Changing from income and sales tax to land and resources tax is a challenge. At the same time we need to reform the money system. This presentation presents a possible method of doing the two together without shocking the economy. We also now have a method for introducing a Citizens Dividend and for reforming the way local authorities are funded. We remove the growth imperative thereby setting in place the possibility of reversing climate change. We are proposing a post growth economic system where investment is naturally channelled into enterprises with a low carbon footprint.
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Sustainable economics without fossil fuels, a thriving postgrowth economy
1. 1
Jobs, shelter, food and clothes for all
Sustainable economics
without fossil fuels
Currency, tax and welfare reform together. New
political solutions for climate change and inequality
2. 2
New Economics Party
proposal
This slideshow has been created by Deirdre Kent
with members of the New Economics Party of
New Zealand. Deirdre is the author of Healthy
Money Healthy Planet –Developing
Sustainability through New Money Systems
Contact her deirdre.kent@gmail.com or on
twitter @deirdrekent
3. 3
Six Sections to the slideshow
1. Symptoms, the presenting problems.
2. The Role of Government
3. Diagnosis
4. A New Approach Needed
5. The Cure. Proposal in ten steps, with its results
6. Actions to take
4. Section One
The symptoms of a separate worldview – global
hyperconnectedness, energy cliff, climate change, tax
havens, habitat destruction
7. 7
Issues – economic, social and
environmental
Water security, food shortages, debt, youth
unemployment, derivatives fraud, terrorism,
cybersecurity, rising greenhouse gas emissions,
energy crisis, land mismanagement, storms,
floods, droughts, demonstrations, riots, war,
refugees, tax avoidance, austerity measures,
currency crises, banking crises etc.
8. 8
A world in crisis
Have we stretched things to the limit?
9. 9
Risks are hyperconnected
“A crisis in one area will quickly lead to a crisis in
another. Attempts at managing them are
fragmented and simplistic and are not up to the
challenge.” – David Sherman, Business
Strategist, Northeastern University, Boston after
World Economic Forum Global Risks, 2013
11. 11
We are a single closed system
“Human society is becoming so integrated that it
is like a single closed system that encompasses
the entire globe. The crisis we are facing now is
actually very unique. We are all close together in
the same system and we can no longer do
whatever we want.”
Dr Michael Laitman, biocybernetics, ontology, Israel in
the movie Crossroads: Labor Pains of a New World
View. http://www.youtube.com/watch?v=5n1p9P5ee3c
).
12. 12
Global Warming
There is little time left to reverse climate change
and life on Earth will become more unbearable
with frequent storms, droughts and floods.
Severe weather events damage the New Zealand
economy and raise food prices for all.
14. 14
Tax havens are a result of
poor tax policies
Governments lose a great deal of their tax
revenue because they don’t tax land. Unlike other
assets, land can’t be hidden in offshore tax
havens. A 2012 report from the Tax Justice
Network estimated that between USD $21 trillion
and $32 trillion is sheltered from taxes in
unreported tax havens worldwide. That is over a
third of the global GDP so you have to either pay
more tax or be prepared to receive less education
and poorer health services.
16. 16
People need sufficient food, clothing, housing
and satisfying work for human dignity. They also
need loving relationships and enough leisure.
We MUST reverse environmental damage like
climate change, loss of species, depleted soils,
deforestation etc.
The economics of happiness
17. 17
Why should I care?
Inequality makes everyone unhappy, whether
rich or poor. Both the tax system and the money
system contribute to growing inequality.
New Zealand is now in the top four in the world
for income disparity with USA, Portugal and UK
(R Wilkinson and K Pickett, The Spirit Level. See also
Born for Love: Why Empathy is Essential and
Endangered Maia Szalavitz and Bruce Perry)
18. 18
After a certain level of wealth, people don’t get any
happier. The widening gap between rich and the
rest hurts all.
(Inequality A New Zealand Crisis ed Max Rashbrooke)
20. 20
As energy returns decline,
governments get desperate
It used to take one barrel of oil
to get 100 barrels of oil.
Now you get less oil for your one barrel
of oil.
(EROEI is Energy Returned
on Energy Invested)
21. 21
The economy needs energy
We can’t continually have economic growth as measured
by GDP because it is dependent on energy and energy
returns are falling. So GDP growth is falling.
22. The result is that
• Governments smile favourably on fossil fuel
exploration.
• Banks lend on fossil fuel exploration and
extraction.
• Banks also lend on mergers and acquisitions so
that corporates can influence governments.
