Low tax rate spur calls for tax reform. I propose a new form of taxation called progressive consumption taxes.

The recent Pro Publica report on the low incomes taxes paid by American billionaires at the same time that their net wealth has been increasing by very large amounts has sparked a lot of discussion about reforming the tax code. Some people would like to redefine what counts as income, and others would like to follow Elizabeth Warren’s suggestion about taxing wealth rather than income.

My preference would be to tax consumption and not income. Typical consumption taxes are sales taxes which cannot be made progressive. That is you can not raise the marginal tax rates as total consumption increases beyond certain defined limits. In order to keep track of total consumption of and individual it would be necessary to keep track of their net financial worth. As an example let us consider and individual whose wealth is entirely in financial instruments of various kinds and whose ‘work’ consist entirely of managing his or her financial assets. Suppose that at the beginning of a tax year a certain individual has a net financial world of 1 billion dollars. When this individual files a tax return in the following year their financial income turns out to be 80 million dollars. In my imagined tax system it does not matter what form this incomes takes. Interest, dividends, and capital gains all go into the income bucket. However, income is not taxed. In order to determine the taxes we examine the net financial worth at the end of the year which turns out to be $1,040,000,000. Taking the income minus the increase in net worth give us the presumed personal spending for consumption which in this case is 40 million dollars.

If the marginal tax rate on consumption over 1 million dollars is 60% then our presumed billionaire pays a very health amount of tax indeed. Note that in this presumed tax system losses in net wealth do not free a person from paying consumption taxes. If the billionaire’s net worth at the end of tax years is 900,000,000 and their market losses for the year are 60 million dollars then they still owe taxes on 40 million dollars of personal spending. This necessity might seem unfair to some people, but remember that in this system savings are not taxed. I you save money for a rainy day tax free, then when the rainy day comes and you spend down you savings then it is perfectly appropriate that you should pay taxes at that time.

In reality, of course, the tax code would be much more complicated that is indicated by the above example. Various adjustments to personal consumption would be required. For example if we want to continue to allow deduction for contribution to charity then such contributions would have to be subtracted from the nominal personal consumption. In this case of a rich person lives like a monk and gives away all of the wealth to charitable causes then they will pay taxes just like a poor person. Of course this tax avoid comes at the cost of not getting any substantial benefit from their wealth other perhaps than a feeling of security and the satisfaction of being a philanthropist. If the rich person lives like a monk and passes on their financial wealth to their children then the children avoid high taxes only if they also live like monks. If, on the other hand they decide to enjoy the substantially the material benefits of being rich then they will pay substantial taxes.

This tax system would require people to account for the totality of their personal wealth. If you moved large amounts of money offshore without accounting for it on your tax forms then you end up paying consumption taxes on this ‘vanishing’ wealth.

I have no intention in this brief post of proposing a detailed system of progressive consumption taxes, but one special case in addition to charitable contributions requires mention even in a brief discussion. The materials used to build housing are a substantial and significant form of consumption yet there are obvious problems with counting the purchase price of a house as personal consumption. For one thing part of the purchase price (and in certain markets a very large part) is the value of the land. Owing land is not a form of consumption. Secondly even if we separate the value of the house from the land the consumption of the materials constituting the house take place over a long period of time. Counting this full value as consumption in the year in which the purchase is made is unfair to the purchaser. Furthermore if the home owner lives in the house for just a few year and then purchases another house they will be charge will full consumption taxes for the materials in two house in a very short period of time. Therefore including housing costs as part of consumption taxes will require special procedures.

My suggestion is consumption taxed for housing should be collected on a yearly basis in a manner similar to property taxes. Some kind of consumption tax assessment would be made on a periodic basis based on an inspection. At minimum this inspection would take place a every time a house changes hands (as already happens at present) but conceivably additional inspections could take place at specified intervals. Because the home owner pay year consumption taxes the purchase price of the house can be deducted from yearly personal consumption. The homeowners only pay taxed on the value of the house that they ‘consume’ during their time living there. This procedure eliminates the problem of over payment and double payment of consumption taxes.

