4.2  Economic Institutions:  Money Supply and Industries. The Failure to effectively Addressing Global Warming

4.2.1 Basic issues: Economic institutions, climatge change, human needs  edited 1/2021
4.2.2 Goals and basic role of governments
4.2.3 Money supply; allocation of money
4.2.4 Federal banks, decentralized development banks, and services of nonprofit private or cooperative banks
4.2.5 Use of local currencies
4.2.6 Changed structure of commercial enterprises
4.2.7 Government sponsored and by governments guided economic activities
4.2.8 Transition from a debt or credit based to savings-based economy, initial steps   added 11/2016 
4.2.9 Transition from a debt or credit based to savings-based economy as politically feasibles
Appendices:
4.2.A.1 Scientific basis for the study of economy
4.2.A.2 Economic aspects of cultural institutions; philosophical questions

4.2.1 Basic issues: Economic institutions, climatge change, human needs  edited 1/2021

Introductory remarks: Today we have a stark choice: reform the economic system and effectively minimize greenhouse gas releases before there is irreversible damage, versus gradually decreasing global warming while our profit-driven, ill-conceived economic system lets much of the world become unlivable and a mass extinction progresses? Caring about people’s quality of life, versus adhering to an ideology that assumes only continuous economic growth is important?
To reform our civilization, we need a model, a clear image, of how the economic system should be. Transitions have to be worked out in which food production and relevant services are not interrupted; what is newly built has to complement, then replace the old. As many new rail lines, human-powered and ultra-light electric vehicles are built, cars and buses will be used much less. Small interacting non-profit enterprises will efficiently fulfill government contracts that aim to make the economy sustainable. To be able to adapt to new goals in research and development, large corporations benefit from breaking up into small enterprises, that rely on government grants and low-interest loans rather than profit-seeking investors.

Economic institutions greatly influence character and mental health of people and the development of civilizations. Modern Western economies obstruct swift changes towards rational goals; the climate emergency cannot be effectively addressed. We are stuck in tracks but nobody knows where they lead. Our economy is driven to maximize productivity and profits; the common good is not a priority, The internet and artificial intelligence are abused in dangerous, unpredictable ways, and we still assume that military power is the final arbiter in conflicts. Most economic activities are financed by loans from meddlesome, profit-driven financial institutions, rather than with money that is owned by the people, businesses and government agencies that work with. Basing an economy on debt contracts destabilize businesses and banks, and a recession worse than any since the Great Depression appears likely.
Personal debts cause people to function poorly and become depressed, however, if people stop buying on credit, our economy collapses. The structure of the economy fosters addictive consumerism and addiction to wealth, social status and power; and success often leads people to behave in sociopathic, mean-spirited ways. The economic system also reinforces people’s inherent fear of major changes – people have reason to fear losing their job and everything they bought on credit. There have been catastrophic, ill-conceived developments; to redirect them, major changes in economic institutions are needed.

      This chapter introduces a model for reforming capitalist economies. The subsequent chapter addresses the related issue of taxation.

While many developments have been very positive, modern economies could certainly do much better: private financial institutions and corporations have an unwarranted influence on people, their governments, and their cultures, often with very negative consequences. A disproportionate part of the U.S. economy consists in “financial services”: intelligent people benefit from creating and allocating money in the form of loans so others can work; they speculate in the securities market, squeezing profits out of others’ work, they invent new forms of wealth by creating extremely complex “financial instruments,” etc. While wealthy people and corporations hold large assets in securities and other investments, much of the circulating money is borrowed, meaning that somebody pays interests to a financial institution; the economy de facto leases much of the money supply from private banks. The complex arrangements of loan contracts and people’s economic insecurities prevent rational, rapid changes; with an added inherent fear of rapid changes, people can only imagine very gradual improvements; global warming and other detrimental developments are expected to continue for decades. Our children deserve that we work towards reforming our political and particularly the economic institutions, so that rapid changes towards a better future will be possible.

Many variations of capitalist and mixed economies lead to significant increases in productivity, but in most countries, people’s access to jobs and services is uncertain, and too many people are essentially excluded from the economic and technological achievements. Due to globalization, negative aspects of the U.S. economic system influence economies of most countries. In some of the wealthiest countries, old people often live in impoverished conditions and many young people find no meaningful function, become addicts or end up in gangs. Whole families are homeless. In Third World countries, a rapidly growing middle class aspires to an unsustainable Western living standard while for poor peasants and herders living conditions have hardly changed in centuries. Basic infrastructure, services and safety for the millions of people living in poor parts of metropolitan areas remain grossly inadequate, and pollution leads to many premature deaths. A widespread conservative ideology is a central problem in economic developments.

To improve societies and to avoid ecological disasters, improvements in economic institutions appear crucial, more than changes in social, legal and governmental institutions. Economic institutions influence, even shape, most aspects of a civilization. Socially, ethics and science-based, pragmatic approaches must become the guiding principles, not ideologies and religions. The U.S. economy is largely driven by a single-minded goal of profits, and material wealth in a futile pursuit of happiness, as exemplified in people’s luxurious but isolated lives in metropolitan areas. There is a vicious cycle of consumerism driving institutions and institutions reinforcing materialistic values. The powerful appeal of the economic model of the USA, with large parts of economic activities being based on credit, has influenced virtually all countries. Aspects of its materialistic culture reached even remote parts of the Third World. Responding to what appears decadent in modern civilizations, people of many cultures seek to restore a sense of morality by reverting to harshly punitive pre-Christian fundamentalist-religious beliefs and incorporate them in their ideological-religious beliefs.

There may be considerable agreement on problems within modern civilizations, but there is little agreement on how to reform their economies. To create a model of exemplary economic institutions, some basic issues require reevaluation:
– the function, ownership, and allocation of money;
– the size, structure, and interactions of economic units;
– the use of incentives and disincentives through taxation and other governmental interventions;
– oversight on how wealth, particularly by working with Internet-based media, can be used to influence people’s buying patterns, beliefs, and political inclinations.