22
24. 24
economysecurity
A tax system
to suit the banks
banks
government
the people
houses and other
improvements
land
tax labour, sales,
and enterprise
no land tax you tax labour
loans
value
expressed
in interest
bearing debt
laws
less
purchasingpower
tax
payments
25. 25
All Levels of Government are
important
Why is central government important?
Community champions have been advocating
strong, vibrant local economies for decades. But
central Government policy has never yet
provided the right conditions. Governments
should make the rules, then get out of the way.
27. 27
Won’t local currencies be
enough?
Community currencies are great, but they need
capable and dedicated administrators.
Community currencies, however, can’t generally
provide finance for housing, farms or other
business investment.
28. 28
What we need
An economic recipe to feed the hungry, reverse
climate change and build good houses. Jobs need
to return to the provinces. We have to remove
the growth imperative yet have a thriving
economy. So let’s find a way to provide liquidity
for all the many businesses necessary in a post
fossil fuel economy.
29. 29
What other outcomes do we
want?
People need to get out of debt and worry less
about money. Families need enough to feed their
children and our youth need training and jobs.
NOTE: What this slide show will not mention is
how to “get on the property ladder” as nobody
should make money from the “ownership” of
land. Life is not a competition and we need to
rediscover the economics of co-operation.
30. Section 3 Diagnosis
• An illogical tax system, a destructive money
system, an out of date welfare system and a
precarious shadow economy
31. 31
It is an illogical tax system
We currently tax labour, sales (GST) and
enterprise (company tax). This is illogical if we
want to encourage work, trade and initiative. In
New Zealand these taxes comprise 79% of our
revenue. The tax system has grown in a rather
unconscious way and it is time to rethink it.
32. 32
Banks reign
Banks get the best security – land. They benefit
from rising house prices.
Government has to be content with revenue
coming from less secure sources like labour.
We need to weaken the link between banks and
land and strengthen the link between
Government and land.
33. 33
What should we tax?
“We should tax the things we hold or take, not
what we do or make.”
Bob Keall in Resource Rentals for Revenue paper
34. 34
What are resource taxes?
Property owners hold a monopoly on ‘their’ land.
Since some land is more valuable than others,
those landholders should compensate others for
this privilege. Those who have the monopoly use
of resources supplied by nature like water,
minerals, radio spectrums should compensate
others. And those whose products cause harm
others should pay up too e.g. tobacco, alcohol,
gambling, pollution.
35. 35
As landowners gain from rising land prices,
wealth is concentrated with landowners and
banks.
36. 36
The tax system should encourage
long term investments
When you tax labour but not land or resources
everyone’s purchasing power is diminished.
Money goes into bidding up the price of assets
instead of going into real production.
37. 37
A destructive money system
Our money system results in widening of the gap
between rich and poor, growing debt, habitat
destruction from the growth imperative and
instability. And because everyone is competing to
pay their debt with interest, it also shapes our
behaviour towards being competitive rather than
cooperative.
38. 38
A money system to suit the
banks
When banks create money as interest bearing debt
Competitiveness
Growing debt
Wealth concentration
Instability
Growth imperative
which leads to habitat
destruction
39. 39
The parable of the eleventh
round
Once there was an island where ten families swapped
goods, chickens, pigs etc
A stranger came and said they should improve the
system. He cut up a hide and gave each family ten
rounds of leather.
He asked them to pay it back next year with 10%
interest.
40. 40
Where does the eleventh
round come from?
After a year of competitive trading, many families
manage to get their 11 rounds.
But some don’t manage it, so have to go back to the
stranger to ask for another loan. They go further into
debt.
This is what is happening now. For more information
on the money system see http://positivemoney.org.nz
41. 41
When banks create the
principal but not the interest
There is never enough money in the system for
everyone to pay back their debt so someone has
to go further into debt to pay the interest.
This means the total money supply has to keep
increasing.
This means economic growth must continue –
the growth imperative!
42. 42
Growth imperative
When climate change talks fail because nations
prefer economic growth and when this growth
imperative is caused by the currency system, why
do we keep it?
A no brainer
43. 43
Widening the gap
If the money system keeps widening the gap
between rich and the rest, why do we keep it?
A no brainer!
44. 44
A welfare mess
Means tested benefits are costly to administer
and result in the benefit trap where you can only
earn so much or your benefit is cut. A plethora of
government income support programmes result
in a complicated and expensive welfare system
quite unsuited to the 21st century.
45. 45
The Shadow Economy
Off the balance sheets of banks is a huge and
dangerously precarious shadow economy.
Derivatives are bets on the value of something else,
usually a stock or bond, a security or an interest
rate. The notional value is the size of the thing that
you are betting on and that is now over $1.2
quadrillion or nearly 20 times the size of the global
economy. A default could lead to an even greater
crisis than the 2008 global financial crisis. In this
game of musical chairs there is only one seat for
every 100 or more players.
