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Friday, April 28, 2017

Money makes the world go …. green?

Posted by steve on August 7, 2012

Just suppose we all decided  – and I mean all of us, politicians, corporates, national economic policy experts, universities, bus drivers, dog owners .. you get the idea… to demand that, apart from everyone doing their level best to live sustainably, that a monetary system would be put in place to drive development in that direction.

Just suppose…. Humour me, this is a post on my new hobby – capitalism. It’s quite a fun hobby, I have been posting for several months and still haven’t come to the core of defining capitalism.  Maybe, as some say, there is no definition. In which case it’s better to get on with the job in hand and look at how this money system could be set up.

One theme  is in the diagram below. Quite simply, the aim of policy would be to drive development into the top left-hand corner. From people not having enough to eat to having sufficient. From environmental services being degraded to eco-systems maturing.

Alternative outcomes for economic policy

Now it might seen like nation economy policy makers have a lot of tools at their disposal. Forgive me if I have this wrong, but I can only count three: economic laws, interest rates and taxes.

That is not a lot to play with, but given the idea of introducing flexible fees to provide a mechanism to control engineer the economy, it might be possible.

Let’s look at each square of the matrix in turn. As the bottom left, worst case, is a combination of the other two we can analyse community challenge and eco-challenge.

Eco-challenge is where the needs of the community are being met, but at a price. Ecosystem services are depleting and so are minerals.

Here flexible fees kick in. Basically it works like this: A point where eco-system services are being degraded is identified. This is done by looking at the supply chain of essential goods and services. The substances that are the main cause are identified and traced back to where they are either imported or extracted. The extraction or import of these substances is subjected to a fee. The fee is raised or lowered at regular intervals at sufficiently large intervals until market behaviour changes.

At the same time, a large part of the fee collected goes back to the population via general tax rebates, for example. The effect is that substances, or practices with these substances, become relatively more expensive. Non-polluting things become cheaper. Investment flows to these now more competitive alternatives.

Read more in the white paper http://avbp.net/wordpress/wp-content/uploads//whitepaperFE_V2.pdf

But it need not stop there, there is plenty more that can be done. Take for example taxes. Every item for sale has a VAT – Value added tax or Sales tax levied on it even if it can be zero. And every item is coded in international systems for classifying what kind of item it is.

However, even though these systems distinguish between books and luxury items, food and alcoholic beverages, they do not distinguish between products and raw materials that are guaranteed organic. A simple twist of accounting could produce this – well maybe not simple but it is not rocket science.

Again, putting, say 25% VAT on industrially grown lettuce and 6% on certified organically grown would increase the competitiveness of the organic products.

The next blog will tackle how the monetary system  can tackle the community challenge.

And maybe the next next I will consider what is stopping the simple development of accounting and taxation that could create the saying “money is making the world go green”.

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