Of course, the miseries of enforced lockdown have given most of us a chance to do some deep thinking about the state of the world – and possible answers. After 70 years of reflection I now see clearly that the invention of “bank money” has been humanity's biggest mistake. The money system and the economics that goes with it are giving us all the wrong signals. “Wrong” here meaning threatening the life and viability of our beautiful planet Earth – not to mention the comfort and wellbeing of the humans that live here.
I am prompted to say this by my increasingly troubling exposure to heart-rending nature documentaries (the eloquent narrative of Sir David Attenborough) and today to the findings of the government commissioned report on “The Economics of Biodiversity”. This report by Professor Sir Partha Dasgupta (from Cambridge) urges governments (yet again) to include “natural capital” in their national accounting systems (among many other obviously sensible recommendations). As usual, the report is welcomed by our Ministers but, as usual, nothing very useful is likely to result from it. After all, there have been so many similar reports and recommendations over the last 40 years – but nothing substantive has changed as our rush to use up the Earth continues.
Many of you will also have seen (with great suspicion and perhaps concern) that the now infamous World Economic Forum is also campaigning for the “great reset” (supported by our future monarch Prince Charles). This looks forward to a new world where the Earth's huge corporations will be able to provide all we need in a green-washed version of consumerism. I recommend the article by Naomi Klein:
So here we are again. Millions of humans are increasingly desperate to “save the planet” and more and more “worthy” agencies are pressing for change – almost screaming it from the rooftops! But we can be pretty sure that very little is actually going to change as our corporate consumer “bandwagon” speeds towards destruction (our governments strive to increase Gross National Product each year, which is effectively the measure of how fast we are using up the Earth)
So why are we stuck in this rut? After all, we humans are supposed to be intelligent. We have thousands of academics and experts – not to mention thousands of well-meaning NGOs – all dedicated to finding solutions. They may press for new laws and new agencies. They clamour for “sustainable” development, for renewable energy and new “high tech” methods of food production. But all this fuss and noise is easily shrugged off by the all-powerful corporate world. They know full well that the invention and workings of our MONEY system will always ensure they can retain their dominance and keep consumerism going (whatever the cost to the Earth).
The effects of the money system are well hidden but profound (and ultimately deadly). But the huge majority of our well-meaning commentators, pressure groups and academics take the existence of “money” as a given. They constantly strive for solutions within an institutional structure which includes “money” (as well as populist democracy, private ownership and corporations). This is what I call “cognitive dissonance” - an inability to see real solutions when they are actually staring you in the face (hidden in plain sight). Future historians will certainly (after the “crash”) see “money” as the most foolish and dangerous of all human inventions.
Note – I am talking here about “bank money” (now our dominant form of this invention) which really began when the British created the Bank of England to finance war in 1694. “Bank money” is created “out of thin air” when Banks make loans. Earlier (less dangerous) forms of money were simply minted or printed by Kings or Emperors (“sovereign” money usually to pay soldiers and levy taxes). The amount of “Bank money” is effectively “elastic” - very convenient for ambitious national governments.
Certainly there is a general feeling that our money system is useful, that economics and the price mechanism are “good” for human progress and welfare, and that we could not live without a money system. Very few commentators have expressed any other views: Richard Douthwaite, Silvio Gesell and even Maynard Keynes are the exceptions. Most people are amazed to hear that the (very successful) Inca civilisation never invented or used “money” over the several hundred years of its dominance in South America.
Bank money is created “for profit” - so all new “tokens of power” are only channelled into activities which make profits (community or social needs do not come into it)
Bank money is all created as loans subject to interest being paid – the “extra” money needed to finance interest payments can only come from continual “growth” or “inflation”
The “elasticity” of Bank money (a “fiat” currency which is not backed by gold) makes it easier for nations to go to war
The price mechanism gives us the “wrong” signals because it cannot and does not take account of “externalities” (pollution, health care, etc.) or the finite stock of Earth's resources.
The rate at which we spend is governed by our expectations about the future – fear of recession cuts back spending which reinforces the slowing of the economy, while positive expectations increase spending fuelling a boom. The system is highly unstable.
Unlike the rules for businesses, National Accounts are not required to produce an annual balance sheet – showing how their (natural) capital has been reduced by economic growth.