48. 48
Starve the banks!
The gigantic and growing shadow economy is
very weakly regulated, even after the Global
Financial Crisis. Derivatives were at the heart of
the Global Financial Crisis. Banks are now both
too big to fail and too big to jail. The wealthiest
top 1% can now easily influence Governments.
So if we can’t control them, let’s just starve them
by starting up a second national currency.
49. 49
The big four Australian banks
use them too
Westpac, BNZ, ANZ and ASB, which hold 92% of NZ
mortgages, are all Australian owned. But they are really global
companies. Major shareholders include HSBC Custody
Nominees, JP Morgan Nominees Australia, National
Nominees, Citicorp Nominee .
They are all hugely exposed to toxic derivatives. “Even if 1% of
these contracts default because third parties get into trouble,
the whole shareholder wealth would be wiped out and the
banks could be broke” Adele Ferguson, senior business writer
and columnist for The Age and Sydney Morning Herald.
50. Section 4
A New Way of Thinking
• Why we need a systems approach and a
completely new model.
51. 51
Time to think differently?
We can’t solve our problems with the same level
of thinking we used when we created them.”
Albert Einstein
52. 52
New type of thinking?
“You can’t change things by fighting the existing
reality. To change something, build a new model
that makes the existing model obsolete.”
Buckminster Fuller (engineer, designer and
inventor)
e.g. Wikipedia replaces Encyclopedia Britannica,
Model T Ford in 1908 changed the transportation
system, email is replacing postal mail
55. 55
We plan a second currency
designed to flow like blood
This currency will flow freely to all parts of the
country unimpeded by taxes on work, sales or
enterprise. It won’t pool in any city or coagulate
in anyone’s bank account. It will incentivise its
users to invest long term. It will nourish each
local economy and reward enterprise and work.
57. 57
Designing a currency
A well designed currency system is a powerful
agent for change. It can build in incentives for
import substitution. It can shape behaviour
towards co-operation and generosity. In the
event of a financial crisis it can be the deciding
factor between resilience or collapse.
59. 59
Currency creation is a
country’s sovereign right
New Zealand should have tino rangitiratanga (or
absolute sovereignty) over its right to design its
own currency system and not let privately owned
banks take charge of this. We want an ecosystem
of currencies, not a monoculture.
60. 60
So the challenge is...
We have to bring about major reforms to the
currency system, the tax system and the welfare
system but do it in a way that doesn’t shock the
economy.
62. 62
It really is a living system
We must treat all the above problems as a whole
system containing patterns which mustn’t be
broken. We must keep the relationships. This
means we have to choose where to intervene to
get the most leverage. Treating one thing in
isolation won’t work.
A family is a system. Family therapists presented
with a troubled child treat the family as a whole
system, choosing the most effective intervention.
63. 63
Intervention Level in order of
effectiveness
Paradigm – deepest held beliefs driving the system
Goals –what the system is trying to achieve
Structure – as a whole, e.g. enhancing connections
Feedback and delays – self-regulation, self-
reinforcement, adaptation
Structural elements – subsystems, actors and the physical
structure of a system
(Source: http://www.donellameadows.org/)
64. 64
Which intervention gives us the
biggest bang for our buck?
Systems theory says change major paradigms
(the common assumptions and beliefs) about the
currency system and the basis of taxation.
And we need to change the goals. The true aim of
a vibrant economy is not growth. Growth of GDP
is what is killing the planet. People can thrive
without economic growth. The economists
assumption that we can keep going as we are is
wrong.
65. 65
UBI would shock economy
Universal Basic Income or a full Citizens
Dividend, if suddenly introduced, would shock
the economy with inflation. These three reforms
of tax, currency and welfare reform if done
separately would all shock the economy. But
when done together and introduced gradually as
a small but growing Citizens Dividend, they won’t
disrupt it.
66. 66
The new thinking is..
We aim to create a new parallel national currency
and link it to a very different tax and welfare
system. This currency will grow slowly. We must
introduce it gradually and monitor its effects
closely to avoid inflation.
67. 67
Imaginal cells
When a
caterpillar has
eaten enough,
a new type of
cell (called
imaginal)
emerges with
a new type of
thinking. They
start to build a
butterfly.
69. 69
If we do monetary reform
only
If interest rates drop a surge of money goes into
housing – a housing bubble. There has to be
something to stop it. A capital gains tax is not
good enough. Even if all money is created by
Government at zero interest, it doesn’t create
jobs because you haven’t swapped income tax for
land tax. You need to unblock the riverbed so
that money flows into production. Besides,
wealth still pools with landowners.