There have been conflicts between conservative thinkers who want a stable, very slowly growing money supply, versus bankers and representatives of financial institution who control the money supply, expanding or contracting it by lending according to expected profits and risks. The Federal Reserve System (central bank) and governmental treasuries enabled irresponsible dealings by bailing out large failing institutions; bank representatives, who committed fraudulent and otherwise criminal actions that caused bad recessions, have not been prosecuted. With much new money having been infused into bank reserves after the crisis of 2008, lending has been relatively stable, maintaining the functional money supply. However the infusion of money into banks had the effect that savers paid for the bank bailout by having to forego interest earnings and losing money due to inflation. While fairly well paying production jobs have been outsourced or were replaced by robotics, more low-paying jobs have been created. With an equal amount of circulating money and lower average salaries, unemployment should have decreased. However, the economic growth mainly increased incomes of the upper middle class and the wealthiest, people who generally avoid products and services of the lowly paid; thus under-employment and unemployment remain high. Since private banks rather than government agencies control the circulating money supply, it is politically difficult to maintain full employment by government spending, such as repairing and improving infrastructure and schools.

4.2.2 Goals and basic role of governments

   In the proposed model, the government sets a framework for a decentralized, democratic market economy with a stable money supply. The government is responsible for and supervises many functions, such as education, health care, and infrastructure, but utilizes local enterprises to fulfill most tasks. The government is responsible to maintain a stable supply of circulating money.

Every person, employer or employee, works as a free agent; and economic entities, farms, production plants, service providers and distributors, interact with each other as independent agents. Entrepreneurs are influenced, in some ways regulated, but never controlled by their elected governments. They produce and provide services for basic needs, they fill economic niches, and they adapt when needs and desires change. Direct feedback from consumers-clients is encouraged to help improve the quality of products and services.

Most important and most valuable in an economy are the people and the natural environment. Basic economic rights are crucial. Every person must have reasonable access to goods and services and a meaningful function in society. In a well functioning civilization, main incentives for working and improving products and services are finding satisfaction in meaningful, reasonably stable work, and being part of communities that enhance the quality of life of present and future generations.

The goals of the proposed economic model are:
– to meaningfully include all people in a sustainable economy
– to encourage input into economic development by the workers, by the population as a whole and by researchers
– to foster economic developments that improve people’s quality of life
– to minimize negative effects from economic activities on people, animals and the environment.

The economy must realize the potential of its people: there is no excuse for unemployment and disregard of needs if there are unemployed people willing and able to work, apparent deficiencies, and available materials to work with. The proposed economic model relies primarily on offering interest-free loans and grants to new entrepreneurs who can fulfill needs, for products, services and/or workplaces. Otherwise, economic activities are to rely mainly on savings rather than lending and credit: people earn and save, then spend. The government-issued money supply must be adequate and stable, greatly decreasing the importance of financial institutions in daily economic interactions. An essential part of the model is that loans and grants are issued according to needs and values of the area. Decisions are made by elected officials with good education in natural ethics, economics, ecology, and other relvevant sciences.

   Access to financial resources to start enterprises has always been problematic. Historically and ordinarily, people have been relying on:
– personal assets, saved earnings and inherited, and/or by families’ pooled savings and trusting relatives;
– conventional bank lending (with banks demanding substantial collateral assets for loans);
– newly developed means of allowing invested labor of informal economic activities to serve as collaterals1
– offered microcredit with no collaterals which may be disbursed and managed utilizing small cooperatives2.
Well-managed microcredit is valuable in poor areas. It appears particularly beneficial if distributed to women’s cooperatives with conditions designed to improve health and education of all children. However interests must be low and failures to earn adequately from the invesments should lead to an extension of the loan and/or added new loans.

Grants to very poor people have also been helpful in some projects (e.g. Give Directly contributions were given to very poor families in Kenya with, in many cases a very positive effect, directly and indirectly by braking the vicious cycle of hopelessness). Professionally managed grants and interest-free loans that consider relevant research make more sense than bank loans – bankers are not broadly educated. However, loans and grant projects must be monitored; governmental development bank officials must learn from observations and out-come reports.

In poor areas, money often leaves the area when people spend too much on products that are not produced locally. To remedy such problems, local currencies are encouraged. A limited amount of local currency serves exclusively to facilitate local economic interactions. The local currency cannot leave the area and is not readily convertible into the country’s federal currency.

Economic development and progress must not primarily refer to a quantitative increase in production or sophistication of products. Instead, developments should further pursue and apply research to minimize harm to the environment and improve the quality of products and services. Goals include minimal impact on climate and improved quality of life; safety, relative simplicity, reliability, durability, and low energy consumption, if applicable, should be primary concerns for improvements of products. Waste, the production, and the transportation of many goods should quantitatively decrease, with enterprises developing and building less, better products. Another goal is that people may work fewer hours.

4.2.3 Money supply; allocation of money

   To realize this model, the government significantly increases the functional money supply while limiting bank lending and credit.  During the recession that started in 2008, the money supply was much increased, but it was channeled into bank reserves and added to the functional, circulating money supply through bank lending. People and businesses should own much of what they enjoy and work with, and they should own additional cash reserves. If banks are tightly regulated, they cannot create inflation, economic “bubbles” and recessions.

The government assumes full responsibility for the money supply and the allocation of money in the economy. Instead of bankers and investors lending money with the single goal of profit, elected, well educated employees of federal banks, their branches, and of private cooperatives allocate money in accordance with society’s needs and goals. Experts of public universities and members of NGOs serve as consultants. As laws strictly regulate activities of financial institutions, lending by private banks does not significantly add to the circulating money supply.

