ECONOMIES...the way money should be handled!

THE WAY MONEY SHOULD BE HANDLED FOR ALL NATIONS

From the book "More Good News" by David Suzuki and Holly Dressel

One of the financial experts that environmentalists have been consulting for many years, Bernard Lietaer, the author of The Future of Money who also helped design the euro, pointed out then that "Today's official monetary system has almost nothing to do with the real economy. Just to give you an idea, 1995 statistics indicate that the volume of currency exchanged on the global level is $1.3 trillion U.S. per day. This is thirty times more than the daily gross domestic product (GDP) of all the industrialized countries of the world put together."³⁰ Today it is many times that amount. This "money" being traded around the world is almost fully decoupled from any measurable physical wealth. Lietaer says, "Of that volume, only 2 to 3 percent has to do with real trade or investment; the remainder takes place in the speculative global cyber-casino. This means that the real economy has become relegated to a mere frosting on the speculative cake, an exact reversal of how it was just two decades ago." One reason this happened is that during the Nixon administration the United States decoupled paper money from gold, because they found pegging imaginary wealth to something physical was too limiting. Today a few countries still maintain a 10 percent reserve of deposits, which prevents the banking system from creating more than ten times, as much currency; but as Korten says, "Today most money is created by borrowing. When a bank decides to grant a loan, they create that money out of nothing; but it still represents a claim on the real wealth of anyone who wasn't given a loan."

A given individual or corporate group can, under our current system, apply to a bank for a $2 billion loan for various kinds of business development. The bank grants the loan, which means they create that $2 billion out of thin air, and by social convention, agree that it is now in the hands of the corporation. So with that money, the corporation can go off to Peru, Saskatchewan, or Indiana and buy up mines, forests, factories—entire towns if they want—since they have the power of money against which the locals who used to have tenure over such things simply can't compete. This means, says Korten, that "increasingly, your money supply is being controlled by outsiders, by the banks. They're creating the money and they're taking the profits out of a country or place, essentially for renting that money to some group or corporation when they made out the loan." It's a system of PRETEND money. We make it up, then award huge amounts of it to certain groups, like investment banks or dot-com start-ups, but not to others, like disabled children or unemployed fishers. But there isn't any reason we can't use the pretend money anyway we want. Only true wealth—water, soil, rocks, and calories stored in plants, animals, and organic materials like oil and gas—is limited by reality.

Besides being a founding member of the International Forum on Globalization, the main organization that fought economic globalization throughout the 1990s, David Korten and his wife, Frances, started a magazine called Yes! and an NGO, Positive Futures, that concentrates on trying to facilitate this important transition from one method of economic thinking to another. The 2008 economic meltdown gave Korten, like many other economic reformers, new energy. Working with partners like the Institute for Policy Studies, BALLE, and the New Economy Working Group, his most recent analysis is "Beyond the Bailout: Agenda for a New Economy" and provides recommendations for leaders to consider in designing the type of economy that can support human needs without destroying the planet on which future children depend. Although none of the world's powerful financial bodies—the WTO, the World Bank, the OECD, or the IMF—are embracing these ideas yet, they are not going to be able to ignore them for much longer. They run as follows:

 l "Market prices must internalize full social and environmental costs." That means that a toxic chemical in a fertilizer, for instance, must be costed out in terms of its effects throughout its life cycle. This action would reveal when such substances are too costly to use and provide the economic impetus for better technologies and products.

 2 "Trade between nations must be in balance." That means that goods, chemicals, and subsidized foods cannot be dumped on poor countries without paying the same kind of dividends back for the commodities they produce. If they cannot produce an amount that would equal what they want to buy, that fact would preclude the long-term damage to society of going into debt.           

 3 "Investment must be local." These four words have tremen-
dous effects and are a fundamental principle of sustainability,

a primary criterion of the examples listed in this book.

 4 "No player can be big enough to directly influence market price." Breaking up the monopolies and financial giants like General Motors or Citibank that can hold entire economic systems ransom because they are "too big to fail," used to be a fundamental prerogative of governments. Refusing to allow the situation to occur in the first place would take cafe of most of the entities seeking unsustainable bailouts.

