February 11, 2010

Dear Friend,

There is no doubt that the number of new ideas emerging in the field of
humane, sustainable economics is accelerating. But complete blueprints are
still pretty few and far between. Even so, our British colleagues at the
New Economics Foundation (nef) have created an outline that is both
impressive and hopeful. Their blueprint offers a coherent foundation on
which to build a future economics. They have called it "The Great
Transition."

All of us at the E. F. Schumacher Society look forward to collaboration with
nef as we undertake our own transition to become the New Economics
Institute. David Boyle, a senior research fellow of nef, and his family,
have joined us in the Berkshires to further that organizational
transformation.

At the end of this email David shares his thoughts on nef's Great Transition
report for your information. The full document can be found on nef's website.

Warm wishes,
Susan Witt, Stefan Apse, and Kate Poole
Staff of the E. F. Schumacher Society
140 Jug End Road
Great Barrington, MA 01230
www.smallisbeautiful.org
www.neweconomicsinstitute.org

Board of Directors: Gar Alperovitz, Jessica Brackman, Eric Harris Braun, Neva Goodwin, Hildegarde Hannum, Dan Levinson, Richard Norgaard, Constance Packard, Will Raap, Gus Speth, Joseph Stanislaw, Peter Victor, Stewart Wallis.
Advisory Board: Peter Barnes, Tanya Berry, Wendell Berry, Lisa Byers, OliviaDreier, Merrian Fuller, Hazel Henderson, Wes Jackson, Amory Lovins, Bill McKibben, John McKnight, Otto Scharmer, Michael Shuman, David Orr, Cathrine Sneed, Lewis Solomon, John Todd, Doug Tompkins, Greg Watson, and Arthur Zajonc.

* * * * * * *
The Great Transition

The main question we need to know about any vision of the future is what it
is that has driven the change. In the case of The Great Transition, it is
the rising costs of going back to 'business-as-usual', the huge cumulative
cost of climate change (they estimate this at $3.75 trillion in the UK by
2050) and the cumulative cost of high levels of inequality (they estimate
this at $6.75 trillion for the UK in 2050).

Drivers of change are often uncomfortable, and this one is no exception.
What is exciting about The Great Transition is that it sets out a believable
path whereby Britain can take big, radical steps toward a society and
economy that delivers long, happy and equitable lives and fits within the
planet's carrying capacity.

It means that the UK's conventional GDP will fall by a third. This is
offset by making better use of what they have, and by an economic boost from
increasing social and environmental value. The costs of climate change can
be partly avoided and the costs of social breakdown can be avoided too.

New Economics Foundation policy director Andrew Simms put it like this.
"For years we have been told that there is no alternative to an economy that
wrecks the environment and worsens inequality. We've been told that we live
in a time of prosperity, when really we're no happier than we were thirty
years ago. We've been told that crashes, bubbles and recessions are all
part of the 'natural cycle' of economies. But faced with potentially
irreversible climate change and corrosive inequality, these are dangerous
fairy tales. The Great Transition shows we have a chance of a better
reality."

The point is that, as we know, GDP is a very poor measure of progress: the
revenues skimmed off the financial system by traders in the City of London
as they built a pyramid of 'toxic' derivatives added to GDP. So does
cleaning up the effects of pollution and paying the costs of high rates of
crime increases. This isn't just an academic point: what we measure ends up
driving what we do. The Great Transition proposes a move beyond GDP, to
start measuring the things which really produce value, for our communities,
our societies and our environment.

The report sets out seven main interventions. These include:

- A Great Revaluing to make sure that prices reflect true social and environmental costs.
- A Great Rebalancing that sets out a new productive relationship between markets, society and the state.
- A Great Economic Irrigation that helps money and investment flow to where it is most needed.

But how do we get there? The Great Transition suggests a universal
Citizen's Endowment of between £40,000 and £50,000 to give every adult an
equal chance in life and the opportunity to invest in education, a business
or local productive assets. This would be funded by a phased rise in
inheritance tax on all estates up to 67 per cent and would go a long way to
reducing the massive inequalities of inherited wealth in the UK.

Community land trusts are also central to The Great Transition. The report
also proposes redistributing working time by setting out a four-day working
week for everyone that would cut GDP by a third without a major loss of
jobs.

There would be a major reorganisation of business, with publicly listed
companies progressively transferring shares to their staff, giving them real
control over the companies where they work. This would lead to the creation
of a series of co-operatives, operating in regulated markets, and subject to
competition from new companies. This is designed to change power relations
within workplaces, creating a form of economic democracy.

There would be new variable consumption taxes, replacing income tax,
reflecting the social and environmental costs of goods. A windfall tax on
the profits of fossil fuel companies, for example, could channel funds into
clean energy projects. There would be government lending for large-scale
green energy and transport projects, channelled through a national Green
Investment Bank. There would be a new national Housing Bank, more along the
lines of those in the USA, offering people the opportunity to transfer a
portion of their mortgage debt into equity and paying social rent on the
balance.

There would be new regulations on the reserve requirements of private banks,
which would be related to the social and environmental value of their
investments. This is intended to engineer a 'race to the top', avoiding the
more familiar race to the bottom, at the same time as reducing speculation
and credit bubbles.

The purpose of The Great Transition is to inspire debate. It was designed
for the UK not the USA. Many of the measures will be controversial. Some
will be wholly unacceptable to people who are already steeped in
sustainability. But it is a bold and coherent vision, with details and
figures – using the skills of novelists, as much as the skills of
economists, to create a believable world. And it suggests that other kinds
of economic worlds are possible. That, in itself, represents hope.

Tellus Institute and the Stockholm Environment Institute have made significant
contributions to defining a Great Transition (www.greattransition.org). More
research and discussion is ahead.

David Boyle may be reached at:
davidboyle@smallisbeautiful.org