Currency is Destiny: new currencies for new times
By John Rogers
“We are in a debt crisis of historic proportions because…banks have been lending money into existence as debt with too few effective restraints on their conduct and all the risks of doing so forced upon the taxpayer… thankfully the institution of money is a human, social institution and it can be changed…I want to see every obstacle to the creation of alternative monies within the ordinary commercial law removed.”
Conservative MP Steven Baker made these statements in a UK Parliament debate entitled “Money Creation and Society” in November 2014, the first full debate on the subject of money creation in 170 years. A Conservative MP in the world’s oldest Parliament criticizes the banking system, calls for the ‘institution of money’ to be changed and even argues for legal reforms to enable ‘alternative monies’? Is the Revolution upon us?
Philosopher David Hume wrote that “money is not…one of the subjects of commerce; but only the instrument which men have agreed upon to facilitate the exchange of one commodity for another. It is none of the wheels of trade. It is the oil which renders the motion of the wheels more smooth and easy.” In the narrow context of particular markets this statement has value but in the broader context of international economics ignoring the provenance, nature and quality of the ‘oil’ has proved disastrous. Why were money and banking absent from models of the economy before the 2007 finance crisis when they clearly played the most central role? As Queen Elizabeth II asked the head of research at the LSE “Why did noone see the finance crisis coming?”
This abstract idea of money as ‘oil’, a mere lubricant of the wheels of exchange, has led some to claim that money is ‘neutral’ but this begs such questions as who creates the oil, what kind of oil, at what cost, how the oil gets to the ‘machine’ of the economy or even whose job it is to oil the cogs. In practice money is far from neutral.
Understanding the nature of this oil and the possibility of different kinds of oil is more critical than ever.
IMF researchers calculated that there have been at least 400 currency and banking crises around the world since 1970 alone. At the same time as this unprecedented financial turbulence we have seen accelerating environmental crises – from resource exploitation to species extinction to global warming – that can be directly linked to economic activities, a process driven by the endless need for economic growth, which in turn is driven by investors’ need for money to grow. This is one kind of ‘oil’. Oil for oil we might say.
However, new forms of money free of speculation and exploitation are growing up mostly unnoticed in the midst of this speculatory madness. A potential money shift towards currencies acting primarily as an exchange medium rather than a medium for financial speculation is taking place.
Sometimes money seems like a wild animal raging around untamed. There are four types of ‘money tamers’ with different taming strategies, each potentially complementary to the others:
Money Tamer 1 – Shorter chains for the beast: taming through better regulation
They believe that in recent decades there has been too much liberalisation of the money markets. Their solution: better oversight and control by government.
Money Tamer 2 – Better training for the beast: taming through ethical investment
They believe that money is often invested in companies and projects that are bad for people and planet. Their solution: investment in fair trade, social enterprises, ethical investments etc.
Money Tamer 3 – New leashes for the beast: taming through state-created money
They believe that the exchange medium of money is unjustly created by private banks as loans and debts. Their solution: state-created interest- and debt-free money.
Money Tamer 4 – Breed new species: taming through new forms of money
They believe that one form of money alone – national currency – is not sufficient to meet the needs and challenges of the twenty-first century. Their solution: a variety of currencies for different purposes.
What do these new forms of money look like?
There are two main types of currency: ‘legal tender’ currencies for payment of debts and taxes, like the euro and the dollar, and other legal but not ‘legal tender’ currencies for various purposes. This second category includes:
- Bonus programmes, like Airmiles and supermarket loyalty schemes (not circulating currencies)
- Virtual currencies that can only be used in a closed, virtual world like ‘Second Life’
- Digital currencies like Bitcoin, that can be used anywhere on the internet
- Sectoral or ‘targetted’ currencies e.g. for businesses, for young people, for seniors, for the environment or for voluntary groups like B2B currencies, time banks, exchange rings
- Local and regional currencies like Bangla PESA in Kenya, Banco Palmas in Brazil, WIR Bank in Switzerland, Chiemgauer in Germany, SOL in France, BerkShares in the USA and Bristol Pound in England.
National currencies controlled by central banks arose with the first waves of industrialisation and globalisation in the 19th century and subsequently spread around the world. Local and regional currencies existed for thousands of years before that. They mostly died out after the 19th century – apart from a few experiments during the Great Depression of the 1930s – and were then rediscovered in the 1970s with continuous experimentation until the present.
Bernard Lietaer, a former central banker and currency trader, argues that our mono-culture finance system based on monopoly national currencies created through bank loans as interest-bearing debt is the systemic cause for various kinds of un-sustain-ability: it amplifies business cycles; it makes economic growth compulsory; it automatically concentrates wealth; it programs short-termism. For instance, it is more ‘economical’ to plant a quick growth forest you can harvest in ten years than an oak forest for which you may have to wait a hundred years. Investors are constantly drawn towards the ‘quick return’, which makes it very difficult to get investment in truly sustainable initiatives.
Lietaer coined the term ‘complementary currencies’ to describe an ecosystem of local, regional, national, global, virtual and digital currencies working in parallel to balance each others’ strengths and weaknesses. This ‘jungle’ of currencies might look chaotic to an uninformed observer but it ensures overall balance in the system. Natural systems ensure a fine balance between efficiency and resilience. Some currencies optimise efficiency and competition, others emphasise cooperation and resilience. Just as nature ensures continuity through the diversity of a rainforest rather than the monoculture of a pine forest, so should our economic systems encourage currency diversity to strengthen resilience before disaster hits.
Paradoxically it is the monopoly national currencies that led to financial chaos by tying everyone so tightly into the same system with little resilience when crisis came. We should not fear a world with currency diversity. New currencies pose an interesting challenge to economists to rethink their definitions of money and to model the implications of a multi-currency world. They can contribute to the creation of a more sustainable finance system and a more sustain-able world, one we can sustain for the coming generations.
[Editor’s note: John Rogers is an author, consultant and trainer specialising in new currencies. He is joint author of Margrit Kennedy, Bernard Lietaer and John Rogers (2012) People Money: The promise of regional currencies, Axminster: Triarchy Press http://www.triarchypress.net/people-money.html. See also www.valueforpeople.co.uk]
From: pp.3-4 of World Economics Association Newsletter 5(4), August 2015