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Thread: Modest Proposal for Europe Version 3

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    Default Modest Proposal for Europe Version 3

    Yanis Varoufakis and Stuart Holland have just posted a new Version 3, of their Modest Proposal for Europe. http://yanisvaroufakis.eu/2012/05/19/a-modest-proposal-for-overcoming-the-euro-crisis-version-3-0-policy-3-significantly-amended/

    This is my response. It has already been presented to Yanis’ web page and I repeat it here for an even wider debate.


    As a European (British), individual private inventor, it behoves me to confine my comments to POLICY 3 – An Investment-led Recovery, Rebalancing and Convergence Program. In addition, as the French government in 1987 cited me as having the same technological foresight as Gustav Eiffel a century earlier, (Mention Honourable, Tour Eiffel de la Space Competition), I have already set into motion conversations which may, in time, enable me to present these additional comments directly to the Elise Palace.

    In so far as the revised policy 3 is set out, Yanis and Stuart Holland have made amendments that do start to address the underlying structural difficulties. I particularly agree with the point they make with regard to:

    “the volume of investments is severely circumscribed because of the convention that 50% of project funding be financed by member-states”. (Page 15, para 1).

    This matter of all funding being constrained to 50% has been a disaster for many reasons; a very good example being that, with no parallel institutional framework enabled to deliver the balance of funding; it has never been possible to emulate the great success of the United States SBA (Small Business Administration), and NSF, (National Science Foundation), funding models, (where they will fully fund successful proposals). IMHO, that failure has, in turn, deeply compromised the long term growth of all European competitive private industry.

    As Yanis already knows, my honestly held critique of his previous proposals were entirely centred upon what I saw as the simple fact that the European Investment Bank, (EIB), had no visible experience, and thus related success, of investment right down at the grass roots of any national economy. Particularly, arms length, long term investment of free enterprise based equity capital into private sector creative individuals like me. The record shows that, since the late 1970’s I have been a detailed critic of the lack of private sector savings institutions making any attempt at such investment. Indeed, I would dare to suggest that it is the lack of such private investment institutions that has led us to where we are today; with the entire financial needs of the Western economies dominated by banks; rather than savings institutions.

    That we do not have ANY institutional mechanism, set of agreed rules; designed to make such long term equity capital investment, into new, free enterprise based, very small businesses and related job creation. Again, I have been told in writing that the Bank of England agrees with me with regard to the matter of capital.

    Europe is in need of tens of millions of new private sector jobs.

    With all that in mind, I applaud the proposed Investment-led Recovery, Rebalancing and Convergence Program; with some reservations that relate to my own previous experience with existing investment structures; particularly, Venture Capital.

    It is important for everyone to understand why I object to the use of the phrase Venture Capital. That venture capital, as promoted throughout the Western economies, is a mechanism that drives uncompetitive mergers and acquisitions that have brought us to a feudal mercantile economy that does nothing to address the underlying problems we face today.

    I would press everyone to accept the phrase; Free Enterprise, rather than venture capital.
    That once you all accept that small change; just two words, you will set into motion the re-invigoration of every national economy.

    Europe is centred upon the idea that major corporations and government departments create jobs; yet everywhere we see and hear people, right down at the grass roots of every nation, simply repeating the words:

    We have no jobs.

    The rules I have set out are very simply designed to permit the creation of millions of very small businesses where they are adequately capitalised and free enterprise based; where the manager of the business will be the owner of the business.

    Such that the inventor, the designer, the creator; of the job creating very small business defines the challenge set to the employees; that they are free to fail or succeed.

    The primary difference being that with the use of free enterprise based equity capital, the funding, the equity capital, remains in circulation within their local community.

    That in turn brings me to the matter of how the rules will be funded. In The Capital Spillway Trust response to the Green Paper, Financing a Private Sector Recovery, I set out details of Vanishing Bonds. All that is different between what Yanis and Stuart have outlined, with regard to the difficulties of the banks and my proposals for vanishing bonds is that with a vanishing bond, the bank may be able to transfer their inappropriate holdings of debt instruments to a agreed central institution, which then transmutes them into vanishing bonds; which are in turn used to capitalise new very small businesses – that in turn deposit their new capital back into the retail banking system

    There is no need to use Euro Bonds to re-capitalise the defective holdings of the banking system.

    Vanishing bonds transmute dubious debt instruments held by the banking system into new small business customer capital deposits without any ECB involvement. In turn, they will, over a comparatively short timescale, serve to directly transfer unusable debt held by the banks back into permanent new prosperity within every local community.

    Conventional capitalism; particularly venture capitalism, has been discredited. It does not promote a free enterprise economy; instead it has led us to where the entire Western economy is in deep peril with many millions of citizens unemployed and disrespectful of authority.

    The answer is to start the long journey towards private savings institutions; now given a new mandate for long term, arms length, free enterprise based investment, under agreed rules; that will, in turn allow the ordinary private creative individual to take responsibility for the rest of the working population within their local communities.

    Last edited by Chris Coles; 05-20-12 at 03:50 AM. Reason: Acronym changed from NSA to NSF now corrected and with added detail: United States NSF (National Science Foundation)

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