Of course the consumption of materials in housing is an ongoing process. Periodic major maintenance such as putting on a new roof, replacing pipes etc. are required to maintain the house in working order. For major repairs whose purpose is only maintenance a procedure should exist for deducting the cost of these repairs from yearly personal consumption. Upgrades to the house which increase the living area should results a new increased consumption tax assessment, but the direct immediate cost should be deductible from the yearly personal consumption. Again the home owners pay taxes for that part of the upgrades which consume during their stay in the house and not for the full lifetime consumption value.

Landlords who buy real estate in order rent housing to other people should be directly responsible for paying consumption taxes on this property. Of course the tenant will indirectly pay these taxes via their rent so that they should be able to deduct rent from their personal consumption. The people who own and maintain the physical structure formally pay the consumption taxes. Procedures should exist for petitioning for lower consumption taxes if certain kinds of building upgrades are made which tend to lower resource consumption required to maintain the building in the long term. I know that the idea of any government entity voluntarily reducing taxes may seem strange to some people, but encouraging shoddy construction because it brings in more stimulates the economy by creating more work for the construction industry is a form insanity which must be resisted.

Similar inducements might be used to induce individual private owners to adopt certain kind of environmentally friendly construction practices in the ongoing maintenance of their home. Obviously though, such inducements will be more effective for people who plan to stay in their homes for the long term. I also have some more radical ideas about how to encourage sustainable housing construction methods which I outline in my book Eight Economic Truths

Since the subject of land value came up during the discussion of housing I might as well say a few words about it here. Buying land is not a form of consumption and money so spent should not be taxed as such. If you buy land you would have to declare this fact on your tax forms so that it would be clear that the decrease in you financial wealth due to such purchases was not used for personal consumption. Again this fact demonstrates that a system of progressive consumption taxes requires that the taxpayer should account for changes in net wealth rather than for income.

The idea of progressive consumption taxes may not appeal to some people who see the huge increase in wealth driven by huge a increase in the value of stocks in recent years and who are itching to get their hands on some of this wealth as quickly as possible. I am not going to comment on the wisdom of the short term strategy of financing important infrastructure using this form of wealth. However, in the long term I have concerns about whether the recent run up in stock value represent a real sustainable increase in wealth. In a stock market crash a lot of this apparent wealth could vanish. If some of the stock owners are prescient about the coming crash, they can get out of stocks ahead of time, but then they will liable to capital gains taxes. The progressive marginal tax rates for capital gains are much lower than for income so these tax rates should be a target for income tax reformer. Also for inherited wealth the cost basis for capital gains is reset to the fair market value at the time of death, which means no one pays taxes on the capital gains that occurred in the life time of the original owner of the stocks. Again this change in cost basis should be a target for income tax reformers.

So far I have talked only about taxes on individuals or families and have not discussed corporate taxes. I do not think it makes sense to tax corporate consumption insofar as that consumption is directed at producing salable products. Of course corporations put huge demands on the earth’s material resources, but they do so in order to pass finished products on to end users. Taxing both the corporation and the end users for this consumption would be double taxation. Corporations like individuals pay property taxes which are direct payments for the consumption of public goods and services. However if additional taxes need to be collected from corporations then traditional income taxes (or taxes on profit) seem like the best choice.

In one case, however, corporations should be taxed for consumption. If a part of the cash reserves of a company mysteriously disappear without having been used for some legitimate business purpose it should be assumed that the funds have been used for consumption and they should be taxed at a high marginal rate. This procedure would prevent money from flowing offshore and then being used for hidden consumption.

