Old and young, Conservative and Labour, Leave and Remain - among all groups, the prevailing sense is that the economy does not work in a fair way and that it is becoming increasingly unfair over time.

There is remarkable support for fundamental reform, suggesting the British people are ready for a new kind of economy and a new kind of economic policy.

With politics a shambles, it's time to focus on economics, on development and growth, our prospects, our prosperity.

We need to create prosperity, not just in key areas, but right across the country. This requires education and training, and vitally, secure investment.

Job-creation requires capital:

in sufficient quantity and with the guaranteed longterm financial reliability to ensure a business is properly set up and able to maintain the highest international standards in design, production and marketing.

The UK’s Office for Budget Responsibility cites low business investment as one of the main reasons for persistently low levels of productivity.

Traditional banking practice requires pre-existing assets as security, and loans carry no long-term commitment.

Development Banking avoids these two limitations by securing the investment on the industrial or commercial project itself, thoroughly researched and costed, and by making a long-term commitment based on an intimate involvement with the business or project in which it is invested. This facilitates the creation of new business and new jobs, as well as providing secure finance with which existing business can maximize quality and productivity.

A dedicated Development Banking sector based on Project-Security can spread growth across the nation, creating jobs and providing the wherewithal for existing companies to increase their competitiveness, as well as for infrastructural improvements. Investment targeted regionally can bring industry and growth to traditionally under-developed areas.

The two broad principles of Development Banking focus on analysis, and commitment.

The Development Bank begins by thoroughly researching each investment proposal from design to production, management and sales, calling on outside expert advice and assistance where necessary. A successful investment recipient will receive full back-up support in a close working and constructive partnership with the Development Bank, both on start-up, then continuously monitored with an ongoing flow of performance data. The Development Bank would levy a fixed charge covering its administrative costs, plus a small insurance premium.

This is not a new idea. Development Banking is alive and well in Germany, France, Singapore, Basque Spain and Canada's Quebec Province, to mention but a few.

With investment risk minimized through proper, pre-investment research and positive on-going monitoring of physical production, sales, and accounting, the business itself becomes the security for its investment.

By setting up Development Banks to operate at regional level, focusing on regional and local needs, investment benefits can be spread widely and uniformly across the nation, avoiding the usual pockets of non- or under-development. Local infrastructure can also be financed.

A percentage of the investment charge should also be set aside to fund apprenticeships and on-location training. High youth unemployment is largely caused by the mismatch between the skills that young people offer and those prospective employers need. Indeed, countries with the lowest youth jobless rates have a close relationship between education and work.

Many of today’s successful businesses grew over many years and a long hard climb, starting with minimal capital, operating on a shoestring, and reinvesting every penny of profit. Regional Development Banking can provide sufficient capital for a good business venture to start at full operation, properly equipped for maximum productivity.

Indeed, by conditionally requiring the highest standards of product and service quality, Development Banking can increase competitiveness, and the high level of productivity which creates real and lasting prosperity.

Most significantly, Regional Development Banks can create jobs and industries NOW, with the guaranteed longterm finance needed to maximize productivity and most importantly, maximize quality. Dedicated, Project-secured Development Banking can create wealth and prosperity, maximizing productive capacity across the nation.

During the Great Depression years following 1929, Britain’s Lord Melchett, prominent industrialist and politician, stressed that banking should be at the service of industry, rather than industry at the mercy of the banking system.

His words are equally true today: “While banks take a short-term view for reasons of security and liquidity, business is conducted on a long view. We must alter our banking and economic system to suit the necessities of industry”.

More specifically, we must provide investment based on ideas and their potential, rather than pre-existing assets, then add such backup and support as may be required to maximize each project’s potential.

The Rich are getting richer, the Poor are getting poorer.

Gross and growing inequality of income has become a major issue, and a major source of social discontent. And statistics support popular instincts: the richest 1% of the world’s population now owns 50% of its total wealth, according to a report by Credit Suisse.

Is inequality a problem? No, not if it is a fair and accurate reward for hard work, training and education, acceptance of responsibility, and simple success at what you do. But the REAL, the news-making, the statistics-breaking inequality resulting, not from real, productive work but from financial manipulation, that is arguably one of the greatest injustices of our time. Simply stated, there is no just and fair relationship between work and reward.

