Brian Davey of FEASTA argues that we could do debt cancellation ethically, while leaving the larger financial system intact, and that OccupyEverything should focus its message on the idea of Jubilee.
Instead we need a scheme with a pattern of rewards and incentives that is more appropriate to the times that we live in. This could be achieved by giving people the wherewithall to reduce their debts if they have debts, but also giving the same amount to people who have no debts, or have low debts, which they could use too - not on a consumption binge, but on green investment to bring down our ecological debts (the carbon intensity of our lifestyles).
So how would this be organised?
Here's how it might work (in the UK - you could adapt it to your country if you don't live in the UK).
Every adult individual gets a voucher for, say, Â£25,000 (in the UK) - or some other sum......
On the voucher it explains that the voucher can be used by the person to whom it is addressed in one, or both, of two ways:
to repay debts or money owed to any lender organisation or company in the UK registered with the Financial Services Authority - all such lenders will be obliged to take early re-payment on receipt of a voucher up to the whole value of the voucher, or whatever percentage of it that the voucher holder wishes to use for debt repayment purposes. FSA registered lenders receiving re-payments with the vouchers can then claim cash from the central bank which will be paid into accounts set up for them at the Bank of England.
the vouchers could be used to make payments for invoiced services or products for energy efficiency or renewable energy work from companies or organisations already existing as at October 2011 which are also part of recognised industry trade associations like the Energy Systems Trade Association, the Federation of Environmental Trade Associations, the Energy Institute, the Renewable Energy Association etc. Some people do not own their homes so alternatives would be needed too - for example allowing people to invest in bonds that support renewable energy development. The green economy sector could be invited to submit proposals for what would qualify.
The requirement for these to be pre-existing organisations registered with trade associations is to prevent cowboys getting in on a bonanza. Over time proposals might be worked out for accreditation to allow new firms to set up with suitable skills. Companies wishing to apply for this work, or source of capital, will be obliged to register their interest with their trade association and will submit proof of payment of a voucher or part of a voucher to their trade association which will maintain an account with the Bank of England.
Vouchers must be presented for repayment of debts within so many months of receipt of the voucher.
Vouchers (or parts of vouchers) used for energy efficiency, renewable energy work or investment in clean energy can be redeemed over a longer time period - as it would take time for suppliers to gear up and increase their capacity to deliver.
Read the whole thing. One of the things I like about this plan is that it obviates the traditional objection to redistributing any of unfairly claimed wealth, because everyone gets the same distribution. In the US, pitting struggling people against each other is a traditional method of ensuring that wealth continues to get concentrated - pit, for example, the poor person who can't get health insurance against the one who has inadequate health insurance through the state, and you can be certain person A will vote against person B continuing to have even that small amount of security. Set struggling and exhausted working parents against desperately poor women receiving welfare, and you can be sure there will be no chance that any low income woman will get to stay home with young children.
At the same time, I think there are two objections to be made here - how do you ensure that the money goes to pay off debt, first? Consider person A, who has 25K (or whatever) worth of credit card and automotive debt and person B who doesn't. Person A gets money to pay off her debt. Person B gets to redo his house, and cut his energy bills, and maybe get some cool solar panels. Person A, however, is paying for things she already has purchased, without any of that cachet. I'd like to see that Person A would see the virtue of this, but I'm not at all convinced that she would - or that she would see it is fundamentally equitable.
Without a method of enforcement, my guess is that many people would prefer to purchase something new with their subsidy, and continue to either pay or default on their debt. The methods of enforcement seem potentially troubling, and if sufficient people don't pay off of bank debt, the "leaving the financial system intact" part of this doesn't work. That isn't to say I couldn't be wrong, or that it might not work better than anticipated, but to me, that seems the main difficulty. 50+ years of encouraging people to buy new things rather than pay off debt seems fundamentally difficult to overcome. Still, it is one of the better plans I've seen.
As Davey points out, we're all kind of stuck on our dependence on the banks that have manipulated the economy. While I like Davey's solution in some measure, I think leaving the current financial institutions intact is probably doomed to failure, and I'm not at all clear that Davey's plan actually does.
My own suggestion is somewhat different. The US manifestly needs a new financial system, and one that as Richard Douthwaite has pointed out, is not debt-dependent. None of us want to see a purely centralized economy, of course, but neither do we want to maintain the status quo. My suggestion is that we put American ingenuity to work to create an American-Idol like show that creates new financial institutions for the US. A set of judges could cover the range of commentary and reveal subtleties an audience might not initially grasp. I propose a panel made up of Elizabeth Warren as the basically appealing but still critical judge (think Paula Abdul) "I want to like your suggested scrip, I really do, and you clearly have a lot of heart, but I just don't see an economy modelled on the exchange of cattle as working in Cleveland," Ralph Nader as the odd, idiosyncratic minor player who calls everything "pitchy" and Ilargi of The Automatic Earth as Simon Cowl "That is without a doubt the most idiotic suggestion I've heard outside of a Fed meeting." (Watching CEOs cry when Ilargi criticized them would, of course, be a huge ratings hit). I think continuing in the American Idol vein, we should definitely have a musician appear as a guest judge, because having a portion of our economic future determined by Iggy Pop. Lady Gaga and Tom Waits just seems like a great idea and wholly in keeping with our culture.