The government-issued money supply directly represents the productivity of the economy and slowly grows without significant fluctuations. Gradual money supply increases correspond with increased value of the economy’s productivity3. It is hardly influenced by fluctuating lending activities of for-profit financial institutions, the mood of private investors and venture capitalists, and stock market ‘jitters,’ thus largely preventing business cycles with ‘boom’ periods and recessions. When an increase in the money supply is needed, the government will evaluate increasing development grants and loans, investing newly created money in infrastructure and other government responsibilities, and possibly decreasing taxation, rather than decreasing interest rates to encourage lending.

Initially it is envisioned that there will be more products in the economies: for instatnce, people may keep their cars and repair shops should maintaint them while the government rapidly builds a dense network of public rail lines. Small enterprises are to build ultra-light electric, human-powered and hybrid vehicles for shorter commuting distances and spare-time use. Cars then become rarely used luxury items, mostly for vacations; as public transportation is improved, much less cars will be built and maintained. Eventually, there will be much less, better products in highly devloped countries.

4.2.4 Federal banks, decentralized development banks, and services of nonprofit private or cooperative banks

   The central bank of the federation, or ‘federal bank,’ issues the money supply. It supports all federal government activities (such as the health care system, educational institutions, pensions for retired people, new parents and the disabled, and infrastructure).  New money is also introduced to create and improve workplaces. The newly introduced money represents growth in productivity, including improvements in quality of products and services. Taxes are deposited in the federal bank, but much tax money is then distributed to local governments. Private banks may continue to work at much lower volumes. Most should be broken up into small units and become non-profit cooperative banks.

Examples of government investments that rapidly raise productivity and/or quality of life include improvements in infrastructure and medical care, and grants to create industries in areas with unemployment. Delayed increases in productivity are expected from investments in education, preventive medicine and research. As long-term investments reach their goals of increasing the value of goods and services, and there is progress in automation of production, the money supply can be increased further to fund continued research and development, work hours can be reduced without decrease in salaries, and/or worker salaries can be increased. At times there may result mild inflation4.
Innovations which increase the value of the economy’s productivity may be financed, at least partly, with grants that are issued by federal development banks. Small enterprises that create needed jobs, may receive grants to expand. Generally, remodeling and replacement of equipment without increase in productivity has to be paid for with savings and/or loans. Locally, inflationary and deflationary trends influence the ratio between grants and loans. On a federal level, the growth of the money supply, i.e. how much new currency is issued, is determined by trends towards inflation or deflation.

The central bank works mostly through decentralized development banks. Their primary purpose is to create work places and improve the value of local production; they also promote communities’ and regions’ relative self-sufficiency. A goal is that large corporations break up into small interacting non-profit enterprises. Elected officials of banks must have a good understanding of economics, environmental problems, and human nature, what motivates and drives human behavior and what improves people’s health and wellbeing. Bank officials work quite independently but must consider guidelines by the central bank and local parliaments, opinions expressed in public political meetings, recommendations of academic consultants and goals formulated by non-governmental organizations (NGOs). Bank and government officials may discuss relevant considerations and seek imput by outside consultants when determining the allocation of grants and loans and when suggesting changes in taxation. Varied taxation rates, which are not the responsiility of the federal banks, encourage or discourage economic activities, with the goal of improving the quality of life of all people.

Since banks must consider long-term consequences of their actions, there are no term limits on elected bank officials; they work as career professionals, not short-term oriented politicians. Interest-free loans and grants serve to create and expand enterprises, and to support research and development. Enough grants and loans are issued to insure full employment and to fulfill recognized economic and social needs. Depending on the wealth of the area and the number of available workplaces relative to people seeking work, workplaces may be more sophisticated and expensive (capital intensive) or low in cost (labor intensive).

In addition, there are private, cooperative nonprofit banks governed by elected boards. They complement the federal banks but are not designed to create additional workplaces. Their functions are limited but include commercial banking functions, such as issuing loans to individuals to finance private homes. Local governments may also allow small conventional for-profit banks exclusively serving producers of luxury goods.

Low interest-like fees represent inflation adjustment, loan insurance and a processing charge (for employees’ salaries, etc.). These fees may be shared by lender and borrower. There are no profits from investments, except investments in a limited luxury market.

   Economic activities are thus largely supported by savings, interest-free loans and grants. Conventional loans, bonds, stocks, and other investment instruments lose their importance. Most circulating money and most resources are owned by the person, enterprise, or institution working with them. Only a small part of the money supply also represents a debt, owed to and owned by a financial institution. Interference by financial institutions and investors in economic processes are minimal. There is virtually no more speculation, thus minimizing extra costs and distortions of markets.

Savings for retirement are paid to the federal bank and monthly payments after retirement are higher for persons or couples who had paid more retirement money than the required minimum. Since retired people need products and services for basic needs and health care, payments for retirement funds are invested mainly in education of the younger generations and maintenance of agriculture, production of basic products and infrastructure.

Private and federal banks accept private savings; low interests essentially cover inflation. Private for-profit banks become very unimportant. Checking and similar accounts cannot be used for loans by financial institutions. Credit accounts should be outlawed and functionally replaced by debit card purchases. Money from savings and other accounts, deposited for less than 50 days, must not be used for loans. In addition, to keep total loans low, there may be high reserve requirements for savings and similar accounts5.

Loans made to individuals should be secure and long-term, i.e. mainly for homes. Loans to enterprises may serve to finance investments in research, development and retooling of workplaces, particularly at times when people consume less, are reluctant to replace old durable goods and save more while waiting for improved products. Thus some employment opportunities may be temporarily transferred from production to improvements of production programs. Different specialists may serve as consultants and contractors, including groups of engineers specialized in industrial research, designs and retooling.

Close cooperation between universities and economic enterprises is encouraged. Main goals in the development of products and improvements in production processes are much reduced impact on the environment and consideration of human nature and human needs. Universities and enterprises may receive research and development grants. Research should be transparent, often involving work at universities, and shared between enterprises. Since research should benefit the whole population and is largely financed through grants, there are no patents within the country, with the exception of privately financed development of luxury products. The government may later buy such patents.

