The model is wrong, not completely, just fundamentally.

Living is not economic. Life is social. First you have a society. Then, inside that society, you make an economy. Society enables economy.

You cannot fix a society by fixing its economy. We all know that. You do not have to be told that there is something deeply, fundamentally, wrong with the way we say the world works. We are all share the same deep knowledge that there a basic misunderstanding in the way we live today.

The good news is that it is not that hard to change what we have built. The change is simple, the effects are automatic.

Build your society and the economy will come. Build your society right, and your economy will exceed your wildest imagination.

The change is not economic. There are no economic levers that can change the direction of a society, until the society has changed itself. Interest rates, carbon taxes, money supply, taxes, wages, and trade deals are futile on their own. You can hammer on those nails until the heads disappear, and you will not change the direction of society. If the wood is rotten, the nails are useless.

You have been told that economic growth enables richer, happier societies. But that is not true. In fact, it is an oxymoron. An economy exists inside a society. It is richer and happier societies that enable better economies. First safety, law, schools, and roads; then commerce and innovation. First the plant, then the flowers. First the parent, then the children. First the society, then the economy.

It is the cost of living that matters, not how much we are paid. Income is relative to expense. The more we pay ourselves, the more we cost. The cost of living a basic life should be zero, nada, absolutment rien. Then you can build an economy for the ages. An economy where money is reward for contribution. An economy of joy, not fear. In a society of happiness, not a rat race.

Driving down the cost of living a basic life is the single, most important, thing we can do. It is the foundation for all other actions. It is the act of maturity that is demanded of us in this moment. We have reached for the stars, and inherited the terrible responsibility that comes with being co-creators of the environment within which we live.

A developed society is a good thing. It has a developed economy that leverages the plethora of specialisations in the whole of its population. A developed society and its economy is dependent on maximising the contributions of its people (aka ‘productivity’). Those contributions are dependent on establishing basic safeties that allow the people to turn their attention to making their contributions (aka ‘supply side economics’).

A developed society has a higher dependency ratio and higher safety requirements that an undeveloped society. In a developed society services are the larger part of the society and its economy. The higher dependency ratio and higher safety requirements require more services, delivered by people. Eventually, and we are there now, the dependency and safety needs exceed the ability to meet them from taxing the economy.

The limit of total taxation is the point at which motivation is suppressed enough to reduce contribution. We can reasonably estimate that level at just under 50%, based on observations of existing societies and their economies1. It also makes common sense.

If everything is commodified (expressed in money) then the maximum dependency and safety costs that can be met from taxing a commercial economy is 50%. Above that, it is simply impossible to raise enough tax to pay for the dependency and safety costs without eroding economic productivity.

Safety Ratios

Maximising productivity in a developed society means increasing safeties. More education, more health care, more stability, more freedom. That has been the history of development through the industrial and technical revolutions. This means that simple numeric population dependency ratios do not capture the increasing safety costs needed to sustain the development.

Better to look at the scaling up of total social costs. In the UK from 1950 to 2020 the percentage of the UK population between 25 and 70 stayed constant at 57%. But the total social costs as percentage of the economy rose by 50%, from 18%2 to 29%3 GDP. Most of that increase was the result of additional spending on pensions and healthcare.

Productivity weighted labor force dependency ratio (PWLFDR) suggests that even an aging or decreasing population can maintain a stable support for the dependent (primarily aging) population by increasing its productivity4.

Could the UK economy have developed without that increase spending on social needs? No. People might argue about a percent here or there but there no fundamental disagreement that our sophisticated economy is dependent on an equally sophisticated social infrastructure, from education to old age security.

But here’s the real kicker: were the costs of our social provision complete, or were they subsidised? There is little doubt now that our costs were dramatically subsidised by failing to account for the waste from energy and material production. Can we expect those subsidies to persist into the future? No, we can’t. Not only will the subsidies disappear but we will also have to cover the returning costs from the effects of historical waste. From water treatment to carbon reductions, we have a huge backlog of costs.