A Fair Day’s Pay

What IS a Fair Day’s Pay? A difficult and contentious issue, one might think, fraught with disputes, frustration and strikes. Actually, no. In fact a solution already exists, and needs only to be applied on a standardized national scale in order to bring stability, and social justice, that essential pre-condition of stability, to the economy.

Formal job evaluation began in the United States with the Civil Service Commission in 1871. As organizations became larger and more bureaucratized the need for a rational system of pay differentials became evident.

It is now commonplace for government agencies, and corporations large and small, to use a system of Job Evaluation to evaluate the work contributed by each staff member. Each job is analyzed, and its essential characteristics and demands such as training, responsibility, working conditions and physical/mental effort involved, are measured on a series of common scales. The job value is then directly related to remuneration. In this way, remuneration is fair, both in relation to the work done, and to the remunerations and work of others.

Currently there are several such systems in use, well tried and working successfully. A single standard could easily be established, a national standard of value for measuring the work element contained in any job, so that remuneration becomes a true reflection of the work involved.

If it is to be fully inclusive, the evaluation process must be applied throughout the income range, from shopfloor to boardroom. A contentious issue no doubt, when it reaches ‘the top’. But Management which actually manages, keeps a longterm view of the business in perspective, reviews alternative options and products – in short, actually manages, should indeed be rewarded according to the standard scale. But Top Managements and Honorary Board Members who are only there for the lunch... Reward must be related strictly to actual, measurable contribution.

Revolutionary in present terms, no doubt. But society already measures apples and milk; it could hardly get along otherwise. Yet of all the commodities traded every day, work is the most important, and work is the one commodity we don’t measure. And it is the most significant, pervading and affecting the entire economic structure.

A Fair Day’s Pay – and a Fair Price too?

Work evaluation can ensure fair remuneration. This process must be carried through to prices.

A factory’s, or a business’s total costs consist of three elements. First, the cost of bought-in raw materials and components; second, the direct labour added in the factory; and third, the costs of capital write-off, overheads and finance. These are the costs of making a product, of supplying a service. From these costs a Unit Production Cost can be calculated for each product or service supplied. If this Unit Production Cost then becomes the Selling Price, there would be a direct relationship between cost and price, and therefore between pay and purchasing power.

But the Unit Production Cost is not normally equated with the Selling Price. The difference between the two is commonly referred to as the net profit. How is the net profit currently disposed of?

The prior destination for profits has traditionally been the investors, or shareholders, who provide the necessary investment. The other major destination for the disposal of company profit is re-investment, either in research and equipment or increased working capital. The advantage is that in-house or self-generated investment comes without future servicing cost or commitment to repay.

Business, particularly physical production, is continuously re-inventing itself, as research and on-site improvements, spurred by competition, develop new ways of making products better and cheaper. As productivity increases and products become cheaper to make, there should be some gain to society in the form of lower prices. But it is not only the customer who benefits from lower prices, as lower prices are reflected in increased sales.

In 1913 Henry Ford introduced the continuously moving assembly line. This move dramatically reduced production costs, which Ford astutely passed on in a corresponding price reduction. This not only increased sales, but left the competition way behind. The effect of simplification and scale was to move the price of a Model T down to $550 by 1914, when 248,30 were sold. By 1917, the price had been reduced even further, to $360, with the result that sales soared to 785,432. In 1920, Ford sold 1.25 million Model T's.

Lower costs, lower prices, increased sales, resulting in further productivity gains... a virtuous circle.

Pay, Profit and Price Evaluation: a fair wage, a fair price.

Fair exchange between employer and employee, between producer and consumer – without the need to argue or strike. A social achievement in itself.

And there are further implications, and gains to be made, in terms of financial stability and its effect on our monetary system.

What is money?

For a definitive answer, what better source than the IMF, the International Monetary Fund... you can’t get nearer Heaven than that. And this is their response, clear and simple:

Money serves as
– a medium of exchange,
– a store of value.

