Friday 9 December 2011

Who wants to talk about economics?

The first post that I wrote on this blog, for the relaunch of the Economics and Livelihoods group back in May this year, was entitled "Do we control money, or does money control us?" and I wondered whether the provocative theme would ring true with many people, or whether economics is a subject which people shy away from when at all possible.

Little did I know that there would be the worldwide Occupy Movement on this very theme, starting with protests on Wall St, New York, but spreading to thousands of cities across the world, including our beloved Norwich.

Occupy Norwich's Capitalism/Monetary Reform working group, which formed after a great talk from Dr Rupert Read on monetary reform, has continued to discuss the issues in detail, and I've found it very rewarding to attend their meetings and learn so much about the nature of money, whilst we also look for a monetary system which would satisfy society's needs.

There is a great cross-section of religious and political ideologies and backgrounds amongst those who have been attending the meetings, but one thing is clear to all of us - the present system is broken, and needs to change. So far the discussion has mostly revolved around what money is and is for, and what the deficiencies of the current system are which require a rethink, but we hope to establish in later meetings what action we can take to change things, whether it be campaigning for national monetary reform, or for promoting local currencies which use an alternative monetary model.

What money is for: a medium of exchange, a way of measuring and comparing value, and a store of wealth (and debt, but I'll come to that in a moment). Looking at each of these functions, we tried to establish how our current system is deficient.

Firstly, as a medium exchange, the scarcity of it - although value can be created anywhere, money is not always available in the same place to be exchanged for that value. Although other means of exchange could be (and sometimes are) used, there is only one system that is recognised by law - legal tender - that has been imposed on us by the government, causing a monopoly of money creation with banks. We don't have a choice about whether we use it or not (because it is the only currency recognised by law to be valid for meeting financial obligations) and therefore we are forced to abide by its rules.

As a method of comparing value, our currency is insufficient, because its value is fluid, and is artificially adjusted by those with the power to set prices that do not match their real value (by limiting markets and gaining monopolies, for example, and speculative investing).

As a store of wealth, our currency is deficient for the same reason - its value changes, and in fact continuously diminishes, as is evident through inflation. This only covers the average value of that money, of course. When money is created as debt, as it is in the loans made from banks, the money is a store of debt, rather than wealth, and because it must be paid back at interest rates that are far beyond inflation, the value diminishes quicker, meaning that families with poor credit ratings are paying far more than what something is worth for the same goods.

When exploring some of these deficiencies, we realised that we had to distinguish between money and value. Value is subjective, and always will be, but because of our need to trade, there are some common values which make up the prices we historically see things traded at - one is the production value - how much time and effort it took to obtain or create that value; another is utility value - the nutrients that a food gives you, for example, or the pleasure that a good book brings; and these combine to form an historic value - the value which we really see in a product or service.

I could go on about the things we discussed. Many of them are typed up here on facebook and on the Occupy Norwich forum.

However, the discussion is far from over, and we're still meeting regularly at the Haymarket each Wednesday evening at 7pm to try and find out more, so please join us!

Images: Occupy Norwich protester with "Who has taken our money?" placard; a monetary reform meeting in progress, where our Muslim friends are talking about the concept and dangers of usury; A selection of books in the Occupy Norwich library, including The Future of Money, which discusses the possibilities of complimentary currencies as a solution to our economic problems. Courtesy of Ann Nicholls.


  1. Nice one Simeon, and a pleasure to be on board these workgroups at #OccupyNorwich. One thing worth a mention, when you say "families with poor credit ratings are paying far more than what something is worth" don't forget that a sizeable fraction of the price of all goods & services we consume is made up of interest payable at every step of the production process. One report I read recently estimates this is on average 40% of everything we buy - twice as much as VAT!

  2. Interesting, Nick. In a way, you could say that all the money we use is payable to the banks, either as debt or interest, since the money is created as debt, but I'm really talking about the relative difference that someone poor has to pay for something on credit in comparison to someone who's got a good credit rating. They are getting exactly the same product, so it just means the company selling them the credit is ripping them off.