It is not clear how much corporate income tax would be required in a system of progressive consumption taxes on private individuals. Consumption is the economic bottom line. If we do not consume what we produce people start losing their jobs. If consumption taxes can be made progressive and if we can implement wealth accounting systems which prevent significant portions of our consumption to be hidden, then I see no reason why they cannot be made the basis of a stable system of taxes. If corporate profits do not pass into private consumption then they remain invested in the financial system helping to provide the credit which keeps the economy working. Therefore it is conceivable that a tax system with very low or even zero corporate income taxes could be made to work effectively, but the key to producing such a result would be to make sure that there is not a large amount of hidden consumption (e.g. money being spent out of unreported offshore financial havens).

Do good jobs imply economic growth and more consumerism or can good work have some other significance?

The proposed Green New Deal is often touted as a generator of good jobs. Good jobs are generally understood to mean good pay and good benefits although other intangible factors such inherent interest of the work and sense of doing something beneficial for society play a role as well. At present a lot of the manufacturing associated with renewable energy is located outside the United States, but installation and maintenance are jobs that cannot be outsourced. Aside from electricity generation other elements of the Green New Deal such a creating energy efficient buildings and improving public transportation systems also involve jobs that cannot be outsourced.

However, if a large new group of people are suddenly getting good pay and good benefits then presumably their standard of consumption will rise. It is true of course that part of the increased pay will go into “savings”, but saving are just investments in infrastructure which are intended to pay off in increased production of consumer goods in the future. “Healthy” saving rates are an important part of the machinery which leads to steadily increasing standards of consumption.

However, replacing working infrastructure with new infrastructure which serves the same purpose is not doing anything to directly increase our wealth, although it may help to prevent of decay of wealth by lowering the negative externalities of climate change. The creation of work is not the same thing as the creation of wealth. A home owner who discovers that the roof they installed ten years ago is defective and needs to be replaced will not regard this event as a wealth creating opportunity even though the roofing company who gets the contract will make some money.

The economic effort that was put forth in the support WWII is often cited as an analogy for the kind of effort we need to combat climate change. Although the intensity of the effort may be a good analogy other aspects of the earlier case are quite different than what we face at present. During WWII the U.S. sacrificed domestic consumption via rationing and via encouragement of high savings rates (e.g. by buying war bonds) in order to direct a large proportion of our industrial output to the war effort. Interestingly enough most of the people proposing a Green New Deal do not envisage such a sacrifice of consumption in order to dedicate more resources to infrastructure transformation. These people seem to feel consumption growth and green infrastructure growth will go on simultaneously. In the case of WWII the sacrifice of domestic consumption was temporary. During the war years our manufacturing capacity and our energy production capacity were increasing rapidly. The hope was that when the war ended we would be able to retool this infrastructure rapidly to civilian purposes and people would be able to cash in their war bonds and buy shiny new consumer goods. Some economists were skeptical that the transition from war material production to domestic production could be made rapidly enough and cheaply enough to stave off economic problems in the post war period, but these naysayers were proved to be wrong and a huge boom in domestic consumption rapidly ensued at the end of the war.

This WWII analogy, however, has limited applicability to the current situation. In the first place many people promoting the Green New Deal are not talking about sacrificing domestic consumption to speed up the process of transformation. The assumption seem to be that the infrastructure project will stimulate the economy and traditional consumption growth will take place in parallel with energy system transformation. Secondly even if we were will to temporarily sacrifice domestic consumption in order to speed up the process of transformation there are some reasons to doubt that after the transformation a domestic goods boom equivalent to the post WWII boom would take place. During the years 1940 to 1945 the U.S. was building huge new manufacturing capacity and was increasing its supplies of fossil fuels. There was obvious reasons to believe that directing this capacity to domestic consumption rather than to producing war material would result in a consumption boom. In the current situation we would be attempting to replace existing infrastructure with new low carbon infrastructure. This goal is undoubtedly worthy and necessary, but it is not clear that its accomplishment will act as a huge stimulus to the production of domestic consumption goods.

