2004 Proutist Universal 1 Proutist Economic Development Trade Dr. Michael Towsey revised by Dieter Dambiec.

2004 Proutist Universal 1

Proutist Economic Development

Trade

Dr. Michael Towsey

revised by

Dieter Dambiec

Dr. Michael Towsey Proutist Universal 2

The logic of neo-liberalism

• Concentrate on producing a few special goods most cheaply for export.

• Use the foreign exchange to import whatever you need.

• BUT ...

• Locks poor countries into poverty, environmental destruction and dependence because of the tendency for downward pressure on prices of raw materials and agricultural produce in poor countries that are not able to take the benefits of advances in technology and extract the raw materials themselves.

– Better to extract raw materials for local production of goods.


No country has ever developed using free markets and free trade

• Joseph Stiglitz, 2001 Nobel Prize, Economics, author of "Globlisation and its Discontents".

• "I have always been struck by the divergence between the policies that America pushes on developing countries and those practised in the US itself."

• "Those in Mexico, Brazil, India and other emerging markets should be told a different message: do not strive for a mythical free-market economy which has never existed. Do not follow the encomiums of US special interests ..."

– "The Guardian" London, 29/10/2003


The New Zealand experience

• Prof. Tim Hazeldine, Auckland University, New Zealand.

• Book – "Taking New Zealand Seriously".

– We import so much because we export so much.

– Tourism – "all the foreign exchange earned from tourism is required to pay for the imports to replace local goods that are no longer produced because the people who could produce them have been sucked into tourism."

– Strategy of export-led GDP growth has failed.


Prout promotes economic self-sufficiency for socio-economic units

1. Prout promotes self-sufficiency in the essentials of life.

2. Trade in raw materials is a sign of a weak economy.

3. Minimise imports of essentials – food, medicines, clothes, housing requirements, educational needs.

4. Avoid dependence on tourism – fickle and destructive.

5. Avoid export of raw materials - value add before export.

6. Export surplus and specialty goods mainly.

7. Barter trade wherever possible on an international level.

8. Establish trade blocs between equally developed countries.


Barter trade

• Two types of trade - bilateral barter (not so efficient) and multilateral barter (can be very efficient).

• Barter – not so efficient in domestic economies, but efficient in international / global economy.

• Prout favours barter on the international level wherever possible.

• TNC barter trade already amounts to $1 trillion per year (Hazel Henderson).

• Not subject to currency exchange fluctuations.

• Disadvantages of barter no longer apply – due to modern communications.


Fundamentals of barter trade

• Ordinary two-way barter is less flexible than money.

– "But I don't want 10 dental checkups! I want my roof repaired.“

• Simultaneous barter means that all parties agree to the deal at the same moment, even if the goods may be delivered later.

– The decision to trade the various items is made at a single time.

– Ordinary two-way trading is usually simultaneous and goods/services may be delivered at the same time or a different time.

• Example of a simultaneous two-way trade (different time):

– A says "I'll walk with your kids to school today if you'll walk with mine tomorrow." B says, "OK."

– At that moment, the deal is struck and the decision to do both actions is determined, though the actual carrying out of the actions is at a different time.


Multilateral barter trade• Multilateral barter is more flexible and useful at the international level.

• Multilateral barter is barter among 3 or more people.

– For example: A, B and C can make a deal where A provides coal for B, B provides trains for C, and C gives A numerous used motorcycles.

• Non-simultaneous multilateral barter:

– A gives something to B, A doesn't know what A will get in return, or when. A might get something from C six months later.

• Simultaneous multilateral barter:

– Allows the parties to check things out first, ask questions and find out what products they will be getting – before they agree to a deal.

– Similarities of what people do when buying something with money, but in barter no cash changes hands.

– If B wants something from A, B doesn't have to wait until A wants something from B, which might never happen. A can get what is required from C.

– The chances of a 3 to 5 person loop (or more) joining A and B are much higher than the chance that A will want something directly from B.

• Barter is not subject to inflation or economic recessions, and is especially useful when unemployment is high, or in economically depressed regions.


Multilateral trade using currencies

• Old system: fixed exchange rates and gold standard.

• Broke down, eg because UK financed WW1, USA financed Vietnam war and through inflation tax.

– Importing from them became more expensive.

– An inflation tax is the economic disadvantage suffered by holders of cash and cash equivalents in one denomination of currency due to the effects of inflation, which acts as a hidden tax that subtracts value from assets.


Multilateral trade using currencies

• Current system: floating exchange rates with USA dollar as fiat currency.

– Benefits the USA.

• USA can import commodities and export debt.

– Other countries must hold US dollars as reserve or government bonds.

• Floating exchange rates: benefit countries insulated from one another‘s inflation.

– If country has inflation, its currency depreciates.

• Floating exchange rates: defective in that it opens up possibility for speculation in currency values.


Speculation in currency


Multilateral trade -an alternative system

• Mutual credit trading.

• Zero sum accounting system with maximum credit and debit.

• Unit of account:

– the Terra (a proposal of Bernard Lietaer).

• The Keynes Plan was similar to a mutual credit system:

– money unit was bancor tied to gold.

• A commodity backed currency:

– tied to a representative basket of traded commodities.

• Demurrage fee to discourage surpluses.

• Could be used by South American trade bloc – MERCASUR.

2004 Proutist Universal 1 Proutist Economic Development Trade Dr. Michael Towsey revised by Dieter Dambiec.

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