This would allow any reasonably creative group of people to propose fiscal models and offer them up to the general public for consideration. Current financial institutions could also participate, of course, although their prior records would be part of their larger performance. (Actually, for extant large financial institutions, a survivor-style pre-game strikes me as ideal, as the obese institutions are whittled down to show size by a series of arbitrarily cruel and humiliating exercises). Those voted off would have their assets redistributed to the winners, which would restart from the beginning. Legal cases against losers could take over the time slot during the summer hiatus.
All debts are cancelled, the new regime (which can't possibly be any stupider and more evil than anything else) takes over, and a good time is had by all...almost all. Hey, it is the Jubilee!
You know Sharon, a show like that could get me to watch TV. If, of course, the ideas were actually implemented.
The biggest problem here is that you are forgetting about Person C--a member of the poorer renting class who has either lived within their very limited means or who was unable to get credit to acquire debt in the first place.
These people don't get the benefit of paying off existing debt, and they don't get the benefit of upgrading their home to be more energy efficient (saving them lots of money over the long term) and more comfortable.
Until the needs of the many Person C's in this country are taken into account, this proposal just stinks of a less-severe form of classism.
I should've added that even if this plan would allow the renting class to invest in energy-efficiency in their current rentals, it still doesn't fix the underlying class disparity, because renters are subject to the vagary of landlords, who can toss them out for many reasons other than non-payment of rent.
They can decide they want to sell the place, they can decide that they or a family member should get to move it, they can decide to double the rent, they can decide to tear down the building to put up something else (a fancier house, condos, etc). Sure, there needs to be notice given, but the reality is that once the renter is booted out, all those energy-efficient upgrades are meaningless to the poor renter.
Why not simply allow the handouts to be used by poorer members of the renting class as a downpayment on a permanent abode?
I don't agree - you can set it up to enable portable goods transport that Person C can take with them from apartment to apartment. Moreover, Person C almost certainly has debt - in fact, the poor renting class generally has plenty of debt. There are weaknesses to this plan, but I'm not sure that's one of them - and it seems fairly simple to me to shift the benefits to portable infrastructure improvements - Person C could use a good bike, portable solar chargers, a super-efficient fridge, etc...
For most of my adult life, I was a renter with no debt. A bike would do me little good as I did not live close enough to a job. The apartments all had refrigerators provided. The things that would have helped me reduce energy consumption were better windows, better insulation, high efficiency heat pumps. Your proposal offers the specter of higher taxes with no benefits for the working poor such as I was.
Where does the money to back these vouchers come from? I'm not getting that key part. I'm fairly clever at managing my own finances, but the workings of the screwy system mystify me, so I think I missed something in the original article.
I can see how people like this idea.
However, I rent, have no debt, and don't want to be forced to invest in renewable energy bonds. What are my options? Charge up 25K on the credit card, pay the "debt" with a voucher, and return the unused stuff to the store?
The 14th Amendment forbids us from denying the debt. And well it should -- this is perhaps the only topic on which our government has admitted that denial is invalid. (If the 14th Amendment could be held to apply to evolution and global warming, this would be a much better country.)
I also feel that most of our debt can be cancelled. But it won't go away until someone can prove mathematically that most of it isn't owed to anyone. Of course, this means the protesters have to give up their fear of learning economics.
Person C (and Person B) could invest the money in green companies (wind farms, tidal power etc). A benefit to them, the economy and environment.
a rent obligation could be considered a debt especially if there's a lease
So where does the money for the debt relief voucher come from? Taxes.
The vouchers are simply redistributing wealth in way that gives some people warm and fuzzy feelings. We do a lot of wealth distribution, some positive and some not, but the underlying issues of who pays taxes at what rates remains unchanged. I can guarentee that under the current tax system, as one of the milked class I'd pay more in taxes than the voucher is worth, the poorer classes wouldn't be able to use the vouchers effectively and would still be in debt, and the upper classes would end up with a freebie they don't need because they are busy leveraging their debt instead of scraping by to service it.
In short, its a gimmick, not a fix. A real fix involves fixing the tax code and expenditures, and there are no quick fixes there.
"The 14th Amendment forbids us from denying the debt."
Unless I misunderstand the 14th Amendment refers to public (as in government) debt, not the debts of individual citizens.
However, the new bankruptcy laws from 2005 make it very hard for citizens to bankrupt and very easy for corporations to bankrupt. In fact that ease of bankruptcy has been used as a business model for several years now.