4.2.5 Use of local currencies

   Lack of money and unemployment reinforce each other in a vicious cycle and make economic interactions cumbersome. In many almost self-sufficient rural communities, money is lost when people increasingly buy goods that are not locally produced, such as unnk food, appliances, and electronic gadgets, and when they have to pay for sophisticated medical treatments. Generally, there is always a trend for money to leave poor areas, to metropolitan areas and wealthy countries; this is partly due to the under-valuation of good that are produced by poor people. While dealing with the principal economic problem, local governments should, at least as a temporary solution, mediate local economic activities using a local currency that functions like barter coupons. Such a currencies may serve to pay for locally produced goods and services, including agricultural products, child and elder care, repairs, and teaching. It would also create an incentive to start local production of simple industrial products for local use and export. In some transactions payments may be partly with local, partly with “hard” federal currency, e.g. teachers’ salaries or goods that are locally built but require imported parts and machinery. Generally it is every government’s duty to provide an appropriate money supply to avoid inefficient barter arrangements, inappropriate borrowing and unemployment. While fulfilling this need, a local currency discourages – does not allow unrestricted buying of goods that have to be brought into the communities since it cannot leave the area and is not readily convertible into the country’s federal currency.

Local governments may issue and evenly distribute small amounts of local currency among all inhabitants of a valley or impoverished part of a metropolitan area, or it may use newly issued local currency to pay local service providers such as public health nurses and teachers. It may also issue small interest-free loans through cooperatives. Such loans may be offered with conditions relating to beneficial social change and other desirable innovation.
Local currencies discourage ecologically damaging, unnecessary trade of goods that can be produced locally or are not needed in the first place. They encourage economic interactions between people who are known within a small area and thus have more pride in doing good work. People are also more likely to be scrupulously honest. Taxation of such interactions has to be worked out by local governments.
Local currencies should never be simply an expansion of the money supply, and successful local currencies must not expand the area where they can be used. It is reasonable that some outsiders who trade with inhabitants of a small area accept their currency, but starting to use it in neighboring cities defeats the local currency’s purpose. However, local currencies may be used in a larger area if the economic situation and problems within the area are similar and economic interactions are encouraged and mutually beneficial.
In rare circumstances, there may be a statewide local currency in addition to community or small area currencies, e.g. a country currency within the Euro-zone.

   If there is a collapse of the money supply and workers can no longer be paid, the employees should have the insight that it is best for everybody to keep working, at least part-time, even if there is no certainty that the institution they work for will survive. Notes or coupons that promise future payment, if possible, may then function as a temporary local currency.

4.2.6 Changed structure of commercial enterprises

Production is decentralized and democratically governed. Commercial enterprises must be owned mostly by their workers and individuals or entities directly involved in design, production, or distribution of their products. Larger corporations are expected to break up into small enterprises that interact as independent agents. Enterprises may specialize in consulting and facilitating interactions between small enterprises that work in larger projects.
The main incentives for entrepreneurs are the creation and maintenance of gratifying workplaces in small settings6, allowing themselves and their workers to develop and exercise their skills in the area where they live, and to offer appreciated goods and services of high quality. Stable long-term employment is usually desired for all employees. When there is less work, rather than laying off employees, work hours should be decreased, and workers may be offered publicly funded educational programs or part-time work at other enterprises. Successful entrepreneurs are encouraged to provide consultation to less experienced and less successful entrepreneurs, rather than starting additional business branches in other areas that try to get local enterprises out of business.
Stock ownership no longer yields profits, but is important because stockholders participate in planning and decision-making7. Enterprises have incentives to experiment with innovations and learn from each other. Innovations may be recognized and earn prizes or other acknowledgment and rewards. Instead of successful businesses having many branches or franchises, local businesses try to copy most successful ones while adapting them to their local conditions and culture and improving them further.
Development banks may promote the production of basic durable goods, mostly in modular design, which fulfill all culturally significant demands in the most simple and reliable way. Examples: a limited product line of electronic equipment, utilizing somewhat obsolete designs, most with limited functions but working efficiently and reliably; stocks of healthy, mostly simple, low-cost foods and limited choices of many sorts of luxury foods; human powered, electric-assisted, fully electric and hybrid vehicles which are safe, reliable, economical and simple to operate. Producers are encouraged to do much research to develop a “nearly perfect” product before mass production, avoiding the marketing of a car that is further developed over many years, gradually improving gas mileage, safety, reliability, etc. However, entrepreneurial people are not discouraged from establishing luxury restaurants, create beautiful jewelry for special occasions, etc., while good products and services readily meet everyday needs.
Producers of durable goods are generally responsible for their repairs and maintenance, and/or they may train independent repair contractors. Enterprises building similar products may contract to repair each others’ products and independent repair services may contract with many producers. The responsibility of manufacturers to repair their products improves the quality of repairs and helps manufacturers improve their products.
In order to thrive, enterprises have to cooperate, e.g. businesses building parts of products, building finished consumer products, and distributing goods have to coordinate their efforts. Similarly, service providers have to adjust to and cooperate with other enterprises in order to fulfill the needs of their area.