The document adds:
Without it, modern economies could not function.

Absolutely not, for sure. We must, and do have a monetary system of course. But it fails on one out of the two essentials: clearly money as we know it, and as it is managed today, is not a store of value.

Its value deteriorates day-by-day, sometimes slowly, sometimes rapidly, but inflation, the gradual reduction in the purchasing power of our currency, is ever-present. Don’t put your money under the mattress, Nellie. By the time you’re retired and want to spend it, it’ll be worthless. If the mice don’t get it, inflation will.

So how do you save for your old age?

The fallback for many is the good old government pension scheme. But for the young, the future looks cloudy, as a decreasing workforce is funding a retired population which grows with increased longevity.

So we must inevitably look elsewhere, and for millions of people who are not sophisticated investors, this means your house.

As a result there is considerable upward pressure on house prices, putting the dream of 'a home of your own’ beyond the reach of many young people today, which, incidentally, is probably why they’re not marrying and having children, so we have an 'ageing population’.

Such is the social cost of inflation, the steady deterioration in the value of money.

Pay, Profit and Price Evaluation, by establishing fair remunerations and prices, would eliminate inflation. Prices would not increase. Indeed, as lower production costs are reflected in lower prices, prices would steadily fall across the board.

This is the opposite of inflation. Prices go down, not up. Your money buys more each year, not less. As productivity increases, it becomes possible for goods and services to be produced and offered at lower prices, thus progressively lowering the cost of living, and raising the standard of living.

And with your money steadily increasing in value, you can simply save a regular amount into the bank (or under the mattress if you prefer), then, when you retire it’s there ready for you, without need for investment plans (and paying people to administer them), or scrambling to fund a mortgage in a grossly over-inflated property market.

This in turn means that as we get older we can look forward to increased purchasing power for our savings.

A wild dream? No. This is as it should be, the normal course of events. We should be increasing productive efficiency, lowering the cost of production, and thus the price.

But the whole financial and business climate must be right.

The essential ingredients

of maximum, nation-wide prosperity are simple and straightforward, devoid of any esoteric complexity or the obfuscation with which professional economics can so often cloud the issues.

One. Full employment is clearly a primary ingredient of prosperity. If 5% of the working population is unemployed, 5% of productive capacity is wasted. That means beefing up education and training, not as charity, but as an investment in our future.

Two. Maximum productivity: everybody working productively. Even if everybody is working, but working inefficiently using outdated equipment with poor organization, then again, output and potential prosperity, will be reduced.

Three. Maximizing productivity requires secure, longterm, committed investment, in education, training, research and development, in the tools and machinery of industry, and in the nation’s infrastructure.

Four. An accepted, top-to-bottom system of remuneration, price and profit evaluation creates a condition of social and monetary stability, a foundation on which economic expansion can be maximized without inflation.

Five. With remuneration, price and monetary stability, as productivity increases, so prices fall, and personal savings increase in value. Money at last becomes a true store of value.

A powerful combination which cannot fail to give us the widely shared prosperity of which we are surely capable and which would so enrich all our lives.

Ultimately the idea of living in a society where the cost of living goes down slowly, year by year instead of up, where your savings are not only safe but increase in value, where your domestically produced goods get progressively better and cheaper, where a fair day’s pay for a fair day’s work in decent conditions is an accepted norm rather than an on-going battle... it may all seem utopian.

But it’s possible. And it’s all do-able. Right now.

Prosperity won. Prosperity lost.

Government is the nation’s biggest spender, taking anything up to 50%-plus of the nation’s earnings. It is also a monopoly, subject to little or no discipline in the efficiency of its operations and its cost-effectiveness. It taxes and spends at will with very little meaningful accountability. We need to establish a new relationship which accurately reflects reality, namely that government is a service to its citizens, its wages paid by its citizens as its customers.

The process of government must be clearly defined in its field of action and subject to strict financial and administrative disciplines, so that it fulfills its functions productively without incurring an over-burdensome tax on the nation’s earnings.

Good Government at Less Cost - Disciplined and Productive.

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The presumption of Liberty


Preserving our Green and Pleasant Land

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