 5 "Economic power must be equitably distributed." This means allowing small local businesses, farms, and communities to have a say in what happens to their products and energies, and also letting small countries have control over how economies are structured. That way, minimum, wages can reflect true need and progressive tax rates can control excesses in income, contain health care costs, and regulate interest on such things as mortgage and credit card interest rates.

6 "Every player must have complete information and there can be no trade secrets—that is, no government-enforced intellectual property rights." This would take care of a great deal of the more outrageously expensive medical drugs, as well as destroy the lucrative patent motive for creating dangerous new technologies like genetically engineered organisms or nanotech.

7 Finally, and most importantly, "Markets must be regulated to assure that these essential conditions can be maintained." This requires "that we measure economic performance against the results we really want"—healthy, prosperous societies, not a few outrageously rich individuals or corporations surrounded by want.

One of the most important ways to structure a functional regulatory system involves replacing GDP, the Gross Domestic Product, with GPI, a General Prosperity Index, GPIS measure health, education, and pollution levels—in other words, quality of life instead of the number and amount of cash transactions undertaken every year. The new, post-meltdown world is endowing the idea of these new measurements, based on societal, not financial, values, with a lot more power. What we use now, as Korten points out, the GDP, "measures costs, not gains," which makes it clear why trying to increase GDPS has led us into economic and natural resource crises.

Korten's most interesting and still radical suggestion is a proposal for what he calls "debt-free" money. Most people do not realize that money is no longer issued by governments and that the quantity issued is not based on some kind of wealth reserve, like gold bars. It's not based on ANYTHING AT ALL, in fact, except the desire of some individual or entity, which also enjoys power and connections, to have it. Since the 1980s almost all world currencies have been issued directly by private banks. As noted, when a bank agrees to make a loan for a business venture, the bank creates the dollars or yen or euros to finance that loan. The bookkeeping entry for that loan creates only the principal amount, not the interest that immediately begins to accrue, So the mere existence of this money will automatically take the bank's books into the red, unless the overall economy grows fast enough to generate more loans, to create more new money, so as to make interest payments on the old loans! This is palpably crazy, and no household could possibly be run this way; yet that's how Wall Street has set up the global economy.

What this creates is an immediate "demand for interest on nearly every dollar in circulation," which naturally puts the economy into default. Korten points out that both Thomas Jefferson and Benjamin Franklin, neither of them considered wild-eyed leftists, advocated replacing bank-created debt-money "with an alternative system in which the government creates debt-free money by spending it into existence" the same way we do now, but to fund public goods like health or education. This would not be in any way a more inflationary system than the one we already have; for example, where exactly is the interest on the $700 billion used to bail out companies after the 2008 meltdown coming from? More money creation, based on nothing except the fact that it's needed and governments and banks are in agreement about creating it.

The difference debt-free money would make is simply that the bookkeeping entry "would be made by government for a public good, instead of a private bank for private profit." Some of Barack Obama's and even Stephen Harper's economic rescue policies, are a de facto move toward government-created, public-good money, especially if they create more jobs in service industries, like teaching and nursing. Money created for infrastructure construction to provide jobs, as in Franklin Roosevelt's New Deal, is the same kind of thing. This money is being created by the government and would be intended to serve the public good by preventing job losses and recession. It would be very easy to take the money that was created to rescue failing private corporations like AIG or General Motors, and instead invest it in new technologies like solar power, organic farms, or public transport.

People are beginning to realize that a major reason for the huge pressures on our finite and dwindling true wealth of forests, farms, fresh water, and seashores is that old-fashioned debt-money absolutely requires infinite growth in the economy, on a finite planet, mind you, just to pay the interest that was created along with it. Debt-free money would not require the growth-for-growth's-sake development that currently results in more housing, more fishing, and more farm production—that uses up long-term national resources in order to feed the maw of accruing interest. Without the urgent demand to pay interest, development could not only proceed at a milder and more sustainable pace, but, as in Rajasthan and Freiburg, time could be spent to determine its ultimate utility to the people in the area.