70. 70
Introducing land tax alone is
political suicide
You can’t just add a land tax because it is an extra
tax. People already pay for their mortgage and
they pay rates or local taxes. Why should they pay
a third? So it is not politically feasible. The point
of a land tax is that you must untax labour and
sales at the same time and this is tricky to do.
Despite many tax reviews recommending land
tax in New Zealand, no government has
implemented those recommendations.
71. 71
Land and Money the Siamese Twins
If we had monetary reform without tax reform,
then we would have a housing bubble. And if we
had land reform without addressing the money
system as in Hong Kong, the banks get up to all
sorts of mischief.
75. 75
Step One
Allow Treasury to create Treasury Notes, (call
them Zeals). They are dated. That means they are
acceptable for the payment of tax until that date.
They turn into a pumpkin at a certain date so
naturally people want to spend them and keep
them in the country. Like Flybuys loyalty points
they drop off if you don’t use them.
76. 76
Step Two
Treasury offers to buy the land of anyone who
volunteers. Treasury uses Zeals to pay. From
then on the land is leasehold in perpetuity. A full
ground rent is payable on that land.
77. 77
Step Three
Link the new currency to a completely new tax
system. Trades in the new currency will not incur
income tax, sales tax or company tax.
..newcurrrency,
new rules..Currency No income tax, GST
or company tax, only
resource taxes
78. 78
Step Four
• The ground rent would be shared by all levels of
Government (in New Zealand we have only
central and local Government) and would be set
by auction where possible. No further rates (local
taxes) would be payable.
Central
Government
Local
Government
share revenue
79. 79
Step Five
• Ground rents would not be linked to inflation
but to the site rental value of the land. A Ground
Rent Index would be established for each area
by taking a sample. Ground rents would only
rise if new public infrastructure was built and
would only fall if there was an earthquake or
subsidence or, say, a rail link was discontinued.
They vary very little over time otherwise and are
not subject to lease reviews because they are
leases “in perpetuity”. No sudden rises!
80. 80
Step Six
• Zeals and New Zealand dollars could be freely
traded but there will be a financial penalty for
exchange from Zeals to NZD. However, because
Zeals are dated, they would need to be in New
Zealand at the time of the expiry date. Importers
will need the trading currency NZD and
employers will favour the new Zeals.
81. 81
Step Seven
• Treasury will refresh and redate the zeals paid in for
tax and from time to time will issue all men, women
and children with a Citizens Dividend in Zeals. Thus
the ground rents from the land are shared with the
people. It will be digital only.
82. 82
Step Eight
• Resource taxes are imposed at source on
the monopoly use of any part of the
commons e.g. Coal, oil and other mining,
fisheries, water, radio spectrum etc.
Revenue to be shared by all levels of
government.
83. 83
Step Nine
• The homeowner who has been paid in Zeals uses
it to make a long term investment and to pay
taxes in advance. As they must be used for New
Zealand-sourced goods or services, Zeals cannot
be spent on overseas travel or on imported goods.
This encourages import substitution
manufacturing e.g. wool insulation of homes,
food products, clothing, furniture, fuels, natural
paints and other NZ-sourced building materials.
84. 84
Step Ten
• As people spend their Zeals on labour intensive
industries, production will flow to the regions.
Organic farming, smaller farms, restoration of
land will result from more labour input and less
fossil fuel input. Businesses with a low carbon
footprint will thrive because of this new capital
injection. And the price of houses on leasehold
land will halve.
85. 85
The plan in action
• Here are some examples of what might happen.
Most people in this sample are mortgage free,
one has a mortgage. (We are choosing mortgage
free people to start with because there is no
opposition from banks.) One is an absentee
owner. In the next slides some are individuals
and some are organisations.
86. 86
Woman in Auckland
• She is a 42 year old solo mother (one child), full
time student who owns her suburban house.
Land worth $200,000. Ground rent would be
about Z10,000 a year so she pays two years in
advance leaving Z180,000. She decides to build a
second storey so she can rent it out. No tax or
sales tax on all trades in Zeals. No more rates.
87. 87
Ecovillage
• The land held by their trust is now worth $2
million so they move into the leaseholding
scheme and pay off six years of ground rent
Z100,000 a year. Remainder of 1.4million Zeals
is now invested in a range of sustainable
businesses which require buildings and labour
and NZ sourced materials. By the end of six years
the income in Zeals exceeds the ground rent. The
saving on rates is considerable each year.