4.2.7 Government sponsored and by governments guided economic activities

   Government sponsored economic activities, including building and maintaining infrastructure, and providing education and health care services, should be decentralized. Local entrepreneurs and service providers accept and execute contracts with considerable freedom, however governments are involved in planning at all levels and may mediate between small interacting enterprises. Governments may pay parents to buy school education and/or health care, and governments may establish institutions that compete with inferior private ones; governments must always assure that education and health care are available and accessible to all at minimal cost and it must fill gaps in the system.
Governments are to prevent unreasonable or risky experimentation and assure that institutions comply with current standards, particularly in health care, education and safety (buildings, means of transportation, infrastructure, etc.); governments are also to ensure a reasonable degree of conformity within large areas utilizing extensive government sponsored studies of existing system in different parts of the world. Such research is to guide and set standards for health care, education, and regarding safety, (e.g. for building regulations in areas with a risk of natural catastrophes). Local governments may have contractual agreements for education or health care with regional or federal government.
Central and regional governments evaluate problems and needs, clarify economic goals, and influence the direction of progress without controlling it. Universities provide consultation services. Entrepreneurs, workers’ representatives, and well-educated bank officials participate in making most of the important decisions. Direct government investments through bank grants should bring about desired progress. Targeted taxation discourages adverse developments such as harm to the poorer population or wasteful use of resources.
Raising children and helping elderly and otherwise disabled persons, within families or in cooperative arrangements, is considered self-employed work, valued and compensated by the communities fairly with consideration of local culture. Generally multiple adults are involved in the care of every child and disabled person. Particularly families with difficult children and/or disabled members shall be supported by the community and by family and friends from other communities.
Governments serve as employers of last resort. Rather than paying unemployment compensation, governments may employ unemployed people for public work projects, such as cleaning cities and working in public green spaces, building public park facilities, and improving infrastructure. Unemployed people may combine schooling with especially created jobs in research facilities. Such work and educational opportunities may also be offered to part-time employed people who would like to work full-time and/or cannot find work in their field of training and expertise.
As technological progress in the early new millennium is accelerating in ways that are hard to imagine, many concerns that have been discussed may become trivial and the main goal may be slowing down automation and the creation of abundance (compare work of James Martin, Oxford, GB, and Peter H. Diamandis, Ray Kurzweil and others, Singularity University, Mountain View, California, USA). What the primary goal of most humans will be is hard to foresee, however, happiness, enjoying nature, relationships and forms of artistic expression, a sense of belonging and meaning in life, ethical thinking, being compassionate and humane, will always be important.

   Education and health care require particular attention and they should be improved based on scientific, experiential and ethical evaluations. All people should have access to good services including good education and encouragement for prevention of illnesses and for family planning. Positive results from many different health prevention projects and types of schools need to be reviewed and applied to provide the best systems for all. For instance, Finland’s experience of having better results by starting formal school education at age 7 and other successful aspects of their educational system should be further studied and universally applied; similarly leaders in education systems must study experiences of sex segregated schools that teach girls and boys according to the inherently different brain development and decrease social problems. Leonard Saxreviewed and described much scientific data that has been largely ignored by most educators.
Media, entertainment and other informal education should be included in the evaluation process by government, based on scientific, experiential and ethical consideration, for instance the well documented very detrimental effects of many video games require decisive intervention by the branches of government that oversee ethics and education.

4.2.8 Transition from a debt or credit based to savings-based economy, initial steps   added 11/2016

   Particularly in the USA, a cultural shift is needed. Since the collapse of the money supply 2007-08 and the huge bailout of large financial institutions and certain industries, middle-class people paid in part for the losses by not getting interests on their savings (not even compensating for inflation). While investments in securities have been profitable, the lower middle-class has been encouraged to borrow more since interests were relatively low. However, the large financial institutions seem more irresponsible than ever and the relative stability of the economy is deceiving.
A first step should be that people move savings and retirement investments out of the large financial institutions, use credit unions for daily banking needs, pay off debts, forego luxurious consumption, particularly luxuries that are not produced locally (soft drinks, cigarettes, out-of-season and otherwise expensive food items, luxurious large cars, etc.), start or increase savings, buy apartments or homes and improve them for energy efficiency, etc.
Politically, journalists and leaders within communities should advise people that economic problems are key in many or most political conflicts; and voting should be influenced by such knowledge. There are major conflicts of interest; financial institutions have become far too large, self-serving and powerful; there is very corrupt thinking and politicians and bankers have been behaving grossly unethical: Wall Street finances elections and benefits greatly from many political decisions that are not primarily serving the people; former and prospective officials also benefit from the cozy relationship between Wall Street and the U.S. government. Until they protest loudly and vote differently, people will continue to be exploited by the economy’s “financial sector” – the “financial services industry” earns huge profits and employs many very well paid, highly intelligent people to find complex ways of skimming profits off people’s work. And the government wants us to believe that ours is ‘the least bad of possible systems.’
Even if functioning smoothly, capitalism includes major incentives to behave in ways that are damaging to society. People need to learn that mixed and socialist economies have done more to improve people’s lives than unrestrained capitalism. Scandinavian socialism developed out of the Lutheran church: when the church became overwhelmed in its goals to provide education, health and elder care, the state took over. The consequent access to what is most essential to families, the safety net and low crime rate greatly increased the quality of life of people. Scandinavians were then able to focus on other issues that enhance their civilizations and they became a model to many Western democracies.

4.2.9 Transition from a debt or credit based to savings-based economy as politically feasible

   During the initial transition period, while outstanding loans are repaid, new money is issued and part of it distributed among all citizens to start savings for durable goods no longer available on credit. Committees, representing the population but including many outsiders and foreign consultants, must determine ethical ways of allocating newly issued money that is distributed to the population. Some newly issued money may be used to accelerate payments on the public debt to foreign countries and to improve infrastructure and public services.
Conventional bank and credit card loans are converted into interest-free loans from the federal banking system or loans from newly formed private cooperative nonprofit banks. These loans are to be paid off within a limited period.
The ownership of securities must, within a reasonable time, be transferred to persons working in or directly involved with the enterprise. To promote this transition, securities may be taxed if not owned by persons involved with the enterprise. Transfer of savings into foreign investments may also be discouraged through taxation.
Many large corporations are expected to break up into small enterprises. Stocks and other securities that represent ownership of work places are devalued since they no longer represent profit producing investments; owners of devalued securities may be partly or largely compensated for the loss of their investment, particularly if they invested recently and/or if investments represent savings for their retirement. Bonds and other securities which essentially represent a loan to an enterprise, may be bought by local governments at a fair price and converted into conventional interest-free loans.
Complex and indirect investment instruments are phased out; their creation and sale is outlawed and the existing ones are devalued, as if a crisis would have occurred, and bought by governments. The function of commodities markets is replaced by insurance companies: rather than a farm family selling their next harvest cheaply to an investor to be protected from possible losses, farmers may insure their harvest income. Farmers of a large area who are not likely to have harvest failures in the same season may in effect insure each other by joining insurance cooperatives. Similarly, hospitality industries, ski lift operators and other groups with weather-dependent and otherwise much fluctuating income may similarly form cooperatives to insure each other.
Government sponsored services and construction work are usually executed by local enterprises with government officials collaborating on details of plans and contracts. Government officials may help mediate contracts between various involved entrepreneurs. Universities provide consultation services. Direct government investments through central bank grants may bring about progress. Targeted taxation discourages adverse developments.