At the moment only private desires for more wealth are being served when money is issued to an individual or large company intent on, for example, taking a gamble that destroying more coastline with hotels, roads, or shrimp farms will make a quick fortune. If we issued money to publicly answerable entities to build new schools, educate populations about family planning, or fund medical care, development that supports positive human endeavors would not stop, as critics cry, but would obviously increase. The dividends of that development would benefit everyone instead of the wealthy few, and more public jobs would replace some of those private jobs—not such a big deal when we consider that for the past twenty years, we've legislated the opposite.

In other words, we used to use money like that as recently as the 1960s, and our finances and futures were a lot more stable. Such fiscal policies would quickly get us more orderlies and nurses working in local hospitals, more construction workers employed on needed infrastructure like railroads or bridge repair, and more farmers taking care of their animals humanely. This lending would also automatically be subject to public oversight, as opposed to private manipulations set up to respond uniquely to the constant interest pressures of debt-money. Even if it does sound too idealistic to imagine, considering that the system we're now working under will, without the slightest doubt, eventually destroy this planet and wipe out our species, some serious rethinking of how we run our economies is surely worth a try.

Fortunately, elements of Korten's alternative system are being introduced in small, medium, and even fairly large ways, all over the world. In the first edition of this book, (2002) we talked about the local currency movement, where cities and neighborhoods print up their own forms of exchange to keep money within the area, a movement that continues to gain adherents. Revolutionary banks, like ShoreBank in Chicago, Triodos Bank in the Netherlands, and Germany's GLS Gemeinschaftsbank, are thriving and expanding, even if we still don't have nearly enough of them. These institutions lend money to Organic or socially responsible start-ups, finance international microcredit schemes, and help alternative business systems like cooperatives.

With more than a billion dollars in assets, Triodos and GLS aren't exactly small, but along with smaller, community-based banks and credit unions, all of these alternative banking systems, without exception, have been able to laugh at the financial crisis that has destroyed or tainted major financial institutions, from Fannie Mae to Wells Fargo and the World Bank. That's because they haven't been indulging in the speculative "casino" economy but manage money in the same ways that householders know will keep them in the black.

Triodos money helped set up the Essential Trading Co-operative, one of the largest worker-owned co-ops in Britain, which imports fair-trade goods and wholesales organic foods to six hundred retailers around the U.K. Triodos Belgium provided a large loan for the construction of a huge eco-building that houses the Oxfam World Shops in Ghent. There are many other bank services available, such as their most brilliant venture, Triodos Match, Ltd., which acts as a matchmaker to pair up social and environmental businesses that need capital with people who have capital—and, frequently, relevant skills and experience as well. These investment "marriages" typically work for businesses trying to raise between £20,000 and £500,000 (US$28,000 and US$700,000). Besides all this, Triodos offers normal banking services and is active in outreach projects such as forgiving Third World debt and supporting organizations like the Environmental Law Foundation. They also give a lot of their profits to charities. They're definitely not the kind of bank we're used to.³¹

Canada continues to lag behind in creating such wonders, having only one such bank, VanCity in Vancouver; but there are two similar financial institutions in the U.S. Chicago's ShoreBank was founded in 1973 mainly to help entrepreneurs in inner-city neighborhoods get the start-up funding they need to take control of their lives. So far they've sent out $600 million in loans to help revitalize the lives of thousands of families and businesses in the tough south and west sides of Chicago. This completely social mandate expanded with the founding of their affiliate, ShoreBank Pacific, opened, not surprisingly, in Portland, Oregon. It's focus is environmentally sustainable and community development projects......

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NOW  THAT  IS  MUCH  MUCH  CLOSER  TO  WHERE  IT  SHOULD  BE,  MUCH  MORE  IN  LINE  WITH  THE  SPIRIT  OF  THE  LAW  OF  GOD - Keith Hunt

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