I am not opposed to an intense collaborative effort to combat climate change, but we need to be realistic about the requirements of such an effort. We also need at some point to grow up and find some other source of psychological nourishment that an endless growing production of consumer novelties. We need to ask ourselves what is the real nature of good work? Is work good only if it produces steadily increasing consumption rights for the people doing the work? Or is that work good which enables steady sustainable consumption over long periods of historical time while allowing workers sufficient leisure to pursue recreational, aesthetic, and intellectual pursuits that bring intrinsic satisfaction apart from their ability to stimulate ever increasing levels of buying and selling?

Human creativity and consumption growth need to be decoupled if we are going to create an ecologically sane society.

In the past when I have attempted to discuss limits to economic growth and the destructive nature of consumerism as a primary driver of human social activity I have been told that there is no point in talking in this manner since if I am believed I will induce despair and depression rather than effective action. I have been told that we need a positive vision of the future rather than a negative one if we wish to create a mass movement supporting social transformation.

I am definitely in favor of using positive energy to drive our society towards an ecologically sane mode of operation, but the question arises as to how an unending exponential increase in the flow of money has come to represent the only possible positive vision of humanity’s future on earth.

The most obvious example of a system with long term productive creativity based on constant recycling of resources is the earth’s biosphere. Current thinking holds that life was present on earth 3.5 billion years ago as evidenced by stomatolites, a kind of limestone formation created by ancient mats of oceanic algae. In spite of this enormous length of time no evidence exists that biological processes are exhausting the earth’s resources or degrading the ability of the earth to support further biological activity. I would be a mistake to regard the ongoing evolution of life on earth as a strictly linear unidirectional progress, but nevertheless the ongoing creativity of life in adapting to the conditions of its environment has been extremely impressive. Most people who appreciate life’s creativity are more impressed by its variety, intricate complexity, and beauty rather than by the sheer amount of biomass present in a certain ecosystem. Of course life has made certain impressive large steps forward in its utilization of earth’s resources which did result in greatly increased biomass. Perhaps the two most impressive example were the development of chlorophyll based photosynthesis about 2.4 billion years ago and the colonization of land which began about 500 million years ago. It might not be immediately obvious that the colonization of land would lead to a huge increase in biomass since land represents only 29% of the earth’s surface. However, it turns out life on land can make more effective use of nutrients than life in the sea so that the net primary productivity per unit area is three times higher on land than in the sea.

Life has proved to have extraordinary long term resilience. Earth has undergone a series of mass extinctions (at very wide time intervals) of plant and animal species most probably driven by episodes of super-volcanism. But life has survived all of these episodes and has subsequently produced a vast new array of plant and animal species. Constant recycling of resources driven by the energy of the sun has been the key to the extremely long run of creativity. So perhaps humanity can learn from this example and initiate its own long run of qualitative creativity based on similar principles.

Now some people might look at the idea on going qualitative creativity and regard it as an opportunity for unlimited money making. After all the value we place on goods and services has a large subjective component. So who is to say that we can not squeeze exponentially more value out of human productivity even in a period of relatively constant resource use? The suppositious people in this example are not merely theoretical. I once had a discussion on an Internet forum with a man who made precisely these arguments. He acknowledged the reality of climate change, the finite nature of the earth’s resources, and the truth that ecological considerations put certain limits on human economic activity. But he insisted that the outward forms of the money chase could not be significantly altered without disaster. People would be depressed and unhappy without the prospect of exponential growth in monetary flows, and private credit markets represented a definitive end point in the evolution of human social creativity. When I pushed him hard about how continued exponential growth in monetary flows could made consistent with ecological limits he insisted that value was subjective so that by valuing the right things we could chase exponentially increasing money flows forever (or at least for so long that no one now living need worry about any economic alternative) while living in an ecologically sane manner.