   With other changes, many people may deserve compensation: it is proposed that federal governments rather than landowners have property rights for water, oil, natural gas, minerals, archeological artifacts, etc.; and taxation should shift from income to sales or consumption taxes (undesirable and luxurious goods being taxed highly) and to increased land property taxes that make land worthless as unused investment property.
When income taxes are abolished and replaced by sales taxes (consumption taxes) and higher property taxes, land loses its investment value. Farmers who own the land they farm must receive adequate compensation. Farmland should belong to the persons working it with possible co-ownership by people who are directly involved in the local processing and distribution of the farms’ products. As an alternative way of interpreting the proposed status and conditions: all land is considered publicly owned and farmers receive long-term leases with responsibility for ecologically responsible use. In areas in which farming is not economical, but government agencies determine that farm production serves communities and/or is ecologically valuable, the government will pay the farmers to compensate for losses when selling their products on the open market. During a transition period, people with significant savings deserve some compensation for double taxation. They paid income taxes when earning their savings and will pay high sales (consumption) taxes when spending that income. As property of water, natural gas or oil, minerals, etc. are transferred from private to government properties, compensation is paid to previous owners based on ethical principles, i.e., corporations that bought water rights or the right to drill for oil should not be compensated according to market value, if such deals were unethical.

Appendices:

4.2.A.1 Scientific basis for the study of economy
For the understanding of economic activities, it is essential to understand human emotions, which are manifestations of our instincts. Instincts and ways of expressing them are continuously reinforced, inhibited and modified by experiences in one’s cultural and physical environments. Aspects of the economic system are a major part of this cultural environment: economic valuations, associations with possessed or desired material goods, associations with money or availability of credit, etc. are powerful factors influencing ways of expressing our instincts.
The ‘rational mind’ can mobilize negative emotions when foreseeing dangers and problems, but the instinct-based emotional-behavioral system drives and directs behaviors. It leads people to seek stimuli and situations that elicit the expression of instincts or sequences of instinctive behaviors, for instance seeking food and eating when hungry or bored and anxious. Stimuli and activities that are associated with instinctive behaviors become part of the system that motivates and drives people. Activities that express an instinct, directly or virtually, thoughts of the activities and focusing on anything associated with the instinct strengthen it, sometimes to the degree of psychological addiction; examples are watching frequently aggressive sports or pornography. Emotional responses (instinct behaviors) are accompanied by feeling states such as hunger or craving, pleasurable satisfaction or positive excitement and satiety; examples of feeling states include aggressiveness and competitiveness, libido, loving affection and longing for affection, curiosity with urge to explore; also surprise, awe, perception of beauty, serenity and peacefulness; and people sometimes long for as negative perceived feeling states, such as fear and sadness.
If not thwarted by leaders, rigid traditions and/or abject poverty, instincts lead towards progress. The inherent urge to explore have motivated scientific learning and research, and the desire to rise in rank by being or doing things better may motivate attempts towards improvements. Emotional responses to other persons, to many animals and to most natural environments are instinctive sources of a perception of beauty which led to the development of the ‘beaux arts’ (fine arts): visual artworks representing the human body, animals and landscapes, and abstract, very indirectly with instinct fulfillment related forms of art such as classical concertos and symphonies. Social instincts are the foundation of human societies and relate to a sense of belonging and having a role or function, competing for rank or status, functioning as a leader or following a leader, care-giving and helping, and craving to express sexual instincts and to form families.
Animals and humans instinctively judge moods of others and intuitively appraise others as loyal and trustworthy relatives or group members, potential new friends, potential mates, and, in case of strangers also as possible enemies or guests, and people judge environments, including vegetation, rivers and man-made structures. Cultures and people as individuals assign values to anything that is directly or indirectly associated with instincts or emotions; often there is no awareness of the association.
By associating many stimuli and behaviors with natural instincts and by assigning values, cultures strongly influence motivations and activities of people. Since measuring the value of work, goods and services is an integral functions of money, economic factors play a very important role, even if people may not admit that price tags and salaries influence them. There is a two-sided relationship between economic systems shaping cultures and people’s behaviors versus cultures influencing economic behaviors and developments. However, economic incentives and interferences with the emotional-behavioral system are more immediate and powerful; changes in incentives can change behaviors without relearning.

