|Price Performance Policy|
RIP has two macroeconomic policy instruments:
The PPR is a measure of progress of each economic unit in lowering the ratio between changes in output prices against variations in input costs. The PPL is a rebate on a basic levy according to the PPR values achieved. Economic units can manage their affairs to minimize the levy even to zero. In this way the macroeconomic policy is coordinated by the participatory development of companies and their work forces and not by largely arbitrary interest and debt targets.
RIP bases policy impact and success on the knowledge and calculations made by the economic actors thereby solving the calculation and knowledge problem in an operational structure that more closely approximates participatory constitutional economics.
The empty slogan "Global Britain" might have some meaning if policy encouraged productive investment and rises in productivity in order the reduce the balance of payments (BoP) deficit of this nation through the export of products as opposed to financial services.Bank of England decisions on interest rates
The state of debt on the part of government, private sector and consumers has risen to levels exceeding those witnessed in the pre-2008 financial crisis. As a result even a 1% rise in interest rates could result in a range of corporate failures and loss of homes for those on the margin. QE has killed off the interest rate option. Attempting to raise the exchange rate of the pound using interest rates is no longer feasible.BoE evidence to the Economic Affairs Committee
Rather than admit the complete failure of QE the evidence provided by the BoE to the recent Economic Affairs Committee was troubling in the sense there was no convincing statements showing a complete understanding of the operational impacts of QE. After 12 years of operations and having created a inflationary boom in assets values the BoE was limited to admitting that it was, "still learning about the effects of QE"!!The balance of payments
Our trade in goods has a £35 billion deficit and, goods production is the area where Britain needs to improve performance through judicious investment and rises in productivity. In the context of COP 26 and Sustainable Development Goals, the other long term option is to change national behaviour and to stimulate import substitution through expanded national production so as to reduce demand for goods imports leading to less pressure on the BoP. There don't appear to be any plans along these lines under current government policies.The role of RIP
The policy fixation with finance reflects the strong influence of the financial services sector over Bank of England policies. In many cases of needed rises in productivity there is only a marginal requirements for loans. RIP raises the immediate return on improvement in price performance combining lower risk with an ability to penetrate markets with competitive unit output prices. This can generate more income which can be used to invest in necessary plant and equipment and human resources. Sometime operations need to continue for some time to accumulate sufficient funds to invest but at least this avoids the need to pay bank interest rates and put up assets as collateral.
Funding through equity under RIP becomes more attractive because of RIP's ability create more rapid returns, free from bank interest rates and collateral risk. Lastly the most under utilized device for efficient growth and income distribution is the mutual organization model where the work force owns the economic unit, freeing the operations from "shareholder value" pressure. It is estimated that mutual organizations have an operational costs advantage of around 10%-15% when compared with plcs.
Looking at the equity model of buying shares in a mutual, the participation in profits is equivalent to receiving interest without a bank involved and no risks to collateral. In any case, even if interest were to be charged it is up to the individual providing the funds to fix and agree interest rates without intervention of any central authority.
1 Hector McNeill is director of SEEL-Systems Engineering Economics Lab
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