The Great Transition

By David Boyle
Feb 12, 2010
From the New Economics Institute Newsletter

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.

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