   Cultures guide and shape how and in what situations instincts are expressed. Through education, folklore, literature and entertainment, children learn cultural expectations, mandates, beliefs, values, morals, prohibitions and taboos. Cultures also teach ways of expressing instincts indirectly, for instance in sports, arts and religion, or vicariously, by watching fights or adventures and in video games. Through cultural and other learning many activities, perceptions, objects and notions become associated with instincts; they become part of the emotional-behavioral system and trigger instinctive behaviors and feeling states like natural stimuli.
There are often natural conflicts between enjoying instinct fulfillment at the moment versus forgoing a pleasure in pursuit of long-term instinctive goals, for instance selfishly enjoying a banana or generously sharing it to strengthen a bond. Traditional cultures generally value long-term goals.
Humans have also an inherent propensity to form complex systems of morals. Languages already contain moral judgments and the ‘moral center’ of the brain is probably an extension of the language center.
Cultural moral valuations include overvaluing material goods and living standard versus seeking a simple life with inner peace and/or focusing on healthy and strong family ties; having or lacking a so-called ‘work ethic’; highly valuing or depreciating work traditionally done mostly by women such as childcare; appreciating saving versus accepting credit and living financially ‘on the edge.’ Cultural-moral valuations also address people’s attitudes regarding tolerance of minor dishonesty and corruption and a sense of responsibility towards the larger community and the environment. Cultures universally teach and try to promote discipline, the ability to resist temptations that are contrary to the values and beliefs of the culture and to personal long-term goals, but enticement by economic opportunities and incentives are often stronger than established cultural values. Economic systems and institutions are parts of cultures that can change human behaviors and values rapidly, in positive or destructive directions.
Spending much on material goods like clothes or cars, trying to emulate a certain living standard and failing to resist impulses to buy luxuries often creates financial problems. People consequently tend to make unethical decisions, for instance neglecting their own and their children’s health or putting children in inferior childcare; and they often work more hours than is healthy for individuals and families. While focusing on money and material goods, safety may not be a high priority, for instance employers may save on work place safety measures that are not legally required and workers may chose dangerous work when the pay is good; advanced car safety features are rarely installed in cheaper models even if many luxury features are ‘standard.’ Overspending usually leads to indebtedness; high stress levels and depression result in impaired mental functioning and physical health, and often a sense of helplessness.
Traditional cultural morals and values have developed over centuries. Cultures may also foster the developing of ethical values that are based on reflective thinking about experiences, observations and compassionate empathy. Their associations with specific cultural mores and with instincts are much more indirect. Economic values tend to be more influential and volatile; the addictive qualities of money and power often corrupt people’s moral and ethical values. Political goals to stimulate the economy by promoting “consumer confidence” exploit instinctive propensities and also rely on short-term thinking and people’s inherent, mostly false assumptions that increased comfort will have a lasting effect on one’s happiness.
Goals of society include providing for the needs of people, protecting animals and the environment, and improving the quality of life of populations. With these goals in mind, efforts to improve economies need to address cultural valuations and associations that direct human motivation versus economic processes that endorse diverse directions. For instance, parents who intend to buy what their families need may also buy products of little real value because media had created strong associations with instinctive goals such as high status or attractiveness. Economies and the quality of life of populations improve when the formal and informal educational systems, including mass media and entertainment, are united in strengthening values that improve people’s quality of life, reduce inappropriate associations of products and services with instincts and prevents people buying non-essential goods on credit.
People generally expect from their government and governments generally make efforts to improve and maintain quality of life of the population through schools, health care services, services for disabled, very poor and old people, infrastructure, prevention of crimes, help in natural disasters, etc. People failed to expect and governments largely avoid addressing harm caused by economic institutions. In capitalist societies much of the economy is driven mostly by the pursuit of profits, and the population is not protected from misleading advertisements that create inappropriate associations of products with instincts, from clever enticement to get indebted while buying luxuries, and from commercial entertainment that exploits and strengthens unethical instincts, particularly aggressiveness an revenge thoughts, reckless competitiveness, exploitative sex and instinctive fascination with cruelties.

4.2.A2 Economic aspects of cultural institutions; philosophical questions
Cultural institutions that address economic functions include folklore, literature and entertainment that pass on or change moral valuations; examples include people having or lacking pride in good work, caring for products versus seeing them as disposable, or appreciating savings versus seeking loans from family and banks. Cultural-moral valuations also address people’s attitudes regarding more or less strict honesty, any form of corruption, sense of responsibility towards lager community versus narrow-minded family loyalty, priority of commercial work versus family needs and domestic work, etc.
Directly or indirectly, people assign values to virtually everything including humans. There are valuations that lead people to spend resources on clothes, cars and reaching a certain living standard while unable to pay for medical treatment of their children and loved ones. Many marketed goods and services are broadly considered luxurious, but some people perceive them as necessities or fail to resist temptations to buy them.
In older cultures, ‘overspending’ was not possibly for most people – either people owned or did not have tradable goods, either healers treated a poor people or they refused. Today, ‘over-spending’ and ‘luxuries’ are very relative terms. Paying a shaman or modern medical doctor to treat a sick child may be a luxury, if payments lead to unmanageable debts. Spending money on alcohol when feeling desperate may feel like needed temporary relief. The vicious cycles of over-spending and debts often lead to poor functioning, impulsivity, poor health, depression and ‘learned helplessness’: poor people’s experiences lead them to believe that any attempt to improve their plight is futile. People working in subcultures of hopeless people have found that the poor may first need to unlearn their sense of helplessness so that they will recognize and take advantage of ways that may lead them out of vicious cycles. Because of the broad indebtedness, many poor and middle class people in the U.S. feel similarly trapped and hopeless.
‘Economic’ is an ambiguous term: virtually all activities may be considered economic. Time we spend has economic value because it can be utilized producing goods and services, doing work for family, or investing in self by learning or exercising. Time we enjoy has value because of the value of pleasure, whether it is essentially free when reading, singing or walking in the countryside, or whether we pay for a performance, flying to a ski resort, etc. Pleasures, in addition to being enjoyable, may also be valuable because they enhance physical and mental health. Most people in highly industrialized regions do not have many children, mostly for economic reasons, but raising and educating an optimal number of children is an investment in the future of a society. Improving education in poor countries also leads women to have fewer children.
Economic-philosophical questions regarding work need to be considered. For the individual worker, what is the psychological-social function of employment? What do working people wish to accomplish? What are the main goals of employment? To fulfill a role that is generally respected, a function that helps improve society or just earning an income? Is it filling time in a fairly enjoyable way and improving personal satisfaction, or is it trying to earn a high income for social status and a luxurious lifestyle? Is issuing loans, exacting profits from any type of economic interactions and increasing one’s power a ‘good’ job morally and ethically?
People must also thoroughly re-evaluate what functions a government must fulfill versus what individuals can and should do themselves within their communities and countries. Ideally, what should a good government offer?

