impact of low-paying jobs. Result: a downward spiral of stagnant wages and higher taxes to pay it out to everybody, no questions asked.
d) Helping out as a volunteer with a view to building a career is an option. Receiving free benefits doesn't help half as much as gaining experience in a role that prepares you for paid employment by providing much-needed experience. I'm under no illusions about the opportunities to exploit people in such schemes so we'd have to beware of that.

4. Can you think of some examples of the kind of thing we're talking about?

Can you think of an economy that would meet one or two of the three criteria you've laid out, but not all three? What would that look like? For example, could you have an economy that rewards work but is not self-sustaining or vice versa?

I told Alex I can actually think of several. Detroit springs first to mind as an example of unsustainable reward for work. Alaska's non work-rewarding Basic Income scheme is self-sustaining till the oil runs out. Many indigenous communities don't use money but use barter to reward work; traditionally, people have contributed to their communities in order to receive goods and services from them. This is how communities have always worked whether money was involved or not. As I pointed out, communities' economies tend to do better when their members are engaged in some economic activity whether this involves the exchange of money for goods and services or not.

How did I do?

I know how I think I did; I didn't duck any of the questions, I answered them as fully and completely as I could without making excuses or changing the subject. I have seen how small village communities work because I grew up in a village in Ireland. Farmers helped each other bring the harvest in, they struggled to sell their produce on the open market and often found it easier to sell it to passers by at the roadside.

My own economic experiences

Some of us aren't meant to be farmers and need to look at other options like my father did. He became an electrician and fixed televisions for a living till it became cheaper to buy a new set than to have it repaired. I've seen how fickle the market is and how you have to be able to adapt at a moment's notice. Now my skillset includes silver service waitressing, potwash, reception, post room, call centre (inbound), data entry, web design, graphic design, and facilities management administration. Why? Arthritis makes it hard for me to stand for long periods so my jobs must be sedentary. The basic web design market is saturated but facilities management is a niche market and I'm good at it. When my wage went up I could afford to hire the carpet man to come to my flat and do most of my floors. When I was less flush I had to walk everywhere and couldn't share in social activities; now if I'm told my friends are going out for a meal I can afford to join them.

I might not be qualified to talk about the national economy but I do know what works for me. I trip over homeless people on the way to and from work every day. I see food bank baskets in the bigger supermarkets. It's obvious that market-first policies aren't helping the people of Salford and I don't fancy being squeezed to pay a fixed monthly sum to wealthy folk while I struggle to put bread on the table*. Is it any wonder I'm so keen on Middle-out?

*If I have to get UK citizenship I have to pay over £1000. This does not guarantee that it will be granted.

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