In recent months I have been learning a lot about money and our economic system. I have discussed many of the issues with those at Occupy Norwich as well as with family and friends. I have established what I think is the problem with money as it is.
It is not the fact that money is created as debt - all money is a debt, and wouldn't be money if it wasn't, because money represents what value is owed to the bearer, through the authority of the issuer (The Bank of England, in the case of pounds).
It is not the idea that interest is borne on debts - ok, interest can be excessive, and needs to be curbed and regulated, but where it represents the foregoing of the use of that value by the owner for a period of time, interest is a justifiable payment as the compensation for not having access to that value, just as you might rent your house to someone, or lend them something you own as long as you can have it back as soon as you need it.
The problem, I feel, is that the interests of money, and the accumulation of it by banks and wealthy individuals, through the pursuit of financial growth by the wealthy, mandated via corporate law (companies are legally bound to maximise profits above all else), is directing the use of resources, both human and physical, to the benefit of a rich elite of society, rather than for the well-being of society as a whole.
Money as credit
If I do something for someone else, in hope of reward, I'd be a bit miffed if they didn't see it the same way, and that they weren't going to give me anything back. In this way, if they gave me their promise of value as reward, I would be happy that the agreement was in place that I could claim value back when I required it. At this point, it doesn't really matter whether that "promise of value" is in the form of pounds sterling or an IOU, as long as I have faith that the issuer will honour their promise.
In this way, money is merely credit, and nothing more.
Value as well-being
Value on the other hand, is another kettle of fish. Since value is the well-being that I obtain from a particular action, item or experience, I'd be very happy to be rich in value, especially (and this is where equating money and value really breaks down) when I can share that value with others, as that also gives me the addition value of feeling part of something bigger than myself.
So what is money really for?
In a previous blog post, I established that money may have three purposes: as a medium of exchange, as a store of value, and as a measurement of value.
To me, it now seems obvious that using currency as a long-term store of value is bad, because it means that others are always endebted to you, enslaving them to your service, especially if you do not release that money without the condition of return to you with interest (a loan), and that stores of value for the long-term should be investments in things of real value - things which will not lose their value over time (and by value in this instance I mean their ability to provide well-being for people, not the amount of money that you could sell them for!).
Long-term value storage should therefore be in investments, such as property ownership (without mortgage) and in ownership of businesses that provide value to communities (see John's post).
But what about as a medium of exchange? It is the artificial scarcity of money (artificial because it is not aligned with a scarcity of value, as demonstrated by the fact that their are people out of work, who could be creating value if only there was money to employ them) that prevents it from being an effective lubrication for our economy, and thus we need to find alternatives that are more effective.
Previously this week, we have heard about gift economy, which is a great way of overcoming the difficulties of lubrication without having to actually exchange anything. A gift economy can be viewed as one where there is a free flow of value, and no debt. I.e. the creators or "owners" of value forego the debt of giving that value away on the basis that in future, others will do the same for them. It's a great idea, but it does rely on all those within the economy being fair, balanced people who won't take advantage of the system by claiming all the value for themselves and leaving others without, or worse, lending that "value" back to them at interest. It works well in families, but for communities where people don't know each other, we sometimes require something that is more robust - a currency.
From the word go, I think it must be recognised that money represents a promise to pay - a debt, and therefore an effective local currency should be safeguarded from two extremes of those promises:
- No individual should be in so much debt that they are effectively enslaved to the community, working long hours simply to service debt rather than improve their own well-being.
- No individual should have so much currency that they can manipulate, even control, the system for use to their will, rather than a collective will; their well-being, at the expense of others.
This, I am still exploring, and I could write another whole post with my ideas of how this could be done (although it would be a bit rambly!), so I'll save that for another time!
Images: Oiling bike chain from this youTube video.