In my experience monetary theory is an intellectual realm in which anything can be asserted and nothing can be proved. Therefore I am not going to claim that I have certain knowledge that this vision of green growth is destined to short term failure. However, it is not hard cast doubt on this conception as a reasonable model for long term ecologically sane creativity. Consider an individual engaging in creative production for personal satisfaction. Consider for example a home vegetable gardener. A truly creative and enthusiastic vegetable gardener does plant an identical mix of plants and cultivate them with an identical methodology year after year. They experiment with new varieties and with new methods of growing old varieties. To the true enthusiast gardening is an endless creative process which produces new pleasure and occasional pains as certain experiments prove to be unsuccessful. No home gardener of this type would ever dream of measuring their success by assigning a quantitative value to 1 kg of each type of garden output and then adding up the product of these values with the masses of each product and then subtracting the value of all the effort and labor (translated somehow into the same universal scale) used in the production of these outputs. And in point of fact to a person in love with gardening the time and effort spent in growing vegetable may very well be a source of pleasure and satisfaction rather than a negative factor which needs to be subtracted from the pleasure of eating fresh vegetables. The negative aspects of gardening are more likely to arise from the fact the home gardeners have other interest outside of gardening and obtaining life satisfaction requires obtaining an appropriate balance between multiple spheres of action. But again, at the level of an individual producing of his or her satisfaction the idea of reducing this balancing act to calculating a single bottom line number and the exponentially increase this number into the indefinite future is an absurdity.

Therefore the question arises that if the exponential growth of a single bottom line number is not an appropriate model for individual creativity, what reason is there to believe that the model is appropriate for society at large?

When I suggest that chasing exponentially increasing monetary flows into the indefinite future may be poor strategy for creating an ecologically mature society I do not mean to suggest that money should be eliminated as an economic tool. Money has functions which are indeed valuable. I would like to keep money as a medium of exchange and as means of measuring the efficiency of various production processes. However, I think that the chase after unbounded increases in monetary flows as a means of gaining future security of consumption and a means of gaining social status should be eliminated. Human creativity and consumption growth need to be decoupled if we are going to create an ecologically sane society. My book Eight Economic Truths is an attempt to think about means of keeping the useful functions of money while eliminating its destructive aspects.

How is the American Green Party claim that the Green New Deal will pay for itself to be understood in terms of a growth based consumer society?

The American Green Party on its web page promoting legislation to combat climate claims that the Green New Deal will pay for itself via cuts in the military budget which will be enabled when we no longer need to protect foreign sources of oil and natural gas, and by a reduction in health care cost as fossil fuel related illnesses disappear.

I cannot really speak to what the Green Party mean by the words “pay for itself” since they do not explicitly give an explanation, but the common understanding of these words will be that no reduction in our standards of consumption will be required. The amount of traveling that we do, the size of our houses, the variety and sophistication of consumer goods and services will not decrease. And in fact, the ordinary machinery of capitalism requires that the variety and sophistication of consumer goods and services should continually increase in order to produce the economic growth required for the “healthy” functioning of private credit markets. I call this optimistic view of ecological maturation the all gain and no pain version of social transformation.

If this “green” growth scenario is false and we will need to lower the output of consumer goods in order to dedicate the right amount of resources to infrastructure transformation then many people would predict a future of decay, destruction and chaos since it is well known that the only alternative to Wall Street is the Politburo. Since the Politburo admitted its own failure and incompetence in 1991 and committed suicide, the future does not look very bright if you believe in this dichotomy.

Personally, though, I have refused to accept the assumption that human creativity in the sphere of social organization has already been exhausted so that our only option is to choose among a limited group of completely developed alternatives. My own conception of economic organization is based on the realization that private markets for goods and services and private credit markets are not an indissoluble whole. Credit in its most fundamental sense is making intelligent decisions about relatively intensive expenditures of resources in the present that are intended to enhance welfare over a relatively long period of time in the future. The evidence that a competitive contest for the unbounded accumulation of future consumption rights results in intelligent decisions about economic infrastructure is weakening by the day.