88. 88
City professionals with kids
and no mortgage
• Land worth $400k. Use Z50,000 to pay two
years ground rent. Use Z100k to lease country
land and plant trees for firewood or timber. Use
Z250k to insulate and upgrade their house so
that they pay lower power bills. A flat is added to
bring in rental in Zeals. Their next project with
zeals will be to set up an apiary on a friend’s rural
orchard.
89. 89
Musician on rural block
• Land worth $30ok. Mortgage free. With the zeals
they build sheds for a music centre, attracting top
musicians who get paid in zeals, no tax. Overseas
artists need to spend the zeals before they leave
the country, so they use them to buy food while
here and make sure they visit him first so they
have time to spend them while in NZ. Food forest
established after paying for permaculture advice.
Cool food storage room built and fences. No
further rates, saving $2600 a year.
90. 90
Rotary club in small town
• They own a building and sell the land to
government, receiving 100k Zeals. Ground rental
payable is 4000 Zeals a year. They pay off three
years and use the remaining 88,000 Zeals to
become a partner in a local business
manufacturing and selling its bio-fuel made from
old tyres.
91. 91
Couple on small lifestyle block
• In their early sixties. He commutes to the city.
Land worth $340,000. They want to develop the
block to produce an income. They set aside
ground rent and pay for labour and for buying
fruit and nut trees. They plant a cash crop (say
pumpkin or garlic) which they sell within New
Zealand. They pay a permaculturist for advice
and pay for labour to plant a food forest. They
insulate the house and build fences.
92. 92
Ground rent paid early
• By now you can see the trend. People use their
Zeals payout to pay taxes in advance. This is why
the Government, after sharing some of the
bounty with local government, is able to
distribute a Citizens Dividend quite early.
93. 93
We have a mortgage
• Our land value is $300,000. So we leasehold our
land to the Government and pay a ground rent of
Z15,000 a year instead of a mortgage payment on
the land to the bank of $15600 a year. We also
save $3000 in rates a year, making a saving of
$3600 a year.
94. 94
I am an absentee owner of
five Auckland homes
• The government decides to force me to sell my
land to them. I own five expensive homes in
Auckland and the total ground rent is exhorbitant
so I decide to sell all properties. I can only spend
these Zeals in New Zealand and I don’t live here
so can’t spend them. I could cope with the rates
but this ground rent is many times higher and I
have to sell. The houses are bought by New
Zealanders.
95. 95
When people receive a small
Citizens Dividend
• Remember that Citizens Dividend paid to all
citizens. Imagine finding you have 50 Zeals in
your bank account or on your multicurrency
debit card from Kiwibank. Spend it in a
mainstreet shop, Four Square store or
supermarket for NZ produced food. Spend it on
local entertainment. Use it to pay part of your
power bill (the company also needs NZD). The
Government has a role in persuading Fonterra,
power companies and others to accept it for part
payment. Buy New Zealand is now possible!
96. 96
A caregiver receives more
• I am the mother of five kids and I struggle
financially. My partner and I both have casual
work. We decide I will be designated the chief
carer so I receive six Citizens Dividends or six
times 50Zeals or Z300. I can give up my cleaning
job and care for my children myself. Some school
fees are payable in Zeals. I give my 14 year old
her share so she can use it for clothes (without
going to the mall)
97. 97
I am an inventor
• But I make very little money as I love the
inventing side but not the promotion or
production side. I just want to invent more
things. The Citizens Dividend is now helping so
much that I am in heaven. I can invent to my
heart’s content and even sell my inventions to
production companies.
99. 99
What can you do to help?
• Ideas catch on if they are good. Nobody owns
them. This idea could be applied in all countries.
Do we have to wait for financial collapse before
we solve our political problems? Do we have to
wait till our planet is unliveable?
100. 100
Things you can do
• Visit and join the site of the New Economics Party
http://neweconomics.net.nz. Become a financial
member.
• Go to our Facebook page
http://www.facebook.com/NewEconomicsParty.
• Discuss the issue with your friends and family and online.
• An article on this is on a blog at
http://neweconomics.net.nz/index.php/2013/06/how-to-build-a-
• Contact us info@neweconomics.net.nz.
----- Meeting Notes (15/07/13 21:21) ----- Includes its disposal cost
----- Meeting Notes (15/07/13 21:21) ----- pay in advance
----- Meeting Notes (15/07/13 21:21) ----- Stories, pictures, examples, fewer numbers.PR person for presentation. reduced simplified. To get the general public to listen to the stories, also need all the theoretical stuff to be solid, the numbers to work out. Not much on fossil fuels.Maori issue. Extremely controversial proposal partnership, two countries within one country. All land alienated from Maori is vested in the crown.