   Usual results of over-spending include unethical financial decisions, stress with long work hours and impaired family relationships. In considering work places, the cost of improving safety is often judged to be too high. Car manufacturers generally assumed that customers care more about speed and luxury than cars being safe and ecological. People often handle economic tradeoffs poorly, for instance choosing a cheap, inferior and/or much more dangerous way of addressing medical-surgical condition, or working more and putting children into inferior day care, when instead the family could forego luxuries. Many people suffer and die prematurely because of unhealthy nutrition and lifestyles and because not enough resources were allocated for health care.
Particularly religious people often stress the need for ‘faith’ and/or ‘hope.’ ‘Hope’, as ‘justice’ may be meaningful in a negative way: unfairly applying laws to some but not other groups is ‘unjust’ and seeing no possibility of improving a bad situation is ‘hopelessness.’ However as justice is an elusive term, hope and faith are harmful when realism is replaced with optimism that ignores unpredictability and factors of randomness: people must find meaning in pursuits that may make their children’s lives better, knowing that the efforts may fail. People may feel good accepting discomfort and even pain if one’s actions have a slight change of helping other people or future generations. Imagery of positive results as part of ‘hope,’ possibly associated with prayers, have been shown to rather decrease people’s efforts and often lead to devastating disappointments.
Generally, religiosity seems to fulfill some inherent human longing, but an expectation that anybody knows God’s (or a god’s) will or can personally communicate with or influence a personal god is not healthy. And we must separate ethics and religion. Moral teachings that are based on religions overlap to various degrees with ethics, but contrary to religious morality, ethics is based on science, including research on mental processes, observations, experiences and empathy. If persons hold on to specific religious beliefs, they must be personal. Specific beliefs or faiths, attempts to interpret old religious texts, should no longer be taught to children as, in one’s culture, superseding ethics, human rights and sciences; if incorporated in early learning, they are usually very divisive, often reinforcing prejudices and destructive us-against-them thinking and frequently leading to violent encounters and even wars. Religious beliefs must never dictate economic, legal and/or political decision-making. Finding meaning may follow religious-spiritual feelings but must not follow religious dictates, be governed by religious leaders and/or be based on a religious sense of hope. ‘Faith’ gives a feeling of belonging to a religious congregation or group but members rarely have a comprehensive vision of what practical moral guidelines their beliefs entail, what afterlife they may expect, how their selfish and otherwise ethically questionable behaviors influence an afterlife, etc. Christian groups greatly differ even in what is morally right, on how our political leaders and we as individuals should address crimes and suffering related to many causes, within our communities and worldwide, and how we are to protect the environment, as a matter of respect for the ‘creation’ and/or for the sake of future generations. If a specific faith is taught, people are hardly able to comprehend and believe it – many examples show behaviors that clearly indicate that there is no true faith. For example, people fall in love with a person of another religion and one or both change their ‘faith.’ And who ever believed that souls who reach heaven are happily ignoring the torture of their relatives’ souls in hell.
Alost universally, self=proclaimed religious people still make economic success a much higher priority than living morally and piusly. Throughout history, wealthy and powerful people usually compensate for their selfish behavior by giving some of their earnings to religious institutions.
For good quality of life, commercial work and work within families, should be relatively enjoyable and meaningful within a personal culture of ethics. Commercial work should provide an adequate income for self, family and some charitable giving. Civilizations should also provide opportunities for low paid meaningful work (that improves the quality of life in communities) for people that are not able to participate in otherwise productive wok due to disabilities or where technological progress would lead to unemployment. People should always have time for a balanced life with physically healthy, social and artistic activities and good access to natural environments.

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1 The Peruvian economist Hernando DeSoto, author of The Other Path, 1989, and The Mystery of Capital, 2000, describes how poor people in Third World countries and the former Soviet Union accumulate value or savings by building houses illegally without title to land. He worked towards getting such investments recognized, that institutional changes help people to expediently receive title over such land with improvements, with the goal that their investments can be traded and qualify as collaterals for bank loans.
2  Compare Grameen Bank, founded by Muhammad Yunus.  www.grameen.com
3 If the money supply increases more than productivity, and/or if consumers want to use up savings and buy more products and services than the economy produces, some inflation is expected.
4  Sometimes there is the appearance of inflation, e.g. when the rent for apartments of same seize or prices of train tickets increases. In reality, the apartment’s value increased due to better infrastructure, air quality, possibly better insulation, plumbing, and floor materials, etc. The value of train rides rise when quality of cars are improved, allowing comfortable reading and communicating, and when there are more frequent rides and more convenient connections with shorter travel times. Often improved productivity with higher quality goods and services is not correlated with price increases and there is hidden deflation.
If productivity decreases and/or many people want to use their savings for more products and services than are produced, some inflation is expected. During a transition period, inflation has the beneficial effect of decreasing the financial assets of wealthy people and decreasing indebtedness of the poor.
5  These conditions are important to avoid an increase in the functional money supply through lending. As a loan is issued, the money is transferred to other accounts but stays within the banking system. It can, consequently, be lent many times over, creating functional money and increasing the money supply, unless there are legal limitations to lending activities.
6 Malcolm Gladwell (in The Tipping Point, 2000, 2002, p. 169ff, 184) gives examples of how humans function well as groups when in small units, less than 150 individuals. The Gore Associates corporation apparently has been very successful in creating small plants that cooperate effectively with sister plants. In small plants employees work well together without authoritative hierarchy, and they enjoy higher satisfaction.
7 As Thomas Piketty in Capital in the 21st Century, 20154,p 145f [Le capital au XXI siècle, 2013], describes, German stocks are valued relatively lower than Anglo-Saxon because local governments, worker representatives, NGOs, etc. own enough stock to significantly influence the direction of a company. This represents a step in the direction that is proposed.
8 Leonard Sax: Why Gender Matters, 2005, Boys Adrift, 2007, Girls on the Edge, 2010; and many publications.  www.leonardsax.com

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