In my book Eight Economic Truths I propose the alternative of non-profit community credit markets whose goal is to aid in creation and maintenance of valuable infrastructure rather than to produce exponentially increasing flows consumption rights (and therefore exponentially increasing flows of consumables). These community credit markets could still serve private businesses, but the primary goal of those businesses would no longer be to increase shareholder value but rather to enable the actual producers of useful goods and services to have a decent quality of life. What a concept!

I discuss a variety of issues how the structure and function of such community credit markets in my book. These issues include structure and function, performance measurements (Yes, even though the purpose of such credit markets is to make infrastructure rather than to “make money” they must be deeply concerned with return on investment), and on the possibility of an evolutionary transformation as opposed to a revolutionary one. I do not claim to evolved a magical master plan which will bring about the millennium if only people will admit to its truth and adopt all of its recommendations. But I hope to provide the basis for further intelligent conversation about the structural transformation of a system which is clearly not sustainable in its present form.

Proponents of Economic Degrowth discuss the strategy of transformation but do not put forward concrete proposals for the organizational structure of a post growth society

In an article entitled From Taming to Dismantling: Degrowth and Anti-capitalist Strategy Ekaterina Chertkovskaya (a researcher based at Lund University, working on degrowth and critical organization studies) uses sociologist Eric Olin Wright’s classification of anti-capitalist strategies to discuss possible paths of transformation to a post-growth society.

Wright identifies three logics of transformation: ruptural, interstitial and symbiotic. Ruptural transformations seek a sharp confrontation or break with existing institutions and social structures. Interstitial transformations involve building new forms of social empowerment on the margins of capitalist society, usually outside spaces dominated by those in power. Symbiotic transformations, in turn, are aimed at changing the existing institutional forms and deepening popular social empowerment existing within the current system so as to ultimately transform it.

The second of these categories (interstitial transformation) is not really a solution to the problem of unbounded growth unless it eventually morphs into one of the other two categories. Chertkovskaya recognizes this fact and admits later in the article that the symbiotic logic of transformation (i.e. the transforming of current institutional structures) must eventually come to play a vital role in bringing about a post growth society. She seem to reject the ruptural or revolutionary strategy.

An emphasis on interstitial transformations is understandable since it offers an opportunity for immediate concrete action. You can grow a significant portion of the food you consume. You can preserve locally obtained food by canning and drying. You can learn various skills that make you less dependent on selling your labor to The Man. You can make yourself less dependent on external energy sources by better insulating your home or doing passive solar retrofits. You can engage in barter with like-minded neighbors, or if you are more ambitious you can help to create a local currency by means of a local exchange trading system (LETS). However, unless you want to go all the way back to the neolithic the mantra of relocalization will not get you to your desired destination. If you want to take some advantage of the more varied pool of material resources available from a wide geographic area, and if you want to take some advantage of the specializations and efficiencies of advanced technological culture, then the larger systems which make these resources available also need to be transformed.

Unfortunately symbiotic transformations represent an extremely daunting challenge. A complex interconnected system of social institutions and cultural norms must be transformed in order create an economy that is not dependent on constant growth. A mechanism must exist for creating reasonable standards of consumption. A reasonably efficient method of making decisions about infrastructure investment (both civil and manufacturing) must be created which does not require the payment of debt based interest as compensation for the risks involved in such decision making. The proprietorship of land must be able to change hands with incurring large debt based interest payments. A means of providing security of consumption for the elderly must be devised which is not dependent on growth based investment.

And even if one comes up with proposals for reform which address all of these issues, such proposals will have to face the resistance of an enormous cultural inertia which favors familiar forms of social organization. Samuel Butler in his essay God the Known and God the Unknown describes such cultural inertia in the following terms:

MANKIND has ever been ready to discuss matters in inverse ratio to their importance, so that the more closely a question is felt to touch the hearts of all of us, the more incumbent it is considered upon prudent people to profess that it does not exist, to frown it down, to tell it to hold its tongue, to maintain that it has long been finally settled, so that there is now no question concerning it…