And, finally, have we delivered the kind of social safety that maximises productivity? No, we haven’t. Large portions of the populations of developed societies live with insufficient safety to enable their maximum contribution. Productivity, which was likely flattered during the period of cost suppression, has largely flatlined. Maintaining the levels of social safety demanded by our sophisticated economy has become reliant on suppressing costs by driving down compensation for basic safety tasks. Yet safety is insufficient for many, and tenuous for many more. The combination puts a lid on potential productivity.

We are now at the point where we cannot deliver the level of social safety that supports our economy. Large increases in taxation would be self-defeating, as they would reduce productivity. Taxation is already heavily skewed to a minority of the population. Increasing wages simply increases costs for social safety. We have reached the end of the road for a commodified, power dynamic, singular economy. We are in an existential gear jam entirely of our own making.

Dual Economies

There is a simple way out of this conundrum. The separation of basic social needs from the commercial economy. The recognition of social need as different, separate, and foundational for the commercial economy. For the same levels of tax as are currently in place we can deliver the basic services that underpin a modern society, and its economy, free at the point of use. In doing so we create a new, parallel, hygiene economy in which basic needs are satisfied in return for reciprocal effort.

In this society universal basic services are available to all to satisfy universal basic needs, without charge. Once established, there is no need for minimum wages because all basic needs are satiable for free. Wages become purely motivational. The monetary costs of social safety crash through the floor because so much of today’s costs are labour compensation for basic needs.

The key to this breakthrough is to drive the costs of the basic services as low as possible but still satisfy basic needs. Instead of compensating people so that they can afford overpriced goods and services in a commercial market, deliver the equivalent basic safeties as services. Public transport, not discounts on cars. Social housing, not private rent rebates. Community kitchens, not individualised food. No conditionality. Everyone welcome. Universal availability and accessibility.

Of course taxes and can, and should be, reformed to align with this more reciprocal arrangement. All incomes should be taxed equally and at universally similar rates. That is quite easy5.

Same tax revenues, different spending priorities. Actual safety, not compensation for lack of safety.

The result, quite unconsciously, is to create a separate, parallel, hygiene economy. In this economy, contribution is exchanged for safety. The portion of today’s compensation that satisfies basic safety is removed from the commercial, monetary transaction. Monetary compensation is for marginal contribution. The free basic services could replace about £10,000 of wages (half the minimum wage). Where does that money go? It is replaced by reciprocal effort. The marginal inefficiency of individually-compensated satisfaction of basic needs disappears out of the economy, leaving only the material and motivational costs. The cost of old age social care drops by around 50%, of nursing by around 30%, and advanced medical care by about 10%. The cost of repairing a bicycle, preparing a meal, or delivering the mail halves, or more.

It’s a different world. A world in which everyone works doing whatever they want for whatever compensation they want. It’s a world of cooperation more than competition. It’s a sustainable world in which the costs of materials and energy assume their appropriate levels relative to human effort. It’s an incredibly productive society with the richest tapestry of contributions, small and large.

It is still a society in which some people make more money than other people, where some people’s contributions are valued more highly than others. There is still a commercial economy. There is still money. There is still competition between ideas and products in marketplaces. This all continues in the commercial economy. It’s just that there is no commercial provision of basic services. There is no money to be made from basic shelter, food, education, transport, communications, or healthcare. There is still money to be made from fancy houses, restaurants, extra classes, personal transport, entertaining communications, and pampered healthcare.

Unless a society separates its hygiene and commercial economies it is doomed to fail to establish sufficient safety to maximise the real productivity of its people. Everyone recognises that increased productivity is what is needed. Everyone knows that more comprehensive ‘supply side’ support is needed to reach that goal. And everyone knows that we cannot afford to ‘pay for it’. We all also know that we can afford to do it, we just don’t know how to “pay” for it.

Turns out that giving it away for free is the way to afford the life we want.

  4. Marois G, Gietel-Basten S, Lutz W (October 2021). “China’s low fertility may not hinder future prosperity”. Proceedings of the National Academy of Sciences of the United States of America. 118 (40): e2108900118. doi:10.1073/pnas.2108900118. PMC 8501780. PMID 34580226.

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