Real Incomes 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. 
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The hazards facing a national population include power-by-proxy political parties, power-by-proxy government and the objectives of those who control the proxy political parties.
Although governments are nominally answerable to the majority, the evolution of macroeconomic policy over the last 50 years has very much favoured those who manage the power-by-proxy system where power is held by physical and financial asset holders and dealers who fund party machines to ensure their interests are upheld in policies. Such policies are, of course, promoted as being to the benefit of the "economy" and to "prosperity" and, by implication, the majority of constituents.
The growth in the financial services sector has not only developed as a result of monetary policies supporting financialization but also by standards of due diligence declining to the extent that there have been wholesale transfers of assets to financial services from service customers, be these individuals, companies or countries. There are specifically notorious cases of, for example, the Royal Bank of Scotland's Global Restructuring Group which is alleged to have purposely steered thousands of healthy companies into bankruptcy in order to enable "legal" asset stripping and loss of assets of clients. Similar allegations concern the largest US banks in relation to an international scheme involving local authority loans in which the small print concerning hard to understand "options" was geared towards a fraudulent securing of money and assets. The fraud surrounding the 2008 financial crisis is now fairly well understood.
The problem is that policies, like quantitative easing (QE), where low interest rates drive debt and steep rises in asset values, mean that this process of asset transfer is highly beneficial and facilitated for the financial services sector. As a result the temptation to exercise unethical financing decisions has increased.
This track record would indicate that extreme care and precaution needs to be exercised in the areas financial regulatory design and investment due diligence. More importantly it is essential to identify means of securing investment funds without risking assets. As things stand, financial service represent both a hazard and the standards of management a major risk. Normally, risk is the likelihood of losing assets and future prospects and this justifies risk management. Therefore, as in the case of natural hazards such as accidents and climate change, the most effective means of reducing the risk is to avoid participating in any activity where the hazard can have an impact. The most evident option is to avoid using financial services for purposes of productive investment.
Practical steps to avoid loss of assetsIn the industrial revolution, although bank loans were significant, included many developments that arose through
autonomous growth based the persistence of inventors and those who improved processes gaining higher margins as a result of their innovations so as to build up savings which were invested in efforts to further improve productivity and efficiency. One of the main facilitators of this process was that the people concerned were developing tacit knowledge or skills in specific types of development as a direct result of their dedication to experimentation, testing and improvements applied to specific processes. Here, money is less important than the understanding and demonstrated capabilities of the people concerned. Therefore in many cases innovation took place without any need for external finance. At the next level, in order to avoid loan conditions, equity or shares in the business from small investors, each committing a small amount, on the basis of the promise to receive a share in future profits, as a way to push this forwards without "loan condition risks". The early cooperative movement was based on this type of model, largely in the retail sector with "shareholders" being customers who received dividends linked to the amount "invested" in the form of their purchases. Lastly, the mutual model where a group of people establish a business on a shared basis so that all of the shareholders consist of the work force of the company, is another way to initiate growth. One of the benefits of mutuals is the fact that on average, because of their freedom from chasing external "shareholder value" they can benefit from operational costs being 10%-15% less than plcs.
Toward autonomous growth policiesIn terms of stimulating autonomous growth Real Incomes Policy reduces the risks associated with autonomous investment from own savings by providing companies with immediate rises in margins to the degree they reduce their
price performance ratios as a result of rebates from the
price performance levy/i>. The levy can be lowered to zero if investment and pricing is carefully managed. As a result finance-less growth can be more profitable while operations become more price competitive and likely to secure growth through market penetration. This also has a beneficial impact on consumer purchasing power or real incomes. On the side of external finance, the government could establish a mutual development corporation to educate, disseminate knowledge, advise and provide funding for companies that have a track record of low PPRs integrated into the Real Incomes Policy model where cash flow replaces assets as the guarantee of return. The cash flow guarantee can be managed through alterations in the price performance levy. In effect this substitutes medium to long term capital loans by a working capital provision based on actual performance. This also means if there are failures, far less money is at risk and assets remain in the hand of mutuals or companies. The ability of mutuals to offer more generous wages would result in natural redistribution of real wages to those participating in such growing schemes.
At on point the Cameron government toyed with the idea of supporting mutuals but were discouraged by financial interests from doing so. On the other hand, the Labour party have many MPs as "cooperative" members and yet this party has done nothing to advance these sorts of policies at a national level. Anyone interested in "levelling up" the country needs to look to easily understood practical solutions rather than referring to quantum computing and other distant concepts which are unlikely to have any practical impact in the foreseeable future.
A Real Incomes Policy provides the potential to help the country move in the right direction.
1 Hector McNeill is director of SEEL-Systems Engineering Economics Lab
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