Nevertheless, however conservative we may be, and however much alive to the folly and wickedness of tampering with settled convictions-no matter what they are-without sufficient cause, there is yet such a constant though gradual change in our surroundings as necessitates corresponding modification in our ideas, desires, and actions. We may think that we should like to find ourselves always in the same surroundings as our ancestors, so that we might be guided at every touch and turn by the experience of our race, and be saved from all self-communing or interpretation of oracular responses uttered by the facts around us. Yet the facts will change their utterances in spite of us; and we, too, change with age and ages in spite of ourselves, so as to see the facts around us as perhaps even more changed than they actually are…

Under these circumstances, organism must act in one or other of these two ways: it must either change slowly and continuously with the surroundings, paying cash for everything, meeting the smallest change with a corresponding modification so far as is found convenient; or it must put off change as long as possible, and then make larger and more sweeping changes.

Both these courses are the same in principle, the difference being only one of scale, and the one being a miniature of the other, as a ripple is an Atlantic wave in little; both have their advantages and disadvantages, so that most organisms will take the one course for one set of things and the other for another. They will deal promptly with things which they can get at easily, and which lie more upon the surface; those, however, which are more troublesome to reach, and lie deeper, will be handled upon more cataclysmic principles, being allowed longer periods of repose followed by short periods of greater activity…

So with politics, the smaller the matter the prompter, as a general rule, the settlement; on the other hand, the more sweeping the change that is felt to be necessary, the longer it will be deferred.

The advantages of dealing with the larger questions by more cataclysmic methods are obvious. For, in the first place, all composite things must have a system, or arrangement of parts, so that some parts shall depend upon and be grouped round others, as in the articulation of a skeleton and the arrangement of muscles, nerves, tendons, etc., which are attached to it. To meddle with the skeleton is like taking up the street, or the flooring of one’s house; it so upsets our arrangements that we put it off till whatever else is found wanted, or whatever else seems likely to be wanted for a long time hence, can be done at the same time.

Of course we are not going to take up the street and flooring our society unless we have a fairly clear idea what we are going to replace them with. The failure to provide such clear idea is a weakness of many people advocating for new economic norms. Economic Degrowth proponents express good ecological intentions but fail to make concrete structural proposals for the organizational structure of a post growth society.

In my book Eight Economic Truths I have attempted to lay out a set of organizational principles for a post growth society. I do not claim that this attempt has produced a definitive and final formula for transformation, but I hope that a concrete vision of new form of social organization may lead to more fruitful dialogues than can result from abstract discussions of strategy detached from concrete proposals of reform.

Does the developed world need to continue wasteful consumption in order to pull the developing world out of poverty?

John Cassidy of the New Yorker magazine in an article entitled Degrowth seen from the New Yorker wrote:

If major industrialized economies were to cut back their consumption and reorganize along more communal lines, who would buy all the components and gadgets and clothes that developing countries like Bangladesh, Indonesia, and Vietnam produce?

If developing countries produce less consumer toys for the developed world then they can produce more basic commodities for themselves. There is such a thing as healthy growth. Everyone wants their children to grow into healthy vigorous adults, but in middle age we do not want them to be forty feet tall and getting bigger all the time. In order to live in an ecologically sane manner we need a reasonable standard of consumption. If many people living in relatively impoverished regions of the globe are living far below these standards then it is perfectly reasonable for them to aspire to growth in consumption that will allow them to reach this level. If the highly developed parts of the world are consuming at a level that a world of nine or ten billion people cannot hope to attain to, then our consumption should fall so that we can eventually meet the poorer parts of the world on common ground. From a systems point of view the lower the demand on resources required to meet that standard of consumption the easier it will be to attain to.

Of course the question of how to organizationally achieve such a result is complex. But it seem clear to me that one requirement is that we most evolve towards a system of providing credit whose primary goal is meeting basic human needs rather than chasing exponentially increasing monetary flows forever. The argument that the developed world need to continue wasteful consumption in order to pull the developing world out of poverty needs to be debunked.