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Steps in the right direction |
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Seven Steps to JusticeRodney Shakespeare & Peter Challen
New European Publications, £10.95
 The authors propose that interest-free loans be created for capital investment in the public sector. The idea is amazingly simple, and works like this. The government asks Bank of England to lend it however many billions it needs to fund its projects. The loan is then paid back out of tax receipts over a period of years. It might be argued that the Bank of England has no deposits to back such a loan, and would be creating credit out of thin air. But this is exactly what the high street banks do all the time. When they lend money they don't take it out of their depositor's savings, or tell them that they can't withdraw from their accounts. They create credits from nowhere, which in turn become further bank deposits. This means that the amount of bank created debt far exceeds the deposits held in the banks. And these loans carry interest, meaning that the whole system is inflationary. It is a confidence trick, and it works so long as too many people don't try to withdraw their money at the same time. If they did, the whole banking system would collapse.
Under the system proposed by Shakespeare and Challen, the Bank of England would not charge interest, so its loans would be non-inflationary. The authors then go on to talk about something they call binary economics and, after saying that conventional minds will not understand it, show themselves totally ignorant of the subject that they are writing about. They state that “ ’Binary' means ’composed of two' and there are two factors in production - capital and labour. Have they never heard of land? To miss the third factor of production is to make nonsense of their whole thesis.
They also suggest a form of employee share ownership. The state bank would lend money free of interest to a trust which would be issued shares of a corporation when the corporation needed to finance expansion. The shares would be held for employees, and the dividends from the corporation would repay the loan whereupon the shares would be handed to the employees. There is nothing wrong with employee share ownership, but experience shows that people tned to move jobs, sell their shares, or, if they work for a firm like Marconi, see their shares become worthless. But these are just three of the book's seven steps to justice - I recommend it as an interesting if controversial read.
Geoffrey Lee
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